Mining in Ghana – What Future Can We Expect?
T s h e e n G i h M an of a Chamber
Report Mining in Ghana – What future can we expect?
Mining: Partnerships for Development July 2015
Foreword 3 Executive summary 4
Introduction and methodology 10 Abbreviations 12 1. Ghana’s economy and the role of mining 13 1.1 National profile 14 1.2 The mining sector 17
2. Macroeconomic life cycle contributions of mining 25 2.1 Life cycle projections of the mining sector 27 2.2 Mining’s impact on value added 32 2.3 Mining’s impact on employment 37 2.4 Scenario analyses 39
3. Local views 43 3.1 The different stakeholder groups 44 3.2 Key findings 45
4. Emerging priorities for action 49 References 53
Annexes 57 Annex A: Input-output methodology 58 Annex B: List of stakeholders interviewed 61 Annex C: Workshop details 65 Annex D: Key policy developments in Ghana’s mining sector 67 Annex E: The mine project life cycle 69
Acknowledgements 70
Cover image courtesy of The Ghana Chamber of Mines
Foreword
The history of mining and its economic significance to the Ghana is often cited as an established mining nation and one people of Ghana stretches over a century. However, the of Africa’s fastest growing economies. This report brings out narrative and literature on the mining sector’s contribution to another quality in Ghana – a country that is planning for its economic progress have often been woven around descriptive future. and spot data. Even though this provides useful historic information on the benefits of mining, it stymies efforts to As far back as 2006, ICMM was invited to help Ghana to bring premise policy decision making on robust analysis. It is a together the government, mining companies, civil society, well-recognized fact that a comprehensive understanding mining communities and others who have the capacity – by of the life cycle contribution of mining is fundamental to working together – to make a solid, global mining industry realizing the shared objective of maximizing the spectrum that will contribute to the economy and the society. of benefits induced by the presence of the mine. In the decade since, mining has been an important part of In recognition of this challenge, the Chamber collaborated Ghana’s macroeconomic progress. Even with a cyclical drop with the ICMM to undertake a watershed research on the in the price of gold, mining still accounted for 19 per cent of life cycle contribution of mining to the economy of Ghana. all direct tax payments in Ghana in 2013. But the continued This project comprises both historic and forward looking data declining revenues for commodities globally through 2014 from seven mining operations in Ghana, namely, Gold Fields mean that the industry faces real challenges that can partly Tarkwa, Gold Fields Damang, Newmont Ahafo, Newmont be mitigated by strong relationships with host countries. Akyem, Golden Star Wassa, Adamus Resources and Chirano Gold Mines. I wish to express profuse appreciation to the While there is a clear positive impact of mining on the representatives of the fore-cited companies who cooperated national economy of Ghana, at the local level, more could be with the researchers in supplying the requisite data. As well, done for communities to benefit from the mining industry – I am equally grateful to the various stakeholders that for example, through local procurement. As the report volunteered information towards the successful completion highlights, although large-scale mining is a capital intensive of this seminal project. industry that creates relatively few direct jobs, the industry creates far more indirect jobs in local supplier businesses – The findings of the research undertaken by Steward which is a direct benefit to the whole community. Redqueen and African Center for Economic Transformation (ACET) do not only underscore the direct benefits of mining This report shows that about half of the mining company but also the numerous value multipliers generated by the expenditures that remain in Ghana relate to local economic activity. Particularly, it empirically demonstrates procurement while the other half is direct value added (the how local purchases in the mining sector could be leveraged sum of salaries, taxes and profits that accrue to Ghanaian to catalyze industrial growth as well as spur the creation of residents or entities). If it were possible to increase local new wealth. In the long run, this outturn is expected to procurement by 25 per cent across certain categories, enhance economic development and well-being of the the value added to the economy would increase by about population. Over and above the recommendations proffered US$50 million annually, and indirect employment would by the researchers, stakeholders were also given the be even further increased. opportunity to comment on the findings. These have been incorporated into the report as part of the blueprint There is a tremendous desire to find a way forward that truly measures that would be spearheaded by the Chamber and maximizes the contribution that mining can make to long its stakeholders. term social and economic development. As this report concludes, there are five emerging priorities for action, I am confident that every reader would find this report, including the implementation of a national action plan to which is a good blend of academia and industry, exciting and increase local procurement and linkages. insightful. No doubt, it would have far-reaching positive impact on the sector’s policy landscape and engagements ICMM is committed to continuing to support the process, among stakeholders. but it will be the stakeholders in Ghana – government, communities, companies – who must take up the challenge of addressing these priorities to make real progress.
Sulemanu Koney Chief Executive Officer, Ghana Chamber of Mines Tom Butler Chief Executive Officer, ICMM
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 3
Executive summary
About Mining: Partnerships for Development About this report ICMMs’ Mining: Partnerships for Development (MPD) initiative focuses on enhancing mining’s economic and The purpose of the report is to provide an independent and social contribution. It supports the formal commitment objective evidence base regarding mining’s past, present made by ICMM member companies to actively support or and possible future contributions to the Ghanaian economy help foster multi-stakeholder development-focused and society. partnerships in countries where they are active. The report assesses the economic contributions of mining Mining is economically critical for millions of the world’s in Ghana and explores how these might be enhanced. poorest people with some 50 countries being significantly The report does this by presenting the findings of applying dependent on mining. Yet mineral wealth does not always the life cycle model (Module six) of ICMM’s MPD Toolkit to mean positive economic growth – the so-called “resource Ghana. The work has been commissioned by ICMM and curse” theory. the Ghana Chamber of Mines and has been conducted by Steward Redqueen and ACET. This is a follow-up report to In 2004, ICMM began the Resource Endowment initiative in the Ghana country case study (ICMM 2007). collaboration with the United Nations Conference on Trade and Development (UNCTAD) and the World Bank Group. The report is presented in four sections: It developed a substantial body of research on why some countries have avoided the resource curse and developed • Section 1: Ghana’s economy and the role of mining practical actions for companies, governments and civil • Section 2: Macroeconomic life cycle contributions of mining society. It was overseen by an independent international • Section 3: Local views advisory group, including the head of the United Nations Global Compact and a former prime minister of Senegal. • Section 4: Emerging priorities for action.
The Resource Endowment initiative showed that the It should be noted that the life cycle company data is based resource curse is not inevitable. Mining investments can on historic data beginning in 2010 and planned production drive economic growth and reduce poverty nationally and figures from 2014–2022 from a sample of seven mining locally. However, companies alone cannot unlock the operations. These projections are based on expenditures that development benefits from mining – governance is key are presently authorized and exclude the ones that may be and multi-stakeholder partnerships can help fill capacity authorized or revised in the future. In addition to not gaps. The findings were based on the application of ICMM’s including any new projects that may come on stream in the Resource Endowment Toolkit (April 2006) in four countries future, the sample data does not include exploration, and – Chile, Ghana, Peru and Tanzania. therefore the decline in projected gold production is not necessarily a trend for the entire gold mining industry. The toolkit has now been revised, extended and republished At the start of this study the majority of the sample of mining as the Mining: Partnerships for Development Toolkit (ICMM companies based their projections on a US$1,300 per ounce 2011). It responds to a clear need in different parts of the gold price, and consequently the companies who did not work world for a more systematic and objective way to quantify with that price adjusted their projected financials accordingly. and agree ways to enhance mining’s economic and social Projections show the minimum expected contributions of contribution. the sample of mining companies under this gold price, assuming that international and national policy conditions It is currently being applied in a number of countries and remain broadly as they are now. Therefore the results can be used by mine managers and those interested in presented in this report are not forecasts but rather an promoting economic and social development (host illustration of what the future may look like for this sample governments, development agencies and development- of seven mines. focused non-governmental organizations (NGOs)). The seven mines that provided data for the life cycle For more information, visit www.icmm.com/mpd or analysis are: email us at info icmm.com. @ • Adamus Resouces • Chirano Gold Mines • Gold Fields – Damang • Gold Fields – Tarkwa • Golden Star – Wassa • Newmont – Ahafo • Newmont – Akyem.
4 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Executive summary
Section 1 The Government of Ghana still plays an important role in the Ghana’s economy and the role of mining mining sector. Looking at all policy developments in the sector over the last decade, it shows that the Government of Ghana is increasingly focusing on regulating and promoting The mining sector plays an important role in the Ghanaian small-scale mining and strengthening the collection, economy as it attracts more than half of all foreign direct transparency and management of mineral revenues. In 2012 investment (FDI), generates more than one-third of all export alone, six mining laws and regulations were passed. revenues, is the largest tax-paying sector in the country and makes a significant contribution to gross domestic product These policy revisions have proven successful. In 2013, over (GDP) and employment creation. 50 per cent of FDI in Ghana was related to the mining sector. The mining sector contributed significantly to Ghana’s overall National profile export and tax revenues: 37 per cent of export revenues Buoyed by high commodity prices, the advent of oil were attributable to mining and the sector was responsible production and related investments in mining and oil, for 19 per cent of all direct tax payments in Ghana. Ghana’s economy grew from its average of 6.5 per cent in This clearly indicates the significant importance of mining in the 2000s to 15 per cent in 2011 (non-oil GDP growth in Ghana, which is also reflected in mining’s contribution to 2011 was about 8 per cent) before slowing down to about GDP and direct employment, respectively 1.7 per cent of 7 per cent in 2013. This is comparatively higher than the Ghana’s GDP and 1.1 per cent of the Ghanaian labour force. sub-Saharan African average growth rate of 4.2 per cent in 2013.
Despite Ghana’s sustained economic growth, some challenges remain for the country. Ghana faces budget deficits and rising debt-to-GDP ratios, suffers from persistent trade and current account deficits and employment growth has not matched the impressive GDP growth. In terms of social performance, Ghana is performing well “The mining sector attracts in comparison to other sub-Saharan African countries. Ghana is ranked 13th out of 52 African countries in the more than half of all foreign Human Development Index in 2013, is the best performing country in sub-Saharan Africa on the Global Hunger direct investment, generates Index and ranks seventh out of 52 African countries on the Ibrahim Index of African Governance. more than one-third of all
The mining sector export revenues, is the There is a very long history of mining in Ghana. The commercially exploited minerals in Ghana include largest tax-paying sector gold, manganese, bauxite and diamond of which gold is by and makes a significant far the largest, contributing over 95 per cent of the country’s total mineral revenue. Today, Ghana is Africa’s second contribution to GDP and largest gold producer after South Africa. employment.” Prior to 1983, most Ghanaian mining production was state owned, but since the Economic Recovery Program, Ghana has attracted foreign investments and pushed towards privatization and state divestiture. The sector is now largely foreign owned, but the Government of Ghana still holds a minority (10 per cent) free carried interest in most of the main active large-scale mines. The small-scale mining industry is reserved for Ghanaians.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 5
Executive summary
Section 2 “The sample of seven mines Macroeconomic life cycle contributions of mining directly contributed US$796 million to the For the first time, this report presents a picture of macroeconomic contributions from the large-scale gold Ghanaian economy in 2013. mining industry in Ghana, using historical and current data as well as projections provided by a number of Ghana’s Once the indirect impact of largest mining companies. The seven mines which provided life cycle data to this study together represent over 71 per the mines’ expenditures on cent of the large-scale gold mining sector. Throughout this report, all references to the mining sector or to large-scale goods and services in the gold mining refer solely to this sample of seven mines. supply chain is taken into In order to show the current and potential impact of mining account this figure rises to in Ghana, the report documents direct and indirect value added (sum of salaries, taxes and profits that accrue to US$1,556 million.” Ghanaian residents or entities) and employment contributions in Ghana between 2010 and 2022. The direct contributions are based on the data provided by the sample of mining companies and the indirect contributions are based on input-output modelling (see Annex A).
Life cycle projections of the mining sector In addition to government payments and company profits, The data provided by the sample of seven mines comprises other expenditures contribute to value added and positively life cycle projections on sales volume and revenue, capital impact the Ghanaian economy. The wages, social investments expenditure (capex), operational expenditure (opex), social and supplier expenditures that are spent in country, which investments, tax payments, mine closure costs and are about half of total expenditures, impact the Ghanaian employment figures. It should be noted that the life cycle economy indirectly. The next section considers the projections include what the sample of mining companies significance of the indirect effects. planned for production in the beginning of 2014, are based on a US$1,300 per ounce gold price and it is assumed that Mining’s impact on value added international and national policy conditions remain broadly The sample of seven mines directly contributed US$796 million as they are now. to the Ghanaian economy in 2013. Once the indirect impact of the mines’ expenditures on goods and services in the Since 2010, the mining sector has increased production supply chain is taken into account this figure rises to volumes, but from 2014 onwards projections using the US$1,556 million, equivalent to 3.2 per cent of Ghana’s GDP. sample data see production decreasing by an average of By projection, in 2022 a total of US$940 million will be 4.6 per cent per year. This decline in production reflects supported directly and indirectly by the seven mines, genuine reductions in production due to the life cycle stage equivalent to 1.3 per cent of Ghana’s GDP. of the mines in the sample (see Annex E), but is also because a low gold price constrains mine extension plans. The life cycle data from the sample of mining companies also shows that about half of the expenditures that remain in Declining volumes and lower gold prices (compared to the Ghana are local procurement (25 per cent of total all-time high in 2011) bring about lower revenues and expenditures are local procurement) and the other half are expenditures. This diminishes the incomes for both mining direct value added (wages and payments to the government). companies and the Government of Ghana, although the latter If it were possible to increase the percentage of procurement receives a greater share. The data shows that over the period spend that is local, Ghana would benefit significantly. 2010–22 the Government of Ghana is expected to receive Our scenario analysis shows that value added to the about US$1.6 for every dollar of company profits (profits Ghanaian economy could increase by approximately accruing to mining companies after all statutory obligations US$50 million annually based on the assumption that certain are satisfied). categories of local procurement increase by 25 per cent, the gold price remains competitive and all other things remain equal.
6 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Executive summary
Not all local procurement can be translated into value Section 3 added. About 20 per cent of local procurement, which drives Local views the indirect effects, is lost to the Ghanaian economy due to subsequent imports by direct and indirect suppliers. To obtain local views on the impact of the mining sector on This means that for every US$1 spent on local procurement the economy, and especially on mining communities and about US$0.80 is value added. livelihood alternatives, we engaged with 91 stakeholders. The majority of the stakeholders interviewed were Mining’s impact on employment community-based organizations and the others were from Whereas most value added is supported directly by the national institutions. mining companies, most jobs are actually supported in their value chain through supplier expenditures and the Most community stakeholders hold the view that the re-spending of salaries. On average the sample of mining large-scale mining companies have contributed noticeably companies employ annually about 7,000 people directly to increasing overall economic benefits. Especially they while in total about 111,000 jobs are supported. This means note that the sector has a positive impact on employment that for each job at the mine site an additional 15 jobs are and that business opportunities have opened up. Although supported in the wider economy. Comparing that to local communities see positive economic opportunities, survey procurement, it means that for each US$1 million of local respondents from national-level institutions perceive only procurement about 105 jobs are supported. limited economic opportunities. The general observation of this group is that while there has been an increase in High value added and relatively few employees result in business opportunities for locals, jobs have been mostly high-quality jobs. The sample of mining companies add most low paid, with limited upward mobility, and local businesses value per job (US$85,000 per job) and the sectors more have limited capacity to execute contracts offered by the closely related with the sample of mining companies are all mines. substantially above the national average of US$4,400 in 2013. Sectors further away from the mining companies, especially Apart from economic effects, stakeholders from the agriculture (US$2,200), are more often operating in the communities also acknowledge that they have become informal economy and therefore value added per job is lower. more dependent on social amenities provided by the mining companies such as water supply and sanitation facilities, library construction, and school scholarships. The impact of these social investments has been largely uniform across gender and by generations for the simple reason that improvements in social amenities are generally shared community goods.
Although environmental issues were outside the scope of the study, without exception stakeholders highlighted the negative impacts on the environment as a whole. These include land use and water issues. The community stakeholders were, however, unable to determine how much of these environmental impacts could be attributed to large-scale mining companies and how much to the increasing activities of artisanal and small-scale miners. It was generally acknowledged by national level stakeholders (and backed by Environmental Protection Agency data) that most adverse environmental impacts of mining cannot be attributed to large-scale mining but to unregulated artisanal mining and to a lesser degree small-scale mining.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 7
Executive summary
Section 4 2. Provide greater clarity on the management and use of Emerging priorities for action mineral revenues Closely related to the broader mining policy is the need for public conversation on how Ghana intends to manage and Based on our analysis and stakeholder dialogue at a large to share its mining revenues to enhance socioeconomic multi-stakeholder workshop in April 2015, there are five development. The current treatment of mineral revenues as emerging priorities for action. In order for these to be taken part of general revenues dilutes the important contribution of forward, a forum to collectively identify concrete actions and mining in the eyes of the public, and does not recognize the agree roles, responsibilities and timelines for tackling them need to convert mineral revenues into long-term physical in a collaborative manner would be a useful first step. and human capital. The implementation of mineral revenue Within the partnership arrangements that are identified, legislation similar to that which exists for the petroleum there will be distinct roles for government agencies, the sector, (which defines the rationale and the formula for Chamber of Mines, mining companies, mining industry sub-national distribution), will provide the opportunity to suppliers, development partners and CSOs (the latter two improve transparency, accountability and efficient use of the being particularly relevant in the capacity building space). finite revenue flows from mining. 1. Improve mining policy framework 3. Develop a comprehensive national action plan for more Ghana’s mineral policy has remained in a draft form since local procurement 1999. Sustained pressure from civil society organizations Linked to a broader industrial development policy, increased and related stakeholder groups led to cabinet’s ratification local procurement in targeted sectors – those sectors of the policy in December 2014. Whilst waiting for the transferable to nascent or not yet developed sectors of the Minerals Commission to launch the policy, one can only Ghanaian economy – could contribute to economic speculate that the key policy pillars are consistent with the diversification and growth. The presence of mining actually provisions of existing legislation. The mining policy represents a window of opportunity for Ghana to diversify framework should be clearly defined and linked to the through its efforts to increase local procurement. However, country’s development plan. Although putting in place an building such linkages requires co-ordination and positive explicit mining policy does not necessarily guarantee good collaboration at a macroeconomic, regional (industrial legislation, it provides discipline for the legislative and cluster) and firm level. This requires an appropriate platform regulatory framework and guidance for the behaviour of to share information on opportunities and obstacles for more all stakeholders. local procurement, agree on a shared vision and strategy, monitor progress and make any necessary corrections to the national action plan for more local procurement. The mining industry should continue to collaborate with government in the detailed assessment of items that are feasible to be produced in Ghana. There is also an opportunity for companies to co-ordinate efforts to build a portfolio of companies that are well placed to meet the aggregate demand of the industry. Part of this industry effort “Linked to a broader industrial will be to work with local business to improve the quality and service delivery of their products over time to meet the development policy, increased standards of the mining industry.
local procurement in targeted 4. Develop a strategic framework for social investments and align it with local authority spending sectors could contribute to The life cycle analysis for the seven mines shows that social investments are likely to decline. This demonstrates the economic diversification and imperative for mining companies to develop a strategic growth.” framework for their social investments in such a way that they contribute to development to the fullest extent possible and align with other company contributions and with government spending. This point is reinforced by the survey results whereby stakeholders from the communities acknowledge that they have become more dependent on the public services made available by mining companies through their social investments.
8 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Executive summary
A first step to achieving better company and government alignment will be for the Government of Ghana to clearly define the role of local governments in the provision of social goods and services. This will enable mining companies both collectively and individually to begin to align their social investments with local authority spending plans, as well as taking a strategic view of these investments – for example, prioritizing those which nurture small local enterprises. Helping to develop the local private sector through small enterprise development creates additional jobs and generates incomes that will help communities become self-sustaining. Development partners can play a role in this by providing a platform for information sharing, project identification and monitoring progress.
5. Build capacity with different stakeholders From our analysis and the outcomes of the multi-stakeholder workshop, there are several areas where capacity can be enhanced. A first example is within government institutions, whereby a focus on logistics and enhanced training will better enable the monitoring and tracking of mineral revenues as dictated by the sub-national distribution formula. Secondly, the mining industry has an opportunity to be more proactive in communicating its contributions and impacts to all stakeholders, as well as managing expectations. This will enhance mining communities’ understanding of the mining industry, including mining processes, the mining life cycle, legal rights of communities and how mining companies contribute to social and economic development through heir core and voluntary investments and activities. A third “The current treatment of example is the need to provide management, finance and operational training to entrepreneurs and small businesses mineral revenues as part of in order that they are able to develop products and services that meet the requirements of the mining sector and beyond. general revenues into the consolidated fund dilutes the important contribution of mining in the eyes of the public, and does not recognize the need to convert mineral revenues into long-term physical and human capital.”
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 9 Introduction and methodology
In 2007, ICMM’s MPD Toolkit was applied In 2014, ICMM undertook a desk-based review of existing initiatives in Ghana and agreed with the Ghana Chamber of in Ghana. The resulting Ghana country Mines that applying the life cycle module (Module 6 from case study (ICMM 2007) provided an the MPD Toolkit) in Ghana would bring benefits to all objective assessment of the positive and stakeholders by enhancing the common understanding of the long-term future economic contribution of mining to negative socioeconomic impacts of mining Ghana. This module was not applied in the original toolkit in Ghana at the national and local level. application. The report suggested that there is This report presents the findings of the life cycle module that potential to enhance mining’s contribution has been applied by Steward Redqueen and ACET. The study to economic and social development in shows the macroeconomic contributions of mining on the national level over the life cycle 2010–22. These contributions Ghana. The findings were discussed at a are based on life cycle data made available by seven mines workshop in Accra in 2008 (ICMM 2008). in Ghana. Scenarios are also applied to the aggregated data, which can be used to inform current and future policy debates on mining’s contribution to social and economic development.
Methodology The study was conducted over a period of nine months, from July 2014 to March 2015. In this period, Steward Redqueen and ACET collected data from secondary sources, mining companies and government ministries, and aggregated and processed that data in such a way that both mining’s direct and indirect life cycle impact can be shown.
The framework in Module 6 of the ICMM MPD Toolkit allows us to show the direct contributions of mining by considering production levels, capital investments, tax payments, employment and community investments projected into the future. It should be noted that the projections are based on investment spending that is presently authorized and exclude any additional capital spending that is likely to be authorized in the future.
Box 1: About input-output modelling
Simply stated, an input-output model provides a road map of an economy and shows the interrelationship between various sectors. Financial data provided by the sample of mining companies is run through the model to see how revenues and expenditures affect other economic sectors and generate income. From this analysis, we can derive mining’s direct and indirect impact on value added, which is the sum of salaries, taxes and profits that accrue to Ghanaian residents or entities, and on employment. As indicated, this approach allows us to show the impacts, respectively the direct impact from the mining companies, the impact from direct suppliers of the mining companies, the impact from suppliers’ suppliers and the impact that stems from the re-spending of salaries earned by mining company employees and all employees in the supply chain. See Annex A for more details on the methodology.
10 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Introduction and methodology
In order to show the indirect contributions of mining, Steward Redqueen applied input-output methodology “The sample of mining (see Box 1 and Annex A for more details). In order to analyze companies included in this the contributions under different scenarios, assumptions were used (see Section 2.4) to adjust the life cycle data report represents about provided by the mining companies and this adjusted data was used in the input-output analysis. 71 per cent of large-scale
In addition, ACET interviewed key stakeholders in the mining gold mining or approximately sector to gather local views on the mining sector’s impact (see Annex B for more details), and this enabled the 46 per cent of the entire gold quantitative findings to be complemented with more mining industry in Ghana.” qualitative statements. To engage with stakeholders and receive feedback on the findings of this report, a workshop was held in April 2015 (see Annex C for more details). The feedback from the workshop has been incorporated in this report.
Data Limitations in scope The data used to complete the study is from a variety of Although the study aims to be as comprehensive as possible, sources. Relevant secondary sources are used throughout there are several limitations in its scope forced by time and the study, but most sections rely on information provided by other constraints: the government or mining companies. National data sources were prioritized first in the process of gathering the data, • The study focuses on gold mining because gold is by far before filling the gaps with international data where needed. the most significant mineral mined in Ghana. Owing to very limited data availability for artisanal and small-scale • Sections 1.1 and 1.2 are based on data largely drawn from mining, the focus in this study is on large-scale mines. national sources such as the Ministry of Finance, Ghana The sample of seven mines included in this report Statistical Service (GSS), Bank of Ghana, Minerals represents about 71 per cent of large-scale gold mining Commission and Ghana Revenue Authority but is or approximately 46 per cent of the entire gold mining complemented with some additional international data. industry in Ghana. • Section 2.1 aggregates the life cycle data provided by the • The projected life cycle data provided by each of the mining sample of mining companies. For the period 2010–22, this companies is based on a gold price of US$1,300 per ounce. included data on metal production by volume and sale It is also assumed that international and national policy value, expenditure breakdowns, expenditures made in conditions remain broadly as they are now, which, like the Ghana, government contributions and employment. gold price, are likely to change. In agreement with the mining companies, extrapolation has been used to fill data gaps. • The life cycle company data is based on planned production figures from the sample of mining companies planned in • Sections 2.2 and 2.3 are based on company life cycle data the beginning of 2014. These projections are based on and macroeconomic data necessary to run the input-output expenditures that are presently authorized and exclude the analysis. Sector-specific GDP and labour force estimates ones that may be authorized or revised in the future. were obtained from the GSS. The input-output model of the Ghanaian economy has been constructed using data • Social and health/environmental impacts of mining are not from the Global Trade Analysis Project (GTAP) 8 Data Base quantified in this report. This omission is intentional (Global Trade Analysis Project 2012). because the quantification of these impacts would involve a different type of analysis. The report, however, addresses • Section 2.4 shows the possible future contributions of some of these impacts in a more qualitative way through mining under different scenarios. The life cycle data the stakeholder surveys that were conducted. provided by the sample of mining companies has been adjusted to reflect the “new” situation by applying some general assumptions. The applications of these assumptions aim to help illustrate possible future outcomes, but are by no means certain forecasts. • Section 3 uses data from the stakeholder surveys that were held. Overall, 91 interviews were conducted with key stakeholders from Ghana’s mining sector of which the majority were community-based organizations.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 11 Abbreviations
ACET ICMM African Center for Economic Transformation International Council on Mining and Metals capex MPD capital expenditure Mining: Partnerships for Development CSO NGO civil society organization non-governmental organization ECOWAS opex Economic Community of West African States operational expenditure FDI SAM foreign direct investment social accounting matrix GDP SME gross domestic product small and medium-sized enterprise GSS UNCTAD Ghana Statistical Service United Nations Conference on Trade and Development GTAP Global Trade Analysis Project
12 Mining in Ghana – What future can we expect? Mining: Partnerships for Development esy of The Ghana Chamber of Mines ourt Image c
Ghana’s economy and 1 the role of mining 1 Ghana’s economy and the role of mining
This section provides a brief 1.1 background of Ghana’s recent National profile economic, social and governance Governance performance. It also provides the Ghana was the first sub-Saharan African colony to achieve context of the mining industry independence from the British in 1957. Administratively, in Ghana. Ghana is a centralized country. There are 10 regions, but no strong regional governments, and at the local level there are districts and municipalities. In terms of traditional governance system, almost all areas of the country are under the leadership of traditional “Stools” or “skins”, presided over by traditional chiefs.
Growth After a severe collapse in the 1970s, the Ghanaian economy began a recovery in the 1980s that continued through to the 2000s, and slowly regained some of its lost potential. Buoyed by high commodity prices for nearly a decade and the advent of oil production in 2010, the economy grew, on the back of related investments in mining and oil, from its average of 6.5 per cent in the 2000s to 15 per cent in 2011 (non-oil GDP growth in 2011 was about 8 per cent) before slowing down to about 7 per cent in 2013.This rate was comparatively higher than the sub-Saharan African average growth rate of 4.2 per cent (World Bank Group 2015). The expansion of Ghana’s oil industry contributed immensely to the real GDP growth rate in 2011, that is, almost half of the total real GDP growth in that year. Even without oil, the growth rate has averaged about 7 per cent annually between 2008 and 2013 (see Figure 1). There is no doubt that the resurgence of FDI in mining, sustained by favourable gold prices, contributed to this growth spurt.
The growth in GDP is also reflected in the changing structure of the Ghanaian economy. The Ghanaian economy is moving away from agriculture in terms of GDP (about 22 per cent of Ghana’s total GDP) but still employs more than half of the Ghanaian workforce. The industry sector, in which mining resides, contributes about 28 per cent to GDP in 2013, and by far the largest contributor to GDP is the service sector (50 per cent of GDP).
“Buoyed by high commodity prices for nearly a decade, and the advent of oil production in 2010, the economy grew from its average of 6.5 per cent in the 2000s to 15 per cent in 2011.”
14 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Ghana’s economy and the role of mining
Figure 1: Real GDP growth with and without the oil sector, 2008–13 With oil Without oil
2008 9.3% 9.3%
2009 4.0% 4.0%
8.0% 2010 7.7%
15.0% 2011 9.6%
8.8% 2012 8.1%
7.1% 2013 6.5%
0 2% 4% 6% 8% 10% 12% 14% 16% Real GPD growth Sources: ACET and GSS data.
“Ghana’s fiscal picture is one Figure 2: Budget deficit as percentage of GDP, 2005–13
of declining non-oil revenues, 2005 2007 2009 2011 2013 persistent budget deficits and 0 rising debt-to-GDP ratios.” -2 -2%
-4 -4% -4% Fiscal picture Ghana’s fiscal picture is one of declining non-oil revenues, persistent budget deficits (see Figure 2) and rising -6 debt-to-GDP ratios (see Figure 3). The main revenue sources are taxes and non-tax revenue, complemented by grants from development partners, although these have -8 -8% been declining since 2005. Government spending, mainly % of GDP on recurrent expenditure including wages and salaries, -9% has consistently exceeded government revenue. -10 -10% -10% Recurrent expenditure reached as high as 86 per cent of government spending in 2013. Persistent budget deficits have been largely financed by domestic and foreign loans, -12 -12% pushing the debt-to-GDP ratio to nearly 55 per cent in 2013, and it remains one of the highest in the sub-region (World Bank Group 2015). Moreover, Ghana’s inflation at -14 13.5 per cent was well above the regional average of below 10 per cent in 2013. -15% -16 Sources: ACET with Ministry of Finance and GSS data.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 15 Ghana’s economy and the role of mining
Figure 3: External and domestic debt as percentage of GDP, 2009–13
Domestic debt/GDP ratio External debt/GDP ratio
2009 20% 17% 37%
2011 20% 20% 40%
2013 27% 28% 55%
0 10 20 30 40 50 60 70 80 90 100 GDP ratio (%) Sources: ACET with Bank of Ghana data.
External accounts Employment and human development Ghana has become more dependent on imports and suffers Nearly a decade of sustained growth has not been matched from persistent trade and current account deficits. Imports by employment growth. Total employment increased by nearly doubled between 2005 and 2010. Though exports more 3.5 per cent annually on average between 2000 and 2010 than tripled during the same period, it was not enough to (with most of the new jobs occurring in the informal sector) close the trade balance deficit. The deficit has increased to compared with average GDP growth of 6.5 per cent. US$3,849 million in 2013. Except for a modest surplus in Informal sector employment dominates with only about 2003, the current account has averaged a deficit of about 15 per cent of the labour force in formal sector jobs. 6 per cent of GDP since reaching a peak of 12 per cent Youth unemployment doubled from 6.6 per cent in 2006 to in 2008. 12.9 per cent in 2012. Although extreme poverty has fallen from 37 per cent in 1992 to 8.4 per cent in 2014, income inequality persists with the Gini measure of inequality rising by 27 per cent from 0.55 in 1992 to 0.71 in 2013
On human development indicators, Ghana has performed well compared to other sub-Saharan African countries. Ghana ranked 13th out of 52 African countries in the Human Development Index in 2013, achieving “medium” human development status. According to the Global Hunger Index, “According to the Global Ghana is the only country in the subcontinent ranked among the 10 best performers in improving their score between Hunger Index, Ghana is the 1990 and 2011. Ghana’s Global Hunger Index score fell by 58.6 per cent, indicating hunger has declined significantly. only country in the In 2013, the Ibrahim Index of African Governance ranked subcontinent ranked among Ghana seventh out of 52 African countries. the 10 best performers in improving their score between 1990 and 2011.”
16 Mining in Ghana – What future can we expect? Mining: Partnerships for Development
Ghana’s economy and the role of mining
1.2 Figure 4: Gold production in Ghana, 1960–2010
The mining sector 3.5
There is a very long history of mining in Ghana. In particular, there is evidence of gold mining and a gold trade with North Africa going back to the Middle Ages. 3.0 A number of European powers had interests in Ghana, culminating in the establishment of the British “Gold Coast” colony in the nineteenth century. Today, Ghana is 2.5 Africa’s second largest gold producer after South Africa. Figure 4 shows Ghana’s gold production since 1960 and its significant increase since 1990. 2.0
Not surprisingly, Ghana’s mining production is largely driven by gold, contributing more than 95 per cent of the country’s total mineral revenue as shown in Figure 5. 1.5 The other commercially exploited minerals in Ghana include manganese, bauxite and diamonds. Industrial minerals such as brown clays, kaolin, silica sand and 1.0 Ounces of gold produced (million) mica have been exploited on a smaller scale to supply local industries. The country is also endowed with many more under-exploited deposits of iron ore, limestone, 0.5 columbite-tantalite, feldspar, quartz and salt, and there are also minor deposits of ilmenite, magnetite and rutile. There is also huge potential in solar salt production 0 (Minerals Commission 2010). 1960 1970 1980 1990 2000 2010
Source: Minerals Commission.
Figure 5: Total mineral revenues and gold revenues, 2005–13
Total revenue Gold revenue “Ghana’s mining production 6,000 is largely driven by gold, contributing more than 5,000
95 per cent of the country’s 4,000 total mineral revenue.”
3,000 US$ million
2,000
1,000
0 2005 2007 2009 2011 2013
Sources: Ghana Revenue Authority and Minerals Commission.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 17
Ghana’s economy and the role of mining
Ownership Local equity participation in the sector is also very minimal, The ownership structure of the industry can be categorized especially in the large-scale mining sector: domestic players in two main phases. In the post-independence phase (until make up 24 per cent of the sector while foreign companies 1983), there was almost 100 per cent state ownership, with make up the remaining majority (KPMG International 2014). only one exception, the former Ashanti Goldfields Corporation (Minerals Commission 2010). Furthermore, in 1972, the state The small-scale mining industry is reserved for Ghanaians. acquired a majority (55 per cent) interest in the non-state- Although stakeholders describe an influx of foreigners with owned mining operations (Minerals Commission 2010). heavily mechanized illegal mining in the sector, there is The second phase is the post-1983 Economic Recovery hardly any official data to enumerate the extent of foreign Program phase with a push towards attracting foreign influence in the sector. However, in 2014, the Government of investment, privatization and state divestiture. The sector is Ghana deported about 5,000 foreigners reportedly involved now largely foreign owned; the Government of Ghana has illegally in small-scale mining (Ministry of Finance and minority (10 per cent) free carried interest share in most of Economic Planning 2014). the main active large-scale mining operations as shown in Table 1, with Newmont and AngloGold Ashanti as exceptions.1
Table 1: Major mining operating companies in Ghana
Mining company name Government Type of Location in Ghana Country of Annual output share operation origin* (2013)**
Adamus Resources 10% Gold Teleku-Bokazo and Australia 105,215 ounces Nkroful (Western Region) AngloGold Ashanti 1.7% Gold Obuasi (Ashanti Region) South Africa 239,052 ounces and Iduapriem (Western Region) Chirano Gold Mines 10% Gold Chirano (Western Region) Canada 274,683 ounces Ghana Bauxite Company 20% Bauxite Awaso (Western Region) China 826,994 tonnes Ghana Manganese Company 10% Manganese Nsuta (Western Region) Australia 1,997,911 tonnes Gold Fields Ghana 10% Gold Tarkwa and Damang South Africa 785,421 ounces (Western Region) Golden Star Resources 10% Gold Prestea and Wassa Canada 330,807 ounces (Western Region) Newmont Ghana 0% Gold Kenyasi (Brong Ahafo) USA 699,366 ounces and New Abirem (Eastern Region) Perseus Mining (Ghana) 10% Gold Ayanfuri (Central Region) Australia 198,608 ounces Prestea Sankofa Gold 10% Gold Prestea (Western Region) Ghana 22,853 ounces
Sources: Ministry of Finance Ghana Extractive Industries’ Transparency Initiative (GHEITI) 2014 and company websites. Notes: * Country of origin is ascribed to the country of the largest shareholder. ** Ghana Chamber of Mines 2013.
1 The Government of Ghana has a 10 per cent free carried interest in Newmont after the initial cost of investment is recouped. With respect to AngloGold Ashanti, the state holds shares in the global company rather than the Ghana mines.
18 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Ghana’s economy and the role of mining
BURKINA FASO GHANA International boundary
Bawku Province boundary Navrongo Hamale Tumu Zebila National capital Bolgatanga Regional capital Lawra UPPER Town, village EAST Nakpanduri Main road Gambaga UPPER WEST Wulugu Secondary road
K Wawjawga Railroad o lp a Airport Wa w n Gushiago MINING OPERATIONS Vol hite ta 1 Adamus Resouces W NORTHERN 2 Chirano Gold Mines Daboya Tamale Yendi 3 Gold Fields – Damang Sawla 4 Gold Fields – Tarkwa Zabzugu Gbenshe 5 Golden Star – Wassa Japei Bole Damango 6 Newmont – Ahafo a k a Bimbila ti 7 Newmont – Akyem D O
lta Vo Salaga 0 25 50 75 100 Kilometers k c
a l 02550 75 Miles CÔTE D’IVOIRE B Yeji VOLTA Bamboi Kintampo Sampa Dumbai BRONG-AHAFO Kwadjokrom Kete Krachi Wenchi ru Techiman P Atebubu Tain Kadjebi TOGO Jasikan Sunyani Ejura Bechem Hohoe Afra Lake Mampong m Volta Kpandu ASHANTI EASTERN Agogo 6 Kumasi BENIN Konongo Ho Adriemba a i L. Bosumtwi Anyirawasi B Bekwai A n Begoro u m im Wiawso Awaso 7ir Akosombo Dzodze Obuasi B Dam o n 2 V a Kade ese olt Aflao T k a an Koforidua Sogakofe Dunkwa Oda m a Keta Lagoon WESTERN s Keta A Nsawam GREATER Enchi Foso Shai Anloga Hills ACCRA Ada Swedru Tema 3 Twifu Praso Teshi 5 CENTRAL Accra P
r a Winneba 1 Elmina Saltpond Newtown 4 Cape Coast Half Assini Esiama Sekondi-Takoradi Axim Gulf of Guinea
Source: Based on map 4186, United Nations, www.un.org.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 19 Ghana’s economy and the role of mining
Mining sector policy and legal framework Competition for investment across the African continent has Assisted by the World Bank and IMF, in 1983 the mining informed amendments in the mining laws and regulation in sector in Ghana started the inception stages of the Economic Ghana. In 2006, the Minerals and Mining Law, 1986, PNDCL Recovery Program guided by the Structural Adjustment 153 was replaced with the Minerals and Mining Act (Act 703). Program. The policy orientation was to strengthen the value Act 703 was meant to be a game changer in bringing in of the domestic currency through the promotion of exports foreign investment; it offered favourable terms to investors and to increase FDI inflow. The mining sector was identified by reducing government carried interest in new mining firms as a sector that could champion this agenda. To this end, a to 10 per cent and introduced stability clauses. Act 703 was comprehensive mining law, which was the first in the history amended in 2010 with the Minerals and Mining (Amendment) of Ghana (Minerals and Mining Law, 1986, PNDCL 153), was Act (Act 794). designed to aid large-scale investment in the sector. The law and the subsequent efforts to regulate the small-scale gold The strong desire to deepen local involvement in mining mining sector in 1989 led to significant investment activity, culminated in the latest piece of legislation in 2012, Minerals leading to an increase in gold production, as well as in and Mining (General) Regulations (LI 2173), which requires bauxite and manganese. Subsequent legislation and reforms mineral rights holders “to procure goods and services of focused mainly on establishing key state mineral institutions Ghanaian origin to the maximum extent possible”. A cursory to govern the sector (see Table 2). look at all policy developments in the sector over the last decade demonstrates that government is increasingly focusing on regulating and promoting the small-scale mining sector and strengthening the collection, transparency and management of mineral revenues. Appendix D provides a more detailed overview of the key policy developments in Ghana since 2004.
Table 2: Legislation and reforms governing the mining sector
Reforms Date
Minerals and Mining Law, PNDCL 153 1986 Establishment of the Minerals Commission, PNDCL 154 1986 Minerals (Royalties) Regulations, LI 1349 1987 Small-scale Gold Mining Law, PNDCL 218 1989 Precious Minerals Marketing Corporation Law, PNDCL 219 1989 Establishment of Precious Minerals Marketing Corporation 1989 Establishment of Environmental Protection Agency 1994 Drawing up of mining environmental guidelines 1994 Minerals and Mining (Amendment) Act (Act 475) 1994 Review of mining environmental guidelines 1999 Divestiture of state-owned mines from 1992 to 1999 1992 to 1999 Minerals and Mining Act (Act 703) 2006 Minerals and Mining (Amendment) Act (Act 794) 2010 Minerals and Mining (General) Regulations, LI 2173 2012 Minerals and Mining (Support Services) Regulations, LI 2174 2012 Minerals and Mining (Compensation and Resettlement) Regulations, LI 2175 2012 Minerals and Mining (Licensing) Regulations, LI 2176 2012 The Minerals and Mining (Health, safety and Technical) Regulations LI 2182 2012 Minerals and Mining (Explosives) Regulations LI 2177 2012
Sources: Akabzaa and Darimani 2001 and Ibrahim 2013.
20 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Ghana’s economy and the role of mining
The Ministry of Lands and Natural Resources, through The highlight of the fiscal provisions in the 2010 amendment the Geological Survey Department and the Minerals is the change in royalty rate from a variable rate of 3 to 6 per Commission, oversees all aspects of Ghana’s mineral sector. cent to a fixed rate of 5 per cent across the sector. Stability The Geological Survey Department is responsible for and project development agreements with some companies providing reliable and up-to-date geological information and meant the change did not apply to all mining companies. serves as the repository for the country’s geoscientific data. The amendment also saw the change in the capital allowance The Minerals Commission is responsible for regulating and regime to a straight-line depreciation of 20 per cent per managing the use of Ghana’s mineral resources and for annum from the previous accelerated depreciation of 80 per co-ordinating government policy related to them. Through its cent first year and 50 per cent declining in subsequent years. Inspectorate Division, the Minerals Commission institutes Furthermore, the amendment changed corporate tax from and enforces environmental, health and safety standards in 25 per cent to 35 per cent. Loss carry-forward provisions of the country’s mines and ensures that mining companies and five years apply. Mining companies are exempt from paying all mining-related activities comply with Ghana’s mining and import and export duties on some items outlined in the mineral law. Mining List and are mandated to a withholding tax of 10 per cent2 and a capital gains tax of 15 per cent. Mining fiscal regime Ghana’s mining fiscal regime has been fairly stable since The mining sector today the mid-1980s. Major amendments were made in 2006 with The mining sector today continues to be an important the promulgation of the Minerals and Mining Act (Act 703). sector for the Ghanaian economy. Figure 6 shows that Ghana generally uses the minimum of upfront rent capture Ghana broadly conforms to the inverted pyramid pattern and unit- or value-based tax types, relying more heavily of macroeconomic contributions seen in other low- and on mandatory revenue- and profit-based measures. middle-income mineral-driven countries.
Figure 6: The national contributions of mining in 2013 Typical share in low- Ghana and middle-income mineral-driven countries
60%–90% 50% > FOREIGN DIRECT INVESTMENT
30%–60% 37% EXPORTS
3%–20% 19% GOVERNMENT REVENUE
3%–10% 1.7% GROSS DOMESTIC PRODUCT
DIRECT 1% 1.1% EMPLOYMENT
Sources: Ghana figures are based on ACET with Bank of Ghana, Ghana Revenue Authority, GSS, Minerals Commission and Ministry of Finance data, and the typical share is retrieved from previous MPD Toolkit applications.
2 There are a range of withholding taxes in Ghana. For a complete overview of withholding tax rates see p30 of PwC’s report: A quick guide to taxation in Ghana – 2014 Tax Facts and Figures.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 21 Ghana’s economy and the role of mining
Mining-related FDI, as Figure 6 shows, is over 50 per cent of Ghana’s total FDI inflow, and mining exports grew by “Mining-related FDI is over more than 400 per cent since 2005 (see Figure 7). 50 per cent of Ghana’s total The sector has therefore been important for Ghana as it provided the necessary foreign exchange reserves and FDI inflow, and mining supported the country’s balance of payments position. Mining exports’ contribution to overall exports (see exports grew by more than Figure 8) has averaged around 41 per cent of overall exports since 2005 and was 37 per cent in 2013. 400 per cent since 2005.”
Figure 7: Mining exports, 2005–13
2005 1,023
2006 1,372
2007 1,815
2008 2,264
2009 2,619
2010 3,888
2011 5,063
2012 5,771
2013 5,141
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 US$ million Sources: ACET with Bank of Ghana data.
Figure 8: Mining exports’ contribution to overall exports, 2005–13
Total mining exports (US$ million) Total non-mining exports (US$ million)
2005 2,802
2006 3,727
2007 4,195
2008 5,270
2009 5,880
2010 7,960
2011 12,773
2012 13,552
2013 13,752
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 US$ million Sources: ACET with Bank of Ghana data.
22 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Ghana’s economy and the role of mining
Figure 9: Tax payments from the mining sector as percentage of total direct tax payments in Ghana, 2005–13
2005 11%
2006 10%
2007 14%
2008 15%
2009 18%
2010 21%
2011 28%
2012 21%
2013 19%
0 5% 10% 15% 20% 25% 30% 35% % of direct tax payments Sources: Ghana Revenue Authority and Minerals Commission.
Figure 9 shows that about 19 per cent of government tax As well as paying taxes and providing employment revenue comes from the mining sector. Except for the opportunities, mining companies also make direct recent advent of oil, the mining sector makes the largest contributions to the communities that host their operations. contribution to government revenue. Royalties alone have These social investments are diverse and support a range ranged between 4 and 6 per cent of total direct tax revenue of priorities such as education, health, alternative and corporate income tax between 5 and 16 per cent for the livelihood assistance and other infrastructural needs. period 2005 to 2013. Total royalties, corporate income tax These expenditures are intended to complement the and other tax payments made by the mining sector range government’s efforts in developing the mining communities. from 10 per cent to 28 per cent, averaging about 16 per cent for the past decade. According to the Resource Governance Index, Ghana’s governance of the resource sector ranked 15th out of 58 in Although formal large-scale mining is capital intensive, the world in 2013. The index measures country governance large-scale mining and artisanal mining together provide performance in terms of government accountability, considerable direct and indirect employment. The Ghana transparency and rule of law. Areas for attention are Living Standards Survey conducted between 2005 and 2006 Ghana’s reporting practices, as the government does not indicated that mining’s share of total employment in Ghana publish comprehensive information on key aspects of the was about 0.7 per cent (Ghana Statistical Service 2008b). mining industry. Ghana was the highest ranked African According to the 2010 census, the mining and quarrying country followed by Zambia and then South Africa as sectors all together employ 1.1 per cent of all jobs; this shown in Figure 10. figure likely underestimates the overall employment effect of mining (Ghana Statistical Service 2013). The Ghana Living Standards Survey completed in 2014 records an increase of employment in mining and quarrying to 1.6 per cent (Ghana Statistical Service 2014a). Employment in the sector has “Except for the recent advent more recently declined because of the limited operations phase of the Obuasi mine – the largest gold mine in the of oil, the mining sector makes country in terms of direct employment. the largest contribution to government revenue.”
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 23 Ghana’s economy and the role of mining
Figure 10: Resource Governance Index 2013
Norway United States United Kingdom Australia Brazil Mexico Canada Chile Colombia Trinidad and Tobago Peru India Tomor-Leste Indonesia Ghana Liberia Zambia Ecuador Kazakhstan Venezuela South Africa Russia Philippines Bolivia Morocco Mongolia Tanzania Azerbaijan Iraq Botswana Bahrain Gabon Guinea Malaysia Sierra Leone China Yemen Egypt Papua New Guinea Nigeria Angola Kuwait Vietnam Congo (DRC) Algeria Mozambique Cameroon Saudi Arabia Afghanistan South Sudan Zimbabwe Cambodia Iran Qatar Libya Equatorial Guinea Turkmenistan Myanmar
0 10 20 30 40 50 60 70 80 90 100
Source: Natural Resource Governance Institute.
24 Mining in Ghana – What future can we expect? Mining: Partnerships for Development esy of The Ghana Chamber Mines ourt Image c 2 Macroeconomic life cycle contributions of mining 2 Macroeconomic life cycle contributions of mining
This section presents – for the first Figure 11 shows all those mining companies that are included in our analysis (green) and those companies that are time – a picture of the macroeconomic excluded from the analysis (yellow and red). contributions from Ghana’s mining sector, using both actual and projected It should be noted that the life cycle company data is based on historic data beginning in 2010 and planned production data provided by a number of Ghana’s figures from 2014–2022 from a sample of seven mining largest mining companies (see Annex operations. These projections are based on expenditures that A for more details on the data and are presently authorized and exclude the ones that may be authorized or revised in the future. At the start of this study assumptions used). The seven mines the majority of the sample of mining companies based their together represent over 71 per cent of projections on a US$1,300 per ounce gold price, and the large-scale gold mining sector or consequently all other mining companies who did not work with that price adjusted their life cycle financials accordingly. approximately 46 per cent of the entire Projections show the minimum expected contributions of the gold mining industry in Ghana. sample of mining companies under a given gold price, assuming that international and national policy conditions remain broadly as they are now. Therefore the results presented in this report are not forecasts but rather an illustration of what the future may look like.
Figure 11: Percentage breakdown of the gold mining sector based on gold volumes produced in 2013
Data partially available Data available Data not available
Anglogold Ashanti – Obuasi 5% Anglogold Ashanti – Iduapriem 5% Golden Star – Bogosa/Prestea 3% Golden Star – Wassa 4%
Gold Fields – Tarkwa 14%
Gold Fields – Damang 3%
Newmont – Ahafo 13%
Newmont – Akyem 3% Chirano Gold Mines 6% Adamus Resources 2% Perseus Mining (Ghana) 5% Other mining companies 1% Total small-scale 35%
Source: Minerals Commission.
26 Mining in Ghana – What future can we expect? Mining: Partnerships for Development
Macroeconomic life cycle contributions of mining
2.1 “The sample of mining Life cycle projections of the mining sector companies does not include Figure 12 provides an overview of the historical and projected mine production volumes and shows increasing production any new projects that may volumes from 1,910 thousand ounces in 2010 to a projected amount of 2,138 thousand ounces in 2014. From 2014, come on stream in the future. projected production on average decreases by 4.6 per cent Nor does it include exploration per year to 1,510 thousand ounces in 2022. This decline reflects genuine reductions in production but is also because companies, and therefore the a low gold price constrains mine extension plans. Genuine reductions happen because mines are in different phases of decline in projected gold the life cycle (see Annex E). For example, one mine is expected to close in 2019 while others are (almost) in full production. production is not necessarily The data taken from the sample of mining companies does not include any new projects that may come on stream in a trend for the entire gold the future. Nor does it include exploration companies, and mining industry.” therefore the decline in projected gold production is not necessarily a trend for the entire gold mining industry.
Figure 12: Historical and projected mine production volumes for the seven mines in the sample, 2010–12
Historical data
2010 1,910
2011 2,036
2012 1,979
2013 2,047
Projected data
2014 2,138
2015 2,024
2016 1,907
2017 1,908 Average 4.6% 2018 1,922 production decrease 2019 1,902 per year
2020 1,836
2021 1,533
2022 1,510
Average 1,896
0 500 1,000 1,500 2,000 2,500 ’000 ounces Source: Steward Redqueen and mining company data from seven mines.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 27 Macroeconomic life cycle contributions of mining
Figure 13 shows that declining volumes and lower gold “The high gold price in the prices (compared to the all-time high in 2011) bring about period 2010–13 led to lower revenues and expenditures from 2014 onwards. The high gold price in the period 2010–13 led to significant significant investments in investments in the sector. This situation reverses from the sector.” 2014 onwards, in part reflecting lower gold prices.
Figure 13: Historical and projected sales revenues and expenditures for the seven mines in the sample, 2010–22
Sales revenues Expenditures Historical data
2010 2,258 2,162 2011 3,342 2,725 2012 3,481 3,064 2013 3,693 3,447 Projected data
2014 2,317 2,095 2015 2,446 2,255 2016 2,221 2,104 2017 2,194 2,054 2018 2,222 2,078 2019 2,185 2,065 2020 2,220 1,909 2021 2,062 1,716 2022 2,075 1,728
Average 2,517 2,262
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 US$ million Source: Steward Redqueen and mining company data from seven mines.
28 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Macroeconomic life cycle contributions of mining
Mining-related expenditures were on the increase in the We attribute this primarily to the stage in the life cycle years up to 2013 followed by a projected decline. In the short (see Annex E) whereby non-labour capex and opex term this decrease does not boost mining company profits investment gradually reduce as mines come closer to their because the declining gold price also causes revenues to end of life, and also to efficiency improvements that will decrease. However, from 2020 onwards we see a significant need to take place (as a result of the lower gold price). increase in mining company profits (see Figure 14).
Figure 14: Total historical and projected revenue breakdown for the seven mines in the sample, 2010–22
Non-labour capex Social investments Payments to the government Non-labour opex Wages and labour cost Mining company profits
Historical data
2010 539 1,138 193 276 96 2,258
2011 436 1,364 226 641 617 3,342
2012 470 1,602 256 675 417 3,481
2013 1,139 1,439 311 539 245 3,693
Projected data
2014 326 1,142 231 367 222 2,317
2015 431 1,236 228 351 191 2,446
2016 332 1,236 229 273 117 2,221
2017 328 1,209 218 294 140 2,194
2018 338 1,186 220 331 145 2,222
2019 364 1,181 210 305 121 2,185
2020 310 995 181 418 312 2,220
2021 176 995 171 412 346 2,062
2022 243 905 161 415 347 2,075
Average 418 1,201 218 408 255 2,517
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 US$ million
Source: Steward Redqueen and mining company data from seven mines.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 29 Macroeconomic life cycle contributions of mining
Figure 15 presents the cumulative profits of the sample of If we look specifically at the expenditures made in Ghana, mining companies, government income and supplier Figure 16 shows that expenditures in Ghana were about half expenditures over the period 2010–22. On average, mining of total revenues seen in Figure 14. Imports and foreign company profits (profits accruing to mining companies after profits (profits accruing to the international shareholders of all statutory obligations are satisfied), are approximately the mining companies that operate in Ghana) are excluded 10 per cent of total revenues, while the Government of Ghana from the analysis as they do not affect the Ghanaian receives about 16 per cent of total revenues. This shows that economy.3 Apart from profits to foreign shareholders, the the government is the largest individual beneficiary of the reality is that for many goods and services there are either presence of mining; for every US$1 of mining company no Ghanaian alternatives available or none that meet the profits US$1.6 accrues to the Government of Ghana. quality and timeliness standards of the mining sector. In the Considering that most companies in the sample of mining remainder of this report, “in-Ghana” supplier expenditures, companies invested most before 2010, average profits for the local procurement and local sourcing will be used sample of mining companies are likely to be even less over interchangeably. the full life cycle than the 10 per cent stated in Figure 15.
Figure 15: Historical and projected cumulative expenditures, government income and mining profits, 2010–22
Total expenditures (excl government income) Total government income Total profit mining companies
Historical data
2010
2011
2012
2013
Projected data
2014
2015
2016
2017
2018
2019
2020
2021
2022 74% 16% 10%
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 US$ million
Source: Steward Redqueen and mining company data from seven mines.
3 In cases where foreign profits are reinvested in Ghana they will reappear as national payments or imports in the following years.
30 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Macroeconomic life cycle contributions of mining
Ghanaian non-labour capex and opex, and social investments On average the sample of mining companies paid about comprise half of all expenditures made in Ghana and are US$177 million in salaries. This includes all salaries paid considered local procurement expenditures. On average to national employees and allowances for national and this is US$628 million, respectively US$155 million, expatriate employees (spending on housing, transportation, US$456 million and US$17 million, which is about 25 per food, etc in Ghana). cent of total expenditures (US$2,517 million; see Figure 14). Most local procurement relates to contract services such as Social investments are an even smaller portion of the construction and transportation, utilities and (maintenance) payments made in Ghana (on average US$17 million). materials. The social investments shown in Figure 16 are only those that directly impact the Ghanaian economy; construction of Compared to supplier and government payments, salaries schools, boreholes and clinics are included, but scholarships are a relatively small component of spending in Ghana to Western schools and other expenses abroad are not as (reflecting the capital-intensive nature of the mining they do not affect the Ghanaian economy (in terms of industry). spending).
Figure 16: Historical and projected expenditures in Ghana, 2010–22
Non-labour capex Social investments Payments to the government Non-labour opex Wages and labour cost
Historical data
2010 199 419 139 276 1,050
2011 161 499 171 641 1,530
2012 174 591 200 675 1,700
2013 421 504 257 539 1,741
Projected data
2014 121 433 184 367 1,134
2015 160 469 180 351 1,170
2016 123 479 182 273 1,065
2017 121 466 179 294 1,066
2018 125 460 184 331 1,104
2019 135 467 180 305 1,091
2020 115 396 155 418 1,089
2021 65 383 148 412 1,011
2022 90 367 141 415 1,017
Average 155 456 177 408 1,213
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 US$ million
Source: Steward Redqueen and mining company data from seven mines.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 31 Macroeconomic life cycle contributions of mining
2.2 The size of the red dots shows the amount of value added Mining’s impact on value added generated by a sector. The size of he grey dots shows the beneficiaries of value added. The line thickness indicates the size of a flow. In order to show the current and potential impact of mining in Ghana, the report shows direct and indirect value added The single largest flow is the tax and non-tax contribution of in Ghana between 2010 and 2022. Value added is defined mining to government income. The construction sector as the sum of salaries, taxes and profits that accrue to receives most of the supplier expenditures, but there are also Ghanaian residents or entities and is comparable to Ghana’s considerable expenditures on local trade, manufacturing and GDP. From the life cycle data provided by the sample of utilities. The indirect value added from intermediary demand mining companies, we can determine the direct value added (red arrows) is shown as grey arrows flowing from each that the sample contributes to Ghana. However, in order to economic sector to the value-added components. determine the indirect value added in Ghana, we need to understand how much is locally procured and in which Figure 17 also shows how the sample of mining companies economic sectors those payments end up. is integrated into Ghana’s economy. While it may never be possible to source all specialized products and services from Figure 17 presents a visual impression of how value added within Ghana, there are opportunities to get a greater degree (grey arrows and dots) is created as the spending of the of integration via upstream linkages, which can drive greater sample of mining companies (blue arrows and dots) and the economic diversification (if these sectors can supply other intermediary demand between sectors (red arrows) moves sectors, rather than be reliant only on the mining sector through the economy. The size of the blue dot indicates total for business). payments made by the sample of mining companies.
Figure 17: Pathways through which the sample of mining companies’ expenditures creates value addition
Supplier payments Agriculture
Intermediary demand
Value added Manufacturing
Utilities
Extractives Household income
Mining companies Company profits and savings Construction
Government income Trade
Transportation and communication
Services
Source: Steward Redqueen and mining company data from seven mines. Note: For reasons of interpretation, intra-sector flows and flows smaller than US$1 million are excluded.
32 Mining in Ghana – What future can we expect? Mining: Partnerships for Development
Supplier payments Agriculture
Intermediary demand
Value added Manufacturing
Utilities
Extractives Household income
Mining companies Company profits and savings Construction
Government income Trade
Transportation and communication
Services Macroeconomic life cycle contributions of mining
Figure 18 breaks down the total value added per round of The formal and capital-intensive nature of the mining industry impact (for more information on rounds of impact see Annex is the reason that indirect value added is much less than the A). In 2013, a total of US$1,556 million value added was direct value added. Having more capital available in a sector supported, which is approximately 3.2 per cent of Ghana’s that is well regulated results in higher levels of productivity GDP of which US$796 million was supported by the sample and thus more value added per job. Besides that, some of the of mining companies themselves, US$507 million by direct local procurement (the sum of Ghanian non-labour capex and suppliers and US$252 million by suppliers of the direct opex, and social investment; see Figure 16), which drives the suppliers. Total value added decreases to US$940 million or indirect effects, is also lost due to additional imports by direct 1.3 per cent of Ghana’s GDP in 2022,4 which is in line with and indirect suppliers. Based on the input-output methodology the decline in Ghana expenditures as is shown in Figure 16. (see Annex A), we estimate that about 20 per cent of procurement expenditures leave the country and the rest is translated into value added. This means that for every US$1 spent on local procurement about US$0.80 is value added.
Figure 18: Historical and projected value added per round, 2010–22
Mining companies Direct suppliers Suppliers’ suppliers
Historical data
2010 425 324 187 927
2011 812 357 226 1,395
2012 875 408 261 1,544
2013 796 507 252 1,556 3.2% of GDP Projected data
2014 551 270 210 1,031
2015 531 297 228 1,056
2016 454 275 228 957
2017 474 265 224 963
2018 515 263 224 1,002
2019 485 274 227 986
2020 573 233 194 1,000
2021 560 192 183 936
2022 556 203 180 940 1.3% of GDP
Average 584 298 217 1,099
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 US$ million
Source: Steward Redqueen and mining company data from seven mines.
4 Ghana’s GDP has been estimated by multiplying Ghana’s GDP in 2013 by the average growth rate of GDP from the last 10 years. This results in an estimated GDP of approximately US$75 billion in 2022.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 33 Macroeconomic life cycle contributions of mining
Figure 19 provides a breakdown of the historical and projected value added per category. The Government of “Although a fluctuating gold Ghana and Ghanaian households are the biggest recipients price directly influences royalty of the value added. As mentioned in Section 2.1, mining company profits (foreign profits) are excluded from the and corporate income tax analysis as they do not affect the Ghanaian economy. Figure 19 therefore only shows profits that are retained in payments, the drop in Ghana, in this case profits made by direct suppliers and suppliers of suppliers. government income starting in 2014 is primarily due to capital allowances in mining.”
Figure 19: Historical and projected value added per category, 2010–22
Household income Ghanaian company profits Government income
Historical data
2010 494 91 342 927
2011 571 107 716 1,395
2012 660 123 761 1,544
2013 786 134 636 1,556
Projected data
2014 507 95 429 1,031
2015 534 104 419 1,056
2016 519 101 338 957
2017 507 99 358 963
2018 509 99 394 1,002
2019 515 101 370 986
2020 441 86 473 1,000
2021 397 78 461 936
2022 396 79 465 940
Average 526 128 446 1,099
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 US$ million
Source: Steward Redqueen and mining company data from seven mines.
34 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Macroeconomic life cycle contributions of mining
In comparison to in-Ghana expenditures (see Figure Box 2: Capital allowances in mining 16), Figure 20 shows that income for the Government of Ghana in the form of tax and non-tax payments is It is standard accounting practice to distribute the cost of acquiring much more volatile. Although a fluctuating gold price capital (buildings, machinery and equipment) over several years. directly influences royalty and corporate income tax The reason for this is that if the capital is used over a long period, its payments, the drop in government income starting in cost should not be counted against the revenues of only one year. 2014 is primarily due to capital allowances in mining Tax authorities around the world generally follow the same practice, (see Box 2 for more details on capital allowances). requiring the cost of equipment to be deducted against revenues In 2020, most investments have been recouped, which over several years, corresponding roughly to the life of the piece of equipment. Such deductions are called “capital allowances” and are results in an increase of corporate income tax payments thus not allowances in the sense of something being given away by of almost US$100 million (from US$88 million in 2019 tax authorities to companies. Rather, they reflect the fact that the to US$184 million in 2020). On average, corporate acquisition of capital and turnkey projects to construct a mine are income tax payments are US$163 million, but these costs that companies can offset against income. fluctuate from US$55 million in 2016 to US$349 million in 2012. In addition to the direct tax and non-tax In the case of mining (and often as a general principle), many jurisdictions allow companies to deduct the cost of equipment over payments to the Government of Ghana, this report also a shorter period than the equipment’s productive life. This is called considers the tax payments by suppliers (on average “accelerated depreciation”. This practice does not affect the total US$46 million) and the payments by suppliers of amount of tax that is paid over the life of the mine, but it means that suppliers (on average US$20 million). less tax is paid in earlier years and more in later years.
Figure 20: Historical and projected government income broken down by source 2010–22
Free carried interest Payroll tax Royalties Suppliers’ suppliers tax Other taxes Corporate income tax Direct suppliers tax
Historical data
2010 84 33 90 59 46 19 342
2011 69 140 42 279 111 53 22 716
2012 4686 49 349 144 60 26 761
2013 2775 55 254 129 71 26 636
Projected data
2014 25 65 42 116 120 43 19 429
2015 2157 39 121 113 47 21 419
2016 59 39 55 108 44 21 338
2017 57 37 75 110 43 20 358
2018 56 38 102 119 43 20 394
2019 49 32 88 124 44 20 370
2020 35 41 27 184 131 38 17 473
2021 38 39 26 204 104 33 16 461
2022 39 38 25 206 108 34 16 465
Average 28 65 37 163 114 46 20 474
0 100 200 300 400 500 600 700 800 US$ million Source: Steward Redqueen and mining company data from seven mines.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 35 Macroeconomic life cycle contributions of mining
The previous graphs showed both the direct and indirect “On average there are five value-added impact. Figure 21 captures only indirect sectors that together support impacts that stem from local procurement. On average there are five sectors that together support most value most value added: extractives, added: US$84 million in extractives, US$60 million in utilities, US$112 million in construction, US$97 million in utilities, construction, trade trade and US$85 million in transportation and and transportation and communication. communication.”
Figure 21: Historical and projected value added per sector, 2010–22
Agriculture Manufacturing Construction Transportation and communication Extractives Utilities Trade Services
Historical data
2010 62 30 38 138 92 81 61 511
2011 82 31 53 141 105 96 59 583
2012 93 36 60 154 122 110 81 699
2013 87 39 54 278 123 113 54 760
Projected data
2014 85 25 62 99 91 81 30 480
2015 92 28 67 111 100 88 32 525
2016 92 27 67 88 100 88 32 503
2017 91 26 67 84 97 85 30 489
2018 92 26 68 85 96 83 28 487
2019 92 26 69 91 96 84 35 502
2020 79 22 59 78 82 70 29 427
2021 76 20 58 46 77 66 27 376
2022 75 20 56 62 75 64 26 384
Average 84 27 60 112 97 85 40 515
0 100 200 300 400 500 600 700 800 US$ million
Source: Steward Redqueen and mining company data from seven mines.
36 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Macroeconomic life cycle contributions of mining
2.3 Figure 22 shows that on average about 27,000 jobs are Mining’s impact on employment supported by direct suppliers, 39,000 jobs are supported by the suppliers of suppliers and 37,000 are supported through the re-spending of salaries. Note that only for jobs, and not When it comes to jobs supported in mining, this report for value added, we take the re-spending of salaries into includes jobs at mine sites as well as the indirect jobs with account as an additional round of impact. Whereas the suppliers and induced jobs caused by the re-spending value-added impact mainly comes directly from the sample of salaries. Over the period 2010–22, the sample of mining of mining companies (including value added would amount companies is estimated to support between 83,000 and to a double count; salaries would be counted when earned 148,000 jobs, equivalent to an average of 111,000 jobs and then went spent). Figure 22 shows that most jobs are annually. In 2013, about 1.3 per cent of the Ghanaian labour actually supported indirectly in the value chain. This results force was supported by the sample of mining companies, a in an average job multiplier of 15; for every 1 job at the figure that is projected to decline to 0.6 per cent of the labour sample of mining companies there are an additional 15 jobs force in 2022.5 This decline reflects the increase in labour supported in the Ghanaian economy. productivity but also the declining volumes and expenditures.
Figure 22: Historical and projected direct, indirect and induced employment per sector, 2010–22
Mining companies Direct suppliers Suppliers’ suppliers Re-spending of salaries
Historical data
2010 6435 39 0120
2011 7436 43 2127
2012 7 38 50 48 143
2013 8538 47 5148 1.3% of labour force Projected data
2014 8324 37 5104
2015 7326 40 7111
2016 7325 40 6108
2017 7324 39 5106
2018 7324 39 6106
2019 7325 40 6107
2020 6321 34 191
2021 6219 32 883
2022 6219 31 883 0.6% of labour force
Average 7327 39 7111
0 20 40 60 80 100 120 140 160 ’000 full-time equivalents
Source: Steward Redqueen and mining company data from seven mines.
5 Ghana’s labour force has been estimated by multiplying Ghana’s labour force in 2013 by the average growth rate of the population from the last 10 years. This results in an estimated labour force of 13.8 million people in 2022.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 37 Macroeconomic life cycle contributions of mining
Figure 23 excludes the induced effects and only shows the The mining sector’s capital-intensive nature is reflected in jobs that are supported through local sourcing. Most of the the quality of jobs that are supported. Job quality is defined jobs, on average 30,000, are in the trade sector. This is no as value added per supported job. Value added is the sum surprise given the informal nature of the trade sector, with of salaries, company profits and government income and jobs such as importers of heavy machinery and equipment, therefore the quality of job numbers should not be hotel and restaurant staff but also street vendors. compared to different levels of salary, although there Local procurement is on average US$628 million (see obviously is a relation. Figure 16) and on average 66,000 jobs are supported (excluding the 7,000 jobs that the sample of mining companies employ themselves); the local procurement multiplier is 105 jobs per US$1 million of local procurement.
Figure 23: Historical and projected direct and indirect employment per sector, 2010–22
Agriculture Manufacturing Trade Extractives Utilities Transportation and communication Mining companies Construction Services
Historical data
2010 536 11 3 11 27 7 7 80
2011 737 10 5 9 30 8 6 85
2012 737 12 6 7 37 8 8 95
2013 638 13 5 12 36 7 5 93
Projected data
2014 428 854 29 5368
2015 437 936 5 2 6374
2016 437 936 4 2 6372
2017 437 836 4 1 6371
2018 437 836 4 1 6370
2019 437 836 4 1 6371
2020 2763 53 27 5361
2021 3652262 5 4256
2022 2653253 5 4255
Average 437 935 5 0 6473
0 20 40 60 80 100 120 ’000 full-time equivalents
Source: Steward Redqueen and mining company data from seven mines.
38 Mining in Ghana – What future can we expect? Mining: Partnerships for Development
Macroeconomic life cycle contributions of mining
Figure 24 shows the quality of jobs supported for an 2.4 average year. The sample of mining companies has the Scenario analyses highest quality of jobs, just over US$85,000 per job. The sectors more closely related with the sample of As indicated, the results in this report are not forecasts but mining companies, such as the extractives and rather an illustration of what is likely to happen. Changes in construction sectors, are substantially above the the gold price, fiscal policy or the amount of goods and national average of US$4,400 in 2013.6 The key driver services procured locally will influence the sample of mining for this, just as for the sample of mining companies, companies’ contribution to the Ghanaian economy. In order to is the sectors’ relative capital intensity. Sectors further address this, we examine the following three scenarios: away from the mining companies, especially agriculture (US$2,200), are more often operating in the informal • decline in the projected gold price economy and therefore the value added per job is lower. • increase in the royalty rate • increase in local sourcing by the sample of mining companies.
Figure 24: Value added per job (direct and indirect) in several sectors (in US$ per job) of the Ghanaian economy on average
Ghanaian average 80,000
70,000 Agriculture
Manufacturing 60,000
50,000 Trade
40,000
Number of jobs 30,000 Services Utilities 20,000 Transportation and communication
Construction 10,000 Extractives Mining companies 0 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000
Value added per job (in US$)
Source: Steward Redqueen and mining company data from seven mines.
6 The Ghanaian average is estimated by dividing GDP by labour force: US$48.7 billion/11.1 million = US$4,401 per person in the labour force.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 39 Macroeconomic life cycle contributions of mining
What happens to the contributions when these events occur Figure 25: Scenario – decline of gold price over time is mine-specific. Much depends on the phase of the life cycle each mine is in. Therefore caution must be taken Change in sales revenue Gold price US$1,100 when interpreting the results from our scenario analyses. Gold price US$1,300 If for example the gold price decreases, for some mines 4,000 volume of earth moved may continue at same speed while 3,500 others may slow down. Mill volumes may change as existing 3,000 stockpiles (which are likely to be lower grade) are milled. 2,500 And when lower grade ore is milled, gold production will decrease. This again will worsen the decrease of net profits, 2,000 enue (m US$)
eventually shortening the life of mine and decreasing total ev 1,500 life cycle revenues. Unfortunately no specific company data 1,000 es r is available for the different scenarios. Therefore, we used Sal 500 a few scenario-specific assumptions to adjust the life cycle 0 data provided by the sample of mining companies and used 2010 2012 2014 2016 2018 2020 2022 the adjusted data in our input-output analysis. Change in direct government income Gold price US$1,100 Declining gold price Gold price US$1,300 The first scenario considers a drop in the gold price from 800 US$1,300 per ounce, the gold price used in the life cycle 700 projections, to US$1,100. Working with company data that is available, we have applied the following assumptions: 600 500 • Royalty payments decrease by the same 15 per cent as ome (m US$) 400 the gold price 300 • Other variables (opex, capex, salaries, social investments 200
and people employed) remain constant in the simulation ernment inc 100 period v Go 0 • Company profits decrease, and the free carried interest 2010 2012 2014 2016 2018 2020 2022 of the government and corporate income tax decrease by more than 15 per cent. Change in value added Gold price US$1,100 Gold price US$1,300 Figure 25 shows that sales revenues are about US$300 1,900 million less every year, government income and total value 1,800 1,600 added are about US$120 million less7 while employment 1,400 does not change. What is not shown in these results is that 1,200 due to a decrease in the gold price, the life of mine is likely 1,000 to decrease. Lower margins mean that it becomes less 800 attractive to mine for the more costly (deeper) ores and 600 therefore mines will close earlier. In this case, the life of
alue added (m US$) 400 mine is likely to decrease, but for all mines it is estimated V 200 that this happens after 2022.8 0 2010 2012 2014 2016 2018 2020 2022
Change in employment Gold price US$1,100 Gold price US$1,300 160 140 ees) 120 oy 100
yment 80 o 60 Empl 7 This is straightforward given that government income is the only 40 value-added component (salaries, Ghanaian company profits and 20
government income) that changes. (‘000 full-time empl 0 8 Income figures for mining companies might be negative in the next years (due to depreciation) but cash flows remain positive and therefore any 2010 2012 2014 2016 2018 2020 2022 earlier closure of a mine, which is likely to happen with a lower gold price, is beyond 2022 and therefore out of the scope of this study. Source: Steward Redqueen and mining company data from seven mines.
40 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Macroeconomic life cycle contributions of mining
Increasing royalty rates Figure 26: Scenario – royalty rate over time If the government changed the royalty regime from 5 per cent to 10 per cent, the same scenario applies as with a Change in sales revenue 10% royalty decreasing gold price; the profits for the sample of mining 5% royalty companies decrease and as a result the life of mine is 4,000 shortened. Working with the company data that is available, 3,500 we have applied the following assumptions: 3,000 • Royalty payments increase from 5 per cent to 10 per cent 2,500 2,000
• Other variables (opex, capex, salaries, social investments enue (m US$)
ev 1,500 and people employed) remain constant in the simulation 1,000 period es r
Sal 500 9 • Company profits and thus free carried interest and 0 corporate income tax decrease due to higher royalty 2010 2012 2014 2016 2018 2020 2022 payments, while expenditures remain constant. Change in direct government income 10% royalty Figure 26 shows that sales revenue does not change, 5% royalty government income increases by about US$70 million, total 800 10 value added increases approximately US$70 million and 700 employment does not change. Higher royalties come at the 600 expense of the participating interest of the government in the mines and at the expense of corporate income tax. 500 That, in combination with a greater chance that the life of ome (m US$) 400 mine will shorten,11 means that the Government of Ghana 300 would receive small short-term gains at the expense of 200 larger long-term gains. ernment inc 100 v
Go 0 2010 2012 2014 2016 2018 2020 2022
Change in value added 10% royalty 5% royalty 1,900 1,800 1,600 1,400 “We used scenario-specific 1,200 1,000 assumptions to adjust the 800 life cycle data provided by 600
alue added (m US$) 400 V 200 the sample of mining 0 companies.” 2010 2012 2014 2016 2018 2020 2022 Change in employment 10% royalty 5% royalty 160 140 120 100 ees) 80 9 The freed carried interest rate, which is a percentage, is fixed by law. oy Although the percentage is fixed it does not mean infer that the actual 60
value (payments) are a fixed amount. empl
yment (‘000 full-time 40
10 This is straightforward given that government income is the only value- o added component (salaries, Ghanaian company profits and government 20 income) that changes. Empl 0 11 Income figures for mining companies might be negative in the next years (due to depreciation) but cash flows remain positive and therefore any 2010 2012 2014 2016 2018 2020 2022 earlier closure of a mine, which is likely to happen with a higher royalty rate, is beyond 2022 and therefore out of the scope of this study. Source: Steward Redqueen and mining company data from seven mines.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 41 Macroeconomic life cycle contributions of mining
Increasing local sourcing Figure 27: Scenario – local sourcing over time On average US$628 million, equivalent to 25 per cent of total expenditure, is spent or projected to be spent in Change in sales revenue Increased local sourcing Ghana. More local sourcing will result in more value added Projected local sourcing and employment in-country. This results in more demand 4,000 for other products and services, and consequently more 3,500 value added and employment is created in the country. 3,000 Increasing demand also allows local industries to develop 2,500 and the country to diversify its economy. A diversified 2,000
economy is desirable because it makes Ghana less enue (m US$) vulnerable to external shocks such as a sudden drop in ev 1,500 1,000 the price for oil, cocoa or gold. es r
Sal 500 The following scenario looks at what happens if the sample 0 of mining companies are able to increase the amount of 2010 2012 2014 2016 2018 2020 2022 procurement spend that is local. Of course not all products and services can be procured locally, even highly developed Change in direct government income Increased local sourcing countries such as Germany and Japan need to import some Projected local sourcing products and services, but working with the company data 800 that is available we have applied the following assumptions: 700 • Local sourcing expenditures for the following categories 600 increase by 25 per cent12 500 – capital equipment ome (m US$) 400 – contract services 300 – materials 200
ernment inc 100 – maintenance supplies v
Go 0 – overhead. 2010 2012 2014 2016 2018 2020 2022 • Local sourcing is price competitive and thus cost neutral13 Change in value added Increased local sourcing Projected local sourcing • Other variables remain constant (government income, 1,900 company profits, salaries, social investments and people 1,800 employed) in the simulation period. 1,600 1,400 Figure 27 shows that while sales revenue and government 1,200 income paid by the sample of mining companies do not 1,000 change, more local procurement means more local 800 production resulting in more taxes, salaries and profits 600 being retained in Ghana. The total value added would alue added (m US$) 400 V 200 increase by about US$50 million14 and employment by about 9,000 jobs. If it were possible to increase the percentage of 0 procurement spend that is local – see Section 4 on how this 2010 2012 2014 2016 2018 2020 2022 might be achieved – Ghana would benefit significantly. Change in employment Increased local sourcing Projected local sourcing 160 140 120 12 For these expenditure items we assume that first the “low hanging fruit”, 100
that is products and services of less technical requirements, are procured. ees) 80 Other expenditure items such as transportation and communication are oy already almost fully locally sourced and therefore have not been included 60
in the assumptions/analysis. empl
yment (‘000 full-time 40
13 In the short run this may not be the case as it is more difficult to produce o products for the same price as imported products, but in the long run 20 Ghanaian companies can become competitive especially considering the Empl lower transportation costs. 0 14 This is straightforward given that government income is the only value- 2010 2012 2014 2016 2018 2020 2022 added component (salaries, Ghanaian company profits and government income) that changes. Source: Steward Redqueen and mining company data from seven mines.
42 Mining in Ghana – What future can we expect? Mining: Partnerships for Development esy of The Ghana Chamber Mines ourt Image c
Local views 3 3 Local views
In addition to the desk research and 3.1 forward-looking analysis based on The different stakeholder groups company data, we undertook The sample of participants surveyed was selected to reflect a consultations with key stakeholders to broad representation of key stakeholder groups in the mining better understand the impact that the sector. The majority of the stakeholders interviewed (55 per mining sector has had on the economy cent) were community-based organizations. The remaining 45 per cent were from national institutions, with the majority and especially on mining communities of them based in the capital city, Accra. Overall, 91 interviews and their social and economic well-being. were conducted with key stakeholders from Ghana’s mining sector (see Annex B) largely from seven broad stakeholder We also asked stakeholders to identify groups shown in Figure 28. the key challenges that are facing the sector and what measures and The community stakeholders were drawn from the surrounding areas of two mining operations in the country interventions they think may be useful – Chirano mine and the Damang gold mine. These mining in order to enhance the sector’s impact. operations are in different stages in the life cycle (see Annex E). Together, these mines represent almost 10 per cent of gold production in Ghana. The selection of stakeholder groups within the communities was informed in part by our consultations with the mining companies and the traditional authorities in the area as shown in Figure 29.
Figure 28: Main stakeholder groups at the national level
Ministries, departments and agencies 26%
Development partners 17%
Mining sector related companies 17%
Parliamentarians 14%
CSOs and think tanks 14% Private sector associations 10% Educational institutions 2%
Source: Field survey.
44 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Local views
Figure 29: Main stakeholder groups at the community level 3.2 Key findings Traditional councils 39% The majority of community stakeholders hold the view that the large-scale mining companies have contributed noticeably to increasing overall economic benefits. Community stakeholders especially feel that the sector has a positive impact on employment and that business opportunities have opened up in the surrounding communities. As Figure 30 shows, a large majority of the Local government community stakeholders (86 per cent in total) feel that institutions 36% the mines employ a greater number of local people. Some highlighted that mining remains one of the main sources of formal employment and although people locally employed were generally at the bottom of the national pay scale, mining jobs tend to pay higher than other sectors.
CSOs 17% Similarly, the majority of community-based stakeholders Security services 4% believe that these mining companies provide both direct and indirect business opportunities for the community; Mining sector related companies 4% communities referred to a number of large direct contracts available to supply the mines in areas such as catering, security and transport services. Moreover, communities Source: Field survey. referred to several indirect business opportunities that they believe have emerged from supplier companies to the mining sector. They mention that hospitality and distributive trade in the mining communities depend largely on the depth of mining activities in the catchment areas. They also hold the view that farming has benefited as demand for agricultural products increased via direct demand from mining companies as well as from the aforementioned hospitality services.
Figure 30: Impact of mining on recruitment and local business activities
Direct recruitment of locals Local business opportunities
Very positive 21% 12%
Positive 65% 67%
5% Negative 11%
7% No effect 5%
Cannot tell 2% 5%
0 10% 20% 30% 40% 50% 60% 70% 80%
Source: Community stakeholder interviews.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 45 Local views
Communities referred to a range of immediate positive Figure 31: Impact of social investments perceived on economic opportunities and the effects on their daily different community groups lives, especially in access to improved social amenities. However, survey respondents from national-level institutions saw only limited economic opportunities. Cannot tell 12% About one-third of mining-related companies and half of CSOs and private sector associations believe that there is limited participation of Ghanaians and that limited No effect 12% employment opportunities are provided by the mining sector. Respondents from sector-related ministries, departments and agencies, and parliamentarians, focused Positive 76% on the adverse impact on livelihoods, even when data to Men support some of the viewpoints is generally weak or non-existent. General observation of this group of respondents was that while there has been an increase in business opportunities for locals, jobs have been mostly low paid, with limited upward mobility, and local businesses have limited capacity to execute contracts offered by the mines.
Stakeholders from the communities also acknowledge that they are more dependent on social investments from Cannot tell 10% mining companies, which they see as part of companies’ social responsibility. Communities have come to expect fewer interventions from their local authorities, observing No effect 12% that the mining companies are more receptive to their demand for social support than the local authorities. Key social investments by mining companies, mainly in education and health, constitute critical basic Positive 78% infrastructure in the communities. Examples of high-value Women interventions cited are the provision of junior secondary schools, clinics, boreholes and recreation centres. Figure 31 shows that the impact of social investments is perceived as being largely uniform across gender and by generations for the reason that improvements in social amenities, especially clinics, schools and water, are generally shared community goods. Communities attributed the positive impact to the fact that what companies provide aligns with their development needs and pointed out that social investments have generally Cannot tell 10% been less effective when there has been poor dialogue between mining companies and communities.
No effect 10%
Children Positive 80%
Source: Community stakeholder surveys.
46 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Local views
To improve the impact of the sector, Figure 32 shows that “Fifty-seven per cent of 83 per cent of CSOs and 75 per cent of private sector development partners and associations believe that the Government of Ghana should strengthen the institutional framework – especially to 50 per cent of parliamentarians enhance revenue management, local content and Ghanaian participation, and ensure greater environmental protection. highlighted the importance of Fifty-seven per cent of development partners and 50 per cent of parliamentarians highlighted the importance of enforcing enforcing the already existing the already existing laws, and stressed that Ghana has sufficient legislation; the problem is often in the clarity of the laws.” legislation and hence in the effectiveness of implementation and enforcement.
Figure 32: Ideas that would improve the impact of the sector, according to different stakeholder groups
Strengthening the policy, Enforcement of laws and policies Increased legislation fiscal and legal framework
43% Suppliers 14% 14%
83% CSOs 33% 17%
Private sector 75% 33% associations 75%
Development 43% partners 57% 0%
Ministries, 36% departments 27% and agencies 27%
0% Parliamentarians 50% 17%
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Sources: National and community stakeholder surveys.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 47
Local views
Although environmental issues were outside the scope of However, it is generally acknowledged by well-informed the study, without exception stakeholders highlighted the stakeholders of the mining industry in Ghana, and this negative impacts on the environment as a whole (see position is backed by Environmental Protection Agency data Figure 33). These range from land use and water issues to (AKOBEN Audits), that most adverse environmental impacts conflict with livelihood activities in the mining communities. of mining cannot be attributed to large-scale mining but Community stakeholders were, however, unable to to unregulated artisanal mining and to a lesser degree determine how much of these environmental impacts could small-scale mining. In addition, about one-third of the be attributed to large-scale mining and how much to the stakeholders indicated social vices such as prostitution increasing activities of artisanal and small-scale miners, as a negative impact of mining. whose largely unregulated operations in the field have intensified in the past decade.
Figure 33: The percentage of stakeholders that identified one of the specific negative effects that mining brings about
Destruction of environment 100%
Collapse of livelihood 88%
Health problems 66%
Social vices 37%
No negative effect 17%
0 20% 40% 60% 80% 100%
Sources: National and community stakeholder surveys.
“It is generally acknowledged by well-informed stakeholders of the mining industry in Ghana, and this position is backed by Environmental Protection Agency data (AKOBEN Audits), that most adverse environmental impacts of mining cannot be attributed to large-scale mining but to unregulated artisanal mining and to a lesser degree small-scale mining.”
48 Mining in Ghana – What future can we expect?a Mining: Partnerships for Development esy of The Ghana Chamber Mines ourt Image c
Emerging priorities 4 for action 4 Emerging priorities for action
General expectations about the future On 29 April 2015, over 70 representatives from mining communities, government, mining companies, development contribution of mining to Ghana’s partners, private sector organizations and civil society were socioeconomic development have never brought together to discuss the preliminary findings of the been greater. This report has assessed report. Based on group discussions and the findings from the analysis, five emerging priorities for action are identified here past and present contributions and that could enhance mining’s future contributions. has used the findings and projections from a sample of mining companies to There are ample opportunities to further increase mining’s contribution to the economy of Ghana and to mitigate the project possible future contributions. effects that stem from the projected decrease in gold production. Five emerging priorities for action are identified below. In order for these to be taken forward, a forum to collectively identify concrete actions and agree roles, responsibilities and timelines for tackling the five priorities in an collaborative manner would be a useful first step. Within the partnership arrangements that are identified, there will be distinct roles for government agencies, the Chamber of mines, mining companies, mining industry suppliers, development partners and CSOs (the latter two being particularly relevant in the capacity building space).
1. Improve the mining policy framework Initiated in 1999, Ghana’s mineral policy remained in draft form and received minimal public debate until December 2014. Only then was it ratified by Cabinet. In anticipation of the White Paper release, it is hoped that the key policy pillars are consistent with the provisions of the key existing legislation and clearly defines the government’s aspirations in relation to the role mining is expected to play in the future.
A clearly defined mining policy framework should be linked to the country’s development plan and industrial policy. The latter must recognize the role of mining and how government intends to collaborate with the sector to concretely design and implement ways to enhance mining’s contribution to future inclusive growth.
“The current treatment of mineral revenues as part of general revenues into the consolidated fund dilutes the important contribution of mining in the eyes of the public, and does not recognize the need to convert mineral revenues into long-term physical and human capital.”
50 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Emerging priorities for action
Although putting in place an explicit policy does not necessarily guarantee good legislation (especially with “If mining’s local procurement legislation already in place and where policy changes are is increased by 25 per cent, inevitable) the advantage of a clear policy is that it provides discipline and guidance: discipline for the legislative and the impact on the Ghanaian regulatory framework, and guidance for the behaviour of all stakeholders. economy would be
2. Provide greater clarity on the management and use of US$50 million in terms mineral revenues Closely related to the broader mining policy is the need for of value added and about public conversation on how Ghana intends to manage and 9,000 additional jobs. share its mining revenues to enhance socioeconomic development, especially at the local level where mining If linked to a broader operations take place. Currently mineral revenues are treated as part of general revenues in the consolidated fund. industrial development This dilutes the important contribution of mining in the eyes of the public, and does not recognize the need to convert policy, linkages with the mineral revenues into long-term physical and human capital. non-mining sector of Moreover, the sub-national distribution formula of mineral revenues has no legal backing nor does it address the economy would deepen.” contemporary challenges in all mining areas, especially in northern Ghana. The formula for distributing mineral revenues applies to stool land revenues and is therefore not applicable to areas where traditional authority is not linked to Priorities for action identified during the workshop land ownership. The application of the formula to emerging discussions and suggested for each key stakeholder group mining communities in the North where land is not owned by are noted below. the traditional authority poses a challenge. Mineral revenue legislation similar to that which exists for the petroleum Government of Ghana and Ghana Chamber of Mines: sector – and within it defining the rationale and the formula for sub-national distribution – will improve transparency • Collaborate with the Minerals Commission in monitoring and accountability. the compliance of companies to local content regulations. • Anticipate obstacles in compliance with legislation for 3. Develop a comprehensive national action plan for more mining companies and local suppliers. local procurement The scenario analysis illustrated that if mining’s local • Provide opportunities for local suppliers to learn more procurement increases by 25 per cent, the impact on the about items selected for local sourcing and inform about Ghanaian economy would be US$50 million in terms of value the standards of quality required. added and about 9,000 additional jobs. Linked to a broader industrial development policy, increased local procurement Mining companies: would deepen linkages with the non-mining sector of the • Continue collaboration with government in the detailed economy. Opportunities for linkages exist in the supply of assessment of items that are feasible to be produced in food items (including those that can be used to cater for Ghana. mine site staff); banking and insurance services; light manufacturing in cyanide, grinding media, machinery spares, • Explore opportunities with existing suppliers or make a crusher spares, pumps and spares, safety equipment, motor co-ordinated effort to start (a portfolio of) companies to fill spares, metal working and chemicals; and business services. the needs of mining companies. For government, deeper local content also means additional sources of tax revenues, directly through mining companies’ • Work with local business to improve the quality and service purchases from suppliers and indirectly through further delivery of their products over time to meet the standards rounds of spending both through income and consumption of the mining industry. taxes. A strong local industry, with technically skilled local employees, is also considerably more attractive to investors. However, this requires collaboration and an appropriate platform to share information, agree on a shared vision and strategy, monitor progress and make any necessary corrections to the national action plan for more local procurement.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 51
Emerging priorities for action
4. Develop a strategic framework for social investments and align it with local authority spending The life cycle analysis for the seven mines shows that social investments are likely to decline. This demonstrates the imperative for mining companies to develop a strategic framework for their social investments in such a way that they contribute to development to the fullest extent possible and align with other company contributions and with government spending. This point is reinforced by the survey results whereby stakeholders from the communities acknowledge that they have become more dependent on the public services made available by mining companies through their social investments.
A first step to achieving better company and government alignment will be for the Government of Ghana to clearly define the role of local governments in the provision of social goods and services. This will enable mining companies both collectively and individually to begin to to align their social investments with local authority spending plans, as well as taking a strategic view of these investments – for example, prioritizing those which nurture small local enterprises. Helping to develop the local private sector through small enterprise development creates additional jobs and generates incomes that will help communities become self-sustaining. Development partners can play a role in this by providing a platform “The mining industry has an for information sharing, project identification and monitoring progress. opportunity to be more
5. Build capacity with different stakeholders proactive in communicating its From our analysis and the outcomes of the multi- stakeholder workshop, there are several areas where contributions and impacts to capacity can be enhanced. A first example is within government institutions, whereby a focus on logistics all stakeholders, as well as and enhanced training will better enable the monitoring managing expectations. and tracking of mineral revenues as dictated by the sub-national distribution formula. Secondly, the mining This will enhance mining industry has an opportunity to be more proactive in communicating its contributions and impacts to all communities’ understanding stakeholders, as well as managing expectations. This will enhance mining communities’ understanding of the of the mining industry, mining industry, including mining processes, the mining life cycle, legal rights of communities and how mining including mining processes, companies contribute to social and economic development through their core and voluntary investments and activities. the mining life cycle, legal A third example is the need to provide management, rights of communities and how finance and operational training to entrepreneurs and small businesses in order that they are able to develop mining companies contribute products and services that meet the requirements of the mining sector and beyond. to social and economic development through their core and voluntary investments and activities.”
52 Mining in Ghana – What future can we expect? Mining: Partnerships for Development esy of Newmont Mining Corporation esy of Newmont ourt Image c
References R R References
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Ghana Statistical Service (2014b). Ministry of Finance and Economic Planning (2010). National accounts statistics. The Budget statement and economic policy of the Accra, Ghana, GSS. Government of Ghana for the 2011 financial year. Accra, Ghana, Ministry of Finance. Global Trade Analysis Project (2012). www.mofep.gov.gh/budget-statements GTAP 8 Data Base. Purdue University, West Lafayette, Indiana, USA, Center for Global Trade Analysis. Ministry of Finance and Economic Planning (2011). www.gtap.agecon.purdue.edu/ The Budget statement and economic policy of the Government of Ghana for the 2012 financial year. Ibrahim, M S (2013). Accra, Ghana, Ministry of Finance. Mining contributing greatly to Ghana’s economy. Modern www.mofep.gov.gh/budget-statements Ghana Media Communication. www.modernghana.com/news/475679/1/mining-contributing- Ministry of Finance and Economic Planning (2013a). greatly-to-ghanas-economy.html The Budget statement and economic policy of the Government of Ghana for the 2013 financial year. ICMM (2007). Accra, Ghana, Ministry of Finance. Ghana country case study. The challenge of mineral wealth: www.mofep.gov.gh/budget-statements using resource endowments to foster sustainable development. London, UK, ICMM. Ministry of Finance and Economic Planning (2013b). www.icmm.com/document/301 The Budget statement and economic policy of the Government of Ghana for the 2014 financial year. ICMM (2008). Accra, Ghana, Ministry of Finance. Ghana: sowing the seeds for action. Action learning through www.mofep.gov.gh/budget-statements partnerships. The challenge of mineral wealth: using resource endowments to foster sustainable development. Ministry of Finance and Economic Planning (2014). Spotlight series 11, July. London, UK, ICMM. The Budget statement and economic policy of the www.icmm.com/document/313 Government of Ghana for the 2015 financial year. Accra, Ghana, Ministry of Finance. ICMM (2011). www.mofep.gov.gh/budget-statements Mining: Partnerships for Development Toolkit. London, UK, ICMM. Ministry of Finance Ghana Extractive Industries’ Transparency www.icmm.com/document/1945 Initiative (GHEITI) (2014). Final report on the production of mining sector GHEITI report Khan, R (2012). for 2012 and 2013. African economic overview and the role of the private sector. Accra, Ghana, Ministry of Finance. Standard Chartered public presentation. https://eiti.org/files/2012-2013_final_Mining_Sector_Report.pdf http://fr.slideshare.net/AsiaHouse/1-razia-khan-standard- chartered-bank National Development Planning Commission/Government of Ghana and United Nations Development Programme, KPMG International (2014). Ghana (2012). Ghana: country mining guide. KPMG Global Mining Institute. 2010 Ghana Millennium Development Goals report. www.kpmg.com/global/en/issuesandinsights/articlespublications/ www.gh.undp.org/content/dam/ghana/docs/Doc/Inclgro/UNDP_GH pages/ghana-mining-guide.aspx _IG_2010MDGreport_18102013.pdf
Minerals Commission (2010). Natural Resource Governance Institute. Draft national mining policy of Ghana. Resource Governance Index 2013. Accra, Ghana, Minerals Commission. www.resourcegovernance.org/rgi http://213.154.74.164/invenio//record/18584/files/mining%20policy %20of%20Ghana.pdf PwC, A quick guide to taxation in Ghana – 2014 Tax Facts and Figures. Ministry of Finance and Economic Planning (2005). www.pwc.com/en_GH/gh/assets/pdf/tax-facts-and-figures-2014.pdf The Budget statement and economic policy of the Government of Ghana for the 2005 financial year. Schneider, F, Buehn, A and Montenegro, C E (2010). Accra, Ghana, Ministry of Finance. New estimates for the shadow economies all over the world. www.mofep.gov.gh/budget-statements International Economic Journal, 24(4), 443–61. www.econ.jku.at/members/Schneider/files/publications/2011/IEJ _NewEstimates_ShadEc_World.pdf
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Steward Redqueen (2013). The national and regional socio-economic impact of Newmont Ghana’s Ahafo mine. Haarlem, the Netherlands, Steward Redqueen. www.newmont.com/files/doc_downloads/africa/ahafo/ environmental/Newmont-Ghana-Ahafo-Mine-Socio-economic- Impact-Study-Report_v001_b14e5m.pdf
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World Bank Group (2015). Chapter 2, Sub-Saharan Africa. In Global economic prospects, January 2015: having fiscal space and using it. Washington, DC, World Bank. www.worldbank.org/content/dam/Worldbank/GEP/GEP2015a/pdfs/ GEP2015a_chapter2_regionaloutlook_SSA.pdf
56 Mining in Ghana – What future can we expect? Mining: Partnerships for Development esy of The Ghana Chamber Mines ourt Image c A Annexes Annex A Input-output methodology
Input-output modelling is used to assess the socioeconomic When the gold-related money flows in the economy are impact of the sample of mining companies on the Ghanaian traced, four different rounds of impact can be distinguished economy. Simply stated, an input-output model provides a (see Figure 35) from which the following is constructed: road map of an economy and shows the interrelationship between various sectors. This road map is called a social • direct impact from mining companies accounting matrix (SAM). • indirect impact from direct suppliers of the mining companies Financial data from the sample of mining companies is run through the model to see how the revenues and expenditures • indirect impact from suppliers of suppliers affect other economic sectors and generate income (salaries • induced impact from the re-spending of salaries paid by for households, profits for companies, and tax and non-tax mining companies and all its direct and indirect suppliers. revenues for government). Figure 34 illustrates the process of using financial, GTAP, macroeconomic and employment With value added, induced results are not included. Doing so data to quantify the socioeconomic impact. Value added and would amount to double-counting (salaries would be counted employment are the indicators we use to address when earned and then when spent). Because induced socioeconomic impacts. The economic definition of value employment does not suffer from double-counting, it is added is used: the sum of salaries, taxes and profits that included throughout this report. The next section discusses accrue to Ghanaian residents or entities, and measure in more detail the input, output and outcome of the input- employment in headcount. output methodology.
Figure 34: Overview of the modelling approach
Financial data from sample Allocation of financials to of mining companies economic sectors Estimated procurement and value added for the sample of mining companies GTAP data Direct and indirect effects SAM for the Ghanaian of the sample of mining economy companies on value added Macroeconomic data and employment in Ghana Value added and employment multipliers Employment intensities for per sector Employment data the economic sectors
INPUT OUTPUT OUTCOME FINAL RESULT
Source: Steward Redqueen.
Figure 35: The four rounds of direct, indirect and induced effects on value added and employment indicators DIREC
Direct impact – sample of mining companies MINING’S T V
Effects directly related to local expenditures of the mining companies ALUE CHAIN T
Indirect impact – direct suppliers Effects arising at suppliers of goods and services in the value chain of the mining companies. OT AL IMP Indirect impact – suppliers’ suppliers Effects arising at the suppliers of goods and services of the mining companies’ suppliers ACT
Indirect impact – re-spending of salaries Effects caused by the re-spending of salaries that are paid by the mining companies, its suppliers and its suppliers’ suppliers
Source: Steward Redqueen.
58 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Annex A Input-output methodology
Input Output
Financial data from sample of mining companies Allocation of project financials The following seven mines provided data (based on planned As input for this study, payments by the sample of mining production figures at the start of 2014 and assuming a gold companies have been disaggregated and aggregated based price of US$1,300 per ounce) on sales volume and revenue, on the economic recipients in the Ghanaian economy. Here a capex, opex, social investments, tax payments, mine closure clear division is made between national recipients (providers cost and employment figures for the period 2010-22: of goods and services, households and Government of Ghana) and recipients abroad (through imports of goods and services). • Adamus Resouces The basis for these exercises are the allocations provided by • Chirano Gold Mines the mining companies. However, if not available, Newmont • Gold Fields – Damang Ahafo (for which a very detailed breakdown is available – see Steward Redqueen 2013) serves as a proxy to allocate the • Gold Fields – Tarkwa payments to national recipients and abroad. • Golden Star – Wassa • Newmont – Ahafo Social Accounting Matrix (SAM) • Newmont – Akyem. The key ingredient of the input-output model is the SAM, which describes the financial flows of all economic GTAP data transactions within the Ghanaian economy. As Figure 36 For Ghana, the most recent data with which to construct the shows, in the SAM the number of columns and rows are SAM is from 2007 and is taken from the GTAP 8 Data Base equal because all sectors or economic actors (industry (Global Trade Analysis Project 2012). The SAM is the key sectors, households, government and the foreign sector) ingredient of the methodology and is explained in more are both buyers and sellers. Columns represent buyers detail below. (expenditures) and rows represent sellers (receipts). Final consumption induces production, which leads to Macroeconomic data financial transfers between the various sectors, which in To be representative, 2013 GDP data (sector and expenditure turn generate incomes for households and government breakdowns) from the GSS has been used to update Ghana’s (taxes) and profits (dividends and savings). SAM. In addition, macroeconomic figures such as gold production, GDP, labour force and government revenue have The SAM is a statistical and static representation of the been obtained from sources including the Bank of Ghana, economic and social structure of Ghana; and since Ministry of Finance and Minerals Commission. economies are subject to change, SAMs should ideally be periodically updated. For Ghana, the most recent SAM dates Employment data back to 2007 and has been taken from the GTAP 8 Data Base The employment data per economic sector is derived from (Global Trade Analysis Project 2012). Using data from the GSS the 2010 Population and Housing Census conducted by the and the Bank of Ghana, the SAM has been updated to 2013 GSS (Ghana Statistical Service 2013). These figures have been using the RAS method (Fofana, Lemelin and Cockburn 2005). extrapolated to 2013 to account for the growth of the labour population. From that, so-called employment intensities Assumptions per sector are determined (ie the number of jobs needed to The main assumption of an input-output analysis is that an produce a million dollars of output). increase in demand can be met by an increase of production at constant prices in all affected sectors of the economy. Because of the importance of the informal sector in Ghana, In reality, however, certain sectors will not feel the effect of the methodology differentiates between formal and informal an increased demand for the product and so will not job intensities.15 Not distinguishing between formal and experience an increase in production. There may also be informal employment would cause an underestimation of the sectors unable to increase production at constant prices number of indirect jobs, as the informal part of the economy because of shortages, for example in labour, raw materials is more labour intensive than the formal one (see the section or production capacity. The possible exception might be Employment intensities below for more details on the use skilled labour. and treatment of employment data). Since many households are also farmers, their so-called auto-consumption (consumption of self-produced products) is unlikely to be affected. In the model, all household expenditures on food crops, and on livestock by agricultural 15 In line with findings presented by Khan (2012) and Schneider, Buehn and households, have therefore been excluded. This approach Montenegro (2010) we have assumed that about 65 per cent of national produces a much more robust and realistic estimation of output is formal and 35 per cent is informal; and in line with findings from induced employment effects, which are often significantly the 2010 Population and Housing Census from the GSS (Ghana Statistical Service 2013), we assume that about 15 per cent of the labour force is overestimated. formally employed and the other 85 per cent is working in the informal sector.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 59 Annex A Input-output methodology
Figure 36: Social accounting matrix
Sample of mining Manufacturing c Inv onsumption Agricultur From companies Household es Exports tments
To Ret T axes ail e Agriculture Manufacturing Rows indicate how Sample of mining each sector/stakeholder companies receives money
TRANSFERS CONSUMPTION Retail Households Consumption induces production leading to Taxes INCOMES NON-MARKET Imports transfers of money between sectors leading to
Dividends/savings incomes for households and governments
Columns indicate how each sector/stakeholder spends money
Source: Steward Redqueen.
Employment intensities • In line with findings from the 2010 Population and Housing Because this report focuses on 2010–22 results, the Census from the GSS (Ghana Statistical Service 2013), the employment breakdown from the 2010 Population and assumption is that about 15 per cent of the labour force is Housing Census has been extrapolated to the years for which formally employed and the other 85 per cent works in the total labour force figures were available. This means that for informal sector. 2011–13 employment figures have been extrapolated and for the period 2014–22 the year 2013 serves as the reference • The breakdown of the average and formal output and of year. employment figures over the different industries has been done using information from the GSS as well as insights By using the employment data and the output derived from from ACET and Steward Redqueen. the national SAM, we calculated employment intensities. The employment intensity shows the number of jobs per one unit of output. That intensity is then multiplied by the Outcome amount of output that is supported by the sample of mining companies to estimate the total number of jobs supported Value-added and employment multipliers (differentiating between formal and informal jobs). These Making use of the national SAM, value-added and employment employment intensities have been determined using data on multipliers are calculated. These multipliers are used to the formal and informal output and employment per sector. determine the impact on different dimensions such as impact Data gaps have been compensated using the following per round, per industry and per value-added component. assumptions: • In line with findings presented by Khan (2012) and Schneider, Buehn and Montenegro (2010), the assumption is that about 65 per cent of national output is formal and 35 per cent informal.
60 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Annex B In addition to undertaking desk research – forward- looking analysis based on company data – we undertook List of stakeholders interviewed consultations with key stakeholders to better understand the impact that the mining sector has had on the economy as a whole and especially on mining communities and livelihood alternatives. Table 3 provides an overview of all stakeholders interviewed.
Table 3: Stakeholders interviewed
National-level stakeholders (based in Accra)
Organization Position Name
Government of Ghana Ministry of Trade and Industry Director of Policy Planning, Mr. George Kobina Fynn institutions Monitoring and Evaluation National Development Planning Commission Deputy Director Dr. Addo-Yobo Ministry of Local Government and Rural Director, Policy Mr. Obeng Poku Development State institutions Forestry Commission Desk Officer for Mining, Charles Dei Amoah Corporate Office Geological Survey Department Director Dr. Kwasi Adu Ghana Revenue Authority Officer in Charge of Mining Mr Chris Ocansey Ghana Statistical Service Officer in Charge of Anthony Krakah Industrial Statistics Water Resource Commission Principal Water Resources Dr. Bob Alfa Engineer Precious Minerals Marketing Company Chief Business Jacob Essel Development Officer Minerals Commission (Inspectorate Division) Chief Inspector of Mines Mr. Obiri-Yeboah Twumasi Ghana Extractive Industries Transparency National Coordinator Franklin Ashiadey Initiative Private sector organizations Association of Ghana Industries Executive Director Mr Twum-Akwaboah Ghana Mineworkers Union Research Officer Sampson Agyapong Ghana Chamber of Commerce and Industry CEO Mr Badu-Aboagye Private Enterprise Federation Director General Nana Osei-Bonsu Mining sector related Africa Mining Services Compliance Manager Peter Bennett companies Multi-Tech Services General Manager Ulrik Jacobson Orica Ghana Business and Regional Francis Decker Manager – West Africa Zen Petroleum CEO William Tewiah Outotec Ghana Head Marketing Unit W/A Enoch Kusi-Yeboah Pelangio Exploration Exploration Manager Samuel Torkornoo Vivo Energy Ghana Corporate Communications Shirley Tony Kum Manager Civil society organizations Artisanal and Small Scale Mining-Africa Director, Policy and Edward Akuoko and non-governmental Network Research organizations Integrated Social Development Centre Policy Analyst Bernard Anaba Director Dr Steve Manteaw Third World Network Coordinator Yao Graham IBIS Officer in Charge of Mining Mohammed Mahamud Natural Resource Governance Institute Africa Regional Coordinator Emmanuel Kuyole Centre for Social Impact Studies Executive Director Richard Ellimah IMANI Research Assistants Kofi Boahene and Patrick Stephenson
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 61 Annex B List of stakeholders interviewed
Table 3: Stakeholders interviewed continued
Parliament
Organization Position Name
MPs for mining areas Ahafo Ano South West MP Hon Johnson Kwaku Adu Prestea/Huni-Valley MP Hon Francis Adu-Blay Koffie Abuakwa South MP Hon Samuel Atta Akyea Bibiani/Anhwiaso/Bekwai MP Hon Kingsley Aboagye-Gyedu Kade MP Hon Asamoah Ofosu Parliamentary select Mines and Energy Committee Member Hon Benjamin Kofi Ayeh committee Development partners Canadian Embassy Trade Commissioner Peter Fiamor Deutsche Gesellschaft für Senior Advisor, Extractive Allan Lassey Internationale Zusammenarbeit Resource Governance Swiss Embassy Counsellor and Head of Brigette Cuendet Cooperation Financial Sector Specialist Magnus Ebo Duncan Australian High Commission Senior Program Manager Ebenezer Aryee Netherlands Embassy First Secretary Water and Fred Smiet Climate European Union In Charge of Mining Herve Delsol World Bank Environmental Specialist Felix Oku Educational institutions Institute for Environment and Director Professor Chris Gordon Sanitation Studies, University of Ghana
62 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Annex B List of stakeholders interviewed
Table 3: Stakeholders interviewed continued
Community stakeholders
Organization Position Name
Government of Ghana Sefwi-Wiawso Municipal Assembly Municipal Chief Executive L A Santana institutions Land Valuation District Land Valuation P J Abakah Officer – Bibiani Ministry of Food and Agriculture Agricultural Economist Andrew Agyemang Ministry of Local Government District Coordinating John Nana Owu Director Bibiani/Anhwiaso/Bekwai District Chief Executive Jacob Ware Ghana Cocoa Board (Cocoa Health and Regional Manager Mr. Samuel Amponsah Extension Division) (Western North) Forestry Commission Assistant Manager Forest Gilbert Ampofo Services Division-Bibiani Physical Planning, Prestea/ Technical Officer Charles Ofosu Huni-Valley District Prestea/Huni-Valley District District Crop officer Theophilus Siaw Asare Traditional authorities Subri Community Chief Nana Kwabena Amponsah Nyamebekyere Community Chief Nana Ekumfi Nyamebekyere Community Queen mother Felicia Amponsah Koduakrom Community Chief Nana Peter John Offei Damang Community Chief Nana Amoakwa III Amoanda Community Chief Nana Kofi Ngoro II Wassa Fiase Traditional Council Paramount Chief Osagyefo Dr Kwamena Enimil VI Aboso Community Chief Nana Kofi Kyei II Aboso Community Secretary to the Chief Nana Bosco Quainoo Damang Mine Communities Secretary Seth Gyimah Consultative Committee Damang Mine Communities Spokesperson Peter Amoh Consultative Committee Amoanda Youth Chairman Francis Badoo Damang Youth Chairman J K Mensah Damang Mine Consultative Farmers’ Chairman Solomon Ankomah Association Amoanda Community Opinion Leader Kwadwo Addo Koduakrom Community Opinion Leader Emmanuel Odoom Amoanda Community Opinion Leader Stephen Prah Bosomoiso Community Chief of Bosomoiso Nana Kwaku Nkuah Wiawso Community Paramount Chief of Wiawso Nana Kwasi Bumakama Akoti Chief of Akoti Nana Kwasi Oppong II Paboase/Community Consultation Chief of Paboase and Community Nana Frimpong Manso Committee Cosultative Committee Chairman Aboduabo Community Chief of Aboduabo Nana Amankwah Gyeabour II Etwebo Community Chief of Etwebo Nana Yaw Gyam II Anhwiaso Paramount Chief of Anhwiaso Ogyeahoho Yaw Gyebi II
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 63
Annex B List of stakeholders interviewed
Table 3: Stakeholders interviewed continued
Community stakeholders
Organization Position Name
Local authorities/government Damang Assemblyman Hon Francis Toku Aubynn Amoanda and Bompieso Assemblyman Hon Elvis Adjei-Duah Subri Assemblywoman Hon Agnes Amponsah Aboso Community Assembly man Hon Justice Abroquah Aboso Community Assembly man Hon Clement Saah Aboso Community Assembly man Hon George Nyerisew Koduakrom Community Unit Committee Member Afriyie Siaw Paboase Electoral area Member Hon Joseph Amoah Prestea/Huni-Valley District District Coordinating Director Yaw Adu Asamoah Security services Ghana Police District Crime Officer – Wiawso Assistant Superintendent of Police Kwadwo Amakye Ansah Fire Service Fire Commander – Sefwi Thomas Tettey Wiawso Municipality Mining sector related Top Quality Catering General Manager Bruce Starleen companies Newco Catering & Logistics Site Manager Horveh Amevordji Allterrain Services, Damang Supervisor Agnes Anietey Civil society organizations District Farmers Association District Chief Farmer’s Anthony Kofi Gyebi and non-governmental Secretary organizations
64 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Annex C Workshop details
April workshop program
Time Topic(s) Speaker(s)
9am Registration
9.15am Introduction of Chair Ahmed Nantogmah
Opening remarks Mr Sulemanu Koney, CEO Ghana Chamber of Mines
Opening of the workshop Hon Nii Osah Mills, Minister Lands and Natural Resources
9.45am Presentation of draft findings
1. Introduction and overview Ms Kate Carmichael, ICMM
2. Macroeconomic background Dr Joe Amoako-Tuffour, ACET
3. Impact methodology Dr René Kim, Steward Redqueen
4. Life cycle impact results Dr René Kim, Steward Redqueen
5. Survey results Dr Joe Amoako-Tuffour, ACET
6. Q&A
11.30am Breakout sessions
1. Local economic development Including coffee break 2. Revenue management
3. Social investments
12.30pm Feedback to plenary
1pm Closing of workshop Mr Sulemanu Koney, CEO Ghana Chamber of Mines
1.30pm Lunch
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 65 Annex C Workshop details
Workshop overview During the discussion about revenue management, all participants agreed that the Government of Ghana is best The purpose of the workshop held on 29 April 2015 was placed to manage and co-ordinate the revenue streams that to serve as a forum to discuss and debate the initial come from mining. However, it was brought to the floor that findings from the study, and discuss and identify practical in order for Ghana to benefit more, in terms of economic opportunities for multi-stakeholder collaboration – where development, a clear mining revenue policy should be mining companies, government, international organizations defined. and civil society could work together to improve the social and economic outcomes from mining in Ghana. The In the session on social investments, the discussion revolved workshop was attended by more than 70 stakeholders, around better aligning social investments of mining representing a broad cross-section of the government, companies with the development plans of local authorities, industry, civil society and donors. managing expectations of local communities and being more transparent about where money (including royalties) is going Following welcoming remarks from Mr Sulemanu Koney and what it is spent on. (CEO of the Ghana Chamber of Mines), the workshop was formally opened by the Honourable Minister Nii Osah Mills Afterwards the discussion leaders shared the key takeaways (Minister of Lands and Natural Resources). The Honourable from these different sessions with the audience and Minister Mills said: Mr Sulemanu Koney gave his closing remarks on the day.
“While mining has been a key driver in our strong economic growth, the industry has even greater potential to improve the well-being of all Ghanaians. The best way to make that a reality is for all segments of society to be part of planning a definite future for mining in Ghana and seeing to its implementation. Mining therefore has an integral part to play in our economy.”
After that Ms Kate Carmichael (Manager Social and Economic Development of ICMM) gave an introduction and Dr Joe Amoako-Tuffour and Dr René Kim presented the draft findings of the study. This was followed by breakout sessions, where participants split into three groups to exchange ideas and discuss practical steps that could be taken to strengthen partnerships for development in the Ghanaian mining sector.
The breakout sessions focused on three areas: local economic development, revenue management and social investments.
The discussion about local economic development was focused on local procurement and ways to enhance this. Most participants agreed that the best way to do this was by constructing a comprehensive national action plan for more local procurement and linked industries.
66 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Annex D Key policy developments in Ghana’s mining sector
Table 4 provides an overview of the key policy developments mining and strengthening the collection, transparency and in the mining sector of Ghana. Most policy developments management of mineral revenues. have been about regulating and promoting small-scale
Table 4: Some key developments in Ghana’s mining sector policy
Year Policy initiative focus and objectives Key developments
2004 A revolving gold credit of refined gold was created to increase This involved the College of Jewellery and the Precious Minerals value addition in gold through jewellery production Marketing Company with the assistance from some mining companies To promote value addition in diamond production Diamond-cutting plant was licensed to process local diamonds Establishment of an alternative livelihood program to sustain Minerals Commission involved chiefs and landowners in targeted mining communities after cessation of mining activities communities for oil palm plantation development 2005 To diversify the minerals base of the economy and increase Government of Ghana planned to undertake an airborne investment in the subsector, Government of Ghana planned to geophysical survey of the entire Volta Basin to increase data on step up airborne geographical surveys and improve presentation the nation’s mineral resources and improve presentation of of geological data and mineral information to investors geological data and mineral information to investors Promotion of sustainable small-scale gold mining operations The ministry identified three areas in the Western Region and Winneba in Central Region for small-scale mining operations 2006 To diversify the minerals base of the economy and increase Public awareness campaigns on the new Minerals and investment in the subsector through greater monitoring of the Mining Law exploration and mining activities 2007 Increase in mineral royalties to use the mining industry as a Mineral royalties increased from 3% to 5% catalyst for development Greater monitoring and evaluation of operations for safety 2008 Greater diversification in small-scale mining Exploration of opportunities in small-scale diamond mining Greater regulation in diamond mining in light of the Kimberley All small-scale diamond “brighter future” miners and buyers Process Certification Scheme registered and given identity cards to facilitate monitoring, reduce smuggling and comply with the small-scale diamond sector 2009 Greater Government of Ghana monitoring and evaluation of exploration companies and mining companies to ensure compliance with mining agreements 2010 Government of Ghana review of dividend payments, exemptions Government of Ghana increased engagement with mining and the mining sector fiscal regime companies on their contributions under the fiscal regime Measures to address social issues in mining communities and Draft guidelines introduced on the use of mineral royalties by equitable distribution of mining revenues district and municipal assemblies Surveys undertaken to establish baselines data on social conflicts in mining communities 2011 Changes to when mineral royalty payments are paid Change in when and how often mineral royalties are paid Establishment of multi-agency mining revenue task force Increase in audits of mine operations 2012 Fiscal policy developments to increase revenue from the sector Corporate tax rate increased from 25% to 35% Introduction of a windfall tax of 10% collected from all mining companies Capital allowance of 20% for 5 years for mining companies Establishment of a national renegotiation team to critically review fiscal regimes and mining agreements Support to small-scale mining groups Support provided to purchase equipment and working capital
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 67 Annex D Key policy developments in Ghana’s mining sector
Table 4: Some key developments in Ghana’s mining sector policy continued
Year Policy initiative focus and objectives Key developments
2013 Measures to strengthen the regulatory framework To give full effect to Act 703 on the governance of the industry, six mining regulations were passed by parliament Building institutional technical capacity in contract negotiation Review of existing stability agreements was to be expedited in order to negotiate new standards for the sector Policy to help address developmental issues in mining Ministry of Lands and Natural Resources facilitated the passage communities of the Mineral Development Fund Policy to increase local content development Greater enforcement of the ban on registration and participation of foreign companies in small-scale mining Promotion of capacity building of local entrepreneurs 2014 Presidential directive to establish an inter-ministerial task force 5,000 foreigners engaged in the sector were deported to eradicate illegal mining activities A new reporting format was developed by Minerals Commission to report illegal mining activities Measures to improve collection, transparency and management A multi-agency task force was established to enhance of mineral revenues co-operation and collaboration among revenue agencies and the Minerals Commission
Ministry of Lands and Natural Resources seeks to continue to provide a necessary platform for greater transparent engagement for all stakeholders Support to sustainable small-scale mining Ministry of Lands and Natural Resources planned to establish a small-scale mining competency training centre at University of Mines and Technology, Tarkwa to offer training to small-scale miners in proper mining practices
Sources: Ministry of Finance Budget statements from 2004 to 2014.
68 Mining in Ghana – What future can we expect? Mining: Partnerships for Development Annex E The mine project life cycle
The life cycle data provided by the sample of mining All seven mines that provided data are currently in the companies is all based on seven mines that are currently “operation” phase. This is, however, not the case for the operating. However, how these mines spend their money entire period this study covers. One mine was in the “site – and the impact they have – differs. One of the reasons for design and construction” phase up to 2013 and another these different spending patterns is that the mines are all mine is expected to close around 2019. Understanding that in different phases of their projected life cycle. Figure 37 different phases have different characteristics is important shows a stylized representation of a mine life cycle and (eg capital expenditure and direct employment is highest distinguishes five different phases: during construction) in order to understand the nature and timing of the contributions presented in this report. • exploration • site design and construction • operation • final closure and decommissioning • post-closure.
Figure 37: Stylized representation of the life cycle of the mine
1 Exploration 2 Site design and 3 Operation 4 Final closure and 5 Post–closure 1–10 years construction 2–100 years decommissioning A decade to perpetuity or more 1–5 years 1–5 years
Stylized profile of government revenue contributions (right hand axis)
High High Labour/activity level Labour/activity Level of government revenues government of Level
Low 132 34 5 Low
Time
Source: ICMM.
Mining: Partnerships for Development Mining in Ghana – What future can we expect? 69 Acknowledgements
This work was led by a team from Steward Redqueen and Thanks are also due to the participants of the April African Center for Economic Transformation (ACET). workshop and the staff at the Chamber, especially Steward Redqueen is a specialized consultancy firm which Mr. Ahmed Nantogmah and Ms. Dorothy Oforiwaa Ocran, helps business to enhance their impact on society while who worked tirelessly to ensure the success of the ACET provides research, policy advice, and capacity workshop. We are grateful to all attendees for sharing enhancements that African governments can use to their perspectives on a range of opportunities and transform their economies, reduce poverty and improve challenges facing the mining sector. In particular, we living standards. The report’s lead authors are Dr. René Kim commend the Honorable Nii Osah Mills (Minister for and Mr. Tias van Moorsel from Steward Redqueen and Lands and Natural Resources) for formally opening the Prof. Joe Amoako-Tuffour and Ms. Sarah-Jane Danchie workshop, Mr. Sulemanu Koney for providing welcoming from ACET (with research assistance from Maame Esi Eshun and closing remarks, Prof. Joe Amoako-Tuffour and and Frank Adu). Much of the analysis in the report relies on Dr. René Kim for presenting the results of the analysis data provided by the Ghana Chamber of Mines, especially and Mr. Emmanuel Kuyole for facilitating the breakout Mr. Sulemanu Koney and Mr. Christopher Opoku Nyarko as sessions. The contributions made at the workshop, and well as a working group made up of representatives of those emerging from the break out session discussions participating mining companies in Ghana. Kate Carmichael and many bi-lateral meetings, have immeasurably initiated and led the process on behalf of ICMM, with support improved our understanding of the key issues in mining from Eva Kirch. in Ghana.
The analysis was done between June 2014 and June 2015. The team would also like to extend its sincere thanks Insights and feedback from a multi-stakeholder workshop to the staff at the many participating agencies of the held on 29th April, 2015, which was attended by more than Government of Ghana, participating mining companies, seventy (70) stakeholders; representing a broad cross-section civil society, local communities and many other from government, industry, civil society and donors, have organizations and individuals for their generous help, also been incorporated into this report. support and encouragement during the assignment.
Special thanks go to those colleagues in Ghana that were The results and conclusions in this report are actively engaged in the working group and took the time out Steward Redqueen’s and ACET’s responsibility alone. of their busy schedules to make the necessary data available The assignment has been undertaken on the basis of to our team. The working group comprised the following strict objectivity and independence. representatives: Emmanuel Osei Kesse Adamus Resources Saban Parimah AngloGold Ashanti
Nii Ofei Mante Chirano Gold Mines Nana Afuah Okoh Gold Fields Ghana Ltd Shaddrack Adjetey Sowah Golden Star Resources Dan Quaye Golden Star Resources Derek Boateng Newmont Ghana
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