In pursuit of economic independence: Too late to count on mining as a catalyst?
The refrain in Ghana about promoting local content has not changed,
five months after the production of the country’s first oil and four years
after the discovery of the natural resource.
The high local expectation that Ghana’s oil can serve as a major catalyst for rapid economic transformation seems to be informed by the apparent failure of the country to harness the full benefits of other equally high-end natural resources such as gold and diamonds.
It is believed that if the country had promoted local content in her century-old mining sector, the country’s economy would have seen a much swifter economic transformation and marked improvement in the living standards of the people.
“The Chamber has been at the forefront of the promotion of local content in the country over the years,” Dr. Joyce Aryee, CEO of Ghana Chamber of Mines, told GB&F in an exclusive interview.
“The way I understand local content is that a nation will make sure that as far as possible a lot of jobs can be done by Ghanaians and a lot of services can be provided by Ghanaian companies.
Currently, expatriate employees in the mining sector constitute only 2% and the rest are all Ghanaians. There are a lot of Ghanaian companies that supply inputs to the mining industry. Goods such as explosives, lime, grinding balls and heat exchangers are procured locally. A 100% owned Ghanaian company like Hufra-Tech uses high level technology to supply goods such as heat exchangers to the mining companies. In 2009, the industry spent over US$1.1 billion out of the US$2.3 billion revenue realised to procure local inputs,” she added.
According to Dr. Aryee, all the pipes that are used in the mines as well as huge volumes of cement are produced by local manufacturers such as Interplast, Duraplast and Ghacem.
She said other Ghanaian-owned major mining contractors, such as Engineers and Planners and Drill Masters control a fair share of the market and can hold their own against established competitors like African Mining Services, an Australian company. In spite of what the Chamber considers as gains in the sector, many who argue the industry has not done much to improve the standard of living in mining communities cite the deprived conditions in mining towns like Obuasi and Tarkwa.
“People say Obuasi is ugly but without the mines there will be nothing there. And its ugliness has nothing to do with the mine. It has everything to do with our own concept of building a town or a city. Obuasi will never become a Johannesburg unless we plan for it. We will never become an Australia unless we plan for it.
We will never become a San Francisco which is a financial centre that also was established on the back of mining, unless we plan for it. Most of our structures for planning have totally broken down. Nobody thinks planning is an important part of the development agenda.” she said.
Dr. Joyce Aryee, CEO of Ghana Chamber of Mines
She continued, “ I would even go as far as to say I do not see even our governments having the larger picture in mind even with all the mining investments promotion they are doing. Our obsession in this country especially post-independence has been the revenue (from mining). It is because of these minerals and timber that the rail line, for example, was done in the first place. At least the colonialists knew that we needed to improve transportation, not only that, but general infrastructure such as electricity, telephony, schools, hospitals and so on. But somehow, our planning stopped at a certain stage. And we became more and more obsessed with the revenue to fill the balance of payment gap.”
In pursuit of transparency in the payments and receipts in the mining sector, the Ghana Chamber of Mines has since 2005 been publishing in Ghanaian dailies figures that cover direct statutory and voluntary payments made to government, companies both local and foreign but locally registered in Ghana, district assemblies and traditional authorities.
Source: The Ghana Chamber of Mines
The objective, according to Dr. Aryee, is to correct the perception that mining companies are not doing much to support the Ghanaian economy and the communities in which they mine.
Mineral revenue in the form of royalties, taxes and dividends, traditionally, has been relied upon to finance major infrastructure projects such as roads, rail lines, sea ports, hydro-electric dams and others. However, in the 1980s, when Ghana was struck by massive drought and bush fires resulting in low cocoa output and food stuff, revenue from mining came in handy as it made significant amounts of foreign exchange available for essential imports. Unfortunately, years after the economic recovery of that period, Ghana still depends heavily on revenue from mining to fill annual budgetary gaps.
To address agitations from local communities, the Minerals Development Fund (MDF) was set up in 1991 to make available a portion of the mineral royalties to be used directly for the benefit of mining communities, for research and other projects related to mining.
However, according to the Chamber of Mines, only 10% of the mineral royalties paid by mining companies goes into the MDF. Out of this 10%, the Office of the Administrator of Stool Lands uses 1%. The remaining 9% of the MDF funding is then disbursed to host communities namely, district assemblies, who receive 55% of the remainder, traditional councils who receive 20% and stools who receive
Consequently, apart from the social responsibility contributions made by the mining companies, the proportion of the total mineral revenue, which the government returns to host communities, is only 5.5% of total mineral royalty payments. The Chamber of Mines believes this is woefully inadequate for the stimulation of infrastructural development in the mining communities.
The Chamber has therefore been advocating for 30% of the royalties paid by mining companies to be returned to mining areas over a specific period of time and ring-fenced to specific infrastructural projects in order to catalyse the socioeconomic
development of mining districts.
“This is the time that we should really see the larger picture for mining. Australia, South Africa, Canada, USA and Russia have seen these natural resources as the reason for economic expansion. So for example in Russia, they will lay a pipe to a place as far away and as hostile as Siberia. For them doing roads to Siberia is important because there is a major natural resource (oil and gas) there and so they have to create the conditions for people to be able to move there and establish other industries. They will do an airport to a place like that because there is a major natural resource which in itself is a growth pole for other industries. That is how we should do it,” said Dr. Aryee.
Besides dealing with community tensions, mining companies also have to address accusations of environmental pollution and human right abuse from some civil society organisations.
For example last January, a civil society organisation, Wassa Communities Affected by Mining (WACAM), conferred on AngloGold Ashanti, on the sidelines of the World Economic Forum in Davos, Switzerland, the award of ‘the Most Irresponsible Company’ after accusing the company of contaminating rivers and wells with mining waste and torturing locals at the mining firm’s guard house. This same award was conferred on Newmont Ghana in 2009.
“Some of these cases happened in 1995. We’ve answered to this before. But it is rehashed all the time. What do you do when somebody rehashes the same things all the time? Sometimes, I guess, you ask yourself what is the motive?” said Dr. Aryee.
“I think that if you are a civil society organisation, your motive should be to see the right things done. And sometimes the right things are done when you even decide to engage the people who you think are persistently doing wrong. It’s not enough to complain. I think it’s always good to do something about it, to be solution-oriented”
Dr. Aryee believes the solution to Ghana’s economic underdevelopment is through tapping the full potential of mining. However, she thinks the country must do things differently in order to attain the desired economic turnaround.
“The potential to use all aspects of mining to change the face of this country is very great. But unless we decide that the minerals we are taking are only a means to an end with the end being greater development through massive infrastructure development, nothing will change,” she said.
Underground mining operations underway as miners work together
Mining operations require significant investment in earthmoving equipment