An Economic History of the Ashanti Goldfields Corporation, 1895-2004: Land, Labour, Capital and Enterprise
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AN ECONOMIC HISTORY OF THE ASHANTI GOLDFIELDS CORPORATION, 1895-2004: LAND, LABOUR, CAPITAL AND ENTERPRISE Thesis submitted in accordance with the requirements of the University of London for the degree of Doctor of Philosophy By AYOWA AFRIFA TAYLOR London School of Economics and Political Science August 2006 1 Signed Declaration The work presented in this thesis Signed Dated 2 2 ABSTRACT No comprehensive history of the Ashanti Goldfields Corporation (AGC) has been written yet. While this doctorate thesis, due to time and word limit constraints, cannot claim to have achieved this level of completeness it does provide a major contribution towards such a comprehensive history by providing for the first time an academic account of this African-based gold mining firm from 1895 to 2004. The thesis has chronological range: from the firm's incorporation to its demise as an autonomous company. Depth of analysis is reserved for the consideration of important aspects of the four factors of production and how these resources affected the company's fortunes. The thesis will contribute to the business historiography of Africa as well as to our understanding of the history of Ghana with respect to British foreign investment and the development of the gold mining industry. The main question under investigation is how the Ashanti Goldfields Corporation managed to survive for so long: how the company evolved, what accounted for its longevity, and what assessment can be made of its business performance over time. It is found that AGC's business performance in terms of output experienced five distinct phases: steady growth between1898 and1939, decline between1939 and 1956; strong growth between 1957 and 1974; near-terminal decline between 1975 and 1986; and rapid growth between 1987 and 2004. A different and more erratic pattern emerges on profitability notably with a sharp decline in the company's last decade of existence, contributing to its loss of independence. The firm's longevity cannot solely be explained by the geological uniqueness of the Ashanti mines, although this gave the firm a critical advantage. In the face of challenging political and economic changes, managerial decisions and the manner in which the factors of production were employed help us to understand the firm's successes and failures. 3 ACKNOWLEDGEMENTS I would like to thank the following people and organizations for the various forms of assistance given to me during my research. Gareth Austin for his expertise and direction on African economic history, his detailed feedback and critical editorial eye. My thanks to Tim Leunig for his invaluable contributions from a business and financial history perspective and for his constant encouragement. My fees, living costs and fieldwork were funded by the Economic and Social Research Council, for which I am grateful. The following individuals provided help above the call of duty during my fieldwork in Ghana. Mr Ampong, Mary Dwobeng and Kofi Dok at the Public Records and Archives Department, Kumasi; Mr Sackey, chief executive of the Mines Department, Accra and his colleagues at the Takoradi branch; Isaac Glover of the Ghana Chamber of Mines; the former directors, managers and staff of Ashanti Goldfields who assisted in various ways, in particular the former chief executive, Sam Jonah, for the generous access to himself for interviews and internal company documents; also Mark Keatley, Srinivasan Venkatakrishnan, John Clark, Trevor Schultz, Martin Martineau, Richard Kwame Peprah, Merene Botsio-Philips, Ernest Abankroh, Fred Ohene- Kena, James Anaman, Kofi Ansah, Ken Tshribi, Kwamena Sekyi-Yorke, Rosaline Nutsugah and Kingsley Asamaoah. At Lonmin I must thank the chairman, Sir John Craven, for his cooperation and permission to view internal documents, as well as John Robinson, Rob Bellhouse and Virginia Rigall. From the mine finance industry I would like to thank the following people who assisted with their time, knowledge and data to aid my understanding of AGC's recent history and derivatives crisis: Mark Bankes, Victor Flores, Gerard Holden, John Pott, Michael Price and Andrew Quinn. I am grateful to Sarah Stockwell for providing information which helped me to obtain access to closed papers in the Spears collection at the Churchill Archives, Churchill College, Cambridge; Natalie Adams and Karen Thompson at the Churchill Archives for reviewing, cataloguing in detail and opening up most of the Spears papers concerning Ashanti Goldfields. The staff at the Guildhall Library Manuscripts Department, London, were always helpful. And last but not least, I must acknowledge the incredible support of friends and family over the three years of this project. 4 TABLE OF CONTENTS List of Maps 6 List of Figures 7 List of Tables 8 Abbreviations 15 Glossary of Ghanaian Terms 17 Glossary of Gold Mining and Financial Terms 18 Note on Nomenclature 22 Useful Measurement Conversions 23 PART ONE Chapter 1: Introduction 25 Chapter 2: The Research and Historical Context 39 Chapter 3: A Chronological Narrative 62 The Cade Era 62 The Feldmann Era 80 The Batty Era 96 The Spears Era 102 The Lonrho Era 120 The Jonah Era 139 PART TWO Chapter 4: Land: The Security of the Ashanti Goldfields Concession Agreement of 3 June 1897 161 Chapter 5: Labour: A Principal-Agent Analysis of Capitalist Free Labour Relations 189 Chapter 6: Capital: From Wealth to the Brink of Bankruptcy 222 Chapter 7: Enterprise: The Evolution of an African Multinational 255 Chapter 8: Conclusions 295 Appendices 307 Bibliography 323 5 LIST OF MAPS 1 Ghana showing the location of Obuasi and major towns 10 2 The Ashanti Region 10 3 Areas of gold mineralisation in Ghana 11 4 Schematic of the AGC concession in 1897 12 5 Aerial view showing the spatial relationship of mines 13 6-8 AGC's producing mines and exploration projects, 2003 14 6 LIST OF FIGURES 2.1 Ghanaian gold industry and AGC gold production, 1880- 2002 48 3.2 Early production: quick growth to disillusionment, 1898-1906 80 3.7 Production, 1946-56 109 3.8 Labour productivity, 1954-63 111 3.10 Schematic of operating shafts in 1994 146 3.11 Average annual gold prices, 1975-2004 149 6.2 Interest cover ratio, 1988-2003 229 6.3 The timing of debt with changes in share price 231 6.4 Capital structure, 1899-2003 231 6.5 Hedging income as a contribution to total revenue, 1990- 2003 233 6.6 Capital stock per employee 234 6.9 Capital productivity, 1898-2003 238 6.11 Comparison of AGC's profitability with a risk-free instrument 240 6.12 Shareholders' fortunes, 1898-2003 241 6.15 Dividend paid as percentage of share capital, 1898-2003 245 6.16 Comparison of change in the FTSE all-share index with change in AGC share value, 1898-2003 247 6.17 Comparison of change in the FTSE all-share index with change in AGC share value, 1915-2003 248 6.18 Percentage of AGC revenue directly benefiting the Government 252 6.19 The relationship between government's share of revenue and capital expenditure 253 7.7 Growth in gross gearing, 1994-2000 285 7.8 Output growth during the multinationalisation phase, 1994-2000 286 7.9 Profitability during the multinationalisation phase, 1994-2000 287 7.10 Labour productivity, 1994-2000 287 7 LIST OF TABLES 1.1 Quantitative data collected for AGC, 1899-2003 31 2.2 Gold mining companies in production 51 2.3 The gold industry's contribution to export earnings in colonial and postcolonial Ghana 61 3.1 African daily wage rates, 1897/8 75 3.3 Treatment processes during the Feldtmann era 84 3.4 The roasting process 84 3.5 The filter press process 85 3.6 The flotation process 97 3.9 Major operating shafts in 1994 145 5.1 Principal-agent labour relationship 1 191 5.2 Principal-agent labour relationship 2 191 5.3 Principal-agent labour relationships in AGC pre-1972 192 5.4 Principal-agent labour relationships in AGC post-1972 192 5.5 Strikes affecting AGC, 1945-57 200 5.6 African staff numbers and monthly costs: underground workers, 1939-52 202 5.7 African staff numbers and monthly costs: underground and surface workers 202 5.8 The decline in annual profitability and productivity, 1939-1953 202 6.1 The use of IFC-led debt packages, 1986-1995 227 6.7 Capital stock per employee 234 6.8 Relative cost of land, 1994-2000 237 6.10 Cost of debt and capital efficiency 239 6.13 Share price appreciation in certain years 242 6.14 Share price depreciation in certain years 243 7.1 Sources of monopolistic advantages for MNEs 262 7.2 Summary of the main characteristics of LDC-to-LDC MNEs as portrayed in the literature 264 7.3 Acquisitions made in 1996 272 7.4 Internal view of factors motivating expansion abroad 278 7.5 Internal view of the criteria affecting the choice of mine/project to develop or operate 278 8 7.6 How AGC's major acquisitions were financed 284 7.11 Factors contributing to Ashanti becoming a multinational 289 enterprise 9 Map 1: Ghana, showing the location of Obuasi and other major towns Source: www./tanguydly.free.fr/Pays/Carte-Ghana.gif Map 2: The Ashanti Region, Ghana, 2000 Source: www. www.atidekate.com/ CulturalRegions/Ashanti.htm 10 Map 3: Areas of gold mineralisation in Ghana (shaded) Source: United Nations' hawse ,II‘vfaer07 t "-s E S' • !1 R 1N unkwa ,T Asenkra I F ba die Bogo O National capital e Regional caudal • PreStea o Town, village Airport - International boundary Ne;iown'' - Eniadia Hall Assini Regional boundary Axim Main road 2,5 50 75 1 COko - Secondary road Railroad Geological information adapted from E. Dumett, El Dorado in West Africa: The Gold-mining Frontier, African Labour, and Colonial Capitalism in the Gold Coast, 1875-1900, Athens: Ohio University Press, 1998, p.