Reforming mining sector policies for national developmen

As the nation marks 58 years of attaining independence, the question still remains, are our exploited minerals and mining laws bold enough to reinforce a sustainable economic growth agenda to promote national economic transformation? Ekow Essabra-Mensah writes.

Critics have argued that current laws and regulations governing mineral resource exploitation are largely inadequate, particularly in ensuring that the sector is well-linked to other parts of the country’s economy.

And indeed segments of the legal framework and some mineral regulations affecting environmental protection and mitigation of mining impacts -- such as cyanide spillage, air-pollution and blasting -- need strengthening.

Again, the laws largely favour mining companies when it comes to revenue-sharing, as most of the wealth created does not return to the country. 

There have been indications that mining laws and regulations need reviews to be consistent with changes that have taken place (especially regarding mineral prices) since current laws were enacted.

This calls for comprehensive improvement on the country’s share of benefits; which will require a revisiting of the various mining sector policies and agreements towards achieving national development.

Current mining agreements, most of them signed when mineral prices were very low and the country badly needed mining investments, provided overly-generous incentives which have generated substantial disquiet among Ghanaians in the past few years due to disappointing benefits the country has been receiving from those agreements. 

This has impeded on the country’s inability to maximise mining benefits and ensure retention of adequate share, as was associated with existing mining contracts and agreements.

A new African regional mineral policy regulation; African Mining Vision adopted in February, 2009 by the African Union has provided a framework for industry‐wide changes that could ensure that benefits from mineral resources (both financial and developmental) are optimized and shared equitably among stakeholders. 

These reforms have been occasioned by substantial negative impacts from mining, widespread abuse of human rights in mining areas, inadequate financial and developmental benefits from mining to host countries -- especially when mining companies have been reporting rising profits on the back of soaring prices.

Locally, the country has also initiated certain steps in this direction, some of them including establishment of different committees -- two of them being the Government Renegotiation Team and Law Review Committee -- to review and introduce certain changes to aspects of mining in the country so as to enhance mining benefits and improve on benefit sharing between stakeholders. 

Some fiscal initiatives have been announced over the past few years, some of which are yet to be implemented. 

Mining companies have also been working very hard, especially through the chamber of mines, to forestall the smooth implementation of these policy reforms to ensure national development.

Meanwhile, the Chamber of Mines has observed the continuous confusion in the country’s mining sector, blaming it on the lack of a strong broad-based mining policy that regulates all the activities in the industry.

  The chamber emphasized: “There is confusion in the mining sector due to scattered laws, and to do away with all this confusion there is need for a centralised mining policy to regulate the industry so as to reflect and promote development in the country".

According to the chamber, a number of mining policies which are still being enacted to regulate the sector include the Extractive Industries Transparency Initiatives bill; National Mining Policy; Minerals Development Fund; and Minerals and Mining Act among others.

These various policies create a lot of confusion in the industry. To ensure sanity, there should be a comprehensive broad-based policy to regulate the sector’s activities.

This, the Acting Chief Executive Officer of the Chamber of Mines, Mr. Sulemanu Koney was  hopeful of government plans to diversify the economy away from the dependence on primary exports for industrial development on the back of the minerals and mining industry.

“I am hopeful that the President's resolve to diversify the economy away from the dependence on primary exports for industrial development will soon be realised on the back of the minerals and mining industry.

“Government and other state advocates of mining, such as the minerals commission, must pursue deliberate, systematic and aggressive policies to channel Foreign Direct Investment (FDI) into non -gold minerals. 

Aside from insulating the country against external shocks in the event of a decline in prices of any metal, a diversified minerals sector provides a sustainable basis for economic growth," he said.

He stressed the need to diversify the country’s minerals portfolio on account of the proven reserves of kaoline, limestone, salt, marble, iron-ore and other sought-after base minerals.

The Chamber of Mines, he said, recognizes the efforts of regulators in redefining their engagement with the industry: “it commits to work collaboratively to improve upon its turnaround time”.

Mr. Koney asked government to seriously work to ensure the ratification of minerals rights in the country as required by law, and said that failure to do this will not speak well of the country -- giving the impression that companies are operating illegally.

Call for linkages and value‐addition

The low level of linkages (upstream, downstream and side‐stream) within the mining sector has been a great concern not only to government and stakeholders but also to host communities.

Ghana largely relies on foreign inputs in the mining sector (including catering services) and output of the mineral sector -- exported in raw form to other nations to serve as strategic raw materials for their industries. 

This therefore denies the country the opportunity to transform its mineral resources into sustainable development through linkages.

Again, the current ownership structure of the mining sector, largely owned by foreign companies, has been identified as a major concern and partly responsible for the country not getting adequate benefits from the sector. 

The state is required by law to hold 10 percent equity stake in mining companies, yet these stakes are either diluted or not held at all by the state. 

This calls for a major rethinking and broad based policy reformation in its participation in the mining sector, with possible improvements to enhance mining benefits.

Environmentally, to ensure that mining is carried out in a manner that will cause little or no damage to the environment, government has over the years enacted laws and regulations to ensure that mining is carried out with due regard for safety and environment.

These laws, regulations and guidelines that enjoin mining companies take preventive measures against environmental degradation and pay compensation for lands, farms and properties affected by mining activities.

These laws include the Minerals and Mining Act, 2006 (Act 703), Environmental Protection Agency Act,1994 (Act 490) among others . If these laws, regulations and guidelines are enforced, the adverse environmental impacts of mining can be prevented or minimized to permissible levels.

The main negative socio-environmental impacts of mining in the country are vegetation destruction and land degradation, air pollution, ground vibration and noise, water pollution and social problems.

The rapid growth of the country’s mining has encouraged the migration of people seeking jobs to the mining areas, creating slums with concomitant health hazards, crime and promiscuity.

 Tapping the mineral potential

Ghana is obviously, endowed with significant mineral wealth. Gold, manganese, diamond, bauxite, limestone, silica salt and salt are being exploited in commercial quantities, with gold representing by far the most important mineral mined. In addition to these, considerable resources of iron and various other industrial minerals exist.

Gold is the predominant mineral that has been produced in the country since 15th century, which explains why the country was originally called the Gold Coast.

Industry chieftains, in calculating its forecasts have taken account of the vast untapped potential of the extractive sector, and expect the value of the mining industry to increase from US$0.64billion in 2009 to US$1.68billion in 2014.

It is already Africa’s second largest producer and exporter of gold, and is among the global top-five in manganese-ore production.

Moreover, with gold being the country’s principal mining asset and prices remaining strong, forecasts for the mining sector are more positive than those of some of its African neighbours.

Ghana containing the second largest area of gold deposits in the African region after South Africa is also counted among the top five nations across the globe for its manganese ore production and is home to some of the biggest names from the global extractive industry: Gold Fields, Newmont Ghana and AngloGold Ashanti, Golden Star Resources among others.

The Chamber of Mines anticipates a mixed year for Ghana’s mining industry, expecting gold to perform well, while bauxite and manganese exports could fall as a result of a decline in demand.

Outlook

The mining sector should be viewed as an economic “windfall” with which to accelerate structural change rather than as the backbone of the country’s economy.

The long-term outlook for the country’s mining sector is bright, but requires the acceleration of political, economic and industry reforms to ensure that the mining communities and the indigenes derive the full benefit from the earnings generated by the mining and the extractive sector.

In assessing the implications of the proposed new mining law, no one can question the positive strides relating to increased productivity in the sector.

However, an evaluation of the contribution of the sector to employment creation, to government revenues, net foreign exchange retained in the national economy, and the social and environmental impacts of the upsurge in mining activities, paint a quite different picture.

In spite of concern raised about governance of the mining sector in favour of the poor, and in spite of the adoption of the potentials of the proposed new mining law, the country is still very far from obtaining optimal benefits from its mining sector.

Legalisation of small-scale mining was and remains a laudable policy objective. Yet merely legalising the activity without adequately capturing its fast-evolving and complex social dynamics may prevent the attainment of other social objectives, such as enhancing the potential of the small scale mining sector to contribute to better livelihoods and poverty alleviation. 

The country has mineral deposits that can be mined profitably. If the correct methods are used to mine the deposit, employ the best mining practices to prevent or minimize associated environmental damage, and manage corporate social responsibility to improve the socio economic life of local communities, then the country can enjoy the economic benefits of mining peacefully.