Can extractive industries help Ghana to fly?
Masahudu Ankiilu Kunateh, Ghanadot

Accra, March 20, Ghanadot - Ghana is no stranger to extractive industries or development strategies built on primary commodity exports. Ghana is the second-largest gold producer in Africa-during the era of British colonialism it was called the “Gold Coast”-and the country also produces bauxite, manganese, and diamonds.

Furthermore, a large part of the rural population depends on cocoa production and exports to earn a living. Timber is also an important export.

With the arrival of oil, some are concerned that this could hamper and not aid development strategies that are working to move away from a primary commodity approach.

Ghana has been an important gold producer for decades, and mineral-led development and policy changes designed to encourage investment in the sector have been heavily promoted by the World Bank.

With mining law reforms-including revisions to the Mining and Minerals Law in 2006-and changes to investment rules in the past 20 years, Ghana has recently experienced a boom in mining investment. In 2007, the country produced almost 2.5million ounces of gold.

This investment and production has yielded relatively little in government revenues and local development, engendered increased conflict between companies and local communities, caused the removal of families from their lands, and increased environmental degradation.

A study by the World Bank’s Operations Evaluation Department in 2003 found that it was “unclear what [gold mining’s] true net benefits are to Ghana.” This was after the World Bank’s large investment in the Newmont Ahafo Gold Mine in 2005.

The report went on to add that large-scale mining by foreign companies has a high import content and produces only modest amounts of net foreign exchange for Ghana after accounting for all its outflows.

Similarly, its corporate tax payments are low, due to various fiscal incentives necessary to attract and retain foreign investors.

Employment creation is also modest, given the highly capital intensive nature of modern surface mining techniques.

Local communities affected by large-scale mining have seen little benefit to date in the form of improved infrastructure or service provision, because much of the rents from mining are used to finance recurrent, not capital expenditure.

A broader cost-benefit analysis of large-scale mining that factors in social and environmental costs and includes consultations with the affected communities needs to be undertaken before granting future production licenses.

According to Ghana Chamber of Mines, a reported $53.8million was paid in royalties to the Ghanaian government by all mining companies operating in the country in 2007. A report under the Ghana Extractive Industries Transparency Initiative (EITI)-reconciling reported government receipts and reported company payments, including royalties, dividends, and corporate taxes, among others showed a total of 40,635,725 Ghanaians cedis, or approximately $34.8million in 2005.

Another report by the World Bank in 2008 says that Ghana lacked the capacity to properly collect revenues and audit payments from gold mining companies during the past three years as gold prices more than doubled. The result has been that “increases in metal prices mainly translate into benefits for operators. Improving mining sector revenue management is a key to translate mining investment in Ghana into sustainable development outcomes”.

Indeed, it is unclear whether the relatively small amounts of mining revenue offset the social and environmental costs to communities and the country as a whole.

Communities have complained of pollutions and cyanide spillages that spoil the environment and contaminate water bodies, which serve as sources of drinking water to the community dwellers.

One recent report estimated that environmental costs from gold mining had reached 6% of GDP. Meanwhile, conflicts between community members and mining companies have increased.

Ghana’s human rights ombudsman, the Commission on Human Rights and Administration Justice (CHRAJ), issued a report in September 2008 following over a year of investigative fieldwork. The report concluded that there is evidence of widespread violations of human rights of individual members of communities and communities’ collective rights in some mining areas in the country.

The commission found evidence to conclude that there has been widespread pollution of communities’ water sources, deprivation and loss of livelihoods. Several instances of excesses by the security agencies and the security contractors of the mining companies were provided and documented.

Some of these excesses had resulted in serious injuries and were sometimes fatal. It appears most people living in mining companies in Ghana believe that the right to development remains an empty promise to them even though the U.N General Assembly officially recognized this right in a Declaration over two decades ago.

It is pathetic that, a visitor to villages and towns near large mines in Ghana’s Ashanti, Brong Ahafo, and Western regions would see evidence of neglect and underdevelopment, rather than the development one would expect to see in communities close to such natural resource wealth.

With the discovery of oil, coastal communities, mindful of the experience of mining communities in Ghana and villages in the Niger Delta in Nigeria, are now concerned that they will suffer the same fate and that government revenues will fail to trickle down to ameliorate their lives.