Gold Strike in the Breadbasket: Indigenous livelihoods and territorial restructuring in Ghana

Albert T. Armstrong | 04.01.2008

April 2008, Development Report No. 18

Fifty years after political independence, 40% of Ghana’s 22 million citizens still live in poverty despite the fact that the country is the second-largest gold producer on the African continent. According to the Food and Agriculture Organization (FAO), a large proportion of Ghana’s poor live in rural areas and about 11% of the population, over two million people, continue to suffer from hunger. Hundreds of thousands of rural poor, largely unexposed to the wage economy, derive their livelihoods directly from small-scale agriculture and the natural resources provided by the country’s forests. The rapid expansion of World Bank-financed surface gold mining operations by foreign transnational corporations (TNCs), most recently in the proposed development of mines in Ghana’s forest reserves and the construction of the new Ahafo Gold Mine in the Brong-Ahafo Region by the US-based Newmont Mining Corporation, represent a grave threat to rural livelihoods and indigenous survival.

Using the conceptual model of territorial restructuring, this report surveys the political economy of large-scale corporate gold mining activities in Ghana, with an emphasis on the negative impacts on the livelihoods, food security, human rights, and environment of poor people living in rural small-farming communities in and around the areas of extraction. Territorial restructuring explains how the World Bank (the Bank) and TNCs converge upon specific territories at the sub-national level in the global South with enormous wealth in resources (e.g., oil, gold, diamonds, timber) and, with the complicity of domestic elites, are able to “restructure” conditions on the ground to facilitate the efficient production and extraction of surplus. Over two decades of neoliberal reform and a surge of foreign direct investment (FDI) in Ghana’s mining sector (mainly gold) has generated tremendous gains for TNCs but has delivered comparatively few benefits to either the national economy or mine-affected communities. As one of the largest and most powerful international financial institutions (IFIs) in the world, the World Bank is able to use its conditional lending to directly shape structural conditions at the national and sub-national level, compelling poor borrowing governments to relax their regulatory frameworks and provide economic incentives to assist capital in “opening up” new territory for foreign investment. In Ghana, the government’s revision of the mining code, the granting of huge mining concessions to TNCs on public and tribal lands, and the World Bank’s provision of loans for massive infrastructure programs (especially energy) through its public sector lending arm—the International Development Association (IDA)—as well as the Bank’s direct financing of surface mining projects through its private sector investment arm—the International Finance Corporation (IFC)—all play a central role in establishing elite control over territory and creating an enabling environment for predatory gold mining activities.

Over two decades of neoliberal reform and a surge of foreign direct investment (FDI) in Ghana’s mining sector (mainly gold) has generated tremendous gains for TNCs but has delivered few benefits to either the national economy or mine-affected communities.

The debt crisis and near collapse of the Ghanaian economy in the early 1980s led the government to adopt the first and most ambitious Structural Adjustment Program (SAP) in Africa. From the very beginning of the liberalization process, both the Ghanaian authorities and the Bank’s economists saw the reform of the mining industry, and the gold sector in particular, as the key to the country’s economic recovery. Changes to the mining code under the SAP, including a new Minerals and Mining Law in 1986, facilitated the privatization of all mines and extended a number of very generous fiscal incentives to prospective investors, including drastic cuts in corporate income tax and royalty rates. The Bank has used conditional lending to impose even more extreme mining-sector reforms on other mineral-rich African countries like Mali and Tanzania. This has unleashed a “race to the bottom” across the region that has resulted in the downward leveling of social, economic, and environmental conditions for the majority in resource-rich African nations.

The revision of Ghana’s mining code coupled with the extraordinary rise in gold prices since 2001 has generated a tremendous boom in mining activity in the country. Since 1986, over US$4 billion in FDI has been injected into the nation’s mining sector, and gold production has increased by more than 500%. Gold now accounts for about 40% of total exports and 96% of all mineral exports. At present, there are about 16 large-scale surface gold mines in operation in Ghana and virtually all of these are owned and operated by foreign TNCs. While the largest gold mines, Obuasi and Ahafo, are located in the Ashanti and Brong-Ahafo Regions, half of all the major gold mines, including Tarkwa, Iduapriem, and Bogoso/Prestea, are located in the Western Region where one-third of the total land area is under concession to mining companies. The Tarkwa area, in fact, is said to have the single largest concentration of mines and mining companies on the African continent.

A large portion of the Bank’s lending in Ghana involves a series of large-scale energy infrastructure programs, which are helping to facilitate the expansion of surface mining in the country’s rural hinterlands. Having secure access to an abundant and relatively cheap supply of energy is the most important condition for the profitable operation of a surface gold mine. The Bank views the unreliable and high-price supply of energy in Ghana as a major “infrastructure bottleneck” that must be overcome to attract new FDI to the mining sector. To enhance Ghana’s ability to meet the future energy needs of the mining firms, the Bank is providing the government with loans to support an ambitious long-term “Generation Expansion Program” designed to increase power generation capacity within the goldbelt. This program includes a US$590 million West African Gas Pipeline (WAGP) and a US$229 million Coastal Transmission Backbone Project (CTB). The final delivery terminals for these energy projects are located right in the heart of Ghana’s goldbelt. Moreover, maps in the Bank’s Program Appraisal Document (PAD) for the CTB reveal plans for the future extension of power lines into the Brong-Ahafo Region (home to Newmont’s new Ahafo Mine) as well as the construction of several new hydroelectric dams throughout western Ghana, including the highly controversial Bui Dam Project that will destroy much of Bui National Park. These projects are part of a suite of financial and institutional interventions in Ghana’s goldbelt that represent an imperialist strategy of territorial restructuring, in which the Bank and other powerful actors are able to redirect an enormous sum of wealth and resources towards the development of corporate gold mining operations at the direct expense of the health and welfare of local indigenous communities and the environment.

A thorough cost-benefit analysis of the overall contribution of the gold sector to local and national economic development in Ghana would undoubtedly return a negative result.

A thorough cost-benefit analysis of the overall contribution of the gold sector to local and national economic development in Ghana would undoubtedly return a negative result. Although gold exports account for 40% of foreign exchange earnings, the gold sector only contributes about 5% to Ghana’s gross domestic product (GDP). In addition, surface gold mining operations have devastated many peasant and indigenous communities located in and around the project areas by appropriating and destroying the very land, forest, and water resources they depend on for their survival. The operation of a surface gold mine requires the acquisition of a large tract of land, often hundreds of square kilometers in size, which subsequently has to be cleared of vegetation to accommodate the mine. The transfer of control over large areas of public and/or stool (tribal) lands to private firms by the government amounts to a massive enclosure of the commons. This process has involved both the forced dislocation of indigenous communities numbering in the hundreds or even thousands of people from their land as well as the exclusion of access by the poor to public lands (e.g., forest reserves). Gold mining operations in the Tarkwa area alone displaced 14 communities with a total population of over 30,000 people between 1990 and 1998. Apart from drastically reducing the land available for farming and undermining the income and food security of peasant communities, the rapid influx of large-scale mining activities into Tarkwa has also contributed to an increased incidence of unemployment, higher costs of living, family disorganization, prostitution and drug usage, and the systematic use of intimidation and violence by mining company and state security agencies.

An estimated 25% of the total land area of Ghana (some 58,167 km2) is currently under concession to gold mining firms. Of particular concern today is the rapid expansion of surface gold mining in the Brong-Ahafo Region, which is known as Ghana’s “breadbasket” because it produces 30% of the nation’s food. Despite considerable local and international protest, in January of 2006 the Bank approved US$125 million in IFC loans to Newmont in order to finance the construction of the Ahafo Gold Mine, a huge open-pit, cyanide-processing mining operation, located in the Asutifi District of the Brong-Ahafo Region. The first phase (Ahafo South) of development alone encompasses some 3,000 hectares. About 10,000 people, mainly poor small-scale farmers, have already been displaced to enable the Ahafo South phase of the project to go forward, and an equal number are expected to be displaced as the mine expands northward during its second phase (Ahafo North). According to the IFC, the mine will provide 620 permanent jobs and earn the government some US$300 million over the twenty-year life span of the mine. But these gains are a pittance compared with the enormous social and ecological impacts of the mine. Based on the company’s own projections, Newmont will likely walk away with US$6 billion in net profits.

The following development report is primarily intended to assist Ghana’s mine-affected communities with their grassroots struggle to resist the dispossession of their land and livelihoods by World Bank-financed gold mining operations. This report explains how the Bank uses territorial restructuring to facilitate the development of foreign-based resource extraction projects, the negative impacts of which are blatantly inconsistent with the institution’s stated mission of reducing global poverty. Large-scale surface gold mining is undermining food sovereignty in western Ghana by depriving local people of their rights to food, a healthy environment, and equitable access to and democratic control over the land and resources needed for sustainable livelihoods. This political ecological analysis should be of interest to Ghanaian civil society groups working with mine-affected communities and their international coalition partners, as well as students, teachers, activists, and others interested in understanding the relationship of the Bank’s policies and programs to mining, peasant livelihoods, food security, human rights, and the environment in Ghana or other developing countries.