By Prince Ofosuhene GYIMAH (PIEMA)
Ghana’s extractive sector, anchored by its mining and oil industry, continues to serve as a cornerstone of the national economy.
In 2012, the mining and quarrying sub-sector alone contributed approximately 8.8 percent to GDP and accounted for 43 percent of total exports (Ghana Chamber of Mines, 2012).
A decade later, the sector expanded significantly, contributing over GH₵13billion to GDP in 2022 a 28.9 percent increase from the previous year.
That same year, mineral exports constituted 39 percent of total merchandise exports, surpassing traditional foreign exchange earners such as cocoa and crude oil (Ghana Chamber of Mines, 2022).
These developments underscore the sector’s growing influence and its potential to drive sustained economic growth and national development.
As Africa’s leading gold producer and the sixth largest globally, Ghana earned over US$ 6.6billion from gold exports in 2022.
This revenue stream plays a critical role in strengthening foreign exchange reserves, stabilising the cedi and supporting the importation of essential goods. The oil and gas industry, though relatively new compared to mining, has rapidly emerged as a key player in Ghana’s economy.
Since the commercial discovery of oil in 2007 and the commencement of production in 2010, the sector has become a major revenue earner. In 2022, petroleum exports generated approximately US$4.2billion, further diversifying Ghana’s export base and reducing its reliance on traditional commodities like cocoa.
The oil and gas sector is stimulating the development of ancillary industries, including petrochemicals, logistics and services, creating a multiplier effect across the economy.
The extractive sector contribution to employment, though often understated, is equally significant. While large-scale mining employs tens of thousands of Ghanaians directly, the sector also supports millions of indirect jobs in related industries such as transportation, equipment supply and small-scale mining.
Artisanal and small-scale mining (ASM), for instance, employs over 1 million Ghanaians, making it a vital source of livelihood for many rural communities.
However, the informal nature of ASM poses significant challenges, including environmental degradation and poor working conditions, which need to be addressed through formalisation and regulation.
Revenue from the extractive sector also plays a crucial role in funding public infrastructure and social services. Through mechanisms like royalties, taxes and the Petroleum Holding Fund, the government channels a portion of extractive sector earnings into national developmental projects.
The Minerals Income Investment Fund (MIIF), established to manage and invest mineral royalties, has also been instrumental in leveraging mining revenues for long-term economic benefits, including investments in infrastructure and local capacity development.
However, the environmental degradation, social conflicts and governance challenges associated with resource extraction have raised concerns about the sustainability of these industries.
In response, institutions like MIIF and the Bank of Ghana (BoG) are increasingly turning to sustainable finance principles and environmental, social and governance (ESG) frameworks to promote responsible mining and resource management.
Sustainable finance, which emphasises investments that generate long-term environmental and social benefits alongside financial returns, is gaining traction globally.
In Ghana, the integration of ESG criteria into the extractive sector offers a unique opportunity to align economic growth with environmental stewardship and social equity. This is particularly relevant for both the mining and oil and gas industries, which are critical pillars of the nation’s economy.
In Ghana’s mining sector, the regulator – Minerals Commission, Minerals Income Investment Fund (MIIF) which manages the country’s mineral wealth and the newly operationalised Ghana Gold Board (Goldbod), hold significant potential to drive sustainability.
By leveraging their investment and regulatory influence and strategically directing investments toward projects that meet robust (ESG) standards, these institutions can play a pivotal role in reshaping industry practices.
Prioritising companies that actively reduce carbon emissions, minimise water pollution and rehabilitate mined lands would not only promote environmental stewardship but also establish clear benchmarks for responsible resource management.
For instance, gold mining companies that adopt renewable energy technologies, implement water recycling systems and engage in comprehensive land restoration initiatives could be favoured for funding or strategic partnerships. Through such targeted incentives, MIIF and Goldbod can encourage a broader transition toward sustainable mining practices across Ghana’s extractive sector.
Similarly, in the oil and gas sector, operators have a critical role to play in ensuring that ESG principles are embedded throughout their operations and supply chains.
Major players in Ghana’s oil and gas industry, such as Tullow, ENI and Kosmos Energy, are increasingly adopting ESG frameworks to mitigate environmental impacts, enhance community engagement and improve governance practices. A key aspect of these efforts is ensuring that sub-contractors and suppliers also adhere to ESG standards.
For instance, the operators are now requiring their sub-contractors to incorporate ESG criteria into their procurement processes, from reducing flaring and methane emissions to promoting local content and ensuring fair labour practices.
In 2023, the then CEO of MIIF highlighted the importance of collaborative efforts between operators, regulators and local communities to achieve sustainable outcomes.
He emphasised that the oil and gas sector’s success in ESG implementation largely depended on the ability of operators to enforce compliance among their subcontractors.
This includes monitoring environmental performance, ensuring health and safety standards and fostering inclusive growth through local employment and capacity-building initiatives.
Integrating ESG principles into both the mining and oil and gas sectors, Ghana can unlock the full potential of its extractive industries while safeguarding the environment and promoting social equity.
The Bank of Ghana (BoG), as the nation’s central bank, plays a critical role in shaping sustainable finance practices within the extractive sector. Through its regulatory and monetary policy functions, the BoG can encourage financial institutions to adopt sustainable lending practices.
For instance, it could introduce guidelines requiring banks to assess ESG risks of loans extended to mining and oil companies. This would ensure that only projects with robust environmental and social safeguards receive funding.
Additionally, the BoG could promote green bonds and other sustainable financial instruments to mobilise capital for renewable energy projects and other initiatives that reduce the extractive sector’s carbon footprint.
The benefits of integrating ESG principles into Ghana’s extractive sector are already evident. According to a 2022 report by the Ghana Chamber of Mines, mining companies that adopted ESG frameworks reported a 20 percent reduction in environmental incidents and a 15 percent improvement in community relations.
These improvements enhance the sector’s social license to operate, reduce operational risks and attract socially responsible investors.
For example, Newmont Ghana, one of the largest gold producers in the country, has invested over US$10million in community development projects and renewable energy initiatives, earning recognition as a leader in sustainable mining practices.
Despite these successes, significant challenges remain. Many small and medium-scale mining operators lack the resources and expertise to implement ESG frameworks effectively. Additionally, inadequate enforcement of environmental regulations allows some companies to operate without proper safeguards, leading to environmental degradation and social conflicts.
Limited access to financing for sustainable projects further exacerbates the problem, as many banks and investors remain hesitant to fund initiatives perceived as risky. Corruption and mismanagement in the distribution of mining revenues also undermine efforts to ensure that local communities benefit equitably from extractive activities.
To address these challenges, institutions like Minerals Commission, MIIF and BoG must step in. Providing technical assistance, capacity-building programmes and financial incentives, these institutions can help smaller players transition to more sustainable practices.
Moreover, the government must strengthen the enforcement of environmental regulations to hold companies accountable for their ESG commitments. Encouraging financial institutions to develop tailored loan products and investment mechanisms for sustainable mining practices will also be key to fostering industry-wide change.
The global shift toward sustainability presents both a challenge and an opportunity for Ghana’s extractive sector. As international investors increasingly prioritise ESG-compliant projects, Ghana must position itself as a leader in responsible resource management.
By leveraging sustainable finance principles and ESG frameworks, institutions like Minerals Commission, MIIF, Goldbod and BoG can drive this transformation, ensuring that the extractive sector contributes to national development while safeguarding the environment and promoting social equity.
In conclusion, the integration of sustainable finance and ESG principles into Ghana’s extractive sector is not just a moral imperative but also an economic necessity.
With the right policies, investments and partnerships, Ghana can build a mining and oil industry that is both profitable and sustainable, setting an example for other resource-rich nations to follow. The time to act is now, and the stakes could not be higher!
About the writer:
Prince Ofosuhene Gyimah, PIEMA is a Sustainability and Environmental Practitioner with over six years of experience in Ghana’s upstream petroleum industry and a certified practitioner member of the Institute of Environment and Management Assessment, United Kingdom (UK).
Gyimah also has profound knowledge in community and stakeholder engagement, corporate social responsibility, grievance management and social impact assessment and management.
I can be reached via this email; [email protected]
