Small players, big results: The artisanal mining sector helps to bolster local economies

Although large-scale mining still dominates the industry in Ghana, smaller players are taking an increasing share of the market. While much of this artisanal mining is occurring in the formal sector, illegal mining, which threatens the environment, the health of local communities and the operations of large-scale players, is still a challenge for the government.

LOCAL FOCUS: The small-scale mining segment remains an important component of local economies throughout Ghana. According to a presentation by Mike Hammah, the minister of lands and resources, at a Western Region policy fair in June 2012, 28,000 people are employed in the large-scale mining and mine support services industry, while the more minor players account for over 1m jobs. Gold production accounted for 27.1% of total mining output in 2011 and was responsible for the country’s overall production increase of 6.3% that year, according to statistics from the Minerals Commission.

Additionally, the 283,369 carats of diamonds mined in Ghana in 2011, for example, were all produced by the country’s small-scale players.

One of the country’s primary instruments for helping to strengthen the role of artisanal mining, while cutting down on illegal smuggling of valuable metals and gems, has been the Precious Minerals Marketing Company (PMMC). Established in 1989, the state-owned PMMC serves as the primary buyer, seller and trader of gold and diamonds. It had been previously designated as sole authorised exporter for non-commercial gold and gems. However, by 2011 the market had been deregulated and other major companies were allowed to participate in trading.

GAME CHANGE: PMMC made an immediate impact on small-scale mining and trading following its creation. Although the figures for smuggled and stolen gems were impossible to gauge, some studies indicated as much as 70% of total diamond production was being illegally moved out of the country. Within the first year and a half of PMMC’s inauguration, the company had bought 382,423 carats worth of diamonds, along with 20,365 oz of gold, and brought in a profit of $8m from gem sales. By 2010, the figures for gold purchased by PPMC had risen to 346,861 oz, a slight decline from 2009, while diamonds in that same year amounted to 308,679 carats. The role this state institution plays in the artisanal mining segment is sizeable, and the volume of its exports give an idea of what sort of contribution small-scale operators make to the sector. In recent years, the company’s gold exports have been equivalent to more than one-fifth of the country’s overall total. PMMC has also sought to expand downstream and processing capacity amongst smaller producers and small and medium-sized enterprises.

In addition to its buying operations, PMMC also has with jewellery outlets and refining facilities in Accra, Kumasi and Tema. In early 2012 it unveiled a new $480,000 diamond cutting and processing plant, financed and built in conjunction with an Indian investor, which has a current capacity of 1,750 carats and will employ 40 people.

CRACKING DOWN: The increasing prominence of smaller enterprises is a product of government attempts to crack down on illegal mining. In the past five years there has been an increasing formalisation and legalisation of small-scale players. Nonetheless, illegal mining remains a persistent problem. According to Toni Aubynn, the CEO of the Ghana Chamber of Mines, “As a country, we don’t know what the total footprint of illegal mining is: what is the carbon footprint, the mercury output, the number of people dying in illegal mining pit, or the destruction of the natural environment.”

Illegal mining practices, such as the use of mercury for processing, indiscriminate devegetation and excessive use of explosives, are all of concern to the government. Furthermore, with some of these activities encroaching on land designated for formal large-scale mining, it has also now become an issue for a number of larger operators. “Some of them are directly trespassing on the concessions of our members and diluting their operations,” Aubynn told OBG.

Ghana took the decision early to legalise rather than demonise small-scale miners with the PDNC Law 218 of 1989. However, illegal mining has remained a persistent problem in the two decades following. “You have more than 70% of the people operating outside the law,” Aubynn told OBG. “It is therefore not only enforcement, but also the law itself that is the problem.” That sentiment is widely shared amongst industry players. “Illegal mining continues to be a problem,” R D Damptey, the managing director of Precious Minerals Marketing Company, told OBG. “Even though there have been major improvements in prevention, there is still more to be done.”

LIMITING THE INFORMAL SECTOR: The Minerals Commission is well aware of the challenge posed by informal mining and has introduced a number of measures to limit the problem. “Illegal mining has been a major challenge for the government,” Joseph Yaw Aboagye, the director of policy, planning, monitoring and evaluation at the Minerals Commission, told OBG. “The law allows for those who want to do small-scale mining legally and we try to make sure that we register them, monitor them and give them consultancy services.”

The government has created nine district centres for this purpose and is now focusing on providing technical extension services as an incentive for illegal miners to enter the legal industry. This effort, the first phase of which ends in 2012, has been conducted as part of the Natural Resource and Environmental Governance Programme funded by the World Bank, the government of the Netherlands, the UK Department for International Development, Agence Française de Développment and the European Commission. In the past 12 months, the number of district centres has increased from seven to nine and, according to Aboagye, more are due to be established.

The Minerals Commission is also working to provide land for small-scale miners. “We have realised that access to viable or suitable areas is a major problem for small-scale miners as they don’t have the exploration capacity,” Aboagye said. “As a result, we’ve identified areas to block out for this purpose. We’re going ahead to assess the potential of these areas to see if they are suitable for small-scale mining.” According to Hammah’s presentation, the government is currently exploring seven areas, totalling around 354 sq km of land.

Aboagye is confident that the efforts of the commission and the government more generally are beginning to bear fruit. “The rate at which people are coming for licences is increasing rapidly,” he said. Indeed, the number of small-scale gold licences issued by the commission went from 59 in 2007 to 228 in 2011, although there was a 10.5% decrease in the number of licences issued in 2011. This general trend suggests, however, that government attempts to combat illegal mining are taking effect.