Value-driven mining in Ghana
North American Investors partner with Ghana’s Minerals Income Investment Fund for New Opportunities in mining.
Ghana is at the heart of Africa’s mining and metals sector. This industry, which has been active in the region for centuries, has long brought prosperity and opportunity to the region. Today, as one of Africa’s largest mining countries, Ghana is navigating the changing tides of global commodity markets while looking to new opportunities across the mining landscape.
Diversifying the base
While the West-African country has long been recognised by investors for its strong and stable democracy, Ghana is actively looking to diversify investment options in new avenues of the raw materials economy.
A nation rich in natural resources, the government has identified a variety of growth options across the mining sector and its connected industrial value chains. With key government state-owned entities, such as Ghana’s Minerals Income and Investment Fund (MIIF), driving forward this diversification, the metals and minerals base is being explored beyond the bedrock gold industry.
The mining industry in Ghana presents significant opportunities for investment, something that the government is very aware of. The government has, in recent years, sought to improve the ease of doing business in the country as well as create a more attractive investment environment. Through clear legal frameworks and strong regulations concerning capital and re-investment, Ghana looks to support investors in playing a major role in its developmental drive. Meanwhile, for mining sector investors, the country has sped up the process for mining licence applications, which is critical to support the further development of the industry.
The country’s prime geographic location and its ability to reach most African markets through the dynamic Africa Continental Free Trade Area (AfCFTA) – with the AfCFTA Secretariat based in Accra – are added incentives for investors to choose the country as a base.
With a historically strong and resourceful mining sector, supported by a dynamic supply chain which has created a flourishing mining ecosystem, Ghana already counts as Africa’s largest gold producer. Ghana is aiming to aggressively diversify its minerals base to support its industrialisation drive. The government is supporting exploratory efforts in iron ore, manganese, lithium, diamonds, salt, and bauxite. The government is banking on its existing supply chain infrastructure, investment environment and growth potential to support new and emerging value-added industries.
A promising automotive industry
While gold is still the main driver of the industry, Ghana’s wealth of high-density lithium and manganese deposits is crucial for its future, with the development of lithium-ion battery factories a major option. As Africa’s third-largest bauxite producer, Ghana plans to leverage its nearly 1 billion metric tonnes in bauxite reserves to develop an integrated aluminium industry.
The country’s potential as a future electric vehicle (EV) hotspot, thanks to lithium and manganese, is attracting interest. With six major automobile companies already setting up assembly plants in the country – Toyota, Volkswagen, Suzuki, Nissan, Peugeot and Sinotruck – Ghana has been earmarked as a high-potential future automotive hub. Additionally, Ghana’s large deposits of iron ore and salt are interesting new avenues for value-added growth.
Salt: A top priority
Salt has been identified as a “High Priority Mineral” and there are clear intentions to strategically focus on the development of Ghana’s industrial salt sector and its allied value chain. Ghana sits on sub-Saharan Africa’s largest untapped salt source – the 41,000-acre Ada Songhor Salt lagoon enclave. The enclave – managed by Electrochem Ghana – has the potential for 99.9% processed purity and could bring in upward of $1 billion a year in revenue. The salt industry has the potential to empower many new micro, small- and medium enterprises (MSMEs), particularly female entrepreneurs. MIIF, for its part, is planning to invest heavily in the Ada Songhor Salt Project in 2023, with the goal of listing Electrochem Ghana on the Ghanaian Stock Exchange.
Challenges facing Ghana’s mining industry
The global mining industry is facing complex challenges and Ghana’s mining industry is no exception. These include a lack of access to medium- and long-term capital, current supply chain constrictions, environmental issues, taxes, and inadequate investment across the value chain.
These issues have put Ghanaian mines under pressure to rewire supply chains and rely more on local content. Ensuring a full-fledged ESG (Environmental, Social, and Governance) transformation in mining is, furthermore, integral to the industry’s future. This remains a challenge, particularly for the small-scale gold mining sector, which struggles to meet expectations of increased environmental scrutiny. Finally, taxes and currency exchange are affecting new exploration and creating less opportunity for development across the value chain.
Growth that favours Ghana
With Ghana looking to create Africa’s most competitive and value-driven mining industry, mining plays a key role in the country’s developmental objectives. The government believes that received mining and mineral income should guarantee long-term value for all Ghanaians. It targets industry players and investors who are focused on sustainable development, social inclusion, and environmental considerations.
Strategic partnerships with global financial institutions, development finance and technology firms to develop innovative financial products and digital solutions are a key part of the growth strategy.
Much is being done in Ghana to develop and formalise the small-scale mining industry. MIIF, for its part, is investing $500 million through its Incubation Program into small-scale mines with the support of funding partners. This innovative 10-year program seeks to create jobs and boost total gold output by empowering small-scale miners. An initial 30 mining companies are participating in the program, with the first seven set to receive up to $35 million as equity injection by Q2 2023. This amount covers the provision of tracked machinery, mercury-free processing plants, corporate governance support, a traceability mechanism, and market support through MIIF’s Trade Desk.
The Incubation Program will have a significant impact on the sector, with certain positive effects already visible. The formalisation of the sector will lead to a more sustainable, competitive, and environmentally aware small-scale gold mining sector. This will also contribute to eradicating illegal mining.
The program could potentially double small-scale gold mining output in its first three years after full implementation – from $2 billion to roughly $4 billion in revenue. With SMEs accounting for most of Africa’s economy, and these smaller firms being a key driver of employment, the success of initiatives like the Incubation Program could be an example for other African countries to follow.
In further support of SMEs, regulations in Ghana concerning local content development and the resilience of the supply chain require mining companies to procure goods and services locally. This presents long-term opportunities for investors to invest in Ghanaian businesses and underscores the government’s quest to develop the entire mining value chain.
An ESG-aware future
Ensuring the integration of ESG into mining activities is both a major opportunity and challenge in Ghana. Conversations around environmentally sustainable mining, particularly within the small-scale gold mining sector are frequent, with many mining companies looking to find ESG-support mechanisms. This opens the scope for ESG-driven co-investment with foreign financial institutions and development funds to support mining in Ghana through long-term financial support.
The ESG space offers a significant opportunity for Ghana – a nation blessed with an abundance of natural resources and dynamic, value-driven businesspeople. ESG is directly related to funding, with a focus from government on good corporate governance in business. ESG principles that are being incorporated into the industry include quality reporting and disclosures, transparency, and proper risk management models to support mining sustainable development goals.
This presents an opportunity for capacity building and skills development within the sector. Through responsible funding and ESG-based advisory services, the development of industry players that are environmentally responsible will lead to the growth of a sustainable mining industry. This will, ultimately, contribute to socioeconomic development.
There are many reasons to be optimistic about the future of Ghana, its economy, and its mining sector. The significant progress made by the country in recent years shows that its future is bright. Ghana is already a key investment destination in Africa, and investors should continue to look to it for new opportunities, particularly across the dynamic mining ecosystem.
This article was culled from the 2023 World Ahead Publication by the Economist