Artisanal and Small-Scale Gold Mining in Ghana: Incorporating a Technology Approach for USAID/Ghana s Country Development Cooperation Strategy December 18, 2015 Submitted by: Caitlin Sellers, MSPPM Deme Yoo, MSPPM Patrick Wyatt, MSPPM i
Contents Executive Summary... 1 Background... 1 Brief History... 1 USAID s Development Objectives... 3 The Role of Artisanal and Small-Scale Mining... 4 Our Approach... 4 Technical Solution... 6 SAP... 8 GIS... 8 Cloud Computing and Mobile... 9 Social Networking...10 Local Governance Considerations...11 Leveraging Decentralized Governance...11 Traditional Authorities...12 Conclusion...13 ii
Executive Summary During Fall 2015, team members Caitlin Sellers, Deme Yoo, and Patrick Wyatt conducted an indepth literature review of the gold mining industry in Ghana. During this phase, we discovered that Ghana has a serious problem with the artisanal and small-scale mining sector. According to most recent research, the vast majority of artisanal and small-scale mines are not registered with the government, and operate with essentially no oversight. Therefore, a myriad of economic development, health, and labor issues have arisen around these communities. Furthermore, local districts are unable to leverage the economic activity of unregistered miners as revenue for community development. Though Ghana has taken steps to legalize the artisanal and smallscale mines, these efforts not have been successful. We believe technology can be one way to address this issue, and in this proposal we look at SAP, GIS, Cloud Computing and Social Media to see how they can be applied to potentially solve these issues. Additionally, we believe it is important that our efforts are synched with USAID s Country Development Cooperation Strategy 2013-2017, which unfortunately does not have a component dedicated to advancing technology. Therefore, our hope is that this report will better inform USAID about the importance of technology and perhaps help incorporate these technologies into future USAID programming. Background Brief History During the colonial period, the British called Ghana the Gold Coast Colony due to its abundance of the said mineral. Though gold mining in Ghana has a rich history, the major gold production periods of the modern era can be classified in three distinct rushes : the first gold rush between 1892 and 1901; the second after World War I; and the latest beginning in the 1990 s. 1 The latest rush began in 1985, when the state privatized the mining industry with the aim of attracting foreign investment. As a result, the sector is now largely foreign-owned, but the government continues to hold a minority free carried interest share in most of the main active mining operations in the country. As a result of these policy efforts, gold production has increased by 700 percent between 1990 and 2010. Today, Ghana has the second largest deposit of gold in Africa (second to South Africa) and was the 9 th largest producer of gold in 2011. The contribution of the mining industry to gross domestic 1 M. Fafchamps, Gold Mining and Proto-Urbanization: Recent Evidence from Ghana, World Bank Group, June 2015. 1
product (GDP) has risen steadily from about 1.3% in 1991 to 14.4% in 2011. 2 Even though Ghana has a wealth of mineral resources, gold remains the preeminent mineral produced in Ghana and provides 90% of the revenues. Though the mining sector requires a high level of capital investment, direct employment in the industry is comparatively limited, and has been decreasing. In 2014, the total workforce employed by the producing members of the Ghana Chamber of Mines totaled 12,148 Ghanaians and 234 expatriates. This represents approximately 0.7% of Ghana s total employment, but the figure is grossly underestimated given the informal sector. Regardless, the mining sector continues to bring important spillover effects: For instance, the minerals and mining sector is the leading source of fiscal revenue to the state. In 2014, the sector provided GHS1.24 billion to the Ghana Revenue Authority, which represents 16.2% of total direct tax. 3 Additionally, mineral exports represent 34% of total exports for Ghana, and because producers return 77.5% of their total revenues back through commercial banks and the Bank of Ghana, the producers provide Ghana with a sustainable source of forex. According to the Resource Governance Index, Ghana ranks a respectable 15 th out of 58 in the world. 4 This index measures the overall effectiveness of resource governance in terms of institutional and legal setting, reporting practices, safeguards and quality controls, and enabling environment. The report ranked Ghana as satisfactory in institutional and legal setting, and safeguards and quality controls, while reporting practices and enabling environment are partially satisfactory. 2 International Council on Mining & Minerals, Mining in Ghana What Can We Expect? June 2015. 3 Ghana EITI, Report on the Performance of the Mining Industry, 2014. 4 Resource Governance Index: www.resourcegovernance.org 2
USAID s Development Objectives We believe incorporating a technological approach to the oversight of the artisanal and smallscale mining industry are in line with USAID/Ghana s goals and objectives. According to USAID/Ghana s Country Cooperation Development Strategy (CCDS) 2013-2017, USAID is committed to supporting the Government of Ghana in realizing its goal of becoming an established middle-income country by 2022. 5 In light of these efforts, USAID/Ghana has identified four Development Objectives (DOs) which the USAID Mission hopes to materially achieve and is willing to be held accountable for. The DOs, along with their respective indicators, are as follows: 1. Strengthened Responsive, Democratic Governance a. Improved local government performance; b. Increased government accountability to better-informed citizens; c. Strengthened election institutions and processes; 2. Sustainable and Broadly Shared Economic Growth a. Increased competitiveness of major food chains; b. Improved enabling environment for private sector investment; c. Improved resiliency of vulnerable households and communities and reduced under-nutrition; d. Increased government accountability and responsiveness; 3. Equitable Improvement in Health Status a. Increased access to integrated health services; b. Increased availability of community-based health resources; c. Strengthened and responsive health systems; d. Improved health sector governance and accountability; 4. Improved Reading Performance in Primary School a. Enhanced reading and math instructions; b. Strengthened basic education-management systems; c. Increased government accountability and transparency. Within DO 2 Indicator D (Sustainable and Broadly Shared Economic Growth Increased government accountability and responsiveness), USAID has identified improved governance in the energy sector, and improved local community and management of natural resource as subindicators. According to the CCDS, a lack of capacity, unclear delineation of regulatory authorities, an insufficient legal framework, and poor dissemination of accurate information threaten to turn Ghana s greatest natural resource blessing into a curse. 5 USAID/Ghana: Country Development Cooperation Strategy 2013-2017, December 2012. 3
The Role of Artisanal and Small-Scale Mining Currently, it is estimated that approximately a third of revenues from gold in Ghana are from the informal sector. 6 Recognizing these realities, in the late 1980 s the government of Ghana made the decision to legalize small-scale mining and gave oversight of the industry to the Ministry of Lands and Resources (and related agencies). 7 In order to legally operate, a prospective miner now has to apply for a license, which entitles them a 25 hectare plot. 8 Before formalization, all small-scale miners simply operated without any status using rudimentary means and mined on lands controlled by traditional authorities, who received remittances in return. Though the central government has raised over $300 million in revenues from artisanal and small-scale miners since legalization in 1989 9, the on-theground reality is that the overwhelming majority of miners continue to operate illegally. These illegal galamsey, which are unregistered, do not pay any taxes to the national or local government, and operate with absolutely no oversight. According to the Human Rights Watch, this has created an environment with poor working and environmental conditions, and even the use of child labor in the value chain. 10 We believe in using technological solutions to help the Ghanaian government more effectively manage the artisanal and small-scale mining industry. Our proposal focuses on the betterment of reporting practices (a weakness as indicated by the Resource Governance Index), as that will help streamline communications between all the different stakeholders involved moving forward. Our Approach The extractive industry in Ghana is a key area of concern for the country s economic development. This industry can provide a strong base for economic development if harnessed correctly. Extractive Industry Transparency promotes accountable management of natural resources. This 6 Human Rights Watch, Precious Metal, Cheap Labor: Child Labor and Corporate Social Responsibility in Ghana s Artisanal Gold Mines, 2015. 7 G. Hilson, Structural Adjustment and Subsistence Industry: Artisanal Gold Mining in Ghana, 2004. 8 Ibid. 9 Ibid. 10 Human Rights Watch, Precious Metal, Cheap Labor: Child Labor and Corporate Social Responsibility in Ghana s Artisanal Gold Mines, 2015. 4
effort for information transparency ensures that all local people are receiving fair financial benefit from the resources they extract in their communities. Transparency is vital for industry growth as it curbs corruption, mitigates conflict over the distribution of revenue, and improves the investment climate. The major deficiency we are attempting to address in the Ghana Extractive Industry Transparency Initiative is its failure to capture information from the artisan mining industry. It is very difficult to regulate artisanal mining operations, or monitor their extractive information. To prevent illegal mining, governments are forced to actively stop miners from working in their local communities. A major issue with this is that these mining operations tend to be one of the only ways these isolated communities can make money, and shutting them down can have devastating effects. In order to achieve information transparency of small-scale mining, we propose to develop an Artisan Mine Transparency Initiative with the Ghanaian government. This initiative will focus on increased transparency data through a program to integrate and license artisan miners. There are many examples of successful efforts in Columbia and the Central African Republic, which integrated artisanal mining operations into the national industry. In these countries, international programs did not to attempt to stop artisan mining, but integrate it into the legally licensed mining industry. These programs have successfully improved production capacity, safety, and have mitigated many of the negative environmental impacts from artisan mining. In order to develop legal small-scale mining that will provide transparent information about the undocumented artisan segment of the industry in Ghana we suggest building on a previously complete USAID project. The project Property Rights and Artisanal Diamond Development: Central African Republic successfully helped small-scale miners obtain legal mining licenses to operate legally, and observe environmentally sustainable practices. 11 This program successfully empowered small-scale miners to obtain permits and mining equipment in exchange for observing good safety and environmental practices. This process increased legal diamond mining by 450% in the areas of its implementation in the Central African Republic, over a four-year period. 12 This is a substantial increase when compared to the twenty one percent legal mining increase in areas that did not implement the program. 13 This led to an increased government tax revenue base, transparency of previously unlicensed operations, and regulation of environmental/ safety practices. Overall, this program ensured mining revenues further benefited local communities. The use of technological resources will greatly enhance the implementation of this program in Ghana. 11 "Property Rights and Artisanal Diamond Development: Central African Republic." Land Tenure and Property Rights Portal. USAID, 18 May 2012. Web. 07 Dec. 2015. 12 Ibid. 13 Ibid. 5
Technical Solution Currently, transparency information is predominately disclosed through extractive company and government disclosures of the financial relationship between these organizations. 14 The disclosures attempt to clearly outline the licensing agreement between the government and extractive industries. This information gives local citizens the ability to understand extractive agreements, targeting corruption that deprives local communities of many of the economic benefits of mining operations. Transparency can be greatly enhanced through the application of technology backed programs and solutions. Technologies that can enhance information transparency include: SAP- Enterprise Resource Planning Cloud-backed Mobile Technology Open Data GIS Social Networking Our solution combines these technologies into a single workflow to increase transparency and reduce the number of illegal mining operations. Below is a diagram of how information flows between high-level transparency programs like SAP and GIS, and artisanal miners. 14 Ministry Of Finance. FINAL REPORT ON THE PRODUCTION OF MINING SECTOR GHEITI REPORT FOR 2012 AND 2013. Rep. N.p.: Boas & Associates, 2014. Print. 6
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SAP The Ghanaian government has already utilized a technology solution, fielded in partnership with the German Federal Ministry for Economic development and SAP. 15 The Ghanaian finance industry utilizes SAP Enterprise Resource Management software to track and analyze revenue flows from the hard mineral, oil, and natural gas industries. 16 Transparency of this information allows the Ministry of Finance to compile its yearly Extractive Industry Transparency Report, and track revenue streams and financial information in real-time. 17 Additionally, it provides a central repository of publicly available financial information that helps to prevent corrupt practices. 18 This solution has greatly increased transparency for large-scale mining operations, but fails to provide transparency on the small-scale artisan mining industry that currently accounts for thirty four percent of extractive operations occurring in Ghana. 19 These small-scale, unlicensed operations fail to report financial information to the central government, and do not pay taxes. 20 The central government cannot assist in resource planning, or provide economic transparency to these mining sectors without information visibility. If we were to integrate other technologies with the current SAP system, the Ghanaian government would be able to better track the small-scale mining operations. GIS We propose to develop a partnered program with the Ghanaian government to map artisan mine locations, both licensed and unlicensed small-scale mine operations. This will build directly on our plan to empower legalized small-scale mining operations. The use of GIS mapping technology will allow the government to clearly delineate licensing areas in order to facilitate greater transparency and efficient allocation of property rights. GIS maps would be made available to the public to strengthen extractive industry transparency. By mapping mining locations and comparing that information to licensing agreements with the government, the GIS system will allow the government to map environmental impact and safety compliant mining areas. This will allow for a more organized approach to working with noncompliant local communities to improve operating conditions that do not degrade future agricultural use of mined land. An open data geographic information map of Ghana has already been created by The University of Ghana Center of Remote Sensing and Geographic Information Services. 21 This map provides mine location, revenue stream, and mineral royalties mapping for large scale mining operations. This program is conducted in conjunction with data and support from Ghana s Extractive Industry Transparency Initiative. 22 Artisan mine information can add to this comprehensive map of data 15 Welsh, Evan. "SAP Participates in New Project to Drive Extractive Industries Transparency in Ghana." SAP AG. SAP, 2010. Web. 26 Nov. 2015. 16 Ministry of Finance (2014), 93. 17 Welsh (2010). 18 Kramer, William J., and Beth Jenkins. The Role of the Information and Communications Technology Sector in Expanding Economic Opportunity. Rep. N.p.: Harvard, Kennedy School of Governance, 2007. Print. 19 "About EITI in Ghana." About EITI in Ghana. Ghana Ministry of Finance, 2015. Web. 01 Dec. 2015. 20 Ibid. 21 CERSGIS Contact Details." Extractives Industries Mapping. University of Ghana, n.d. Web. 07 Dec. 2015. 22 Ibid 8
pertaining to Ghana s large scale extractive industries. This additional data would come from information provided by volunteers and the artisanal miners through mobile technologies and social media. Cloud Computing and Mobile One reason the property rights program in the Central African Republic was successful is that miners who paid the licensing fees associated with legal mining had access to mining assistance programs. This included training on efficient and safe mining techniques along with an equipment rental program. 23 These efforts encouraged miners to become engaged with this project. The use of cloud computing backed mobile technology could greatly support the efforts of implementing this program. Cloud backed mobile technology has been utilized for a number of innovative smallscale business solutions. As part of this program we recommend partnering with a mobile technology company to provide a 2G mobile application that will function in Ghana s current cellphone network. Desired application features would include the ability to geo-tag mining locations in order to supply the government database more information. These mining markers could then be linked to licensing information for the miner, and other critical data in the application, which would be a useful tool for pushing simple notifications about license renewal and training services. Another important feature will be information on the current price of extractive minerals to reduce impact of price fluctuation and volatility. This will allow miners to see gold and other mineral price fluctuations prior to shipping the resources to market. An example of a 2G mobile application with a current price function would be the ICow mobile application. Further, a cellular application could provide information on equipment rental stocks by location to provide miners the ability to easily access available rental equipment. A mobile software could also answer simple supply chain management questions. Unreliable and inaccurate order fulfillment was identified as a major challenge by small-scale miners in Ghana. A simple mobile application that provides stocking information is the Pollinate business supply software. Miners could track and update the list of necessary mining equipment through the application, reducing the likelihood of stock outs. We suggest the application also features the contact information from a Ghanaian supported help desk to answer questions about environmental or safety practices. Many of the small-scale miners are unaware of environmental regulations, or proper safety techniques. An application that provides easy access to this information would be very useful. Finally, fostering a relationship between the Ghanaian government and a mobile micro loan application such as M Pesa could improve micro finance for artisan mine operations. We would support fostering a relationship where the micro loan bank extending larger lines of credit to licensed miners. Licensed miners that meet target environmental and safety standards could be 23 Brief, USAID Program. "PROPERTY RIGHTS AND ARTISANAL DIAMOND DEVELOPMENT (PRADD)." (2012): n. pag. USAID, 2012. Web. 7 Dec. 2015. 9
extended further lines of credit. The microloan would have an additional layer of security because failure to meet loan obligations could be identified to the mine licensing office. Social Networking A mobile social networking application would assist in developing an association of artisan miners. The development of miners associations were a key component of USAID s successful BioREDD+ project in Columbia. 24 USAID facilitated a partnership between International Development Company Chemonics and Gran Colombia Gold mining company to reduce illegal mining and improve the livelihoods of small miners in Colombia. This program helped build twenty four mining associations of 150,000 Artisan miners. 25 These associations negotiated with largescale mining operations to increase legal formalized mining units that sell the gold they extract to Gran Columbia for processing. This relationship has improved mining profitability for small-scale miners while reducing the environmental impact of the artisan miners unregulated processing of gold. In Columbia, these associations were able to successfully improve miner and environmental safety by removing Mercury from small scale mining processing. This information was easily communicated through these mining networks to people who were previously difficult to reach by other mass media sources. The creation of these social media networks can improve transparency by provide extensive data on mining activities, The creation of small-scale miner associations in Ghana could assist in creating similar formalization of the Artisan mining industry. The effectiveness of these mining networks could be greatly enhance by mobile social networking tools. The use of simple message over SMS on 2G wireless services would serve to coordinate these large geographically dispersed organizations. They would disseminate training, safety, and industry updates to miners associations. Equally important, mobile technology can be used to coordinate contact for communities to negotiate with large-scale mining operations. More advanced 3G mobile applications in areas with better 3G coverage could be used to provide mining association information back to the government. Mobile tools and social networking techniques should also be utilized to accomplish transparency by directly targeting corrupt practices in mining. The Citizen Feedback Monitoring Program (CFMP) in Pakistan is a good example of simple mobile technology being utilized to target transparency and end corruption. 26 This programs allows Pakistani citizens to send reports to the government through simple 160 character text messages. This anti-corruption system also provides information on the cost of government services to users, so they can identify the real price of government-backed services. Mobile applications like CFMP greatly increase transparency and corruption documentation. This program would provide the Ghanaian government the opportunity to target and remove corrupt licensing and supply officials. Social networking tools can highlight corrupt practices through quick dissemination across Ghana s extensive mining community. Social networks could be utilized as a powerful tool to 24 "Creating Shared Value: An Interview with Gran Colombia Gold." Creating Shared Value: An Interview with Gran Colombia Gold. Chemonics, n.d. Web. 1 Dec. 2015. 25 Ibid. 26 Masud, Mohammed. "Calling In Against Corruption." Foreign Policy Calling In Against Corruption Comments. Foreign Press, 30 June 2015. Web. 07 Dec. 2015. 10
provide a collective voice to small-scale miners that have little input on broader mining policy in Ghana. A combination of information communication technologies should be utilized to improve information transparency of the mining industry in Ghana. Specific improvements need to target small-scale artisan mining operations, and can build on existing information solutions that utilize open data, GIS, mobile technology, social media networking and enterprise resource planning to eliminate corruption. Transparency operations can develop simultaneously while licensing more efficient, safer and more environmentally friendly small-scale mining operations. Local Governance Considerations Leveraging Decentralized Governance In order to promote transparency in Ghana s extractive industry, our proposal stresses the importance of leveraging the decentralized governance structures of Ghana. As a background, Ghana has a Constitutionally-mandated state directive policy of decentralization, which requires the government to make democracy a reality by decentralizing the administrative and fiscal machinery of government to the regions and districts and by affording all possible opportunities to the people to participate in decision-making at every level in national life and in government. As such, Ghana has an extensive legal framework for decentralization whereas constitutional mandates, legislative acts, and directives see the central government tasked with policy planning and monitoring and evaluation, while districts are responsible for implementing basic services such as education, health and sanitation. 27 However, the realization of this lofty goal has been uneven. On one hand, citizens are closer to their representatives and can engage with them more easily. On the other hand, the districts do not have fiscal independence to carry out projects specific to their area, as districts rely heavily from the central government - as much as 70 to 90 27 Fumihiko Saito, Foundations for Local Governance: Decentralization in Comparative Perspective, Physica-Verlag Publishing, 2008. 11
percent - for funds, which are already earmarked for central government-oriented projects. 28 Additionally, given that Ghana has ten regions and within these regions are over 138 district assemblies with legislative duties, implementing any change at all levels of government with consistency can be a challenge. To address these concerns, Ghana s EITI has recommended that the state develop a more robust policy directive in regards to artisanal and small scale mining that can be used as a benchmark for the districts. 29 In 2015, USAID/Ghana completed the successful Ghana Local Governance and Decentralization program, which aimed to increase public participation in local governance in the Western Region of Ghana. One of the project s components was to increase internally generated funds or revenue for the five targeted districts. Tarkwa one of the districts USAID worked in is a major gold producing region. But even in a district with one of the country s largest mines, there was no database in place in order to effectively tax and collect revenue from registration, fines, and taxes. Thus, the project paid funds for a geo-spatial database for district offices, provided computer and software, and training to staff on how to use the new database. As a result, the final evaluation found that revenues in all districts increased between 18%-45%. 30 With increased revenues, the region became closer to achieving decentralization. Traditional Authorities During the colonial era, the British used chiefs as intermediaries between the colonial administration and population. 31 Chiefs continue to play a very powerful role in Ghanaian society, especially in rural areas and at the local level. The chieftaincy regimes of Ghana are quite unique in the world and any technological or capacity building program must incorporate traditional authorities in order to be successful. Chiefs continue to hold moral, ethical and religious sway over large populations, and are widely respected by Ghanaian society due to cultural norms. Unregistered artisanal and small-scale farmers may not formalized with the government or districts, but they still must work with chiefs who own the land in order 28 Democracy International, Final Evaluation of the USAID/Ghana Local Governance and Decentralization Program, 2015. 29 Ghana EITI, Report on the Launch of 2012/2013 Ghana Extractive Industries Transparency Initiative report for Mining, Oil and Gas Sectors, February 2015. 30 Ibid. 31 C. Lentz, Chiefaincy has come to stay, Cahiers d etudes africaines, 2000. 12
to operate. Therefore, any program that aims to formalize informal mining must take into consideration the role of chiefs. If chiefs are using informal mines as a source of revenue for their chiefdoms, and the local districts aim to displace the chiefs, this can serve as a possible source of friction. Additionally, in Ghanaian society it is often considered an affront to question a chief s finances. 32 Therefore, any program needs to actively engage chiefs in the process by conducting capacity building trainings, and educating them on ways that informal mining is harming society. Conclusion Artisanal and small-scale mining is a serious issue in Ghana. USAID is in a position to utilize past projects and experience to change how the Ghanaian government tracks these operations. Our solution will build on existing technology practices to increase transparency and accountability, visualize important information, and expand legal access for miners. We will use SAP, GIS, cloud-based mobile, and social media technologies to create a hybrid, multi-faceted approach that provides benefits for both the government and miners, including increased revenues and safer mining practices. This project also satisfies several of USAID s Development Objectives to help Ghana become an established middle-income country by 2022. 32 GhanaWeb: The Role of Traditional Rulers in Development, 8 January 2006. 13