Mining is risky, creates enclaves – Zoellick

Mining on the African continent has been described as a risky venture creating enclaves that benefit only a small number of people.

The President of the World Bank, Robert Zoellick made these remarks during a video conference with journalists in Africa Tuesday February 2, 2010 after touring some countries on the continent.

Zoellick said even though mining is important, the benefits of the sector do not spread out of a small community. He said mining employs only a small number of people and benefits a small community. He was of the view that mining has to be made to benefit a lot more people than it does now.

He said the Bank is working with African countries within the framework of the Extractive Industries Transparency Initiative (EITI) to make mining companies more transparent and beneficial to a greater number of people.

In Ghana, mining has been going on for over 100 years. Gold, diamond, manganese and bauxite are mined in Ghana, but gold is the leading foreign exchange earner for the country.

Ghana is Africa’s second biggest gold miner after South Africa. The country produced nearly 2.5 million ounces of the metal in 2007, when total mining revenues were $1.8 billion.
Gold accounted for more than 95 percent of Ghana’s mineral revenues in 2008.
According to the Ghana Chamber of Mines, cash costs of gold mining companies were $651 per ounce in 2008, and the aggregated realised gold price was $852 per ounce.
While the mining industry in Ghana attracts lots of foreign investment, it also has attracted some of the bitterest criticisms against any industry. Most NGOs and Community Based Organisations (CBO) accuse the industry of failing to pay its due to local communities where mining companies operate. They often cite land grabbing, land degradation, environmental pollutions and brutalities against locals as some of the ills that mining companies in connivance with some state institutions perpetrate against citizens, a report by an international NGO has said.
And according to the report, “Foreign players have been known to exploit legal loopholes and abuse both human rights as well as the environment.”
Meanwhile, another report, released by a coalition of international and local non-governmental organizations that includes Actionaid International and Christian Aid, and titled “Breaking The Curse,” said African countries rich in mineral resources are losing millions of dollars in revenue that can be used to fund health, education and other social programs because of tax breaks and low royalties that African countries have given to mining companies.
Seven countries were covered in the report, and these are; Ghana, Congo, Malawi, Sierra Leone, South Africa, Tanzania and Zambia.
The report estimates that low royalty rates have or will make Ghana, the second largest producer of minerals to lose $68 million a year in revenue, while South Africa, the continent’s biggest gold producer, is losing up to $359 million a year in revenue, and Tanzania, the continent’s third largest producer, $30 million a year in income.
In Ghana, the basic law governing the mining industry is the Minerals and Mining Act 2006 (Act 703). Under the law, the president holds the power to grant mining rights.
However, the pressure to amend the law and allow farmers to have a say in authorising their lands for mining activity is increasingly gaining favour – and is being seen as a necessary move to crack down on the rampant exploitation of the environment by mining industries.
The two reports suggest amendments to mining laws to take care of communities and countries in which mining take place.
The report on the seven African countries makes the following suggestions: “African mining tax regimes need to be reformed to ensure that African governments are able to collect a fair share of mining rents to fund their national development plans.”
“In some countries this would require an increase in the rates of royalties and other taxes; in others this would require a stop to the practice of negotiating tax breaks for individual companies in secret contracts,” it added.
Drawing comparisons between Ghana and South Africa, the two largest countries with mineral deposits on the continent, the report said, “However, Ghana is still many leagues behind South Africa when it comes to regulations to protect the rights of the locals.”
Adding, “Injustice against the mining communities and lack of proper compensation is an everyday affair that usually passes unnoticed. Indeed, according to the Ministry of Mines and Energy, approximately 30% of Ghana’s land is under concession to mining companies and every year more farmland is converted for this use.”
In the last two decades, more than US$5 billion have been devoted to new mining projects in Ghana, Dr. R. Anthony Hodge, the President of the International Council on Mining and Metals has said.
Dr. Hodge who is a leading authority on sustainable development in mining, said this in an article published on the online version of the Sunday Monitor, a Ugandan publication in January 2009. He argued that “during that time, the national poverty rate has fallen 12 percent.”
He said of Ghana’s 138 districts, its four mining districts have the lowest poverty levels in the country outside the capital, Accra, adding “effective disease control programmes have been a key component of this success.”
The story of the mining industry in Ghana and for that matter Africa has always been a paradoxical mix of profits, poverty and pollutions.

By Emmanuel K. Dogbevi
Email: [email protected]