Ghana's Mineral Industry & Foreign Capital
By Poku Adaa
A major characteristic of the mineral industry in many developing countries is the total dependence on foreign capital and technology. POKU ADAA surveys the extent to which foreign loans and credits are propping up the industry and why without them our mineral industry could mill to a complete halt...Many developing countries can aptly be tagged as the 'supply vessels of the developed countries' diet of minerals and metals. Mineral production appears to be the only way towards economic development and consequently most of these developing countries have their economies wholly dependent on the sale of minerals and metals.
Besides, mining as the central occupation in the mineral industry, is capital intensive, requiring huge financial outlays and specialised skills of technology and management, so that developing countries who have natural resources of minerals to harness or exploit usually resort to joint partner- ship with foreign companies or to borrowing on the international money market in order to establish their mining companies. Thus the mineral industry has developed a major characteristic of total dependence on foreign capital, technology and expertise.
Ghana, as a developing country, is no exception to this trend for her present and future of the mineral industry is tied up with foreign capital and expertise.
DIAMONDS
Diamonds have been mined in the Birim river valley in the Eastern part of Ghana for nearly sixty to eighty years. The past two years have seen the dwin- dling of the fortunes of this once giant company which has opened up the hinterland of West Akyem Abuakwa for nearly a century. Now the diamond pits are exhausted, finished and the stones are bare with no shine or lustre. Output has fallen progressively over the years as reserves got depleted.In 1981, the company produced 836,583 carats and in 1982, it was down to 682,354 carats. Excess plant capacity has accepted redeployment on farming, building projects, etc, in order to create local revenue and reduce losses. Meanwhile, the message is loud and clear that unless a major exploration programme is undertaken to find new richer reserves, the Ghana Consolidated Diamonds will have to fold up.
But where is the money? If finally some company in a foreign country with plenty of money to invest - yes, invest, that's the word it signifies a new round of partnership with exploitation and everyone hugs and smiles and hope for a better tomorrow. Thus it is with cheer that the nation welcomes a consortium of diamond merchants led by INADCO A.G. of Switzerland with £3.3 million to "help us" dig for diamonds. And since they are diamond dealers first and foremost, they get a ready supply of the finest stones.
From that they pay GCD and then GCD pays them for the loan they have taken from them and the partnership survives... but that is not all. GCD have accepted other loans, well lines of credit to be precise, from two Indian companies, Tata Exports Ltd and BEM Ltd for $3.3 million for supply of machinery and equipment. One more line of credit and GCD will be okay for the time being, this time from Aveling Bradford of the UK for £1 million. Meanwhile, the UNDP has spent £2 million to explore in the Birim Valley for more diamonds.
GOLD
There is the story about gold. It is that in a country where gold conjures charm and affluence, sale of gold is still against a closed market and any talk about it is done under whispers with trepidation and fear, in fact, far more fearful than any attack of leprosy. The State Gold Mining Corp- oration (SGMC) is a wholly-owned Ghanaian Company which mine and sell gold from three sites, viz, Prestea, Tarkwa and Dunkwa, and until recently, at Konongo.The SGMC, like all "State Enter- prises" is steeped in, and notorious for, low productivity and inefficiency, so much so that it is virtually milling to a complete halt just like the Konongo Mines just stopped operations all of a sudden. Many expert opinions see a major rehabilitation as a way out of the predicament of the SGMC.
Currently a World Bank loan is being negotiated for the Tarkwa and Prestea mines. Several foreign com- panies are waiting in the wings to cut a slice of investment. The Mitchell-Cotts of the UK and the AMAX Mining Group of the USA have jointly sent a representative to assess the situation. The government of Bulgaria has expressed interest in the re-develop- ment of the Konongo and Obeneması gold mines which had already been declared shut by the SGMC as being 'exhausted' and "economically not viable".
Already, UNDP Technical teams and mining experts from Bulgaria are due to begin exploratory and prospect- ing work which will eventually re- activate the two old mine workings. Local assistance in this respect will be offered by the Department of Mining Engineering of the Kumasi U.S.T.
Still on gold, another US Company, Major International of Texas, is teaming up with American-based Ghanaian businessmen to mine alluvial gold at Nyafomang in the eastern region and in the Ankobra river valley in the western region. The recent addition to goldmining investment in the country involving foreign capital is the Ghana-Libya Mining Company which has sought and obtained the full agreement with the State Gold Mining Corporation to operate a surface mining venture at Bibiani in the western region.
Ghana, of course, has huge gold deposits, estimated to be around two billion fine ounces, out of which only about 1% have been extracted, accord- ing to reliable sources close to the Geological Survey Department. A major portion of the gold deposits lie in the reef currently centred at Obuasi about 60 kilometres from the city of Kumasi where gold has been mined for many years.
The Ashanti Goldfields Corporation (Ghana) Ltd is a partnership between the government of Ghana with 55% shareholding and Lonhro Ltd of the United Kingdom with 45% share, although Lonhro, in addition, man- ages the mine on contract through its subsidiary Lonhro Technical Depart- ment based in London. The mine at Obuasi has a large population of expatriates who enjoy unprecedented high sterling salaries and housing privileges.
Still, the AGC (Ghana) Ltd has recently negotiated a $120 million loan from the International Finance Corp- oration to expand her operations. The Lonhro tycoon, Mr Tiny Rowlands, accompanied by British Conservative Parliamentarians were in Ghana last year to sign the agreement for the loan. The company's expansion programme revolves around the giant George Capendell Shaft and the newly envis- aged New Justice Shaft located at Anyinam and Nyankomasu at the southern periphery of Obuasi township and which are hoping to increase AGC's gold output to 400,000 fine ounces per annum within five years.
Of course, gold production, even short of refinery, is an expensive business and at Obuasi nearly eighty per cent of all inputs consumed at the mine for day-to-day operations are imported and, in fact, there appear to be many companies in the UK who could go bust without AGC's regular imports, but then that is the nature of the business. No doubt it takes a foreign management team with a self- sustaining Export Department located in London to handle equipment and material procurement to keep the mine working. One can understand the pre- dicament of the state-owned S.G.M.C. Ghana has no facility for refining gold at the moment, and gold produced in the country is sold to a Swiss Bank. There have been strenuous demands by Trade Union groups for a reactivation of the refinery proposed to be built in Tarkwa by the CPP govern- ment. There are reliable sources of evidence which point to the fact that the present volume of gold produced in Ghana all put together will not be enough to make the operation of a full-fledged refinery viable.
Ghana has no facility for refining gold at the moment and gold produced in the country is sold to a Swiss Bank. There have been strenuous demands by trade union groups for a reactivation of the refinery proposed to be built in Tarkwa by the CPP government. But there is evidence that the present volume of gold produced in Ghana will not be enough to make the operation of a full fledged refinery viable
Secondly, like all metal refining pro- cesses, electric power consumption will be tremendously high and whether that amount of power will be available is a critical factor. Yet the Russians have indicated their willingness to establish a "gold purification factory" at Tarkwa and their offer has been warmly welcomed by the government.
One does not rule out the Soviet style of assisting Third World countries in the mining industry. Theirs is called the 'Compensation Theory', which means they design the plant, deliver equip- ment, install and engage experts and then they pay for all these with products of the project or plant. It has happened in Guinea for bauxite, Algeria for lead and zinc, in the Congo for lead, and in Egypt for aluminium. However, one view of this Russian theory is that it is the same story of dependence on foreign capital and expertise.
EEC FINANCE
The current visit to Ghana of a delegation from the European Economic Community (EEC) to appraise the EEC-funded projects in the country thus draws attention to the financial aid which the mineral industry has been enjoying under the terms of the Lome Conventions. At a news conference in Accra, the head of the EEC delegation, Mr Patrick Everard, dis- closed that the EEC has been providing on the average $20 million annually towards Ghana's development, out of which a substantial part goes to the mineral industry.Two of such projects need mention here: In 1983, the EEC granted ECU6 million for the rehabilitation of the Manganese mine at Nsuta where depletion of ore reserves necessitated the procurement of new equipment and machinery to enable the extraction of the remaining low-grade manganese deposits. Another grant of ECU6 million was also granted by the EEC for rehabilitation of the Tema Oil refinery (GHAIP).
OIL PROSPECTING
Oil prospecting along Ghana's shores also involves international loans and finance. The International Development Agency granted $11 million to help accelerate the level of Petroleum exploration along 7000km of shoreline, which contract went to Geophysical Inc. towards the latter part of last year. The Canadian government also granted nearly $1.5 million for oil prospecting by the Canadian Company, Petro-Canada Assistance Co.MINERAL COMMISSION
It can be seen, therefore, that most developing countries, like Ghana, cannot hope to operate successfully without the expertise, technical and management teams and without the backing of substantial finance from overseas. All that can be said at this stage is to call for streamlining of negotiations and terms of participation so that the joy of partnership can be spread to all sides involved in any venture.The twice re-negotiated terms with the former Agri-Petco (now Primary Fuels Ghana Ltd) is a classical example. Ghana established the Minerals Commission in the latter part of 1984 to advise the government on all issues relating to exploration and production of minerals and to formulate a mineral policy that will regulate the inflow of capital to keep the mineral industry going. One hopes that as the Commission has taken four months to set itself up it would wake up now for the tasks ahead that are waiting.
