Gold is once again Ghana's biggest export in nominal terms, surpassing cocoa. But this revival also emphasizes how little Ghana's basic economic structure has changed since the turn of the century when these raw materials became the main exports.
A major reason for the revival is the institutional and regulatory framework introduced since 1984 as part of the export-led growth strategy. Key elements were the setting up of the Minerals Commission in 1984 and the promulgation of a new Minerals and Mining Law which provided generous capital allowances and other incentives. These improved conditions attracted more new investment (totalling $1.6 bn in 1983-94) than in any other sector, and most of it went into gold mining.
Photo: Ghana Daily Graphic
Gold production rose from 285,291 oz in 1983 (from four mines), a 23-year low, to 1.7 mn oz in 1995 (from 10 mines and small-scale producers), making Ghana the continent's second largest producer after South Africa. Ashanti Goldfields Corporation Ltd (AGC) accounts for most of the increased production, its output up from 243,194 oz in 1983 to over 1 mn oz in 1996. AGC is now an acknowledged world player, listed on international stock exchanges, with international acquisitions and exploration activities outside Ghana. Some of the new mines are also contributing significantly to the increase, along with the local small-scale producers whose artisanal mining was illegal until 1989. Sales by producers and licensed buying agents to the Precious Minerals Marketing Corporation rose from 9,272 oz in 1989 to 127,064 oz in 1995 and actual production may be double the sales figures.
Officially, gold has been Ghana's leading export since 1992, providing over 45 per cent of total foreign earnings by end-1995, though this fell to 39 per cent in 1996. But this primacy is in gross terms. In net terms, cocoa is still the largest export earner because mining companies may retain 25-80 per cent of their earnings in external accounts for debt-servicing and other foreign costs, an important provision of the Minerals and Mining Law.
Mining's contribution to gross domestic product (GDP) since independence in 1957 has hovered around 1.5-1.8 per cent, indicating the sector's minimal linkages with the rest of the economy. It is also not a large employer since most mines are capital-intensive surface operations. Even AGC, which is mainly an underground operation, is increasingly mechanized.
Currently, land and environmental issues are growing in importance because the main gold belt coincides with the major logging and cropping zones. Mining operations have sometimes disrupted economic and social activities. Farmers whose land has been taken over have usually been given cash compensation for their crops and the loss of their livelihood, instead of similar land and the means to continue farming. In 1996, such issues prompted community protests in the major mining area of Tarkwa.
Good environmental practices
are specifically required of mining companies by the Minerals Commission
and Environmental Protection Agency, as well as by the Minerals and Mining
Law. But a persistent problem is pollution of water courses, many of which
provide drinking water for communities downstream. And in some cases where
companies have supplied wells and pumps for drinking water, as required,
responsibility for maintenance costs has become an issue. Besides the long-running
dispute over water between the community and AGC in the area of its Sansu
surface mine, and the sporadic clashes between artisanal miners and semi-private
security forces of mining firms, reports in 1996 of cyanide spillage into
water courses in the Tarkwa area heightened concerns over the weakness of
regulators.
Addressing some of these issues in 1993, the government set up a Mineral Development Fund. Financed each year with 20 per cent of mining company royalties, half of the Fund supports the Mines and Geological Survey departments, and the Minerals Commission. The rest is distributed in the mining areas for development projects to mitigate the effects of mining. The District Assembly gets 50 per cent, the traditional area 30 per cent, and 20 per cent to the chieftaincy.
The Minerals and Mining Law restricts the exploitation of industrial minerals to Ghanaians. But supportive action is yet to be taken. Small-scale gold mining remains the only form available to ordinary Ghanaians. If properly managed, it could address some of the socio-economic issues raised by large mining operations. Artisanal gold mining may employ some 40,000 people, particularly in the dry season when there is little farming. The income from small-scale mining is more likely to be retained in the rural economy and the subsector's growth could also stimulate the development of small and medium manufacturers of equipment. The World Bank has funded a programme for improving small-scale gold mining through the provision of improved geological information, the strengthening of supervisory institutions, equipment supply schemes, the development of environmental guidelines and standards, and a financing, marketing and regulatory framework.
While mining is set to remain a major foreign exchange earner, it will probably also continue as an enclave. To move away from this, the emphasis on investment promotion will have to shift to a comprehensive vision that facilitates greater exploitation of Ghana's industrial minerals (manganese and bauxite), increases the proportion of locally retained earnings, and stimulates vertical and horizontal linkages in the context of environmentally sustainable development.
