This presentation highlights the opportunities in the mineral sector in Ghana to scale up value addition for broader local economic development. It focuses in particular on the need to strengthen supply chain development.

1. Scaling up value addition and local development in Ghana’s
mineral sector
Isabelle Ramdoo, Senior Advisor
African Minerals Development Centre
Accra, Ghana
27 – 31 March 2017

2. OUTLINE
1. Overview of the mining sector to value creation
a. Economic contribution of the mining sector in Ghana in a
nutshell
b. Scope of the Study
2.Summary of findings: Key challenges to suppliers development
a. Policy landscape
b. Business and investment environment
c. Market size
d. Skills and technological capacities
3.Next steps: Fostering the 3C’s – capacities, capabilities and
competitiveness

3. 1. Overview of the mining sector
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
35
16
2.3
1.1
National contributions of mining (%), 2014
1.a 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

5. Despite substantial contribution, the sector has largely under-performed on 2
elements:
(i)Capacity to generate employment opportunities through linkages. Mining is
capital intensive & accounts for barely 1% of direct jobs. Opportunities are
skewed: a lot of temporary unskilled prospects during construction phase, but
essentially high-skilled demand during production phase.
But potential through linkages is significant – for every direct job created, the
no. of indirect jobs supported can be significant
Country Mining
Ghana 15 – 21**
South Africa 1.9
Tanzania > 3
Chile 7
In Ghana, the number is high because
of the inclusion of informal employment
in trade and agriculture sectors. Due to
the low productivity of the informal
sector, small amount of procurement or
household spending can support many
informal jobs. Other countries only
include formal job potential.
S. Redqueen: 2017
** Multiplier ranges from 15 according to
ICMM to 21 according to Newmont
Job multipliers in the mining sector

6. (ii) Its capacity to create industrial linkages, in particular by fostering the
development of a strong suppliers’ base, which could tap into procurement
needs of mining companies, and use this as a springboard to connect to other
economic sectors.
We estimated that mining companies spent a total of US$ 17.5 billion in local
procurement in 2015 (48% of their total expenditure). Scope is therefore
significant for local suppliers, if the conditions are right

7. 1.b Scope of the Study
ü AMDC in partnership with BGR, conducted an in-depth Study to scrutinise
the mineral policy and overall business framework, within which local
businesses operate in Ghana.
ü The Study outlined the critical barriers that affect the capacity of the work
force as well as the capabilities and competitiveness of suppliers, which in
turn impact on their ability to take up opportunities that the mining industry
could provide.
ü The mining industry is viewed as an anchor client, but ultimately the
purpose of the exercise is to connect the mining industry with the rest
of the economy to ensure broad-based diversification.

8. 2. Summary of findings: Key challenges to suppliers
development

9. 1. The policy landscape
• Assessed policy environment in Ghana, in particular current policy
framework to optimise the contribution of the sector
• Too focused on rent maximisation, insufficient in relations to
supply chain development
• Key policy is local content. First assessment (2015) gave positive
signals, but seems second assessment will be less satisfactory,
notably due to supply side constraints
• Current list seems to focus on’ low hanging fruits’. What is lacking
is strategy to reinforce industrial capacity and capacity of
service providers so that new supply opportunities can be
offered
• Also seems to be disconnected from investment policy and
trade policy (e.g. 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. )

10. 2. Business and investment landscape
Thorough assess of the investment and business climate to
identify the hurdles facing suppliers’ development in Ghana.
Following challenges identified:
1. Systemic challenges: Over the years, Ghana has been
slowly de-industrializing in recent years: In 2016, share
industry to GDP was at 23.6% compared to 26.5% in 2012;
share of global manufacturing output is negligible
Industrial tissue is weak, business climate sometimes stiff;
access to finance for SMEs; small market size; large
informal sector; small size of firms.

11. 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
Ghana’s 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)

12. 2. Low firms’ productivity and weak competitiveness of
the economy hinder the ability of firms to take advantage
of openings
3. Chronic infrastructure deficits (including to trade
across borders) driving up costs of doing business and
affecting productivity; E.g. power shortages and other
logistical challenges, significantly drive up the cost of doing
business for local suppliers, making them uncompetitive
etc.;
3. Institutional challenges and insufficient structured
dialogue between public and private sector concerning
supply development

13. 3. Market size
• Market size is currently too small (next presentation)
• Need to look beyond mining sector 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

14. 4. Skills and technological challenges
Study identified a number of challenges relating to:
(a) Low labour productivity, due to low technical skills/
highly qualified labour 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

15. 3. Next Steps

16. Fostering the 3C’s - Capacities, Capabilities and Competitiveness
On the basis of the Analysis, we looked at what could be done concretely to foster
local sourcing and uptake from domestic suppliers, notably by building capacities
and skills, scaling up production capabilities and improving competitiveness of
suppliers.
We propose the setting up a National Suppliers Development Programme aimed
at enabling suppliers and their ecosystems to deliver world-class products and
services and meet changing competitive requirements.
Two distinct but complementary elements
Workforce development:
> Reforming the labour market from informal to formal;
> Adapting the curriculum: moving towards more scientific
educational training;
> Training schemes; on-the-job training;
> Transfer of know-how
> Capacity building and skills development;
> Movement of talents, skills and competencies
> Access to knowledge; exchange of ideas
Suppliers’ development
> Empowering existing suppliers;
> Supporting new suppliers;
> Identifying potential/ future suppliers;
> Setting up solid networks of suppliers (supply-
side), industries (demand-side) and institutions;
> Availability of support services and infrastructure
for business development;
> Access to technology and know-how;
> Support to innovation, business incubators, start-
ups

17. The objective is two fold:
(i)To improve the efficiency of supply by scaling up competencies:
the level of skills in a country is an important determinant of the ability
to absorb technology and adapt to the exigencies of a demanding
client, like the mining industry. The programme cannot rely on low-
skilled labour.
•
(i)To provide incentives to link suppliers with large firms, not only
in the extractive sector but perhaps, more importantly, with the rest of
the economy.

18. 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)

19. THANK YOU

20. Additional Slides

21. Types of instruments to support business development