Ghana's government focuses on reforming small-scale mining

The role of galamsey, or artisanal, small-scale miners, in Ghana has become increasingly important. This group is currently responsible for all diamond production and its share of gold production has more than doubled since 2008, as the rise in gold prices has attracted more people to try their hand at mining. These operators are currently not heavily regulated and do not pay taxes. Reforms aimed at changing this are likely in the coming years.

Categorisation

Ghana’s small-scale artisanal gold mining sector was first legalised in 1989 with the promulgation of the Small-scale Gold Mining Act, which established the Precious Minerals Marketing Corporation (PMMC), the industry’s main marketer and the sole buyer of small-scale gold and diamond mining output. The law was replaced with the Minerals and Mining Act of 2006, which defines small-scale mining as “mining by any method not involving substantial expenditure”. It requires aspirants to procure a licence, which can cover up to around 10 ha of land for a duration of three to five years. Holders are expected to submit plans for environmental management throughout the life cycle of their mines.

Because it is in large part an informal and lightly regulated activity, small-scale mining is difficult to measure in Ghana, but as a result of the commodities boom of the 2000s the number of miners is estimated to have tripled to as high as 600,000 between 2001 and 2011, when gold hit a high of $1900 per ounce. A March 2014 report from the University of Surrey estimated 1.1m Ghanaians directly participate in artisanal small-scale mining, while a further 4.4m are dependent on the industry for their livelihoods.

Small-scale mining, which is reserved for Ghanaians, plays a vital role in the industry. In 2013 galamsey are believed to have accounted for 34% of gold production, up from 15% in 2008, according to reporting from the Minerals Commission, the country’s mining regulator, and the Ghana Chamber of Mines (GCM), with gold accounting for 98% of cumulative metals receipts. Reuters reported that the country exported 3.19m ounces of gold in 2013 and 3.16m ounces in 2014, making Ghana Africa’s second-largest gold producer after South Africa, while over 50% of foreign direct investment in 2013 was channelled into mining, which accounted for 37% of export revenues.

Environmental Impact

Environmental concerns have heightened with increased activity, and as of 2010 some 13% of land in Ghana had been deforested as a result of small-scale mining, both legal and otherwise, according to a January 2015 report from the University of New England. Galamsey generally seek out alluvial deposits near river beds and some of these have been mined 35 metres down and 60 metres across, the study reported. Rudimentary processing is also a concern, with chemicals such as mercury and cyanide spilling into rivers and working their way into human digestive systems through fish exposed to the chemicals. Toni Aubynn, head of the Minerals Commission, told the press in October 2015 that changes were under way for regulations that would address the challenge of small-scale mining, including establishing three categories: artisanal, small-scale and medium-scale miners.

Tax Eligible

Although a July 2015 report published by the International Council on Mining and Metals (ICMM) found that mining accounted for 19% of all direct tax payments in Ghana in 2013, the PMMC, the government body to which small-scale miners can sell their output, reported that the state is losing GHS500m ($138.8m) in taxes and royalties annually. Existing laws do not differentiate between small- and large-scale mines for the purpose of royalty payments, or specifically exempt any group. However, a recent financial reconciliation and sector report from the Extractive Industries Transparency Initiative suggested that a differentiated system could be created for both taxes and royalties in the galamsey segment.

Commodities Troubles

The government has also been active in introducing legal reforms in recent years, particularly those aimed at supporting small-scale miners, passing six new mining laws and regulations in 2012 alone. However, a move to alter the tax regime for small-scale miners will likely face challenges as a result of depressed global commodities prices. The Bloomberg Commodity Index of 22 raw materials, including oil and metals, fell to a 16-year low in August 2015 as a result of weakening demand in China, while global gold prices dropped to a five-year low of $1088 per ounce in July 2015 and hovered around $1095 per ounce as of November 2015.

The GCM reported in July 2015 that gold mining revenues fell 17.4% to $3.8bn in 2014 as a result of low global market prices and declining output. Total mineral revenues dropped by 16.7% during the same year, with manganese output falling by 32% to 1.35m tonnes. Although declining output can be partially attributed to an ongoing electricity shortfall, falling commodities prices represent a significant near-term challenge for mining stakeholders.

Best Practise

Despite the challenges, legal reforms will play a critical role in supporting long-term stability. Ghana is not the only place where small-scale mining is on the rise, and other countries have established tax regimes that could serve as models. At a December 2014 conference for the segment, Nii Adjetey-Kofi Mensah, the executive director of the Artisanal and Small-Scale Mining Africa Network, suggested that the approach used in Tanzania could also work in Ghana. A similar rise in activity has been reported there, with the number of Tanzanians involved surging from 150,000 in 1987 to more than 700,000 in 2012, according to a report from the Tanzania Minerals Audit Agency.

Illegal Minning

Government will be fully capitalising on all the profits generated from small-scale mining. The industry has also been plagued by illegal mining operations in recent years, which are generally heavily mechanised compared to traditional artisanal mining. The ICMM estimated that in 2014 the government of Ghana deported an estimated 5000 foreigners purportedly involved in illegal small-scale mining.

Promotion and support for sustainable small-scale mining has also played a prominent role in recent years. In 2005 the government identified three areas in the Western Region and in Winneba, Central Region, to be allocated to small-scale mining operations, and in 2008 the government began exploring opportunities for small-scale diamond mining. Reforms passed in 2010 also set aside land for small-scale miners to avoid conflicts with larger competitors, as well as extend concession tenure from five to seven years in hopes of facilitating access to capital for the small players. The government also began providing more financial and logistical support to small-scale miners.