SUPPLY CHAIN OF GHANA’S GOLD
Written to: Edwin Macl ellan
Written by: Sana Alzahrani
Student ID: 20130406
Course: Comparative Development
Cape Breton University
February 15, 2014
Introduction
Ghana is the second largest gold producer after South Africa and 9th globally. Ghana’s gold mining sector has faced numerous challenges including policy failure and supply chain management. 70 percent of the revenues that are collected from gold are spent in the supply chain. This implies that the country and local communities benefit least from the natural resource. The country has put a lot of effort to upgrade its capabilities through investment and reformulation of the policies (Addy, 1999).
Gold supplied from Ghana can be classified into three components: mine proportion that comprise of 64 percent of the product; scrap which comprise of 23 percent of the product; and official sector sales that comprise of 13 percent. In the year 2007, the average production costs were roughly $500 (Hilson G. , 2009). The high demand of gold, constrained supply and significant profits have led to increased gold mining activities in the country. This is contrary to the top eight gold producing countries that recorded a decrease in the production volumes.
Ghana’s supply chain
Ghana gold mining features eight large mines owned by large-scale international companies who control approximately 85 percent of the sector. Ten percent of the sector is controlled by small scale, semi-formal producers. The remaining percentage is controlled by small-scale and informal artisan miners who are unregistered by relevant authorities. The informal artisans have employed approximately 200,000 people (Hilson, 2004).
Vorster et al. (2006) classified the supply chain to include the following stages:
Location
Involves determination of the presence of a mineral deposit (mine deposits).
Valuation
Determination of the profitability of the mineral when mined.
Establishment
Development of a mine plan
Transport
Movement of gold from source to destination
Refining
Involves extraction of saleable product and disposal of the residue
Market
Maximization of profits
(Lumbert, 2006)
Walker and Minnith (2006) note that each stage in the supply chain is designed to increase the economic value of the valuable component of the ore. Each stage requires diverse capital goods and services to ensure productivity and efficiency. Firms that provide these inputs are referred to as “input cluster”. The input clusters are classified as follows:
1. Direct suppliers including firms that offer engineering services, equipment manufacturers, consumable suppliers, agent and distributors. Engineering companies involved include firms such as Lycopodium, Atlas Copco and Sandvik. Input supplier firms include Maxam and African Explosives while agents and distributors include Riepco and Technical Services.
2. Indirect suppliers including firms that offer specialized services such as engineering & services and component manufacturers.
3. Direct mining services including firms that offer geological, land use & survey planning, drilling services and laboratory services.
4. Indirect producer services including firms that offer the following services: insurance, finance and real estate; transportation and logistics; legal services; environmental services; and catering (Lysons, 2006).
The leading business directory of Ghana, the surf yellow pages Ghana (2010), lists approximately 300 companies under the three categories of mining services, mining equipment and mining companies. Ghana has seven gold mining firms, six exploration firms and 45 firms that offer support services. All this firms are associated with the Ghana Minerals Commission. Ghana’s offices are affiliated with global mining suppliers and service firms such as Sandvik, Copco, Carmeuse Lime Products and Boat LongYear.
Ghanaian national firms that are component manufacturers and input suppliers include: Tema Steel who supply steel and
