This presentation looks at jobs opportunities in the mining sector in Ghana. It looks at both upstream and downstream value chains and at the challenges and opportunities in the mining sector. Some lessons are drawn for the oil and gas sector
Creating local employment in up and downstream value chains: Case of mining sector in Ghana
1. Creating local employment in up and downstream value chains
The case of the mining sector in Ghana
Isabelle Ramdoo, Senior Advisor
African Minerals Development Centre
Accra, Ghana
25 – 26 April 2017
2. OUTLINE
1. Implementing the AMV: Where are we?
2. What effects in terms of employment
3. Challenges and opportunities
4. What can be learned for the O&G sector?
4. The context: What is the Africa Mining Vision
• Continental framework adopted by African Heads of State in 2009
• Advocates for a shift towards harnessing minerals for inclusive
and sustainable opportunities
• Focus on utilizing mineral endowments for broader and sustainable
opportunities, notably through innovation, linkages and
diversification.
• No more one-dimensional priority of mineral rent maximization
• So far, 24 countries engaged at various levels of implementation of
the AMV at national level
• African Minerals Development Centre established as
implementing agent of the AMV.
5. The Project on linkages & value addition in Ghana
• A part of Ghana’s Country Mining Vision Process (started in
2014)
• Strategic value – Ghana is at a crossroads, high time for mineral-
based economic and industrial transformation.
• To support Ghana’s broader industrial agenda and leverage the
mineral sector’s strength and importance
• It examines how to foster the linkages necessary to develop
productive and job-creating economic clusters, in order to depart
from the traditional raw material dependence that has led to Ghana’s
continued vulnerability to boom-bust cycles
6. Scope of this project
Three-phase Country Mining Vision:
– Phase 1: Analysis of opportunities in upstream value creation and
development in mining (on going, till June 2017)
– Phase 2: Analysis of downstream linkages (ASM & industrial minerals)
(July – Dec 2017)
– Phase 3: Analysis of the hydrocarbon sector (Jan – June 2018)
•To identify opportunities and areas of potential; challenges and gaps; and
propose realizable options and opportunities.
•Will identify potential for broader industrial development, notably through
clusters, domestic and regional supply chains.
•Format of initial project:
– Study on upstream linkages, value creation and mineral-based
industrial clustering by AMDC
– Study on opportunities in strengthening local procurement by BGR
– Supplier Development Programme
7. Brief outcome of our work so far
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 It focuses on 4 key issues:
1. The policy and institutional landscape
2. Identified the major hurdles affecting the business and investment and hence
the ability of suppliers to take up opportunities or to grow
3. Market opportunities for local procurement that would make business sense,
taking a regional perspective;
4. Skills and technological challenges.
9. Extractive
sector in
Ghana
Mining
LSM ASM
O&G
Offshore
Total of 42,576 people directly
employed = 1.3% pop.
ü Produces 66% gold +
bauxite + manganese;
ü Employment: direct 8,000
+ 140,000 indirect
ü LCR: All unskilled for locals;
ü Skilled: Max 10% in first 3
years; 6% after 3 years
ü Companies to submit
training plans
Ø Produces 34% of gold;
diamonds; other
industrial minerals;
Ø Employment: 1 million
(legal)
Ø License exclusively for
Ghanaians
Ø No specific public
training programmes
q Employment: approx.
5,700 direct
q LCR: 100% general
staff; 70 – 80% locals
at the junior/ middle
level;
q Company to provide
funding for training
Stylized facts about extractives and employment in Ghana
2nd African gold producer; 10th
world largest gold producer
10. 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
1.3
National contributions of mining (%), 2014
Today’s 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
Very disappointing in
terms of local value
added, business
spillovers and
employment creationFor the whole extractive
sector, employment is 2%
11. Despite substantial contribution, the sector has largely under-performed on its
capacity to generate jobs 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.
Direct, indirect and induced employment in the mining sector Ghana
‘000 full time equivalent
Source: ICMM, 2016
The number of employment is expected to decline over time (estimated to
reach 83,000 or 0.6% of labour by 2022, as a result of (i) increase in labour
productivity and (ii) declining volumes and expenditures.
12. But potential is significant – Most jobs are created indirectly along the supply
chain, with an average job multiplier of 28 (IFC). Multiplier even higher in the
oil and gas sector.
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.
Multipliers for indirect & induced jobs
Country Mining Oil and gas
Ghana 28 n/a
South
Africa
1.9 n/a
Chile 7 n/a
US 5 7.5
Scotland 2.5 13.4
Source: IFC
That is the reason why one of the concrete proposals of the CMV process is to
put in place a National Suppliers development programme (for the entire
extractive sector), which provides a wider procurement market for local suppliers
14. Challenges facing extractive sector and economy as a
whole
ü Systemic challenges: Industrial tissue is weak, business
climate sometimes stiff; access to finance for SMEs; small
market size; large informal sector; small size of firms; chronic
infrastructure deficits (in particular energy)
ü Low productivity and competitiveness hinder firms from
taking advantage of openings, low-supply and opportunities in
mining value chains.
ü Skills and capacity challenges (skills gap, mismatches and
quality; low spending on R&D), including changing nature of
jobs with technological breakthroughs
15. A competitive extractive sector is conditional upon the quality of human
capital stock. Today, indicators in Ghana shows some structural
weaknesses at various levels:
(i) Education system: enrolment ratios are regressive: Drop significantly
at upper secondary and tertiary level. High primary enrolment rates are
not enough for quality jobs.
16. (ii) Expenditure on education high, but not sufficient. Much went to infrastructure
and not on improving quality.
(iii) Disproportionately high % of unskilled labour with only primary education
(despite relatively high enrolment rates in secondary education and high
expenditures).
Quality of education a major issue: STEM; TVET to be improved; on the job
training and apprenticeship insufficient
19. 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
20. • 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).
21. • Transformation agenda calls for a systematic and coherent approach to
develop a pool of solid and competitive suppliers. They hold to key for
indirect jobs but also for labour linkages with the rest of the economy
• 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; apprenticeship
> 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
22. • Employment challenges and skills gaps is a horizontal challenge. Must be
addressed at the national level, through a coordinated approach led by
Government, and informed by the industry, who must feed the Gov with all
the information about their needs and requirements;
• Private-public engagement is key, as industries play an increasingly
important role in building competencies, through internships; regular on-the-
job training; apprenticeship schemes as part of academic training etc.
• The approach taken in the mining sector, notably though an SDP with a
pillar on workforce development, can be extended to the oil and gas sector;
• Details will of course vary, as certain specific skills are certainly needed in
the oil sector. But that should not be an obstacle in drawing together the two
industries, when it comes to skills development programmes
How transferable is this to the oil and gas sector?
25. Local content requirements regarding employment
Guidelines and targets in Regulation LI 2173 contain:
(i) Conditions of employment of expatriates;
(ii) Obligations for companies to plan, recruit and train local staff at various levels
of competencies and during all phases of activities in Ghana; and
(iii) Impending penalties that may be incurred by companies if they fail to comply
with the Rules.
The objective is to provide more opportunities to the local labour force, including
by requiring companies to provide the necessary training and transfer of
knowledge and know-how to local skilled work force.
The Regulation however only targets direct employment opportunities at the mine
site.
26. Regulations Specific requirements
Immigration quota for
foreign labour
No quota to be granted by Minerals Commission unless no Ghanaian has the “requisite
qualification and experience” to occupy the relevant position.
Possible special exemption cases:
a) Specialised technology is used;
(b) Training of Ghanaians requires a longer period than the transition period;
(c) Special project including a new mine development, expansion or rehabilitation is to
be undertaken, provided that the duration of the project does not exceed three years; or
(d) Ghanaians are employed to work as expatriates in the firm’s operations in other
countries.
Employment of unskilled
labour and clericals
Exclusively reserved for Ghanaians.
Localisation plan Compulsory submission of 5-year local content programme for recruitment, training and
successions of Ghanaians must be submitted
Training requirements Applications for mining rights must include a proposal for the training and employment
of Ghanaian personnel, including in view of replacement of expatriate staff.
Firms must state how they intend to train Ghanaians to replace expatriates within a
specified timeframe.
Preference to local labour Companies are required to give preference in employment to citizens “to the maximum
extent possible and consistent with safety, efficiency and economy”.
Penalty for non-
compliance
1 year expatriate gross salary for every month of illegitimate stay. Delisted from
companies enjoying duty exemptions.
27. Specific targets per job category and according to the type of licence
(i) For holders of reconnaissance or prospecting licences and providers of mine
support services
% of expatriate staff to total senior staff number
Category Commencement, % After 2 years, % After 4 years, % After 6 years, %
Technical and supervisory 5 5 0 0
Skilled labour 10 0 0 0
Management (no. of
expatriates)
Up to 2 Up to 2 Up to 2 Up to 2
(ii) For holders of mining rights
% of expatriate staff to total senior staff number
Category In first 3 years, % After 3
rd
year, %
Skilled labour (if critical, companies may substitute with part of
quota for expat staff allowed).
0 0
Senior staff Not exceeding 10% Not exceeding 6%
Total no. of expatriates allowed Less than 3 Up to 2
28. Enforcement mechanism and penalties
For non-compliance to an approved localization programme (i.e. the replacement
of foreign staff by local staff), the firm must pay one year’s salary of the
expatriate concerned for each month, or part of each month, that latter would
have worked in excess to what was foreseen in the plan.
The penalty is expected to be used for the training of Ghanaians for participation in
the mining sector;