Mining Regulations Overview
Mining Regulations in Ghana
January 17, 2016
Matthew Wilson – Primary Article Contributor
Keywords: Ghana, mining, regulation, small-scale, artisanal, localization
Mining legislation and regulation in Ghana is largely centered around the Minerals and Mining Act. Initially passed in 1986, amendments were made in 1994 before a new law was passed in 2006. The new law passed in 2006 was created to make Ghana more attractive to investors while still guaranteeing that the government received appropriate amounts of revenue.
Besides receiving tax revenue from the mining industry, the government also worked to ensure citizens would benefit through employment and investment in the local area. The new legislation set out an application process that mandated both a plan to hire and train local Ghanaians as well as a plan to eventually replace the small number of expats they are allowed to employ. Firms are limited in the number of expat employees they are allowed to employ. These limits change based on the stage of mining the firm is currently in, however rules strictly disallow expats from performing any unskilled or clerical work regardless of stage. These restrictions could harm mining firms’ ability to find skilled educated labor, as Ghana recently ranked last in an OECD education ranking. An inability to hire more educated workers from abroad may harm the efficiency of mining operations. However, with the Ghanaian government’s history of protecting and assisting the domestic market, it is unlikely these restrictions will be lifted and therefore need to be planned for.
To help ensure investment in the local area, legislation requires products, materials or services to be purchased from within Ghana or a business registered in Ghana. Any product, material or service available from within Ghana that is imported will be charged import duties. Companies are required to submit reports on their compliance with regulations. Penalties for failure to report are very harsh if extremely delayed. If no plan is submitted on how the firm is purchasing local goods within two months, the penalty can reach $10,000 a day. It is in the interest of the mining firm to follow the procurement regulations both in order to avoid the heavy fines as well as position itself as a positive force in the local economy.
These policies, although relatively restrictive to companies hiring and purchasing practices, has helped to ensure the employment of over 1 million Ghanaians, and supporting 4.4 million more. Procurement policy has meant that for every $1 million increase in local procurement, 90 jobs are being created. It should be noted that these studies were funded by companies involved in mining, such as the Tiffany & Co Foundation, and could be biased towards the positives of the mining industry. The CEO of the Ghana Chamber of Mines, Sulemanu Koney, has also argued that the small expatriate population in Ghana (less than two percent) “demonstrates the extent to which skills, competences and knowledge transfer has been prevalent in the industry.” This low percentage of expatriates could also be linked to the regulations already placed on mining companies.
Although these regulations may be seen as negative due to their effect on the quality and price of labour and materials, they present a very positive opportunity for foreign mining companies operating in Ghana. Both the procurement and hiring regulations have led to the creation of numerous jobs and opportunity, and these positive impacts can be used by companies to create a positive relationship with local residents and government. These positive relationships have the possibility of helping firms avoid backlash from the government or local community in the future.
On October 26, 2015, CEO of the Minerals Commission Dr. Toni Aubynn outlined changes to the Minerals and Mining Act currently being considered by the Ministry of Lands and Resources. Changes would see the Ghanaian mining industry re-categorized into 4 sub-sections: artisanal, small-scale, medium-scale and large-scale. Dr. Aubynn also mentioned that the artisanal and small-scale mining will likely be reserved for Ghanaian nationals, while medium and large scale mining will be more open to international investment and participation. The Commission will also focus investment on artisanal and small-scale operations. This trend of increased focus on artisanal and small-scale operations shows a continuation of the Ghanaian government’s focus on protecting Ghanaian workers, businesses and interests through hiring and procurement policy.
This reorganization may lead to mining firms to be more concerned with which category they fall under, as each category will likely face differing rules and regulations. Considering Ghana’s history of favouring the protection of Ghanaian jobs, stricter regulations on foreign companies and the commission’s investment in artisanal and small-scale mining, firms should take into account and plan for less stringent regulations and possible favouritism from the Ghanaian government in small-scale and artisanal mining.
