This presentation looks at the potential to build stronger and deeper supply chains in the mining sector in Ghana. It is based on a comprehensive study that looks at the local economic development in the mining sector in Ghana

1. Building Supply Chain Potential in the Mining Sector in Ghana
Isabelle Ramdoo, Senior Advisor
African Minerals Development Centre
Accra, Ghana
1 November 2017

2. OUTLINE
1. Overview of the mining sector’s contribution to
value creation
2. What are the key challenges?
2. Building strong supply chains

3. 1. Overview of the mining sector’s
contribution to value creation

4. Foreign Direct Investment
Mining dominates total FDI flows
Exports
Mining exports constitute a
significant share of foreign
revenue
Fiscal revenue
Mining taxation key
to total tax revenues
National
income
Jobs
> 50
45.5
15.8
2.3
1.1
National contributions of mining and quarrying (%), 2016
1.Economic contribution of mining in Ghana in a nutshell
Contribution of the
mining sector
should not be
underestimated.
Generally more
significant in
terms of FDI
inflows, export and
fiscal revenues
But much less
impressive in
terms of local value
added, business
spillovers and
employment
creation
Source: Ghana Chamber of Mines, Factoid 2016

5. US$, million 2015 2016
Total Local Purchases (incl. energy) 1492,9 48% 1690,97 52%
Total Local Purchases (excl. Diesel & Electric Power) 865,6 28% 1013,8 31%
Total Local Purchase on Diesel and Energy 627,3 20% 677,2 21%
Payment to employees 429,97 14% 435,6 13%
Total Fiscal payments 377,3 12% 427,23 13%
Expenditure on Corporate Social Investment 17,8 0,6% 12,2 0,4%
Total mineral revenue 3118,1 3257,6
Meanwhile, the industry reported in-country contributions as follows
Source: Ghana Chamber of Mines, 2016
0 200 400 600 800 1000 1200 1400 1600 1800
Total Local Purchases (incl. energy)
Total Local Purchases (excl. Diesel & Electric Power)
Payment to employees
Total Fiscal payments
Expenditure on Corporate Social Investment
Mining companies' in-country expenditure 2015-16 (US$, million)
2016
2015

6. >
50
45.5
15.8
2.3
1.1
Foreign Direct Investment
Mining dominates total FDI flows
Exports
Mining exports constitute a
significant share of foreign
revenue
Fiscal revenue
Mining taxation key to
total tax revenues
National
income
Jobs
So what explains the difference?
Consumption (incl.
wages, salaries) +
investment + Govt
expenditure + export
revenues - imports
Local purchases includes
imported items from local
firms. These are not
necessarily manufactured
in Ghana. Imports are
significant
≈
Direct jobs are also
limited, due to capital
nature of industry
≈
0 500 1000 1500 2000
Total Local Purchases (incl. energy)
Total Local Purchases (excl. Diesel &
Electric Power)
Payment to employees
Total Fiscal payments
Expenditure on Corporate Social Investment
2016
2015

7. Goods or services 1st
edition
of LC,
2014
2nd
edition
of LC
2016
Forthcoming
3rd
Edition of
LC, 2018*
1 Grinding media
2 Explosive (emulsion)
3 Cement and cement product/ grout
4 Quick and hydrated lime
5 Electric cables
6 High Density Polyethylene (HDPE) and PVC
pipes
7 General lubricants
8 Re-treading tyres
9 Bolts and nuts
10 Crucibles
11 Plastic sample bags
12 Calico bags
13 Bullion boxes
14 Chain link, fencing, wire netting, barbed wire
etc
15 Conveyor rollers
16 Metal/ PVC core trays
17 Overall and work clothes
18 Haulage services
19 Catering services
20 Activated carbon*
21 Ammonium sulphate*
22 Chemicals (caustic soda)*
23 Mill liners*
24 Motor re-winding and re-furbishing*
25 Rock bolts and split-sets*
26 Steel products (plate, angles, brackets,
sprockets)*
27 Ventilation ducting*
28 Wood products*
29 Yelomine pipes*
Local Content Requirements under LI 2173 of 2012

8. Local content regulation: total procurement based on procurement plans and list
of 8 products (LI 2173) assessed in 2016
Based on the assessment made by the Minerals Commission in 2016, it mining
companies purchased 73.3% of the 8 products listed on Regulation LI 2173 from
“local” sources. However, when calculated against the total purchases made
by companies, this was equivalent to only 8.4% (if fuel is incl) and 14.5%
without fuel
Source: Minerals Commission, 2016
Product
2015 Total
procurement
(US$)
2015 Total local
procurement (US$)
2015 2015 True local
procurement
(US$)
2015 % True local
% local
1. Grinding Media 62,3 28,13 45,2 17,89 63,6
2.Heavy duty electrical cables 1,35 0,95 70,4 0,49 36.1
3. HDPE/PVC pipes 9,77 9,75 99,8 9,73 86.7
4. General lubricants 11,22 10,93 97,4 10,93 50.1
5. Quick/ hydrated lime 21,81 21,81 100,0 21,81 100
6. Tyre re-treading 0,75 0,75 100,0 0,75 100
7. Explosives 63,29 63,29 100,0 63,3 100
8. Cement 0,77 0,77 100,0 0,77 100
Total (8 items on LI 2173, 2015) 171,25 136,38 79,6 125,66 73.3
Total purchases including diesel and energy, 2015 1492,9 9,1 8,4
Total Local Purchases (excl. Diesel & Electric Power) 865,6 15,8 14,5

9. Despite current low local procurement, opportunities are significant
,00 20,00 40,00 60,00 80,00 100,00 120,00 140,00 160,00 180,00
Fuel and lubricants - power
Other reagents
Fuel and lubricants - mining
Spare parts and opex equipment
Grinding media
Electricity
Explosives and accessories
Lime
Tyres
Geological and exploration services
Supply chain services
Analysis and testing
Environmental services
Equipment & Plant maintenance & repair
Safety and protective equipment
Site related services
Drilling equipment and services
Food and beverages
Construction, and related materials and services
Electrical equipment and supplies
Exploration consumables
Equipment rental
Feasibility, design and engineering
Corporate / Admin services
Telecommunications
Water services (including general waste management)
Personnel related services
Office supplies and equipment
Electronic equipment and supplies
General maintenance & repair
Camp / site supplies
Total procurement by top categories for Ghana, 2015, US$ million
Source: BGR Procurement Model

10. 2. Key challenges to local supply chain development

11. 1. The policy landscape
• Assessed policy environment in Ghana, in particular current policy
framework that governs mining, but also trade and industry
• Too focused on rent maximisation, insufficient in emphasis on supply
chain development and broader linkages with other economic sectors or
even with territorial development
• Currently key policy is local content. But there is still very little to show in
terms of value addition.
• LC is necessary but not sufficient. However, number of supply-side
constraints became apparent
• Insufficient policy coherence, coordination and consistency; (e.g. duty
exemptions for inputs; Free Zone cap on domestic supply; and capital
requirements on foreign investment seems to limit FDI or JVs with local
firms; complex corporate tax policies etc. )
• No systematic approach to or strategy to reinforce industrial capacity
and capacity of service providers

12. Figure 1: Share of industry is declining
0
100 000
200 000
300 000
400 000
500 000
600 000
Micro (≤5
employees)
Small (6 - 30
employees)
Medium (31
- 100
employees)
Large (≥100
employees)
No. of employees 509033,0 117329,0 9333,0 2539,0
No.ofestablishments
Figure 3: Distribution of non-household firms by size, 2014
Agriculture Industry Services Total
76
46,2
37,9 40,1
24
53,8
62,1 59,9
Formal Informal
Figure 2: Share of persons engaged, informal and
formal sector, 2014
2. Business/ investment landscape: Industrial landscape in a nutshell
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
W
estern
region
C
entralregion
G
reaterAccraVolta
R
egion
Eastern
Region
Ashanti
Brong
Ahafo
N
orthern
region
U
pperregion
U
pperw
estregion
Large Medium Small Micro
No.ofestablishments
Figure 4: Firms’ distribution by region and
size, 2014
2010 2011 2012 2013 2014 2015 2016
Agriculture 26,77 23,67 22,16 21,82 21,96 21,65 21,67
Industry 21,00 26,00 26,50 26,30 25,30 24,80 23,60
Services 48,60 46,62 47,80 49,01 49,76 50,39 51,51
0,00
10,00
20,00
30,00
40,00
50,00
60,00
ShareofrealGDP(%)
Of these, 86% informal
(92% in industry)

13. 2. Systemic challenges: Business climate sometimes stiff; access to
finance for SMEs is very expensive
3. Low firms’ productivity and weak competitiveness of the economy
hinder the ability of firms to take advantage of openings
4. Chronic infrastructure deficits (including to trade across borders)
affecting productivity; E.g. power shortages, traffic congestion and other
logistical challenges, significantly drive up the cost of doing business for
local suppliers, making them uncompetitive etc.;
5. Institutional challenges and insufficient structured dialogue between
public and private sector concerning supply development

14. 3. Market size and market access
• Market size matters. Although the numbers seem big, Ghana is still a
small market by international standards. Even South Africa is almost
2x Ghana in terms of procurement market size
• Important to look beyond mining sector to find scale, notably by
establishing linkages with other economic sectors, including through
clusters (next presentation)
• Need to look beyond Ghana : the local market may not be significant
enough if the country wants to attract suppliers, including from abroad.
Therefore a regional/ international perspective is necessary, as this will
provide wider markets to suppliers. Study looked at 4 countries in the
region, scope to externalise supply chains, once they are competitive
is therefore important

15. 4. Skills and technological challenges
Challenges relating to:
(a) Low labour productivity, due to brain drain and low technical skills
for what is required for the mining supply chain
(b) Non-existence of a skills strategy to define the long-term needs of
the labour market and firms’ needs
(c) Low Govt spending on R&D; lack of facilities to stimulate innovation,
in particular to support SMEs to find solutions to technical specs
challenges;
(d) Weak technological absorptive capacity
(e) Insufficient network across training institutions in Ghana and in the
region

16. 3. Next Steps
Building strong supply chains
An integrated approach to supply chain excellence

17. New momentum in Ghana, including with the new Government’s programme. A
number of policy announcements made:
•The setting up of a stimulus package to support existing industries and
improve competitiveness
•Implementation of at least one industrial enterprise in each of the 216 Districts
in the “One District, One Factory” policy
•Development of strategic anchor initiatives as new pillars of growth,
including the establishment of petrochemical industries; an iron and steel
industry; an integrated aluminum industry; the expansion of the domestic
production of pharmaceuticals; the establishment of a vehicle assembly and
automotive industry; the production of industrial salt; the establishment of
garment and textiles enterprises; and the manufacture of machinery, equipment
and component parts
•Establishment of a multi-purpose industrial park in each of the ten regions

18. • Implementation of a comprehensive programme for SME development
• The implementation of a job creation and development programme,
along with a roadmap to transition from informality to formality, including
through support to businesses; labour protection services etc.
• The establishment of a skills development programme, including through:
– A vigorous expansion and re-equipping of Technical, Vocational and Agricultural
schools and align all TVAET under the Ministry of Education to ensure
standardization.
– Enhance the teaching of mathematics and science in schools, and increasing
use of ICT.
– Improving the quality of education, by encouraging professionalism among
teachers (including through incentives such as restoring teacher trainee
allowances).

19. Setting up of a National Suppliers’ Development Programme
Rationale:
• Dis-enclavement and integration into the broader economy
• A systematic and more sustainable approach to supply chain
development as it helps the organic growth of linkages
• Fosters more business and jobs prospects: creation of linkages
between domestic firms and mining firms; across domestic firms;
across sectors
• Identify gaps and weaknesses and therefore facilitates skills and
capabilities development
• Fosters coordination across various initiatives and policies;
avoids duplication and provides a platform for multi-stakeholders
dialogue.

20. Core functions of a National Suppliers’ Development Programme
NSDP
Increased supply
to mining Industry
through targeted
support to
suppliers
Enhanced skills
and workforce
development
Develop research,
technological and
innovation
capabilities
Spillovers to other
economic sectors
and to territorial
development
Forward looking:
preparing for the
future of the
industry
(technology; mine
closure etc.)

21. Success will depend on strategic partnerships between the public and
the private sector as well as with research institutions. In particular
dedicated responsibilities for Government and private sector to provide:
a. Administrative support (e.g. creating national online platforms to
share information about procurement; networks of suppliers);
b. Technical support (e.g. on product design, standards setting and
support to meet those; access to high tech equipment and facilities;
development cooperation including though JVs and B2B);
c. Financial support (access to finance, special initiatives such as
business incubators, innovation hubs; govt subsidies to support
R&D) and
d. Institutional support (e.g. by supporting existing institutions or
creating new ones, to support policy coherence and coordination but
also to ensure that specific areas, such as productivity and
competitiveness get the necessary attention)

22. THANK YOU