Energy, Utilities & Mining

Gold

Ghana is blessed with abundant gold reserves and currently there are three major players in the gold mining industry in Ghana, AngloGold Ashanti, Gold Fields and Golden Star. Annual production for the three groups in 2004 accounted for the vast majority of gold exports from Ghana. The investment undertaken by all three demonstrate the importance given by the Ghana Government to the mining industry, which has contributed significantly to Ghana’s annual GDP.

Operations include both surface and underground mining and various methods are being used by the mining companies to extract gold including carbon in leach and heap leach methods.

With the friendly climate and the continuing high gold price, Newmont has recently taken the decision to invest in Ghana with two key projects at Ahafo and Akyem. The Ahafo mine is due to start production in 2006.

There are, however, key challenges facing the industry, none more so than the encroachment of ‘galamsey’ miners on mining companies’ concessions. Not only does this provide a headache for the companies, but those miners also put their lives in danger by often practising unsafe mining methods. This is clearly one issue, which needs to be addressed by the Government.

Other issues faced by mining companies include land compensation and corporate social responsibility. All players in the industry continue to strive to add value to the communities in which they operate both by building houses, schools and hospitals for people displaced by mining activities and by providing employment.

Other Minerals

Although gold accounts for the vast majority of mineral exports from Ghana, other minerals mined in the country include bauxite and manganese in the Western Region of the country.

The key issue affecting the production and export of these minerals is the ability to transport to the Takoradi harbour for which the companies rely heavily on the rail network from the mines to the harbour. Without investment in these railways, exports will continue to be restricted.

Energy Sector

Ghana’s energy sector can be classified into two main categories, petroleum and power. These categories contribute significantly to the economy.

Petroleum

Ghana’s petroleum sector is both upstream and downstream. The upstream activities include the procurement and refining of crude oil by the nation’s only petroleum refinery, Tema Oil Refinery (TOR). The downstream activities include the marketing and distribution of petroleum products by Oil Marketing Companies (OMCs) and the pre-mixing of petroleum products for other industrial uses. OMCs operating in Ghana are mainly multinationals, however the last decade has seen an increase in the establishment of a number of small to medium scale OMCs.

Prices of petroleum products were until 2003 regulated entirely by the government until the establishment of an independent board to determine the prices of petroleum products. The nation consumes significant volumes of petroleum products and importation of crude oil constitutes a significant portion of gross domestic product (GDP). The petroleum sector has potential for significant growth.

The Ghana National Petroleum Council (GNPC) has the mandate to explore for oil within the nation’s territory. However, since its establishment, there has been no discovery of a commercially viable oil reserve within their jurisdiction.

Developments in the petroleum industry in recent years include:

• Deregulation of the importation of crude oil into Ghana
• Deregulation of the pricing of petroleum products
• Signing of the West African Gas Pipeline Agreement between West African governments.

Power

Electricity is generated by the Volta River Authority (VRA) and is distributed by the Electricity Company of Ghana mainly in the southern sector of the country and by the VRA in the northern sector.

The VRA has a monopoly over the generation of power in the country and the main source of power is hydro electric, which is environmentally friendly. A relatively small percentage of power is generated from thermal sources. The percentage of power that is generated from thermal sources has been increasing over the years due to increased power demands as a result of population growth, rural electrification and expansion in industries.

In an attempt to deregulate the sector, the government has given the Public Utilities Regulatory Commission (PURC) the mandate to regulate the cost of energy. There has so far not been a major move towards privatisation of power by the government.

Ghana exports power to neighbouring Togo and has an agreement to export or import power to Cote D’Ivoire as the situation demands.

Developments in the power sector over the years include:

• Transformation of the Electricity Corporation of Ghana into the Electricity Company of Ghana.
• Commissioning of Aboadze Thermal Plant to provide thermal power.
• Deregulation of the sector by the mandate given to the PURC to independently regulate pricing of power towards achieving full cost recovery.
• Abrogation of the agreement between the VRA and Kaizer Aluminium of the United States for the payment of below market prices for power.