Miners’urged to initiate 25-year power agenda

Mining industry players have been asked to proactively initiate a 25-year power agenda with regulators and power providers to lock-in and secure the power requirement necessary for smooth performance of the industry.

Mr. Peter Amponsah-Mensah -- Director, PAMICOR Limited, a mining industry service provider -- speaking at the quarterly meeting of the Accra Mining Network in Accra and making a proposal for a 25-year power agenda argued:“It is in our vital interest to take this path; we must after all secure our productive future or risk going under. 

“In that case, I would like to see the Chamber of Mines and Accra Mining Network (AMN) doing effective lobbying and advocacy work to ensure that what is in our common interest receives persuasive hearing and demonstration in the policy-making chambers of this country.

“Not only that: we must also be ready to put our money where our mouth is in order to guarantee that what will work in our interest gets concretely realised.”

The mining industry consumed about 10-30% of power generated in-country at the turn of the millennium, and guaranteed the power providers adequate revenue for maintenance and upgrade. Government early this year asked mining companies to further cut their power consumption -- by shedding a little over 30 percent from the initial 25 percent agreed last December.

Mr. Amponsah-Mensah cited that the high tariffs, power supply is inadequate and the power supply landscape is characterised by rationing of power -- adding that the absence of reliable power from the national grid and lack of a cheaper sources thereof continue to unbalance miners’ resolve to keep afloat with the increase in operating costs; independent power generation is the norm rather than the exception.

He mentioned that the power supply is inadequate because government has not made provision for either the public or private sector to make new investments, adding that government is formulating many ad-hoc solutions including the Karpower, the APR among others.

This, Amponsah-Mensah said, has been the norm during periods of crisis. What is missing has been a coherent, well-formulated approach that addresses the fundamental risks of electric power provision in the country: foreign exchange risk; fuel supply risk; the credit-worthiness of Electricity Company of Ghana (ECG).

He indicated that while the mining sector typically pays more than a cost-reflective tariff, other sectors of the economy do not and the result of the pricing discrimination is that, overall tariffs set by the Public Utilities Regulatory Commission (PURC) are not cost-reflective.

Amponsah-Mensah cited that government inability to pay its electricity bills has contributed immensely to insolvency of the electricity sector.

“Until government pays its bills, and tariffs are properly set, the government will struggle to provide an environment for sustainable provision of electricity.

“For the private sector to meaningfully participate, it needs clear signals from the government and regulators about the rules of the game. 

“The current approach is that whoever wants to do a project is encouraged. Hence, Foreign Direct Investment and Independent Power Producers have monopolised the power space, leaving little participation for the Ghanaian economic player. 

“In other countries, they put out tenders and they do auctions. Based on this approach a country is able to systematically say, for instance: ‘Our target of 1,000 MW is being met as follows by the following projects, and so bid in at lowest cost etc.; and so and so has this much gas and fuel need, and needs this much credit support etc’. The rules can also mandate that local content is a requirement for any foreign participation.”

He observed that the mining sector can play its own role to catalyse new investment by serving as anchor loads for new power projects. This role may potentially free-up power-related investment capital in the mining budgets toward other productive and efficient investments needed to boost the industry. 

Outlining some of the major challenges facing the industry, he mentioned unfavourable market forces, incongruent and misaligned policies, and personal/partial interests that override general industry interest. 

He said all these factors are acting in unison, and at times independently have undermined the responsiveness to opportunities that are present in the industry.

The industry sits in a very enviable position in the national economy. In 2013 gold alone contributed US$5billion to the state, accounting for 10% of gross domestic product. 

In the same year, 23 large-scale mining companies contributed up to 37% of total export by producing gold, diamonds, bauxite and manganese. In addition to all these, there are over 300 registered small scale mining groups and 90 mine-support service companies. 

On gold price, he said, the bullion slump by 28% in 2013 destabilised the industry worldwide and at home. The decline was mainly a consequence of investors’ waned faith in gold as a store of value amid a rally in equities and muted inflation in the US economy. 

The effect on the country’s industry was a loss of 1.2million ounces of production in 2013. A further potential loss of 300,000 ounces is expected as Obuasi Mine (AGA) restructures. 

The accompanying labour rationalisation and cost restructuring exercises of other members of the Chamber of Mines and suppliers have taken an enormous toll of the industry. 

The industry, in spite of the challenges, has contributed toward improved social development through providing jobs, paying taxes, building an industrial base, enhancing efficiency, earning foreign exchange and transferring technology. But the sector has also been perceived by a critical public as deepening disparities in wealth; operating under poor labour conditions; polluting the environment; and being responsible for health and safety failings, forced displacement and other human and civil rights abuses. 

This has led to an increasing pressure from NGOs, Community Based Organisations (CBOs) and Civil Society Organisations (CSOs) all over the world for multinational corporations to become more accountable.