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MASTERS THESIS UNIVERSITY OF BERGEN BY RICHARD SARFO (JUNE 2021) TITLE THE HISTORICAL DEVELOPMENT OF THE ILLEGAL MINING SECTOR IN GHANA: SYSTEM DYNAMIC MODELLING APPROACH TO FORMALIZING THE SECTOR 1 AKNOWLEDGEMENT It has been a long tiring but interesting road in this journey of my master’s degree acquisition. A lot of factors have played a crucial role in helping me to come this far. Friends and family alike have all had a good impact on me since the start of this program. Worthy of mention are my wife Rhoda as well as my daughter Isla who have allowed me some time to concentrate on this course. I so much appreciate their outstanding cooperation and deep concerns during the period of study. Also, my supportive colleagues who stood by me in every way possible during the challenging times System Dynamic presents, are also highly appreciated. Their love will for a long time lingers in my heart. Special mention should be made of Willard Noyes. A true friend and brother. I am humbled by his friendship. Also Besir and Nathalia and all colleagues of System Dynamic group of 2021. The completion of this study also represents the fact that, someone more intelligent has guided and supervised how the study has been organized. You, Prof. Erling Moxnes, are commended so much for your guidance and tutorship during the time of this study. Above all else, I thank Jehovah God for bringing all these beautiful people in my path. People who are good enough to make the mountain of challenges I encountered relatively easy to climb. 2 ABSTRACT Illegal gold mining is arguably the most challenging national issue in Ghana today. This unbridled rush for gold has unleashed inestimable damages to the economy of Ghana including child labor, environmental stress, loss of tax revenue, and health crises in mining communities. As a limit to growth commodity, gold in Ghana will eventually become exhausted, either sooner or later. The ideal condition will therefore be to formalize the sector in a practically sustainable way. This thesis considers how the small-scale mines in Ghana can be formalized using the self-organized type of governance. In this system of governance, the indigenous miners are actively involved in creating and enforcing rules that govern the sector. When this happens, resource boundaries and resource users are clearly specified, effectively excluding foreigner from partaking in small-scale mining activities. Using a system dynamics model as an analytical tool, results show what amount of tax is needed to sustain the small-scale mining sector whilst ensuring a thorough care for the environment by the miners themselves. A win-win result ensues as the sector will provide a good measure of income to investors, greatly reduce the unemployment rate, whilst government will be able to receive a modest income as revenue from tax for the future of the mining sector. 3 Figure 1- Overview of Model ...................................................................................................................................... 25 Figure 2 - Mining Sector ............................................................................................................................................. 26 Figure 3 Reinforcing Loop one .................................................................................................................................... 27 Figure 4 Capital Balancing Loop ................................................................................................................................. 28 Figure 5 Expenses Balancing Loop ............................................................................................................................. 29 Figure 7 - Dominating Reinforcing Loop in Mining Sector ........................................................................................ 30 Figure 8 Gold Reserve Sector ...................................................................................................................................... 31 Figure 9 Gold Production Effect .................................................................................................................................. 32 Figure 10 Environmental Effect Sector ....................................................................................................................... 33 Figure 11 Mine Benefit Sector .................................................................................................................................... 34 Figure 12- The Entire Sector's CLD ............................................................................................................................ 35 Figure 13 Model Behavior and Reference Behavior ................................................................................................... 41 Figure 14 Mines in 2018 .............................................................................................................................................. 43 Figure 15 Miners Income in 2018 ................................................................................................................................ 43 Figure 17 Degraded Land in 2018 .............................................................................................................................. 43 Figure 16 Net Benefit in 2018 ..................................................................................................................................... 43 Figure 19 Mines Benefit in 2021 .................................................................................................................................. 45 Figure 18 Mines in 2021. ............................................................................................................................................. 45 Figure 21 Miners Income in 2021 ................................................................................................................................ 45 Figure 20 Environmental Cost in 2021 ......................................................................................................................... 45 Figure 22 Cost of Producing a Ton of Gold by 2030 .................................................................................................... 46 Figure 23 - Accumulated gold produced by 2030. ....................................................................................................... 46 Figure 25 Capital for Managing a Mine in 2030 ........................................................................................................... 47 Figure 24 Number of Mines in 2030 ............................................................................................................................ 47 Figure 26 Environmental Cost in 2030 ......................................................................................................................... 48 Figure 27 Miners Income in 2030 ................................................................................................................................ 48 Figure 28 Net Benefit in 2030 ...................................................................................................................................... 48 Figure 29 Cost of Producing a ton of gold by 2070. ..................................................................................................... 49 Figure 30 Cost of Managing a Mine by 2070 ............................................................................................................... 49 Figure 31 Number of Mines by 2070 ........................................................................................................................... 49 Figure 32 Total Volume of Gold Produced by 2070 ..................................................................................................... 49 Figure 35 Environmental Cost by 2070 ........................................................................................................................ 50 Figure 33 Net Benefit by 2070 ..................................................................................................................................... 50 4 Figure 34 Miners' Income by 2070 .............................................................................................................................. 50 Figure 37 Environmental cost after policy in 2070 ...................................................................................................... 53 Figure I36 Income from tax in 2070 ............................................................................................................................. 53 Figure 39 Volume of Gold produced after policy in 2070. ........................................................................................... 54 Figure 38 Nature of number of mines after policy in 2070 ........................................................................................ 54 Figure 40 Cost of producing a ton of gold after policy in 2070 ................................................................................... 54 Figure 41 Rate of gold mining after policy in 2070 ...................................................................................................... 54 Figure 42 ...................................................................................................................................................................... 54 Figure 43 accumulated income for miners after policy in 2070 .................................................................................