How the Mining Industry Contribute to Ghana’s Economy
The mining industry in Ghana is known to play a significant role in the country’s growth and development as well as different economic sectors. The country’s mining industry includes mining of gold taking part up 95 percent of all mined minerals. Therefore, Ghana is ranked tenth across the globe in gold mining alone. The mining industry in the country is the largest export contributor. It contributes to 35percent of the country’s exports and 5 percent of Ghana’s GDP. This research will focus on How the Mining Industry Contribute to Ghana’s Economy.
Ghana is also the second country in African that produces the largest amount of gold. Other minerals mined in the country include manganese, gasoline, salt, bauxite and diamond. The main purpose of this study is to answer the question how does the mining industry contribute to Ghana’s economy?
From the upcoming discussion, it will be realized that mining industry in the country has played a significant role in ensuring economic growth in Ghana. Additionally, it created many job opportunities via small and large scale miners. There are also strategies that have been put in place to monitor and regulate mining activities.
Mining activities in the country have significantly increased in the past following changes made in the 80s and 90s. Restructuring activities were put in place thus ensuring introduction of small mining in the industry.
Mining industry in Ghana is well organized and it plays a crucial role in development of social and economic industries in the country. According to research, quarrying and mining industry in Ghana leads to one percent of the country’s total employment. There has also been growth in direct and indirect employment in Ghana because of mining. The increase was attributed to legalization of small scale mining in the 80s and 90s. As a result, many local people engaged in small mining businesses and in sourcing employment opportunities.
Small scale miners create jobs for youths who make up the largest part of the country’s population. Research findings also indicate vital factors that lead to growth of mining industry in Ghana including restructuring of mining in 1980. It is a move that simplified mining activities and reduced the cost of mining equipment. Additionally, the restructuring ensured that export costs were highly affordable to small and large scale miners.
How does the mining industry contribute to Ghana’s economy is the research question for this subject. This is a relevant question for the study based on the fact that it will help in determining the extent under which mining industry has led to the growth of the country’s economy. The question will additionally help creating a solution to the problem affecting mining industry in the country.
What’s more, it will offer an opportunity for evaluating the current policy’s relevance and practices in the industry. Lastly, the topic will help the researcher to recommend changes that need to be implemented as a way of enabling mining industry in the country to reach its maximum potential.
Mining industry in Ghana from the study was restructured and a number of policies and reforms were put in place. Some of the factors that led to the restructuring were to encourage foreign and local investors both in the private sector to take part in mining.
Reforms and Policies
The presence of minerals in any country including Ghana is considered a blessing. This is based on the fact that are freely available for extraction, mining and for use to help people enhance the quality of their lives. Mineral mining also boosts a country’s economic growth. Before mining became successful and beneficial to Ghana, several reforms had to be put in place.
Policies governing the industry also accompanied the reforms in the country. The policies and reforms played a crucial role in ensuring success and significance of the country’s mining industry (Aryeetey, Osei & Twerefou 4). The reforms were put in place from 1983 to 1995. Spearheading the reforms was the Economic Recovery Program in 1983.
Amongst the reforms was the macro-economic policy reform. This helped to ensure sufficient funding to mining industry for smooth operations. The Economic Recovery Program also designed clear policy reforms in the industry. They aimed at increasing investor interests in Ghana’s mining industry. There were also significant developments as well as changes in the policy and it enabled investors to benefit from generous incentives as way of encouraging them to participate in mining industry (Akabzaa 7).
The reforms also led to creation of minerals commission in 1984. The commission was responsible for monitoring all activities that took place in the industry. Additionally, there were mining and mineral codes that were created and propagated in 1986. The body created a small scale mining law that was propagated in 1989. The law is the one that legalized and gave power to small scale mining in country.
In 1994, the environmental protection agency was created. It operated to ensure that despite mining activities in the country, there were minimal effects on the environment (Tawiah & Baa 64). Guidelines were also put in place allowing for direct investment by stockholders in the mining industry.
Some regulations reduced corporate investments for instance, corporate tax for private ventures in the country reduced to 50 percent in 1975 to 45 percent in 1986. In 1995, it reduced further to 38 percent. There was also a policy that created breaks on import duties for different organizations on equipment as well as mining tools in the industry. This was beneficial to small scale miners.
Mining companies were entitled to keeping 25 percent of foreign earnings in a different account as a way of making things better in the industry (Aryee 62). The money in an external account was later used for getting hard production capital, in dividends payment and in catering for expatriate labor.
The laws in place have not only been beneficial to workers in the mining industry but additionally to the farmers thus, enhancing economic growth in the country.
Factors affecting the industry and current impact of large scale mining industry in the country
As earlier mentioned, large mining companies in the country has enhanced economic growth in different ways. Since the reforms were implemented, socioeconomic contributions have taken place besides developmental contributions of different mining activities in the country. Mining socioeconomically has offered job opportunities to individuals living in different parts of Ghana (Kim & Kapstein 27).
Research also shows that people working in the industry, reinvest the money in the industry thus, promoting socio-economic relations. The industry is also quite sensitive to its impact on the environment and therefore, it has designed ways of ensuring mining activities are eco-friendly (Akbaa 9). There are also mining companies that help small scale miners and residents to get loans to improve their business operations.
They also have ability creation programs that help young people to realize their potentials. Some mining companies in the country also ensure that they participate in growth activities. They ensure that people from the communities are employed and economically empowered (Kim & Kapstein 27). They do so by ensuring people in close proximity with mining companies feel the positive impact of being in the neighborhood.
The companies on the other hand have created many development opportunities in the country. Mining activities for instance have ensured development of infrastructure within different parts of the country. Therefore, roads have to be built to enhance and facilitate transport. Mining activities have also enhanced creation of industries. Many companies manufacturing accessories and tools used in the companies were created. Other organizations that participated in purifying minerals in small amounts were developed (Aryee 62).
Mining businesses ensured economic growth in Ghana. Research for instance reveals that mining industry is the major contributor of the country’s gross domestic profit per year. It generates foreign exchange and foreign trade for the country. The industry has also put the country on global mining and trading map (Tawiah & Baa 65). It also enhanced economic growth by enabling many people to engage in mining business through small scale mining.
Mining also earns Ghana good foreign exchange cash and services besides contributing to the country’s total gross profits and state taxation. Politics in Ghana also play a crucial role in promoting success of the industry in the country. It is said that it is through the country’s leadership that economic changes came into existence (Aryeetey, Osei & Twerefou 7).
Politicians also designed policies that welcomed investors to the country. They encouraged direct investment to the country thus attracting more investors to the country. Political parties created a government that put in place ERP. This body established laws that regulated some policy systems that prevented economic growth in the country’s mining industry.
Regulation of policy laws and systems that were put in place has also built a solid foundation for the industry’s growth (Aryeetey, Osei & Twerefou 7). This in turn has enhanced the country’s GDP a great deal via creation of new industries and more job opportunities.
It is also essential to note that Economic Recovery Program (ERP) that was established by the state in 1983, created a solid foundation for growth and development of the mining and mineral sector. The government industry also designed laws and regulations that enabled private sector investors to participate in the larger mining industry.
This research study focuses on Ghana’s economic status from 1980’s. The evaluation is carried out after ten years based on the country’s GDP, state of employment, inflation rate as well as the role of the private and public sector specifically in the mining industry.
It has been realized that mining industry played a crucial role in promoting economic growth in Ghana. The industry contributes to GDP and export earnings in the country. Gold mining in the industry in the larger and generates the largest percent of foreign currency and GDP to Ghana. Besides enhancing economic growth, the industry has promoted the country’s GDP a great deal, created more employment opportunities and developed new industries (Economic Commission for Africa, 2013).
Research also reveals that mining in the country generates 79 million US dollars remunerated as government proceeds in regards to the largely anticipated corporate contributions including royalties, corporate share dividends, income tax, custom duties and excise duties. The most significant of all is the mining industry’s direct royalty contributions worth 42 million US dollars.
Dividends followed closely with 19 million US dollars and the industry generated 17 million US dollars as customs and excise duties utilized in the country. It is additionally essential to note the fact that 10 percent of the country’s royalties is given back to the society via Minerals Development Fund (MDF) to substitute developmental projects in the societies (Economic Commission for Africa, 2013).
The Minerals Development Funds also help the communities to create small scale business as well as other income generating projects to help them get jobs and improve their living standards.
Available data reveal that Ghana’s mining industry accounts one percent of the country’s total employment. It uses a smaller underground mining degree that is labor intensive as such; they need more employees as they can only get from Ghanaian citizens. This mining strategy is open cat mining and is not labor intensive. It means that organizations using this mining strategy need less labor (Ayee & Gangadhar 75). Therefore, they end up hiring few staff. Even so, it is imperative to note that Ghana’s economy contribute to the country’s economic status even if it only on small scale.
The rate of inflation as well as the role of private and public sector specifically to the mining industry
It can be argued that Ghana’s inflation rates are relatively low. The economy is strong and can take care of itself. The private and public sectors play a crucial role in the mining industry. The government for example regulates the industry via public owned organizations. It also creates rules that allow investors to participate in the industry freely.
What’s more, it is essential to note that there are privately owned organizations in the mining industry. The companies contribute to the industry by investing in it. They also provide employment opportunities to locals (Ayee & Gangadhar 78). Private sector also ensures that more potential investors are welcomed into the country by selling Ghana’s mining industry good nature. The public sector also designed laws that enabled foreign and private organizations to invest in the industry.
This part of the study will consider reforms and policies that have been put in place and implemented in regards to mining industry. It will also evaluate successive governments and their action plans in relevance to the industry. The analysis process will consider measures employed and opportunities created to enhance growth and development of mining industry even further.
As discussed above, the mining industry in the country employed major reforms in 1983. This focused on enhancing the culture and nature of mining in Ghana. These policies and changes included macro-economic policy reforms as well as mining and mineral codes created and propagated in 1986.
In 1989, there were small mining laws that were introduced in 1989. The environmental protection agency was also created in 1994. All these measures aimed at enhancing mining condition in Ghana and were very strict until 1983 as they did not give public and private sectors an opportunity to explore mining opportunities in the country to a larger extent (Alpine & James 43).
The reforms and policies also focused on enhancing local and global investors to invest in the industry. This was quite successful because many people made the investment and development was enhanced by availability of small mining in the country. Many global investors from different parts including South Africa, America and Canada actively engaged in mining industry in the country.
Other mining companies in the country worked with foreign mining companies to offer better services (Alpine & James 43). They acquired better equipment and tools through the collaboration as well as skills and knowledgeable needed for the task. The reforms and policies also helped women to actively participate in mining activities in Ghana (Gier 33).
Stereotyping of women stopped and could own mining companies in the industry. They were also employed and given similar opportunities as men in the industry following long struggles. The new reforms and policies additionally enhanced foreign and trade relations and foreign exchange earnings to the country. Additionally, they offered decision making opportunities to the locals and made full potential of the mining industry. After the reforms, it can be stated that the industry became gender sensitive compared to the past.
Before 1983, the government of Ghana was not keen on enhancing its mining industry. Research in fact reveals that they had strict measures for the mining industry. It was also clear that did not understand the significance of the industry. The state wanted to focus on all minerals in the country to itself not knowing that sharing of the resources could benefit the country even further (Ministry of Finance and Economic Planning, 2007).
Before the rules and did not enable foreign investors to directly invest in the industry. Small mining industry in the country was not legalized as there were policies governing the operations and this made investors to stay away from exploring the industry in the country. The government as a result came in 1983, took actions in creating policies to enhance mining industry.
They enhance allowed and encouraged foreign and international investors into the industry. They created many employment opportunities to locals, enhanced foreign exchange and increased exports of different minerals by creating trade relations with regional and foreign states including South Africa, Canada and America. This kind of trade collaboration increased gold making export in the country making it number ten gold exporters across the globe.
The industry opened job opportunities for locals as a result of small scale mining. Community development projects were also put in place via foreign donations carried out by foreign organizations in Ghana. This was a way of giving back to the community and to empower them in different ways leading to creation of more employment opportunities and increasing access to quality youth education in the communities.
Research also reveals that mining industry has led to increase in government revenue a great by way of corporate taxes and mineral royalties. This contribution increased in 1995 when it made up 15 percent of IRS collected revenues. The industry also led to infrastructure development opportunities among others.
Operations of bulk minerals for example led to enhancement of the railway industry a great deal. Bauxite mining contributed 60 percent of railway revenue and manganese contributing 30 percent. Mining in general in the country also creates 7 percent employment opportunities in the informal sector (Aryee and Aboagye 1997).
Ghana’s mining industry has undoubtedly come a long way. It has improved and increased production of minerals significantly since it was introduced many years ago. Many reforms and policies were created to enhance mining conditions in the country. This was additionally aimed at attracting foreign investors to Ghana.
The industry over the years increased the country’s gross domestic profit as it includes mining of different minerals such as bauxite, gold, salt and manganese just to mention a few. The industry has additionally created more job opportunities as well as trade relations with other countries and it employs two mining strategies including underground and open mining.
Mining industry in Ghana is gender sensitive because it allows for participation of men and women in different mining activities despite the fact that it takes place in small scale. Economic and social developments in the country have been enhanced because of mining and it makes up 37 percent of the country’s exports. It also contributes for 5 percent of Ghana’s gross domestic profits.
Ghana should create more ways of enhancing export of gold which has significantly reduced in the past few years. It needs to increase its trade relations and attract more foreign investors as it did in the past. Political instability in northern parts of the country at present should be addressed soonest so that the country can tap more foreign mining companies to invest in it.
The state and its leadership in the mining industry should consider expansion of the industry. As a result, they should design different mining activities and methods for the industry. Additionally, they should create strong ties with other economic sectors including cocoa industry as a way of enhancing foreign relations.
It is additionally imperative for the state to reduce over dependence on its local import consumption and to reduce the level of public expenditure while increasing productivity via training and ideal transfer of technology.
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