Can mining spur local enterprise growth?
Although there is no legislation to enforce the use of locally sourced inputs, mining firms are leading efforts to increase local content to the benefit of indigenous enterprises and the wider economy.
Experts say when mining companies buy more local goods and services than they are presently doing, the country will gain over fourfold more than it is garnering from royalties and corporate taxes.
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The potential of mining as an anchor of economic growth is significant if harnessed properly. It can unlock industrial activities through more value addition.
It creates more business opportunities for the domestic private sector from local procurement, generate indirect jobs along the supply chain.
For a mining bedded economy like Ghana’s, the contradictions are sometimes all too evident. Contradictions of a state seeking to milk more from mining firms, yet seemingly unwilling to tackle the challenges that confront the industry.
The intriguing contradiction of mining communities seeing wealth leave their soils, yet enveloped in thick veils of poverty and the contradictions of a heavily taxed mining industry, still considered as a gluttonous fat cow and a sinister ‘tax evader’.
But mining is no such evil. While it is true that for most of the past century of gold mining in the country, local content has been minimal.
However, this has been changing significantly over the past decade and indeed, over the past three or four years, local content has been increasing dramatically, propelled by deliberate affirmative action in this direction by the Chamber of Mines as an institution, its members, various stakeholder institutions and the government itself.
The targets are set by the chamber and its members themselves in a self-regulatory initiative and the efforts are yielding major positive results.
Billion dollar procurement
Mining companies now spend over one billion dollars a year on purchases of locally sourced products and services, excluding diesel, power and local spending is growing by the year.
It is in this regard that the Ghana Chamber of Mines and the Ghana Standards Authority (GSA) unveiled the mining industry’s quality standards for locally manufactured electrical cables.
The event confirms efforts at making the country’s manufacturing industry globally competitive, thus enabling it to expand sales of made in Ghana products all across Africa under the preferential market access offered through the African Continental Free Trade Agreement.
There are eight other products that account for between 54 per cent and 60 per cent of mining firms’ purchases that is deemed promising for local procurement.
Mining companies themselves are supporting local suppliers and manufacturers to improve their capacities through financial and technical assistance.
The products identified are” electrical cables, lime, grinding media, HDPE and PVC pipes, cement and cement products, tyres and retreading, general and specific lubricants, explosives and caustic soda.
The nature of solid mineral mining makes electrical cabling a key input for the industry. However, applying local content regulations to enable local manufacturers provide most of the mining industry’s needs has been fraught with challenges.
As the chairman of the Supply Managers Committee of Chamber of Mines, Mr Theophillus Otchere, explains the challenges were partly due to the disparities in coding from the countries of origin, as well as concerns over quality, quantity, reliability and cost.
Content regulations
With the coming into force of the local content regulations and the requirement for the mines to procure electric cables locally, there were concerns with mixing Ghana made electric cables with cables from other parts of the world.
One key recommendation from the Electric Cable Workshop was the need to develop local standards for the manufacturing of electric cables in Ghana.
This led to the decision to bring all stakeholders – suppliers, buyers and regulators – together in the form of a Technical Committee to come up with solutions to overcome the problems.
The Director-General of the GSA, Professor Alex Dodoo, said standards were key to industrialisation and the creation of jobs, adding that “with standards, we can trade together, we can talk together and we can do business together”.
Prof. Dodoo said the GSA would ensure that cable standards were established and recognised as de facto African standards to ensure consistency on the continent.
“By buying our local products, we give meaning to local content and preserve foreign exchange,” he said, and urged the mining companies to make advance commitment to the companies so they could invest in production.
The Chief Executive Officer (CEO) of the Ghana Chamber of Mines, Mr Sulemanu Koney, said commercial initiatives under the chamber’s leadership had led to improvement in the procurement of locally manufactured electric cables by mining firms.
He said industrial visits by the Chamber for Supply Managers and electrical engineers of the mining firms led to an increase in the procurement of locally produced electric cables by mining companies from $1.8 million in 2017 to $2.9 million in 2018.
“Appropriate and acceptable standards are a prerequisite to trade and business facilitation. They provide assurance that the product is fit for purpose and will perform as expected. For an industry such as mining, for which downtimes are costly, conformity with standards is non-negotiable,” Mr Koney said.
He said three key issues stood out when considering local content, namely, competitive cost, good quality and delivery time, hence the need for companies to ensure that that was done effectively to reap benefits from the initiative.
Statistical swings
Out of the $2.3 million procurement of electrical cables by mining firms in 2014, only $173 million worth of cables were procured locally, representing 7.5 per cent.
The figure jumped to $488 million in 2015 out of the $1,360 million industry’s expenditure on electrical cables, which represents 36.1 per cent.
Purchases of indigenous electrical cables improved in 2016 when companies increased their procurement cables to more than a million dollars out the over $1.45 million industry spending on cables, representing 73.39 per cent.
It again took a nosedive in 2017, when the figure slumped to $612, 104 out of the industry’s expenditure of $1.78 million, representing 34.2 per cent.
There was a slight improvement in 2018, when mining firms increased their local procurement of electrical cables to $1.67 million from the $2.97 million industry’s spending cables, representing 56.20 per cent
The figure again slumped to $914,000 out of the $2.67 million industry cable spending in 2019, representing 42.22 per cent.
Local manufacturers
With the current commitment, mining firms are therefore expected to procure all their electrical cables from indigenous manufactures to boost the economy.
Local manufacturers of electric cables — Nexans Kabelmetal, Tropical Cables and Conductors and Reroy Cables — are expected to adhere to strict standards set by the Ghana Standards Authority (GSA).
This sets the grounds for further improvement with regard to local content in the mining industry for a product that has already seen tremendous improvements over the past couple of years.
But even more importantly, the procedure used to arrive at the standards for locally manufactured electrical cables can be used for all sorts of other locally made products too.
Indeed, this goes far beyond their usefulness to Ghana’s mining industry; it shows that the mining industry can play a vital role in ensuring that locally manufactured products meet quality standards that would enable them to be internationally competitive.
This is precisely what the mining industry has facilitated with regard to electrical cables; and having identified a most effective process, it is now positioned to replicate it with other products.
