Dr. AK Mensah: Gold mining has not been able to transform local host mining communities; here’s why


Today is World Environment Day and as an environmentalist I would like to do a series on the sustainability of the mining sector using Ghana as a case study. In this episode, I will argue my case to answer two questions:

a. Why are countries with mineral resources poor?

b. Why has gold mining failed to transform local Ghanaian economies and host mining communities?

In my course,Course 17007 Mining and Water Resources/Environmental Protection in Africaat the Ruhr-Universität Bochum in Germany, I discussed and reflected with my students over two summer semesters on why mineral-rich countries have failed to achieve sustainability! In this episode, I discuss with your audience sustainability in the mining sector and we will crave examples from Ghana to answer the question whether we are achieving or can ever achieve sustainability in the sector? I have also given the two images below as case studies in my students’ assignment.

I strongly advise against chewing and pouring in my engagements with students, and I always encourage brainstorming on a topic in my class. The assignment said: Study these two plates in the folder below about a situation in a dominant mining community in Africa.

1. Plate 1 shows a road leading to a mining town

2. Plate 2 shows abandoned mining land from gold mining. The land had been abandoned for many decades and used by children as a playground. The women also use it as a passageway to their farms.

Apply the concept of sustainability (use the documents in the links below to help you):

1. State and describe what might go wrong in each field.

2. What are the implications of each domain on the community?

3. What can mining companies do to ensure community sustainability?

We’ll answer these questions later, but let’s first analyze the first two questions: why nations with mineral resources are poor; and why gold mining has failed to transform local Ghanaian economies and host mining communities.

Plate 1 shows a road leading to a mining town

The first reason is that the resource is cursed. Several academic works had established a link between mining and extractive industries and the proliferation of poverty and underdevelopment. For example, Ross (2001; 2003) observes that “oil and mineral dependence is strongly associated with exceptionally adverse conditions for the poor” and that “higher levels of mineral dependence [are] strongly correlated with higher poverty rates.”

Another study by Gamu et al. (2015) conducted empirical analyzes of fifty cases and found that large-scale extractive mining industries instead exacerbate poverty in mining communities. Interestingly, the same study found that small-scale mining is linked to poverty reduction.

Dr. AK Mensah: Gold mining has not been able to transform local host mining communities;  here's why
Plate 2 shows abandoned mining land from gold mining. The land had been abandoned for many decades and used by children as a playground. The women also use it as a place of passage to their farms.

In 1995, Harvard scholars Sachs and Warmer studied 97 developing countries over the period 1970-1989 and found that resource-poor economies outperformed resource-rich economies in terms of economic growth. Extractive industries like that of big mining companies exacerbate the resource curse.

The resource curse (“paradox of abundance”) refers to the paradox that countries with an abundance of natural resources (e.g., fossil fuels, oil, minerals such as gold, bauxite , diamonds, etc.), tend to have lower economic growth, less democracy and poorer development outcomes than countries with fewer natural resources.

In Ghana, evidence of the resource curse is most visible in gold mining regions and communities, where mining activities have led to increased poverty, environmental degradation and social impacts. In Nigeria, Angola, the Democratic Republic of Congo and Sierra Leone, the resource curse has led to armed conflicts and civil wars.

This curse is also more evident in countries where there is centralized government, less decentralization and less decentralization. Here, power is highly concentrated in the capitals. Less focus and attention is given to local communities. Many companies and their registration are strongly carried out in the capitals. This system is a top-down approach that creates unnecessary frustration, lots of bureaucracy and cumbersome business registration and local decision-making.

Ghana’s decentralization is thus described by some experts as centralized decentralization. Others argue that our so-called decentralization is more like deconcentration. Distribution of gold mining revenue: The curse is also evident in countries and systems, where the revenue generated by mining communities goes to the central government and a small portion of the revenue goes to the communities where the ore is extract. In Ghana, for example, mining companies pay royalties of 7% of total gold mining revenue to the Republic of Ghana.

Here is the breakdown: 80% of these go to central government (retained in consolidated funds) and 20% are transferred to the mining development fund (MDF) – this is stipulated in the MDF law 2016. 10% of the 20% is retained by the MDF and 10% goes to host mining communities. Of that 10% that goes to host mining communities, about 5% is transferred to the district assembly for regulatory institutions such as the Minerals Commission and the Environmental Protection Agency (EPA).

Finally, only 1.8% end up with the chiefs for any development in the communities. There is no law that dictates how even the small 1.8% should be used for meaningful development. Moreover, there are no checks and balances in place to ensure that these funds are used for the purpose for which they are intended.

Dr. AK Mensah: Gold mining has not been able to transform local host mining communities;  here's why
Plate 3: Distribution of revenue from Ghanaian gold mines. Source: Lujala and Narh (2019)

Another reason is that large-scale mining companies are creating “landlocked economieswhere only a fraction of the total Ghanaian workforce is employed in the sector. The sector generally depends on a highly technical and skilled workforce, which is limited in the rural communities where gold mining takes place. Thus, large-scale mines exist to increase national revenues and foreign exchange earnings for the national economy, but the positive economic impacts on the local communities where they operate are minimal. Several previous studies had supported my argument.

Garvin et al. (2009) postulate that large-scale mining employs around 20,000 people in Ghana, well below the estimated number that the artisanal gold mining sector absorbs. Small-scale artisanal gold mining in Ghana employs over four million people.

In 2001, Aryee pointed out that despite huge investments injected into the Ghanaian economy from larger-scale mines, the distribution of income remains unequal, with the rural communities where the mines are located receiving little benefit from the revenue from the mining. gold mining.

Akabzaa and Darimani (2001) reported that poverty abounds in gold mining and resource-rich communities, with low absorption and employment of local people in large-scale mining. Garvin et al. (2009) further add that Ghanaian communities that host mining companies derive real small local benefits from industrial gold mining and exploration activities.

This article is a combination of three episodes from the series I made on World Environment Day (5/06/2022). The other analyzes will be added soon.


Dr. AK Mensah holds a Ph.D. from Ruhr University in Bochum, Germany. He is a CSIR researcher and founder of the Center for Better Society Advocacy and Research-Africa. AK is also the author of the book “I speak of a better society”.


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