THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE DEVELOPMENT OF THE GHANAIAN MINERAL INDUSTRY

ISSN: 247-2528 Vol. 1 No. 1 [148-167] THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE DEVELOPMENT OF THE GHANAIAN MINERAL INDUSTRY Peter Arroja Eshun Mining Engineering Department University of Mines and Technology, PO Box 237, Tarkwa, Ghana arrojaeshun@yahoo.co.uk, paeshun@umat.edu.gh Steve Aidoo Jellicoe Mathematics Department University of Mines and Technology, PO Box 237, Tarkwa, Ghana aijestelacross@yahoo.com ABSTRACT Ghana liberalised the investment policies governing her mineral industry in 1986 to attract Foreign Direct Investment (FDI) into that sector which was constrained due to lack of finance during the late 197 s and early 198 s. Consequently, there have been increases in mineral production, foreign exchange earnings and revenue. However, there are attendant negative effects on the environment and local communities which cannot be underestimated especially when much of the profits are accrued to foreign investors. This paper employs both primary and secondary data to analyse the impact of FDI on the development of the Ghanaian mineral industry. It reveals that FDI has been the livewire of large scale mining operations in Ghana and has even infiltrated the operations of small scale mining which is otherwise preserved for the local Ghanaian artisanal mining community. Key Words: Foreign direct investment, mining, environment, development, local mining community INTRODUCTION The growth experience of the Ghanaian mining industry has followed closely that of the national economy as depicted by the weak economic conditions that prevailed in the late 197 s and 198 s. Gold production declined by 47%, diamond by 67%, manganese by 43%, and bauxite by 46%, during the period. Gross Domestic Product (GDP) growth was volatile, inflation was persistently high and the country experienced severe balance of payments difficulties (modified after Acquah, 27). The industry began to recover in the late 198 s helped in large part by incentives that the Minerals and Mining Law of 1986 provided investors which stimulated the injection of foreign capital. The country has since 1986 to 29, been able to attract over US$ 9 billion of direct investment for mineral exploration, establishment of new mines, as well as the expansion and rehabilitation of existing mines. Part of the investment has been used to finance the establishment of assay laboratories, drilling and contract mining companies, manufacture of explosives and consultancy services (modified after Acquah, 27; Fobih, 27). The industry has spawned local secondary industries that supply essential inputs to the mining companies production processes. These secondary industries also offer employment and pay taxes to the government. In as much as one can enumerate the benefits that the country derives from the mining sector, awareness should be created that much of the profit is accrued to foreign investors who have large stake in the ownership of the industry. Furthermore, mining has attendant negative effects on the environment, local communities and a source of conflict when large Society for Business Research Promotion 148

ISSN: 247-2528 Vol. 1 No. 1 [148-167] scale operators clash with illegal small scale miners. Above all, the mineral reserve which is the source of revenue is non-renewable and as such a wasting assert for future generations. This paper therefore seeks to critically assess the impact of Foreign Direct Investment (FDI) in the development of the Ghanaian mineral industry and recommend ways of maximising the returns from the industry. The specific objectives include: Outline of both the positive and negative contributions that the re-vitalisation of the mineral sector has on the development of the country; Investigation into the impact of FDI in the funding of large scale mining projects and the employment and implication of expatriate staff in the development of the mineral industry of Ghana; Assessment of the infiltration of FDI in small scale mining which otherwise is the preserve of local investors; and Assessment of the capability of financial institutions in the country to finance mining projects. To achieve the above objectives, the following methods are employed: Secondary data acquisition through review of literature; Primary data acquisition through field visits and administration of questionnaire to large and small scale mining operators, and financial institutions; and Analysis of data using inferential statistical methods. SECONDARY DATA ON THE IMPACT OF FDI ON THE MINERAL INDUSTRY OF GHANA Mining Sector Legislation Reforms and Fiscal Liberalisation In the middle 198s mineral rich developing countries like Ghana were encouraged to institute policies that will attract private capital in the mining sector. According to Akabzaa and Darimani (21), various pieces of legislation have either been promulgated or revised in order to facilitate mining sector reforms. One significant aspect of the reforms is the fiscal liberalisation of the mining sector through various provisions of the Minerals and Mining Law 1986, PNDCL 153 and its revision to the Minerals and Mining Act 26, Act 73. One most significant feature of Act 73 is the scaling down of corporate income tax from 35% to 25% and royalty rates from 3 12% to 3 6 % and the provision of more specific fiscal allowances that aim to reduce the general tax liability of mining sector operators. Economic Impact of Reforms FDI Inflows Table 1 presents the FDI inflows into the Ghanaian Mining Sector from 1989-29. Total FDI inflow increased from $25.24M in 1989 to $762.26M in 29. Estimation of the average annual growth rate of FDI into the mineral sector of the country between 1989 and 29 is as high as 27.8%. It should be noted that about 95% of all FDI in the mining sector goes into the gold mining sub-sector (Broch and Owusu, 211). Trends in Output Table 2 presents mineral production from 1989 to 29. Production levels in the four major minerals namely gold, diamond, bauxite and manganese increased from 418 7 ounces, 16 729 carats, 347 65 Mt, and 333 743 Mt respectively in 1989 to 3 119 823 ounces, 354 Society for Business Research Promotion 149

ISSN: 247-2528 Vol. 1 No. 1 [148-167] 443 carats, 49 367 Mt, and 1 12 941 Mt in 29 respectively. The average annual growth rate of production for the four major mineral within the period could be estimated as 11.67%, 13.64%, 5.32% and 9.83% respectively. Gold has been the predominant mineral being mined in Ghana and its production trend with respect to the political and policy regimes is as shown in Figure 1. The figure confirms how the Structural Adjustment Programme (SAP) and Economic Recovery Programmes (ERP) adopted in 1986 have sustained the increasing trend of gold production in Ghana. Export Earnings Table 3 shows the export earnings from the sale of mineral products while Table 4 shows the proportion of mineral export earnings to total merchandise exports for the period 1989-29. Like production levels from the major minerals, foreign exchange earnings generated were $16M, $5M, $9M and $12M from gold, diamond, bauxite and manganese respectively in 1989. This further increased to $2 551M, $7M, $11M and $49M in 29 respectively. The average annual growth rate of foreign exchange contribution from the mineral sector within the period could be estimated as 15.94%, 12.51%, 5.85% and 11.97% respectively. Contribution of gold to total export earnings of the country has increased from 19.8% in 1989 to 43.37% in 29, making gold the leading foreign exchange earner for the country. Contribution to Government Revenue The mining industry contributes to government revenue through the payment of direct taxes such as corporate tax, taxes on wages and salaries of employees, royalties and dividends. Table 5 shows the sector s contribution to direct taxes in terms of corporate tax, royalties, Pay As You Earn (PAYE) and reconstruction levy (introduced in the year 2). Contribution of mineral revenue to total internal revenue generated in the country has increased from 8.94% in 199 to 19.79% in 29. The annual growth rate of mineral revenue within the period is as high as 36.68%. Environmental and Social Consequences of Reforms The negative impacts of the boom in mining activities in Ghana have been echoed in several publications. The reality of this issue is the advocacy against these negative effects by many non-governmental organisations in Ghana. These include: 1. Wassa Communities Affected by Mining (WACAM) 2. Dialogue and Advocacy for Good Governance (DAGG) 3. Youth for Action Ghana (YAG) 4. Centre for Environmental Impact Analysis (CEIA) 5. Centre for Labour Rights and Community Services (CLARCS) 6. Integrated Social Development Centre (ISODEC) 7. Voices of Tomorrow Leaders Foundation (VOTOLEAF) 8. Centre for Public Interest Law (CEPIL) 9. FoodFirst Information Action Network (FIAN), 1. Friends of the Earth 11. Third World Network 12. Green Earth Organisation 13. Abantu for Development Most of the advocacy against the negative effects of mining bothers on air quality, noise and vibration, water quality, land degradation and human rights abuses. Air Quality Atmospheric dust particles are the major air quality issue in mining communities in the country. Activities such as site clearance and road construction, open-pit drilling and blasting, loading and haulage, vehicular movement, ore and waste rock handling as well as ore crushing generate such particulate matter. Others include fumes from the roasting of Society for Business Research Promotion 15

ISSN: 247-2528 Vol. 1 No. 1 [148-167] sulphide ores by assay laboratories and in refining processes (Awudi, 22; Akabzaa and Darimani, 21). Noise and Vibration In Ghana, issues concerning noise are considered important since mines operate 24 hours and level can fluctuate widely. Surface mines mainly generate noise from overburden removal and transportation. Major noise sources from underground mining operations include those from ventilation fans, surface facilities and product transport (modified after Amegbey, 29). Ground vibration is mainly caused by blasting and the movement of heavy earth moving equipment (modified after Anane, 21). Water Quality Mines can affect the surface run-off and ground water quality through contamination with dissolved and suspended materials. The most common surface water contaminant is sediment or suspended solids. Apart from run-off from overburden emplacement and stockpiles, storm water can be contaminated from process plant and workshops. Drainage from the oxidization of sulphur or sulphidic ores is highly acidic and can contain dissolved heavy metals. These are toxic to aquatic life and impact negatively on the surrounding environment (Amegbey, 29). Communities living in the vicinity of mining projects face problems in accessing safe drinking water. The diversion of rivers, the building of dams and lowering of ground water as a result of large scale mining activities threatens the physical access to water. Contamination of rivers and ground water with heavy metals is a major health threat. Several communities have been exposed to cyanide spills and mercury pollution (Anon, 28). Massive Vegetation Clearance and Land Degradation The degradation of large tracks of land by large scale surface mining operations constitutes a major threat to agriculture in such mining communities and their economic survival. Lands that were previously used for farming and those that could be used have now been swallowed by such mining concessions. Consequently, food production has decreased considerably, creating a very high cost of living in such areas in the country (Awudi, 22). According to Anane (23), known forest reserves of rich biodiversity have been concessioned and are being mined by large scale companies. Human Rights Abuses In some mining communities in Ghana, cases of human rights violations, arbitrary arrests and physical molestations are rampant and are usually administered by armed men on behalf of mining companies (Anon, 28). For example according to Awudi (22), in August 1996 and May 1998, two farming communities Nkwantakrom and Atuabo were respectively demolished by some armed men to pave way for surface mining. PRIMARY DATA ANALYSIS ON THE IMPACT OF FDI IN THE MINING INDUSTRY OF GHANA Data Type Primary data source employed for this research involved the administration of questionnaires as well as interviews with personnel in three institutions: large scale mining companies; small scale mining operators; and financial institutions. The questionnaire administered to the large operating mines had the objectives of assessing the impact of FDI in the funding of mineral projects in Ghana and its contribution to human capital in the form of employment of foreign expertise. It further explored the Society for Business Research Promotion 151

ISSN: 247-2528 Vol. 1 No. 1 [148-167] general view of respondent on FDI issues in the development of the Ghanaian mineral industry. The questionnaire administered to small scale operating mines had the objectives of investigating the types and sources of financing their projects and some problems that small scale mining operators face. It further assessed the infiltration of FDI in small scale mining which otherwise is the preserve of local investors. The last category of questionnaire was administered to financial institutions with the aim of exploring their capacity to finance mining ventures. It further investigated anticipated problems in financing mineral projects in Ghana. Analysis of Data from Large Scale Mining Companies General Information Table 6 gives the name, location, mineral mined and the ownership of the large scale mining companies that participated in the research. It could be observed that all of them are gold mining companies reflecting the predominance of gold mining in the mineral industry of Ghana. It could also be observed that all the seven (7) mining companies that participated in the research are multi-national companies with ownership outside Ghana. Sources and Types of Financing None of the seven (7) large scale companies had a local investor or bank as a major financier of their operations. Almost all of them attributed their sources of funding to foreign sources either through shares, external loans or equity from parent companies. This indicates the heavy inflow of foreign capital in the development of the Ghanaian large scale mining industry. AngloGold Ashanti Ltd and Golden Stars Resources Ltd are however listed on the Ghana Stock Exchange but greater percentage of their capital is obtained from foreign sources. Employment Statistics Table 7 presents the rough estimate of employment statistics of the mines that participated in the survey. It could be gathered that expatriate staff proportion is between 1 5% of the total staff in the various mines with most of them being less that 3%. It should be noted that Central African Gold Ltd has the least percentage of expatriate staff in management followed by AngloGold Ashanti, Obuasi and Gold Fields Ghana Ltd, Damang. Chirano Gold Mines Ltd and Newmont Ghana Gold Ltd. have the highest percentage of expatriate staff in management followed by Gold Fields Ghana Ltd, Tarkwa and Golden Star Resources, Akyempim. Most of the respondents attributed expatriate staff experience and expertise in mining as the major driving force for their employment. Some of them also pointed out the safeguard of capital through driving efficiency to maximise shareholders return as the additional justification. Very few of the responds could assign technology transfer as the reason for employing expatriate staff. In addressing the issue on recruitment of expatriates and training of Ghanaians, Part I Section 6 of the Minerals and Mining Regulations make the following provisions: (6) A mining company shall submit an employment equity plan to the Minerals Commission and shall also do the following: (a) establish targets for employment equity in junior and senior management categories, including a baseline of 6 percent Ghanaian participation in management within Society for Business Research Promotion 152

ISSN: 247-2528 Vol. 1 No. 1 [148-167] (i) 5 years of the start of operations; or (ii) 3 years in the case of an existing company. (b) (c) institute training programmes for Ghanaian staff; identify a talent pool and fast track it, including a high quality operational exposure. General Views on the Impact of FDI in the Mineral Industry of Ghana Respondents were made to indicate their agreement or disagreement to some issues bothering on the impact of FDI in the development of the Ghanaian mining industry. This portion of the questionnaire was developed using the Likert scale format which according to Lehmann and Mehrens (1998), Amedahe (22) and Sarantakos (25) appears to be the most popular method of attitude scale construction. The four Likert scale had score values as: Strongly Agree, Agree, Disagree and Strongly Disagree. For easy analysis, the responses to Strongly Agree and Agree statements were put together as Agree while Disagree and Strongly Disagree as Disagree. The statistics of the responses are presented in Table 8 and the ranked responses of respondents agreeing to the issues are presented in Figure 2. From Figure 2, most of the respondents (8% and above) agreed that FDI has been the main source of revitalising the mineral sector of Ghana, and that FDI should be encouraged as Ghana cannot do away with FDI in the development of a sector which requires high capital input. It was further agreed (6% and above) that local entrepreneurs and banks do not have the capacity to invest in large scale mining in Ghana as a result of the high capital requirement and associated risk. There was also low confidence in the Ghana Stock Exchange hosting mining companies on its capital market. However, it was unanimously disagreed (less than 2% agreeing) that Ghana lacks management expertise in the mining sector and that expatriate managers are more effective and efficient than their local counterparts. It is therefore evident that the employment of expatriates could be attributed to protecting shareholders interest and a source of employment for the capital providers. Analysis of Data from Small Scale Mining Operators General Information Table 9 gives the name, location, mineral mined and the ownership of the twelve (12) small scale mining operators within the Tarkwa-Nsuaem municipality that responded to the questionnaire. Almost all of them have formed association to share the risk of the business. It can also be deduced that gold is the most predominant mineral mined within the Tarkwa- Nsuaem municipality. Sources of Financing Table 1 shows the sources of financing that are adopted by small scale miners in their mineral operations. All the respondents indicated they self finance their operations in some form except the Small Scale Miners Association of Tarkwa who derive their funding solely from foreign source. Relatives, friends and particularly gold buyers constitute the next popular means of financing small scale mining operations. From interviews conducted among operators, foreigners do not only finance small scale mining operations in Ghana but also support through the provision of equipment. In some cases, they practically indulge in small scale mining activities. It is worth noting that, no or very minimal financial support comes from local financial institutions in support of small scale mining operations in the country. Society for Business Research Promotion 153

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Problems Faced by Small Scale Miners The following are some the problems that the respondents indicated confront small scale mining operations in Ghana: Financial: Respondents indicated that the administrative bottlenecks as well as the collateral requirement deter them from sourcing financial support from financial institutions. As a result, gold buyers, relatives and friends are means by which they fund their operations. Others indicated that as a result of such difficulties in obtaining financial assistance, especially from financial institutions, they have resorted to foreign finance as a means of funding their operations. The respondents pleaded support from the government to make capital available to sustain the industry since it serves as a means of livelihood for most rural folks in areas endowed with mineral resources. Administrative: Sites visited especially the non-registered and in some cases the registered operators did not have administrative set up like their large scale counterparts. It was realised that many of the sites visited lack proper training in the field of mining and management. This makes it very difficult for proper records keeping of their operations. However, this is what financial institutions require from them in order to get financial assistance. Operational: As a result of financial constrains, most of the sites visited did not own equipment by themselves but rather have to hire such equipment for their operations resulting in low productivity since such equipment are used by others as well. Others indicated that as a result, they depend on foreign finance as a means of providing such equipment. Most sites visited, especially the non-registered operators had low recovery rates as a result of the adaptation of crude ways of processing. The services of trained engineers were not employed, rather, they depend on the raw expertise of experienced unemployed mine workers. Clashes with large scale operations: The relationship between large mining companies and small scale operators has often been characterised by tension and mistrust. Some large scale mines see small scale operators as encroachers on their legal properties and as a result fight them with their local security and in some cases involve the national security apparatus. Small scale mining operations which serve as a source of livelihood for most rural folks in mineral endowed regions of Ghana have to compete with large scale mining operations, hence depriving them of their livelihood. Infiltration by foreigners: Although the small scale mining laws permits the provision of foreign capital for small scale mining operation in Ghana, it detests foreigners from owning concessions. Unfortunately, local operators are now competing with foreign nationals from China, Togo, Mali and Burkina Faso. This is not healthy for the industry taking into consideration how large scale mining have denied local communities tied to mining to lose their livelihood. Section 83 of the Minerals and Mining Act, 26 (Act 73) gives explicit qualification of applicant for small scale mining licence as follows: 83. A licence for small-scale mining operation shall not be granted to a person unless that person (a) (b) is a citizen of Ghana, has attained the age of eighteen years, and Society for Business Research Promotion 154

ISSN: 247-2528 Vol. 1 No. 1 [148-167] (c) is registered by the office of the Commission in an area designated under section 9(1). Analysis of Data from Financial Institutions General Information As part of this research, twelve financial institutions provided information on their contribution to the development of the mineral industry of Ghana. Table 11 provides the general information of the various financial institutions that participated in the research. Provision of Financial Services to the Mining Sector Type of financial service: With the exception of Unique Trust Financial Services Ltd, all the banks indicated they offer minor forms of service to mining companies. Some of the services include: Loans; Foreign exchange; Overdrafts; and Lease Purchase Orders (LPOs). Mining companies financed: Some of the mining companies that were mentioned to have received minor forms of financial support include: Gold Fields Ghana Ltd; AngloGold Ashanti Ltd; Ghana Bauxite Company Ltd; Ghana Manganese Corporation Ltd; Golden Stars Resource Ltd; Newmont Ghana Gold Ltd; Engineers and Planners; and BCM. Capacity to finance large scale mining projects: In trying to explore the capacity to finance large scale mining operations in Ghana, Table 12 gives a summary of the statistics of the number of banks that responded to the various leverages that they are capable to offer. Most of them were enthusiastic to give 1% leverage to large scale mining projects. However, some of the factors that threaten them from investing in large scale mineral projects include: Risky nature of mineral projects especially the unreliability of mineral reserves; High capital requirements as against the balance sheets of the banks; Unstable nature of mineral prices; and Long production periods of mineral projects. Capacity to finance small scale mining projects: It is quite unfortunate to note that among the banks that participated in the study, only Stanbic Bank had ever financed small scale mining operation. Additionally, only SG-SSB Limited is interested in investing in small scale mining project in the future. Some of the reasons militating against the financing of small scale mining projects include: Inadequate collateral; Lack of best practices; Non-organised and lack of managerial structures; Inadequate financial reporting and record keeping; Instability of operations; and Unreliability of mineable reserves. Society for Business Research Promotion 155

ISSN: 247-2528 Vol. 1 No. 1 [148-167] CONCLUSIONS Foreign Direct Investment (FDI) has revitalised the mineral industry of Ghana as a result of drastic liberalization of mineral policies and establishment of institutions in the middle 198s. Analysis of secondary data indicates some positive results which include: Increase in production levels in the four major minerals namely gold, diamond, bauxite and manganese; Increase in foreign exchange earnings; and Increase in mineral revenue accrued to the country. However, there are attendant negative consequences of mining on the environment and local communities. Notable among these are: Air and water pollution; Noise and ground vibration; Destruction of vegetative land; and Human rights abuses in mining communities. Analysis of primary data indicates that: Most large scale mines are financed by foreign sources either through shares, external loans or equity from their parent companies; Expatriate staff who form between 1 5% are employed beyond the justification of their expertise and experience but to protect the investor s interest; Foreigners have as well invaded the small scale mining industry of Ghana which is reserved for locals; and Financial institutions in the country express their capability of funding mineral projects yet they are highly risk averse. Finally it is concluded that FDI is the most immediate means of sustaining the mineral industry of Ghana but the government must strategize to maximise the benefits because of the attendant negative effects of mining. RECOMMENDATIONS The following are recommended: To maximise mineral revenue, the government must periodically review taxes, royalties and allowances. This must be done with careful consultation with stakeholders and also comparison with investment policies of other mineral endowed countries within the sub-region. Government must ensure the enforcement of existing regulations. For example, institutions such as the EPA must be resourced to enable them perform their mandated roles. Additionally, explicit regulation should be made on corporate social responsibility to protect the interest of mining communities. The small scale mining industry should critically be considered for financial and technical support as they provide high level employment for the rural folks. It also generates substantial amount of revenue and serves as a source of raw material for local jewellers. Local financial institutions and entrepreneurs should not only be encouraged by the government to invest in the mineral industry but practical incentives such as tax relieves should be given to make them competitive. By so doing, enough of the gains from the mineral industry will be retained in the country. Society for Business Research Promotion 156

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Revenue from the mineral sector should be put to proper developmental projects which are beneficial to the nation as a whole. Furthermore, linkages between the mining sector and the rest of the economy should be rigorously tackled eg establishment of refinery and jewellery companies. REFERENCES Acquah, P. A. (27). Keynote address. 79th Annual General Meeting of the Ghana Chamber of Mines, Accra, Ghana. Akabzaa, T. and Darimani, A. (21). Impact of mining sector investment in Ghana: A study of the Tarkwa mining region. (A Draft Report Presented to SAPRI). Retrieved 8 June 21 from http://www.saprin.org/ghana/research. Amedahe, F. K. (22). Fundamentals of educational research methods. (Mimeograph). University of Cape Coast, Ghana. Amegbey, N. A. (29). Environmental management. (Unpublished MSc Lecture Notes). University of Mines and Technology, Tarkwa, Ghana. Anane, M. (21). Golden Greed: Trouble Looms over Ghana's Forest Reserves. Retrieved 18 June 28 from World Rainforest Movement Website: http://www.wrm.org.uy/countries/ghana/goldengreed.html. Anane, M. (23). Ghana: Gold rush in forest reserves resisted. WRM Bulletin # 71, Retrieved 3 September 29 from http://www.wrm.org.uy/bulletin/71/index.rtf. Awudi, G. B. K. (22). The role of foreign direct investment (FDI) in the mining sector and the environment. Proceedings of the Conference on Foreign Direct Investment and the Environment Lessons to be Learned from the Mining Sector, Paris, France. Broch, R and Owusu, G. (211). Linkages in Ghana s gold mining industry: Challenging the enclave thesis. MMCP Discussion Paper, 1, 43. CHRAJ (28). The state of human rights in mining communities in Ghana. (Report of the Commission for Human Rights and Administrative Justice). Retrieved 25 June, 21 from www.nodirtygold.org/humanrightsinghanaminingcommunities.pdf. Fobih, D. K. (27). Celebrating Ghana The preferred investment destination in Africa. Ghana Investment Forum 27, La Palm Beach Hotel. Ghana Statistical Service (29). Statistical overview of Ghana s mining industry. Ghana Publishing Corporation, Ghana. Ghana Chamber of Mines (21). Performance of the mining industry in 29. Publication of the Ghana Chamber of Mines. Retrieved 21 June 21 from http://www.ghanachamberofmines.org/site/publications. Kesse, G. O. (1985). The mineral and rock resources of Ghana. A. A. Balkema, Rotterdam, the Netherlands. Lehmann, I. J. & Mehrens, A. (1998). Measurement and evaluation in education and psychology, Harcourt Brace Publishers, Philadelphia. Sarantakos, S. (25). Social research. 3rd ed. Palgrave Macmillan, New York Houndmills. Table 1 Investment Inflows (in Million US Dollars) into the Ghanaian Mining Industry Year Producing Mining Companies Exploration Companies Mine Support Services Companies Total FDI 1989 25.24 - - 25.24 199 268.52 129.72-398.24 1991 87.41 192.8-279.49 Society for Business Research Promotion 157

ISSN: 247-2528 Vol. 1 No. 1 [148-167] 1992 421.3 174.1-595.4 1993 6.76 257.14-263.9 1994 1.7 88.26-98.33 1995 23.97 14.99-164.96 1996 79.77 694.99-774.76 1997 218.23 322.3 52.76 593.2 1998 172.82 63.24 31.48 267.54 1999 153.83 24.19 36.75 214.77 2 29.91 179.4 22.47 231.78 21 18.63 145.21 21.69 275.53 22 11.5 186.44 18.65 315.59 23 325.69 198.13 21.8 545.62 24 47.58 27.36 23.39 638.33 25 543.12 228.5 25.9 797.52 26 33.36 232.9 23.48 586.74 27 41.25 235.41 19.64 665.3 28 466.75 27.72 27.83 765.3 29 511. 222.96 28.3 762.26 (Source : Modified after Ghana Chamber of Mines, 21; Broch and Owusu, 211) Table 2 Major Minerals Production in Ghana Year Gold (Ounces) Diamond (Carats) Bauxite (Mt) Manganese (Mt) 1989 418 7 16 729 347 65 333 743 199 541 147 636 53 368 659 246 869 1991 847 559 687 736 324 313 311 824 1992 1 4 625 656 421 399 155 276 19 1993 1 261 89 59 842 364 641 295 296 1994 1 438 483 746 797 451 82 238 544 Society for Business Research Promotion 158

Production (Million Ounces) www.ajbms.org ISSN: 247-2528 Vol. 1 No. 1 [148-167] 1995 1 715 867 631 78 53 389 187 548 1996 1 583 83 714 738 383 37 266 765 1997 1 752 452 829 524 536 723 332 73 1998 2 371 18 822 563 341 12 384 463 1999 2 68 12 681 576 355 263 638 937 2 2 457 152 878 11 53 825 895 749 21 2 381 345 1 9 72 678 449 1 76 666 22 2 236 833 963 493 683 654 1 135 828 23 2 274 627 94 89 494 716 1 59 432 24 2 31 971 95 344 498 6 1 597 85 25 2 138 944 165 923 66 7 1 719 589 26 2 337 784 97 751 972 991 841 755 27 2 374 28 839 235 1 33 368 1 35 89 28 2 839 82 598 42 693 991 1 89 25 29 3 119 823 354 443 49 367 1 12 941 (Source : Modified after Ghana Chamber of Mines, 21; Ghana Statistical Service, 29; Broch and Owusu, 211) 35 3 25 Pre-Independence Period British and a few other foreign investors controlled the industry during the colonial period. The Post-Independence Period up to 1986 DECLINE Investor uncertainty about the safety of their investment under Ghanaian selfrule. Reforms: ERP/SAP Significant institutional development and policy changes 2 Effects of state intervention in the industry. General decline in the economy. Huge foreign investor interest 15 1 5 1925 1928 1931 1934 1937 194 1943 1946 1949 1952 1955 1958 1961 1964 1967 Years 197 1973 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 Figure Figure 1 Gold 1 Gold Production trend trend through Different Policy Regimes (Modified after Kesse, 1985; Anon, 29a; Anon, 29b) Society (Modified for Business after Kesse, Research 1985; Ghana Promotion Chamber of Mines, 21; Ghana Statistical Service, 29) 159

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Table 3 Export Earnings (Millions US$) from the Sale of Mineral Products Gold Diamonds Bauxite Manganese Total Mineral Exports 1989 16 5 9 12 186 199 22 17 1 14 243 1991 34 19 9 2 352 1992 343 19 1 17 389 1993 434 17 8 14 473 1994 549 2 1 1 589 1995 647 15 1 6 678 1996 612 13 8 7 64 1997 579 11 11 12 613 1998 688 11 7 12 718 1999 711 9 8 22 75 2 72 12 13 29 756 21 618 21 16 37 692 22 689 21 15 29 754 23 83 23 11 29 893 24 84 26 9 29 94 25 946 36 16 37 1 35 26 1 367 31 23 41 1 462 27 1 734 29 19 33 1 815 28 2246 25 22 53 2346 29 2551 7 11 49 2618 (Source : Modified after Ghana Chamber of Mines, 21, Ghana Statistical Service, 29) Society for Business Research Promotion 16

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Table 4 Comparative Analysis of Mineral Export Earnings to Total Merchandise Exports % Gold % Diamonds % Bauxite % Manganese % Minerals 1989 19.8.62 1.11 1.49 23.2 199 22.52 1.9 1.11 1.56 27.9 1991 3.43 1.9.9 2. 35.23 1992 34.79 1.93 1.1 1.72 39.45 1993 4.79 1.6.75 1.32 44.46 1994 44.35 1.62.81.81 47.59 1995 45.21 1.5.7.42 47.38 1996 38.96.83.51.45 4.75 1997 38.86.74.74.81 41.15 1998 32.9.53.33.57 34.33 1999 35.46.45.4 1.1 37.41 2 36.26.62.67 1.5 39.5 21 33.1 1.12.86 1.98 37.6 22 33.38 1.2.73 1.41 36.54 23 36.13 1..48 1.26 38.87 24 31.7.96.33 1.7 33.43 25 33.76 1.28.57 1.32 36.93 26 4.62.92.68 1.22 43.44 27 53.92.9.59 1.3 56.44 28 43.35.48.42 1.2 45.28 29 43.37.12.19.83 44.51 (Source: Modified after Ghana Chamber of Mines, 21, Ghana Statistical Service, 29) Society for Business Research Promotion 161

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Table 5 Mining Sector Contribution to Government's Revenue (in Ghana Cedis) Year Corporat e Tax Mineral Royaltie s PAYE Reconstructio n Levy Total Mining Incom e Total IRS Collectio n % Contributio n by Mining 199 282 594.16 189 343.6 - - 471 937.76 5281 86.8 8.94 199 1 82 184.5 32 127.7 - - 384 312.2 6148 562.5 6.25 199 2 455 51.88 454 58.4 - - 99 632.28 7473 153.1 12.17 199 3 439 344.73 748 512.1 264 93.6-1 452 787.43 1 1323 699.7 12.83 199 4 721 48.2 1 278 368.9 481 8.2-2 48 857.3 1 6659 594.1 14.89 199 5 2 39 297.3 2 91 192.6 795 176.3-4 925 666.2 2 7551 32.1 17.88 199 6 916 52.8 3 552 72.7 1 683 453.4-6 152 28.9 4 2449 19.8 14.49 199 7 986 879.6 3 459 495. 2 52 22.3-6 948 576.9 6 578 257.7 11.47 199 8 1 445 77.3 4 984 124.2 3 11 65.6-9 53 852.1 7 8543 669.3 12.13 199 9 3 111 71.8 4 862 41.9 2 783 926. - 1 757 678.7 9 166 375.8 11.93 2 1 578 916.7 11 873 693.5 5 924 38. - 19 376 99.2 14 944 527.3 13.75 2 1 2 481 289.3 12 735 838.6 7 611 167.8 425 146.8 23 253 442.5 19 516 275.1 11.92 2 2 2 35 115.8 15 345 247.1 1 145 766.8 2 647 463.4 3 488 593.1 27 5774 778.1 11.6 162

ISSN: 247-2528 Vol. 1 No. 1 [148-167] 2 3 6 813 77.2 19 438 757.9 14 14 945. 1 678 588.3 42 36 61.4 38 247 838.9 1.99 2 4 1 33 114.4 21 574 37.6 13 435 771.1 5 318 59.5 5 361 846.6 53 3311 47.4 9.44 2 5 26 988 964. 23 595 19.3 15 437 125.8 1 951 627.9 67 972 98. 62 56 55.6 1.96 2 6 21 566 21. 31 625 478.9 18 271 6.7 1 582 873. 73 45 559.6 73 4135 447.8 9.95 2 7 47 415 69. 4 882 42. 34 587 597. - 122 885 329. 91 235 784.1 13.5 2 8 73 554 697. 59 6 59. 47 139 242. 3 84 675. 21 783 58. 1 222 475 246. 17.22 2 9 124 6 88. 9 415 92. 13 61 985. 36 288 47. 354 367 174.2 1 79 557 8. 19.79 (Source: Modified after Ghana Chamber of Mines, 21; Broch and Owusu, 211) 163

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Table 6 General Information on Large Scale Mining Companies Name Location Mineral Mined Ownership of Mine AngloGold Ashanti Ltd Obuasi Gold AngloGold Ashanti Ltd Chirano Gold Mines Ltd Bibiani Gold Redback Mining now Kinross Central African Gold Ltd Bibiani Gold (Canada) Central African Gold Plc (UK) Golden Star Resources Akyempim Gold Golden Star Resources (USA) Ltd Gold Fields Ghana Ltd Damang Gold Gold Fields (SA), IAM Gold Newmont Ghana Gold Kenyasi Gold (Canada) Newmont Mining Corp. (USA) Ltd Gold Fields Ghana Ltd Tarkwa Gold Gold Fields (SA), IAM Gold (Canada) Table 7 Employment Statistics Name of Company Average Total Staff % Expatriate % Expatriate in Management Reasons for Expatriate Staff AngloGold Ashanti Ltd, Obuasi Chirano Gold Mines Ltd, Bibiani Central African Gold Ltd, Bibiani Golden Stars Resources Ltd, Akyempim Gold Fields Ghana Ltd, Damang Newmont Ghana Gold Ltd, Kenyasi Gold Fields Ghana Ltd, Tarkwa 4 35 1 33 5 4 7 699 1 1 819 2 56 1 4 1.2 47 1 55 5 7 2 38 3 61 Experience & Expertise Experience & Expertise, Drive efficiency Experience & Expertise Experience & Expertise Experience & Expertise Drive efficiency, Technology transfer Drive efficiency, Technology transfer Table 8 General View of Respondents on FDI and the Ghanaian Mineral Industry Disagree (%) Agree (%) FDI has been the only source of revitalizing the mineral sector of Ghana Local banks don't have the capacity to invest in large 1 9 4 6 164

Percentage (%) Agreeing www.ajbms.org ISSN: 247-2528 Vol. 1 No. 1 [148-167] scale mining The Ghana Stocks Exchange is not capable to handle opportunities in large scale mining Local entrepreneurs don't have the capacity to invest in large scale mining Ghana lacks management expertise in the mining sector Foreign managers are more effective and efficient than their local counterparts Ghana cannot do away with FDI in the development of the mining sector 5 5 3 7 8 2 9 1 2 8 FDI should be encouraged 1 9 9 8 9 9 8 7 FDI has been the only source of revitalizing the mineral sector of Ghana FDI should be encouraged 7 6 5 4 6 5 Ghana cannot do away with FDI in the development of the mining sector Local entrepreneurs don't have the capacity to invest in large scale mining Local banks don't have the capacity to invest in large scale mining 3 2 2 The Ghana Stocks Exchange is not capable to handle opportunities in large scale mining Ghana lacks management expertise in the mining sector 1 1 Foreign managers are more effective and efficient than their local counterparts 1 FDI Issues Figure 2 Ranked Responses of Percentage Agreeing to FDI Impact on the Ghanaian Mineral Industry 165

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Table 9 General Information on Small Scale Mining Operators Name Location Principal Mineral Mined Ownership of Mine Johnson and Co. Mining Services Tarkwa Gold Kwakwu Abaidu & Michael Johnson New Target Mining Company Tarkwa Gold Frank Adu Small Scale Miners Association Tarkwa Gold Mohammed Akoon Cooperative Society Tarkwa Gold Adowa Worley Nana Adukwadai and Group Nsuaem Gold Nana Adukwadai Nana Yeferi and Group Nsuaem Gold Nana Yeferi Nana Duaburo Cooperative Nsuaem Gold Nana Duaburo Nana Adai and Group Nsuaem Gold Nana Adai Nana Kwaku Ndur and Group Nsuaem Gold Nana Kwaku Ndur Kesse and Group Bonsa Gold Kesse David and Group Bonsa Gold David Table 1 Sources of Financing Small Scale Mining Operations Sources of Funding and Proportion to Capital Structure Name Self- Financing Financial Institutions Relatives, Friends & Buyers Foreign Johnson and Co. Mining Services 1% - - - New Target Mining Company 1% - - - Small Scale Miners Association - - - 1% Akoon Cooperative Society 8% - 2% - Nana Adukwadai and Group 3% - 35% 35% Nana Yeferi and Group 4% - 6% - Nana Duaburo Cooperative 35% - 35% 3% Nana Adai and Group 3% - 4% 3% 166

ISSN: 247-2528 Vol. 1 No. 1 [148-167] Nana Kwaku Ndur and Group 3% - 3% 4% Kesse and Group 35% - 65% - David and Group 3% - 7% - Table 11 General Information on Financial Institutions Name Location Type of Banking 1 2 3 4 5 Barclays Bank Ghana Ltd High Street, Accra Barclays Bank Ghana Ltd Tarkwa Barclays Bank Ghana Ltd Hospital Road, Tarkwa Cal Bank Ltd 23 rd Ind. Ave, Accra Ecobank Ghana Ltd Tarkwa Ghana Commercial Bank Ltd Accra Merchant Bank Ghana Ltd Accra Merchant Bank Ghana Ltd Tarkwa SG-SSB Limited Tarkwa Stanbic Bank Valco Trust House, Accra Standard Chartered Bank Ltd Accra Unique Trust Financial Services Ltd Tarkwa Legend: 1 Commercial 3 Trade 5 Credit/Lending 2 Investment 4 Universal Table 12 Capacity of Financial Institutions to Finance Large Scale Mining Operations Leverage (% Debt Finance) No. of Respondents % of Respondents 1 7 58 75-1 - - 5-75 2 17 25-5 2 17 Below 25 1 8 167