Petroleum Commission should crack the whip on erring oil firms

Oil companies in Ghana would act with impunity if Ghana’s Petroleum Commission fails to crack the whip in regulating the industry, according to industry watchers.

Tullow Ghana Limited, a leading oil firm in the country, has laid off 70 workers, claiming to be reeling under the fall in crude oil prices.

The Petroleum Ministry had directed the company not to lay-off any core technical staff.

Managing Director of Tullow Ghana, Charles Darku has however denied allegations the locals affected in the retrenchment fell within the highly skilled labour force.

The Ministry also directed the company to put in mitigation measures to ensure minimal impact on employees by redeploying “employees of risk redundancy” to other areas of the business where their skills could be used.

But Industry Watcher, Dr. Steve Manteaw says such orders by the Ministry will yield no results because it has no regulatory responsibility and that the oil companies are not “an extension of government bureaucracy”.

He rather believes an effective regulation would prevent oil companies from bullying their way through the system, emphasizing that the Commission “have access to feasibility reports of the oil companies; know where the break-even point is on the feasibility reports; so have to act on the basis of the information available to it”.

Dr. Manteaw has acknowledged the importance of consultation in the process of regulation “but not when the facts are so glaring that this country is being ripped off…you crack the whip”.

The Petroleum Commission was established in July 2011 by an Act of Parliament, Act 821, to regulate and manage the exploitation of petroleum resources and to co-ordinate the policies in relation to them.

The Commission is the regulator of Ghana’s upstream petroleum sector and is mandated to regulate and co-ordinate all activities in this sector for the overall benefit and welfare of Ghanaians.

But does the Petroleum Commission have the capacity to crack the whip?

Dr. Manteaw, who is the Executive Director of the Integrated Social Development Centre (ISODEC), says the Commission, as an infant institution, has some weaknesses though there is an ongoing project to build capacity to the fullest level.

In spite of the low capacity, he states that “regulations are done in accordance with the law and therefore in so far as the law has been in fractured upon, then it becomes a matter for the Commission to apply the law; we can use the court system or other punitive sanctions are actually prescribed in law to get the companies do the right thing”.

Story by Kofi Adu Domfeh

Ghana losing Gh500million to smallscale miners annually

Gold exports from Ghana’s smallscale miners in 2012 and 2013 amounted to the same volume of production by the three leading mining firms in the country.

Figures from the Minerals Commission indicate small scale and artisanal mining accounted for 34% of total gold production in Ghana, which amounts to 1.6million ounces of gold.

This is equivalent to the total exports of Anglogold Ashanti Obuasi mine, Goldfields Tarkwa and Newmont Gold Ahafo mine.

The State is however losing its resources without compensatory revenue.

There is no mineral royalty payment on the extraction of gold by the small scale miners – an annual Gh₵500million in taxes and royalties is estimated to have been lost to the artisanal mining.

The Mining and Minerals Act 2006, Act 703 does not differentiate between small scale and large scale operations in terms of royalties and both are liable for royalty payment.

The 2012 and 2013 report of Ghana Extractive Industries Transparency Initiative (GHEITI) has recommended that “the rate at which royalty is paid may be differentiated between large scale and small scale holders” whilst royalty payment may be instituted at the point of export for the small scale operators.

Dr. Steve Manteaw of the Integrated Social Development Centre (ISODEC), a civil society group, says taxing the smallcale miners will demand mainstreaming of their activities.

He observed the failure of the country to make formalization of illegal mining attractive to galamsey operators.

“When multinational mining companies come into the country, we bend over to give them incentives and whatever support they need to be successful; their success become of paramount interest to the State. Why shouldn’t the success of smallscale miners be of paramount interest to the state?” he quizzed.

According to him, players in the informal mining sector can be incentivized with support mechanisms, including access to geological data, technical aid - in which a plant pool of equipment can be accessed at subsidized rate.

“If I know that by formalizing my activities I get some support in terms of being able to access venture capital fund to finance my operations, then it becomes attractive to move away from illegal activities into the formal sector; once you’ve done that then we can identify these groups and tax them appropriately to finance national development,” suggested Dr. Manteaw.

Story by Kofi Adu Domfeh 

From gold to ghost towns – salvaging resource rich communities in Ghana

Some extractive industry watchers are skeptical about AngloGold Ashanti’s return to mine in Obuasi after its announced two year break to restructure operations.

The mine has been put under “care and maintenance” following operational losses recorded in recent times, a situation that has resulted in the retrenchment of over 5,000 employees.

“Basically we have some challenges with the production levels and the cost of production is also high, the gold price has gone down so there is the need to re-strategize and see how the mine can become profitable in the future,” said Aboagye Ohene Adu, Senior Manager in charge of Sustainability at the AGA Obuasi Mine.

But Dr. Steve Manteaw of the Integrated Social Development Centre (ISODEC) is cynical about the company’s come back.

“In my view you could still re-strategize without closing shop; scale down your operations and then you do your re-strategizing before scaling up your operations,” he observed. “I guess it would have been more difficult for government to accept and allow them to go if they said they were closing shops for good and I think the easier way would be to say ‘we are putting the whole mine under care and maintenance’ such that, in terms of the negotiations around that it would be much easier for them to exit.”

 

The inherent danger, according to Dr. Manteaw, is that the mining concession could be opened up to illegal mining or ‘galamsey’ invasions which could affect future prospective investor’ attraction.

However, based on the existing 6.5 million ounces of ore deposits currently available at Obuasi, Mr. Ohene Adu is positive gold prospecting in Obuasi could thrive for at least 17 years if AngloGold’s redevelopment is properly undertaken.

“We are trying to put in certain initiatives in partnership with the government to ensure that the communities here also become sustainable as we move along,” he said.

The AngloGold Ashanti mine is the backbone of the economy of the Obuasi municipality and four other adjourning districts as well as a key foreign exchange earner for Ghana.

Apart from the impact of the latest development on direct employment, peripheral services that feed off and depend on the mine would be hardest hit. The company would also withdraw funding of existing social services in the areas of health, education and sports.

Woes of local mining communities

Sanso is a predominant mining community in Obuasi. Local assembly representative, Benjamin Annan, says livelihoods are negatively impacted because there are no alternatives to mining for local communities.

“When the mining was underground, we were not having problems because we are farmers, but now surface mining has affected our farms. Now Sanso is ghost town; we can’t farm, we can’t have access to the mine because we’re not skilled labour and our source of livelihood – artisanal mining – is also closed,” he complained.

AngloGold has been engaging interest groups to offer alternative livelihoods that would protect local communities from turning into ghost towns, says Mr. Ohene Adu.

“The company alone cannot take the burden,” he noted, stating that some local economic initiatives are being thought through to create employment opportunities.

Richard Ellimah, a community rights activist and Executive Director of NGO, Centre for Social Impact Studies (CeSIS), says the company’s two year break is an opportunity to begin the process of designing an alternative industrialization programme for Obuasi.

“It was a long term decision we should have made. Everybody should have understood that there will come a time when the mining company will fold up; either they will find mining no longer profitable and they’ll leave or the ore will get depleted,” he observed.

According to Mr. Ellimah, Obuasi can sail through the current crisis if sustainable small scale mining is promoted alongside agriculture.

He therefore wants the Minerals Commission and AngloGold Ashanti to consider ceding off part of the mining concession for small scale miners to begin operations.

“If we have people in town who have the requisite capital and want to do mining, there should be available land for them to do their mining because for small scale miners, their operations don’t generate so much cost and they are indigenous companies who would not just fold up because gold price has fallen and the money will stay in the town,” stated Mr. Ellimah.

The Obuasi Municipal Assembly is already looking forward to improved working relations with AngloGold Ashanti when the mine is reopened for business.

Isaac Appiah Nsiah, Municipal Budget Officer, expects that “there should be more transparency with regard to how we generate revenue and how the communities are going to benefit from that. The Assembly itself is going to open up to the communities so that they would also know what they are getting from AGA and what we are utilizing the money for.”

Integrating mining into national economy

Nana Owusu Akyew Brempong of the Adansi Traditional Council is seeking divine intervention for AngloGold Ashanti to resume operations after the downscaling exercise “because we have suffered a lot and the Lord will change things for us”.

Ghana has failed to integrate its gold resource into the national economy after over 100 years of commercial mining.

Dr. Steve Manteaw says the Obuasi experience is a bitter lesson for Ghana to ensure that the extractives sector serves as conduit for sustainable development.

“When you as a policy want to integrate the resource into the rest of the economy, then you want to make a departure from collecting your royalties in cash to collecting them in kind as raw material gold so that you supply that raw material gold to the domestic jewelry making industry; when you do that you’ll be creating jobs, you’ll also be creating tax opportunities for financing local and national development”, said the ISODEC Coordinator.

In adding value to Ghana’s gold exports, Dr. Manteaw added that there is a multiplying benefit of integrating gold into the local economy, including tourism, as people troop to Ghana to experience the reflections of the “Gold Coast”.

Story by Kofi Adu Domfeh 

Aligning CSRs of mining firms with medium term plans of assemblies

Mining firms support community development through their corporate social responsibility (CSR) initiatives, whilst expecting the government, through the local assembly, to deliver on socio-economic goods with the collected royalties.

But mining firms often bear the brunt of community agitations of deprivation – communities affected by mining would direct their concerns to miners than to the government.

Companies in the extractives industry should therefore be proactive in having inputs into the medium-term plans of local assemblies within their operational catchment, says Dr. Steve Manteaw of the Integrated Social Development Centre (ISODEC).

According to him, aligning CSR programmes with the assemblies’ development agenda will provide the impetus for coordinated project impact on communities.

“A lot of time you see abandoned projects in the name of corporate social responsibility just because the project was not thought through and not aligned with the development priorities of the districts,” he observed. “I see companies as essentially citizens and that is why they pay taxes and [individual] citizens also pay taxes; the distinction is companies are corporate citizens who also benefit from the expenditures of the assemblies; so in my view the companies ought to be part of the processes of determining the medium term priorities of the areas where they operate.”

 

Some Community social investments

Newmont Ghana Gold Limited (NGGL) between 2008 and 2012 contributed almost Gh₵30million to the Newmont Ahafo Development Foundation (NADeF) as commitment to supporting sustainable community development among the host communities.

Newmont contributes $1.00 per ounce of gold produced and one per cent of its annual net profit to the Foundation, which targets ten communities in the Asutifi North and Tano North Districts.

The NADeF has six main thematic areas of development, including Human Resources Development, Economic Empowerment, Infrastructural Development and Social Amenities. Others are Cultural Heritage and Sports, and Protection of Natural Resources.

The Foundation has completed and handed over about 60 infrastructural and social amenities including community libraries, teachers’ and nurses’ quarters, ICT centres and schools. 

A component Fund is invested as an endowment to help continue development projects after life of the mine. So far, an amount of GHC6.7million has been invested as Endowment Fund to sustain the Foundation’s activities beyond the life of the Ahafo mine.

Perseus Mining Ghana Limited in January 2012 started commercial production on its lead project, the Edikan Gold Mine (EGM) in Ghana.

The company has since established a Gh¢1.5million Edikan Fund to aid development projects in its catchment communities in the Western and Central regions.

AngloGold Ashanti also has a trust fund where the company invests 1% of its profit to drive development projects in local communities.

Aboagye Ohene Adu, Sustainability Manager at AngloGold Ashanti Obuasi Mine, says the company has already started engaging the local assembly on a regular basis to prevent duplication of projects “because it is a wasted effort if we are doing boreholes and they are also doing boreholes in the same community whilst we can channel the resources on other things”.

The CSR Guideline

The Minerals Commission has devised a Guideline to serve as a uniformed benchmark for development and assessment of corporate social responsibility (CSR) programmes of miners.

But Dr. Manteaw says aligning the CSRs with the local assemblies’ medium term plans reduce social conflicts in mining communities.

 

“It could be in monetary terms or it could be part of taking up the responsibility of executing or providing some of the infrastructural needs of the society so that at least the society benefits from some of the corporate social responsibility expenditure of the companies,” he noted.

Story by Kofi Adu Domfeh