Scaling up value creation and local development in the mining sector in Ghana FISCAL LINKAGES SPATIAL LINKAGES UPSTREAM LINKAGES SI ESSING LVE C R RO EG. AGRIC. LINKAGES LATERAL G P O E L E D C R I T V I N R R E O G N E C N S I E O S S C R I S E C I V E T R C N S E I O C I K S R G E L L P O METALSERVICE CENTRE A L Z T I N E K M L E A D C O A L ES DISTRIBUTOR AG K IN L E CONSTRUCTION G D AUTOMOTIVE E L W O N K DOWNSTREAM LINKAGES © 2018 Economic Commission for Africa Addis Ababa, Ethiopia All rights reserved First printing September 2018 Material in this publication may be freely quoted or reprinted. Acknowledgement is requested, together with a copy of the publication. Layout and design by Phoenix Design Aid, Denmark. Scaling up value creation and local development in the mining sector in Ghana Contents Acknowledgements ....................................................................................................................................iv Abbreviations................................................................................................................................................v Preface ....................................................................................................................................................... viii Executive summary ................................................................................................................................... xi Chapter 1: Introduction ............................................................................................................................. 1 1. Overview of the economic landscape in Ghana ......................................................................... 1 1.1 Introduction ................................................................................................................................ 1 1.2 Ghana’s overall economic performance ............................................................................... 2 Chapter 2: Summary of findings ............................................................................................................30 2. Structural weaknesses of the Ghanaian economy and policy options ................................30 2.1 Identifying structural challenges ..........................................................................................30 2.2 Policy options for addressing structural weaknesses ......................................................48 Chapter 3: Value contribution of the mineral sector in Ghana ......................................................65 3. Value contribution of the mineral sector in Ghana ..................................................................65 3.1 Assessing mineral production capacity and reserves ......................................................65 3.2 Policy and regulatory frameworks relevant to the mining sector .................................69 3.3 Weaknesses and challenges of existing policy frameworks ...........................................78 Chapter 4: Economic Contribution of the Mineral Sector through Linkages .............................82 4. Economic contribution of the mineral sector through linkages ............................................82 4.1 Brief assessment of fiscal linkages .......................................................................................84 4.2 Using local content to boost employment .........................................................................89 Chapter 5: Production linkages .............................................................................................................96 5. Production linkages .........................................................................................................................96 5.1 Why do production linkages matter? ..................................................................................96 5.2 Developing linkages through local content policies .........................................................96 5.3 Assessing the effectiveness of linkages development through local content policy ������������������������������������������������������������������������������������������������� 98 Chapter 6: Looking beyond local content: market analysis of procurement in Ghana and the region .................................................................................................. 106 6. Looking beyond local content: market analysis of procurement in Ghana and the region .............................................................................................................. 106 6.1 The BGR procurement demand model ............................................................................ 106 6.2 Overview of findings of mining company profiling ....................................................... 109 6.3 Overall gaps and support recommendations ................................................................. 133 ii Scaling up value creation and local development in the mining sector in Ghana Chapter 7: Supporting domestic suppliers: establishing a national suppliers’ development programme ................................... 135 7. Supporting domestic suppliers .................................................................................................. 135 7.1 Scaling up the “3Cs”: capacities, capabilities and competitiveness ........................... 135 7.2 Previous attempts to develop mining supply chains in Ghana ................................... 137 7.3 Establishing a national suppliers’ development programme (NSDP) in Ghana ....... 138 7.4 Designing a successful NSDP ............................................................................................ 142 7.5 Improving the institutional architecture to support the NSDP .................................. 151 7.6 Key steps to implement the NSDP ................................................................................... 152 Chapter 8: Developing a mineral supply cluster in Ghana ........................................................... 156 8. Developing a mineral supply cluster in Ghana ....................................................................... 156 8.1 Industrial policy and the mineral sector in Ghana ......................................................... 156 8.2 Industrial clusters – potential linkages with the mining sector .................................. 159 8.3 Harnessing clusters to support linkage development .................................................. 167 8.4 Policy options for strengthening industrial clusters ...................................................... 175 9. Conclusions .................................................................................................................................... 179 9.1 Improving the overall business climate and facilitating investment .......................... 179 9.2 Establishing a national suppliers’ development programme in Ghana ...................... 180 9.3 Setting up Mineral Supply Clusters .................................................................................. 181 9.4 Market analysis of procurement ........................................................................................ 182 9.5 Getting institutional coordination right ........................................................................... 182 Annex 1: Distribution of GDP at basic prices according to economic activity (per cent) .. 186 Annex 2: Detailed overview of Ghana’s participation in intra-African trade....................... 187 Annex 3: Linkages: outlining the CMV approach ....................................................................... 194 Annex 4: Mineral sector revenue allocation................................................................................ 197 Annex 5: Procurement information provided by AngloGold Ashanti, 2004 ........................ 198 Annex 6: Procurement categories in the mining sector ........................................................... 200 Annex 7: Overview of international supplier development initiatives ................................. 205 Annex 8: Ghana’s key industrial stakeholders............................................................................. 209 Annex 9: Economic potential in the 10 regions of Ghana ........................................................ 210 Annex 10: Assessing the level of development of the competitiveness of African economies ...................................................................................................... 213 Annex 11: Business environment: How Ghana performs compared to its peers in West Africa ................................................................................................................... 214 Annex 12: State of infrastructure networks in Ghana ................................................................. 219 Annex 13: Ghana’s Logistics Performance Index .......................................................................... 222 References ............................................................................................................................................... 226 Scaling up value creation and local development in the mining sector in Ghana iii Acknowledgements This report is a joint publication of the Afri- throughout the process, including validation can Minerals Development Centre and the exercises and a workshop held in November Federal Institute for Geosciences and Natural 2017. Special thanks go to the Chief Executive Resources of Germany.