Gold mining and its impact, 64 years after independence

1 Kilo gold bar

Ghana turns 64 years today, since freeing itself from the grip of colonial rule on that fateful occasion of March 6, 1957 – becoming the first sub-Saharan nation to attain the enviable status of an independent country. From the period of independence to date, a lot has happened in the colonially-named Gold Coast turned Ghana which have shaped its enviable accolade as a beacon of democracy as well as its leading role in both continental and global development.

So, while this momentous occasion in the history of the country is worth being celebrated with all the pomp and pageantry, especially at the back of all the instabilities which were encountered along the way to the present democratic regime, it is important to consider how the performance of one critical sector of the economy, mining, has contributed to economic development, impacts on the environment and the lessons thereof going forward.

Ghana’s former identity, Gold Coast, takes it roots from the first entry of Europeans into the country many years ago. With gold nuggets easily discovered along the shores of the country, European missionaries who had journeyed across the Atlantic Ocean in pursuit of spreading Christianity were driven to remobilise and returned in droves to engage in all forms of trading, largely involving mineral trade – which eventually led to them naming the country the ‘Gold Coast’ of Africa.

Mineral production and its sale – mining – from the period of colonial rule (pre-independence) to the era of Dr. Kwame Nkrumah (independence) and to date (post-independence), has had significant impacts on development of the country. In fact, Ghana’s history of mining stretches over a century; but it is important to acknowledge that the commercially exploited minerals in Ghana include gold, manganese, bauxite and diamond – of which gold is by far the largest.

The number of gold mining companies in Ghana as of end-year 2008, amounted to more than 23 with the sector providing over 24,000 jobs for Ghanaians in the formal sector; that is, direct jobs with the operating mines and mine support service companies. Small-scale mines also generated about 500,000 jobs across the nation. Some indirect jobs were also created as a result of the existence of mining companies.

In a mining sector report compiled by the Ghana Chamber of Mines, a sample of seven mines used for the study made a direct contribution of US$796million to the Ghanaian economy in 2013. “Once the indirect impact of the mines’ expenditures on goods and services in the supply chain is taken into account, this figure rises to US$1,556million, equivalent to 3.2 percent of Ghana’s GDP. By projection, in 2022 a total of US$940million will be supported directly and indirectly by the seven mines, equivalent to 1.3 percent of Ghana’s GDP,” the report stated.

However, in 2012 with the discovery of oil in commercial quantities, oil overtook gold as the commodity that generates the most revenue in Ghana. But this notwithstanding, the mining sector remains an important source of revenue within the country.

According to the Ghana Extractives Industries Transparency Initiative (GHEITI) 2015 Mining report, the gold sector contributed about 96 percent of the total value of mineral exports in 2015, with manganese (1.95 percent), bauxite (1.24 percent) and diamonds (0.31 percent) as the other commodities mined at significant levels in the country.

Around the same period, 2015, the country’s annual production placed it among the leading African gold producers, with a total mine production amounting to 130 metric tonnes.

“Producing mining companies of the Ghana Chamber of Mines paid an amount of GH¢102,899,622.86 as social security contributions on behalf of their employees in 2019. These are long-term funds which assist the country’s capital formation efforts. Indeed, the mining industry contributes to capital formation multipliers, which arise from mining companies’ influence in attracting foreign capital into the country as well as domestic capital mobilisation for mining-related investments.”

According to data from the central bank, proceeds from export minerals increased by 16 percent to US$6.678billion in 2019 from US$5.760billion in 2018. The expansion in mineral revenue was occasioned by improvements in receipts from gold, manganese and bauxite, which outweighed the decline in proceeds from the export of diamond.

Receipts from the export of gold increased from US$5.436billion in 2018 to US$6.230billion in 2019 – representing a growth rate of 15 percent. The expansion in export receipts for gold was largely driven by an increase in the traded price.

“In Ghana, as in most other countries, royalties are levied on gross revenues; meaning that as long as the mine is producing, it will be generating royalties based on the revenue generated from selling this production. Conversely, corporate income tax is levied on profits. Corporate income tax can generate the largest share of a project’s government revenue if the mine is highly profitable; often coming only after the mine has been producing for several years. In the short-term, companies are able to offset their costs first, and thereby reduce the size of the profit on which corporate income tax is calculated.”

In spite of all these significant contributions of the mining sector to the national kitty, there is very little to show for it – in terms of how the revenues have been put to use over the years, unlike notable accomplishments realised from our nascent petroleum industry.

This is not to say mining companies are not making any investment to improve the livelihoods of their catchment communities. For the record, the Chamber of Mines has adopted a policy whereby member-companies set aside a minimum of US$1 out of every earning per ounce of gold, and also one percent (1%) of their net profit to develop their communities.

“Aside from adhering to this policy, mining companies in Ghana also voluntarily undertake community sustainable development projects in their catchment areas. In 2012 alone, mining companies committed US$26million to community sustainable development projects in various communities. To these mining companies, sustainability is significant when it comes to CSR initiatives. That is why most of their projects are in the long-term.”

However, the country’s own commitment to ensure that mining revenues bring optimum impact tothe livelihoods of Ghanaians, especially the people’s whose lives are directly impacted by mining activities leaves very much to be desired. I dare say the state of mining cities in Ghana is in sharp contrast to a city like Johannesburg, South Africa, a mining city.

On the other side of the discussion is the subject of environmental impact. While the Environmental Protection Agency (EPA) subjects recognised mining companies to strict adherence of the country’s environmental laws, illegal mining operators and those backed by political party affiliates mine with little or no compliance with the environmental laws.

As we reflect on how far we have come as a country, can we begin to rewrite the story of the mining industry?

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