By Toma Imhre
It may have taken close to a century, but finally, Ghana’s vibrant mining industry – the country is now the biggest gold producer on the entire African continent – is being brought into the mainstream of economic activity across the nation.
This is crucial; for most of the past 100 years the mining industry had correctly been criticized for being an enclave one, generating more to Ghana’s tax revenues (GHc4.172 billion in 2020) and foreign exchange inflows (US$3.67 billion in 2020) than most – if not all – of the other sectors of the economy but not offering significant knock-on business opportunities for the rest of the economy.
By its very nature, the mining industry relies much more on technology than human resources to extract solid minerals from the ground which means its ability to generate employment opportunities is very low. Last year, for instance the mining industry directly employed 8.760 and another 25,803 indirectly. By comparison Ghana’s cocoa industry is responsible for the livelihoods of an estimated 800,000 entire households.
Furthermore, with the development of a gold mine requiring hundreds of millions of investment into equally large values of physical infrastructure and equipment, Ghana’s local financial services industry lacks the capacity to fund more than working capital requirements and the relatively cheaper aspects of project finance such as acquisition of vehicle fleet. The sheer size of mine development financing costs requires that mining firms are listed on foreign, more developed and liquid stock markets than the Ghana Stock Exchange, although a couple have listed locally in addition to their foreign listing to give Ghanaians a chance to buy into (insignificantly) small portions of their equity.
Add to this the fact that the end products of their activities are necessarily sold on international commodity markets rather than local markets which deprives the domestic commerce community from deriving business opportunities.
However, over the past half a decade, Ghana’s mining industry has taken deliberate, concerted steps toward mainstreaming it into the wider economy and this has produced impressive successes. Key here has been the drawing up of a Mining List which identifies an ever increasing array of production inputs which mining companies are required to procure locally. This has dramatically increased the local sourcing of such iputs, giving local enterprise huge production and sales opportunities.
In 2020 alone, mining companies in Ghana spent US$4.387 billion in the local economy through payments to manufacturers and suppliers of goods and services (including labour), government taxes and financing of corporate social responsibility projects. This amounts to 85.7% of their total expenditure for last year.
Specifically, last year mining companies in Ghana spent US$ 2.670 billion on the procurement of non-energy goods and services from manufacturers and suppliers domiciled in the country, this translating to 51/93% of their revenues for the year. Importantly the in-country spend on locally procured goods and services continues to rise – in 2019 the proportion of the industry’s revenues spent on local procurement was 42%.
There are still problems though. Most notably, a significant proportion of locally procured products are actually imported and only qualify as locally procured because they were secured through enterprises registered and domiciled in Ghana. Although this too, adds to business opportunities and wealth generation by local firms along the supply chain , it is not an optimal situation.
Crucially though, Ghana’s mining companies, operating through their industry association, the Ghana Chamber of Mines, are determined to change the situation for the better. “Locally produced goods should mean locally manufactured goods, as much as is possible” asserts Sulemanu Koney, the Chamber’s chief executive officer.
This however requires deliberate affirmative action to dramatically upgrade the capacity of local producers of mining industry inputs, with regards to production volumes, product quality and price competitiveness.
Instructively, it is the mining industry itself through its Chamber, rather than government that is leading this drive. For instance the Chamber has been engaging the Ghana Association of Bankers to facilitate the provision of competitively priced funding to support the local content agenda. Consequently, the two associations are noe developing special purpose vehicles for the provision of supply chain financing for local mine support services companies.
Even more instructively, the Chamber’s producing members are deliberately turning a blind eye to the availability of cheaper imported alternatives to the locally produced versions they tend to, opt for. Regulations frequire them to opt for the local version rather than the foreign alternative as long as the former is not more than 5% more expensive than the latter but mining companies in Ghana willingly accept local versions that are up to 10% more expensive, without prodding from anywhere.
However product quality cannot be compromised on like pricing can and this is where the Chamber is making potentially its most promising interventions, having devised a product quality improvement strategy for local manufacturers that not only stands to make them quality – competitive for Ghana’s mining industry, but for all industries they are involved in and for markets all across Africa.
This strategy is based on quality standardization through collaborative action between the Chamber, manufacturers, product standards institutions and government itself. It has already been applied for the electrical cables industry – the quality if which is crucial to the mining industry but which hitherto was not subject to universally accepted international quality standards. It involved a procedure developed and implemented over half a decade of intensive research, conceptualization and actual implementation and has produced excellent results – Ghana now produces electrical cabling that is accepted worldwide for its quality.
But even more importantly, the procedure used to arrive at the standards for locally manufactured electrical cables can be used for all sorts of other locally made products too. Indeed this goes far beyond their usefulness to Ghana’s mining industry; it shows that the mining industry can play a vital role in ensuring that locally manufactured products meet quality standards that would enable them be internationally competitive. Coming at a time that the African Continental Free Trade Agreement is opening up markets all around the continent to made in Ghana products on preferential, duty free terms, this can prove pivotal.
Here the mining industry thus goes far beyond providing a market for Ghanaian manufacturers. Through the product quality standards it is setting, such as with electrical cables, is challenging them to meet the standards than can make them competitive all around Africa and indeed globally.
Given that transnational firms demand that their inputs meet globally acceptable standards, ultimately with the appropriate development programmes in place, local companies will not only be in a position to be competitive in producing for the local transnational firms but also be able to compete in the regional and African markets.
“The presence of transnational firms such as large-scale mining companies in a developing country as ours provides a fillip for building the local capacity of local producers of their inputs” asserts Sulemana Koney. “Accordingly, whilst deepening local content is a desirable goal, the building blocks to a competitive, sustainable and thriving local production base is predicated on a sound strategy that includes appropriate supply development programmes.”
This is precisely what Ghana’s mining industry has facilitated with regards to electrical cables; and having identified a most effective process, is now positioned to replicate with regards to a host of other products which it uses and which can be made in Ghana and sold world wide.
This may turn out to be the biggest and longest lasting legacy of Ghana’s mining industry, and its members, through their Chamber, are leading by example. The Chamber is already heavily invested in a comprehensive, thoroughly workable initiative aimed at making the industry a hub for mining support services across the whole of West Africa.
Indeed, even as Ghana’s mining industry has proven hugely successful in mainstreaming it into the wider national economy it has already embarked on the next step – facilitating the capacity of local industry to compete in foreign markets, using the local mining industry as the staging post. Thus it is establishing a legacy that will prove crucial to Ghana’s economic performance well into the future.
