Since the 1990’s, Ghana, under successive political administrations, has trumpeted its lofty ambitions of becoming a trade and investment hub for West Africa. More recently, under the tenure of the President Nana Akufo-Addo administration the country has become more specific in its aspirations, seeking to become a financial services and ICT hub in particular, although actual policy initiatives to make this happen have been opaque at best.
Now however the Ghana Chamber of Mines, backed solidly by its members, has declared its intention to make Ghana a West African hub for mining support services, and is actually taking concrete steps to actualize this ambition. The Chamber last week unveiled its plans to senior business journalists grouped together under the auspices of Journalists for Business Advocacy (JBA), a professional association of senior media practitioners that partners industry regulators and participants in several different sectors to promote improved conduct, performance and consequent impacts.
Importantly, the Chamber’s ambition is not just another lofty vision that is not backed by concrete action as many, if not most, announced dreams of making Ghana a sub regional business hub have been; the Chamber is actually in the process of putting together a team of consultants to identify areas where Ghana’s mining industry has competitive advantages with regards to providing support services, and to work out a feasible plan of action to position its mining support service providers as a hub used by the growing number of sub regional neighbours who are actively seeking to increase solid mineral exploration and production activities in their respective jurisdictions.
To this end the GCM has budgeted several hundreds of thousands of US dollars (the actual budget has not yet been revealed) to secure a fully workable plan in this regard.
However, challenges are already being encountered. In 2020 the Chamber advertised a call for proposals for the study on positioning Ghana as the sub regional hub for mining support services. Out of the 13 companies that responded, four were short-listed for the final round of the selection process, with the expectation that the chosen consultants would commence the study this year.
However in discussing with all four short-listed companies the GCM found that none of them had fully grasped the scope of the required study and thus the competencies required. Consequently the Chamber has revised its road map; the plan now is to assemble a team out of the contenders and effectively guide them onto the path that needs to be followed to derive the road map needed to position Ghana as a mining support services hub. This, process, the GCM hopes, will be completed this year enabling the team to actually start executing the study by the start of 2022.
With funding fully in place, enthusiasm is high; JBA is already bidding to become part of the team, offering to provide a plan for marketing Ghana’s mining support services industry through the media in target countries. Considering the close working relationship between the Chamber and JBA over the past few years, and the resultant mutual respect each party has for the other’s capacities, this group of media practitioners is likely to be among the first professional segments to get accepted onto the multi-disciplinary team to be formed. (If that happens Goldstreet Business will have representation on the team that would be tasked to develop the road map.)
To be sure, Ghana’s mining support services industry is well positioned to serve as the hub for West Africa’s mining industry.
First of all, Ghana’s mining industry is both the biggest and the oldest in the sub region. It is well over a century old and more importantly, its liberalization – part of the liberalization of the entire economy during the 1980s – provided the model framework which the rest of the continent adopted subsequently and which has resulted in Africa’s solid minerals mining industry becoming arguably the most important economic revenue generating sector on the continent. Following Ghana’s example countries such as Mali, Burkina Faso, and Cote d’Ivoire have made West Africa one of the fastest growing mining investment destinations in the world. Indeed Ghana’s regulatory and investment facilitation framework has been adopted by countries much further afield as well, particularly in East Africa which is resultantly competing with West Africa in attracting international capital and expertise in the mining sector.
But even more important than the size and regulatory pioneering status of Ghana’s mining industry is its local capacity, with regards to the provision of both goods and services used by the international exploration and production companies that rule the roost all around Africa. Here, it is important to distinguish between local content and local participation – even Ghana’s mining support services industry is largely foreign owned. However they are domiciled in Ghana which means most of their net income – and other economic benefits such as employment and sub-contracting opportunities – are retained locally and this would still be the case if that income is generated abroad.
Interestingly, unlike in the case of Ghana’s relatively new upstream oil and gas industry, local content regulations have been driven primarily by the industry itself rather than by government. Here the GCM has collaborated with the Minerals Commission as the industry regulator, to identify products which can be supplied by local enterprises.
Initially though, most of the locally supplied inputs were actually imported, qualifying as locally sourced only because they were supplied by locally domiciled enterprises. But having recognized the situation, the Chamber has over the past two years spearheaded efforts to increase local manufacturing capacity. Today, Ghana’s local manufacturing industry has more capacity to produce mining inputs in-country than any other nation on the continent except South Africa itself. Importantly, the fact that these products are bought by international mining companies evidences their world class quality.
Now, with the commencement of the African Continental Free Trade Agreement at the start of 2021, Ghana’s mining inputs industry has become potentially more price competitive than ever before as a source of products supply for the continent’s other mining countries.
The situation is similar with regards to professional skills driven mining support services such as geological surveying and assaying. Ghana’s longer experience than its neighbours in solid mineral mining, its bigger levels of activity and its recently introduced local content regulations have combined to make it the most competent provider of such services and its closer geographical proximity and exchange rate considerations allow it to be price competitive against its counterparts in the western hemisphere which up till now have been the primary source of support services to West Africa’s mining nations.
Add to all these competitive advantages similarities in business cultures as well. Even though some of this aspect of Ghana’s competitiveness must remain unsaid in public, the reality is that the country’s mining support service providers would be more willing to play by the unwritten rules of business in Africa – such as showing “appreciation” to those who award them contracts through financial and other material “presents” than their counterparts from the western hemisphere.
The export of mining industry inputs and services will be increasingly important to Ghana in financial terms over the coming years as local production levels and consequent foreign exchange revenues from the sale of gold – which accounts for 95 percent of the country’s total mining revenues – stagnates and ultimately declines. Last year’s 12.1 percent decline in gold production to 4.023 million ounces, from 4.577 million ounces in 2019 was the sharpest year on year production fall since 2003. While the decline was underlined by the peculiar circumstances resulting from COVID 19 and the effects of Ghana’s ongoing efforts to curb illegal artisanal mining, the fall in Ghana’s competitiveness as a destination for gold exploration, compared to its sub regional neighbours, is telling. In 2020 Ghana attracted US$84.4 million in new investment towards exploration for new gold deposits, which was less than the amounts invested in Cote d’Ivoire, Burkina Faso and Mali respectively; up to just two years ago Ghana was the recipient of the second largest investment in gold exploration in all of West Africa.
Inevitably, the shift away from Ghana towards its neighbours with respect to exploration will translate into a similar shift with regards to actual gold production. This makes it imperative for Ghana to increase its foreign exchange income from the export of mining industry inputs and technical services to compensate for consequent falls in gold export revenues.
Just as importantly, making Ghana a mining support services hub for West Africa would accelerate the process of mainstreaming the mining industry as a whole to the benefit of the country’s wider economy. For the past century Ghana’s mining sector had been regarded as an enclave industry and correctly so too, since its linkages with the rest of the economy were minimal. Simply put, foreign mining companies would come to Ghana explore for gold and upon finding some, would build a mine to exploit it. The gold would then be sold abroad and the state’s share of the revenues would be received. Even employment was minimal, except during the mine construction period.
Over the past decade or so though, Ghana’s mining industry, through the GCM has been trying assiduously to create linkages between it and the rest of the economy and local content regulations and targets have been the key strategy in this regard. The effort to manufacture mining inputs locally has significantly expanded Ghana’s manufacturing capacity, not just through the demand the mining industry creates, but through deliberate support initiatives to improve production quality and installed capacity.
A recent example of this is the recent initiative from the GCM towards the standardization of electrical cables used by the industry. In supporting the introduction of and adherence to acceptable international quality standards for made in Ghana electrical cables used by the country’s mining industry, the GCM, in collaboration with the Ghana Standards Authority has ensured that local electrical cables manufacturers produce items that are quality competitive against those from even the most renown western hemisphere manufacturers. In turn this has positioned them to take advantage of opportunities thrown up by AfCFTA.
By making Ghana a mining support services hub, the industry would help manufacturers of other products used by the industry to become internationally quality and price competitive too, thus positioning them to take full advantage of AfCFTA as well. For input manufacturers that can achieve this, huge sub regional markets would be waiting – the mining industry in all the West African countries with solid mineral endowment are major buyers of the inputs they need and their willingness to patronize any particular product serves as a veritable endorsement of that product, opening the doors wide for patronage by all the other industries in the country.
All of this is still quite some way off however. Even as the GCM and its members recognize the potentials for Ghana’s mining support services industry to become a sub regional hub, and the benefits to be derived from achieving that position, it is acutely aware of the difficulties and complexities that will have to be overcome first. This is indeed why it has budgeted so heavily towards getting a viable, practical road map and is a hurry to begin implementing it.
For once though, Ghana’s ambitions of becoming a regional hub in a particular type of activity is going beyond the state’s wish list and is being actively pursued by the private sector companies that stand to benefit directly from the foreign exchange revenues that would be generated.
Hopefully, this initiative by the GCM and the way it is going about it will serve as a model for other sectors in Ghana with sub regional hub potentials, to emulate. If indeed that happens, it will have made Ghana’s mining industry more than a mainstream component of the country’s economy; it would have made it the trail blazer in the effort to create a modern export led industrialized economy.