Impact of Illegal Mining
Illegal Mining in Ghana and the Impact on International Mining Firms
February 2, 2016
James Balasch – Primary Article Contributor
Matthew Wilson – Team Leader Ghana
Keywords: Ghana, illegal mining, small-scale mining, China
In 2005 a “Chinese Goldrush” occurred in Ghana, one of Africa’s foremost gold producers second only to South Africa. Since then, the influx of Chinese prospectors into Ghana was estimated to have reached 50,000 at its peak in 2013. This is just prior to the departure of a number of Chinese prospectors that gave up later in the year due to the dramatic nose-dive of the value of gold. At its prime, though, several thousand Chinese-influenced small-scale mines were prevalent throughout Ghana. While small in scale, these mines used bulldozers and other heavy machinery combined with locally-hired labor, and were run by Chinese prospectors partnering with local owners.
These mines, while technically illegal throughout Ghana, were prevalent throughout the country. Over recent years the adverse effects of this illegal, unregulated mining became more apparent. Example of these effects include the environmental devastation of local farmland and negative effects on various communities including water supply and production. Most striking was the sporadic violence that erupted between Chinese prospectors and Ghanaians, resulting in fatalities on both sides. By May 2013, the Ghana government had witnessed enough. It immediately began deporting small groups of illegal Chinese prospectors, and commissioned a task force to combat illegal gold and diamond mining in Ghana. Significant to this analysis, it idealized a number of judicial initiatives that could have long term impacts if initiated.
One of the first initiatives this illegal mining task force communicated was the idea of encouraging local purchase and export of minerals. In simple terms, this would translate to Ghanaian communities taking the excavation of minerals into their own hands. Up to this point only privately owned, foreign companies were officially licensed to export minerals independently. Ghanaian President John Mahama backed up this idea, “…pledging to support sustainable small-scale mining, including by promoting village co-operatives ahead of bigger companies…” as a way to boost the Ghanaian economies and create jobs. This could potentially have far-reaching consequences for foreign or larger companies already legally established in Ghana, or companies looking to tap into Ghana’s resources. With this explicit statement from the President, this would put larger and foreign mining companies’ interest and initiatives at the lowest of Ghana’s priorities. This will have the possibility of influencing larger and foreign mining companies’ profits negatively, worrying stockholders and leading to a possible drop in value of any legal company involved in Ghana. With the possible addition of new suppliers of minerals as indicated by the task force and the President, there is also a second avenue for legal companies to lose out. As economic theory explains, with the increase of more suppliers competition will arise, causing prices to lower which adversely affects larger, currently legal companies.
