Bars of gold
Despite the growth of Ghana’s oil industry, which has significantly contributed to the economy amid fluctuating production levels over the past four years, gold mining remains a cornerstone of the country’s fiscal stability and economic growth.
In 2023, global output growth was robust at 3.2 percent, slightly lower than 2021’s 3.5 percent rate, despite the impact of reduced quantitative easing and ongoing supply chain disruptions due to the Russia-Ukraine and Israel-Hamas conflicts.
Meanwhile, Ghana’s GDP growth rate decreased from 3.8 percent in 2022 to 2.9 percent in 2023, the lowest since the COVID-19 pandemic. In nominal terms, GDP rose from GH₵181.257billion to GH₵186.595billion.
The decline was driven by contractions in the industrial and services sectors, with agriculture being the primary growth driver. Specifically, the industrial sector contracted by 1.2 percent, with the oil and gas sub-sector initially in recession but improving by the year’s end.
The electricity and construction sub-sectors faced recessions while manufacturing grew to 0.9 percent. The mining and quarrying sub-sector contributed significantly, despite a reduction in its growth rate.
The services sector also slowed from 6.3 percent to 5.5 percent while agriculture’s output increased from 4.3 percent to 4.5 percent, the highest sectoral growth in 2023.
Notwithstanding the impact of these developments, the mining sector contributed GH₵11.55billion (US$980million) in taxes—a record-breaking 81.1 percent increase from GH₵6.38billion in 2022, according to the Ghana Chamber of Mines.
This makes it the country’s largest domestic tax contributor, accounting for 22.7 percent of direct taxes in 2023, accentuating its crucial role in supporting the government’s economic recovery efforts.
As the pillar of the national economy with consistent growth in export receipts, data from the Ghana Statistical Services (GSS) shows that gold export accounted for 62.1 percent of total export in 2023.
In monetary terms, gold exports contributed GH₵46.5billion out of a total of GH₵74.8billion in the third quarter alone. In the second quarter, gold exports made up 57.6 percent of total export receipts.
Overall, the mining sector contributed 47.4 percent to gross domestic product (GDP) in nominal terms and 17.1 percent in terms of real GDP for the third quarter. Comparatively, in the second quarter, it contributed 52.1 percent to nominal GDP and 14.1 percent to real GDP.
Gold mining added GH₵8.6billion (US$580million) to Ghana’s GDP at constant prices in 2023, according to Statista. This marks an increase in the value added by the precious metal compared to the previous year. The highest GDP contribution from gold was recorded in 2019, reaching GH₵9.8billion, the report noted.
Sectorial developments
In 2023, Ghana reclaimed its status as Africa’s top gold producer, with domestic output rising 32 percent to 3.7 million ounces—up from 2.8 million ounces (oz) in 2021.
Increased output from new and existing large-scale mines drove growth, with the large-scale sector alone achieving a record 3.1 million ounces in 2022, up 13 percent from the previous year. Small-scale mining operations accounted for the remainder of the output.
The production of gold, the country’s dominant mineral, rose from 3.7 million ounces in 2022 to 4 million ounces in 2023. This is equivalent to an 8.3 percent increase in production and is also the country’s highest output since the outbreak of the COVID-19 pandemic.
The growth was driven primarily by the expansion in the output of small-scale miners, which was sufficient to offset the decline in the large-scale sub-sector.
Gold production attributable to the large-scale sub-sector declined from 3.1 million ounces in 2022 to 2.9 million ounces in 2023, which translates into a downturn of 4.9 percent. Conversely, the comparable out-turn for the small-scale sub-sector grew by 70.6 percent, from 0.66 million ounces to 1.1 million ounces in the corresponding period.
The Ghana Chamber of Mines, in its annual report, noted a 6.1 percent slump in production, which led to a reduction in its members’ contribution to large-scale gold output from 99.1 percent in 2022 to 97.9 percent in 2023.
In contrast, the aggregate output of large-scale mines not affiliated with the Ghana Chamber of Mines rose from 27,635 ounces in 2022 to 60,419 ounces in 2023, representing a year-on-year growth of 118.6 percent.
This cohort of non-chamber miners saw their share of the large-scale sub-sector’s gold output grow from 0.9 percent in 2022 to 2.1 percent in 2023. As for national gold production, chamber member-companies accounted for 70.8 percent of output in 2023 – a decrease from 81.7 percent in the previous year. The share of non-chamber large-scale mines in national gold production also rose from 0.7 percent in 2022 to 1.5 percent in 2023.
In the small-scale sub-sector, output growth followed a recovery trajectory aided by the halving of the withholding tax on unprocessed gold from 3 percent in 2021 to 1.5 percent in 2022.
Minister of Lands and Natural Resources, Samuel Abu Jinapor, recently acknowledged that as of August 2023, gold alone contributed US$4.6billion in export receipts. For 2024, the first half of the year saw gold export receipts reach US$5billion, with a projection to exceed US$10billion by year-end.
The mineral sector is expected to experience significant growth in both production and export. Gold production in 2024 is projected to range between 4.3 million and 4.5 million ounces, driven by increases from both large and small-scale producers.
New production from Newmont’s Ahafo North project, Azumah Mining Resources, and Cardinal Resource’s newly inaugurated Namdini Gold Mine is expected to bolster the overall output of chamber member-companies, which is projected to range between 3.1 million and 3.3 million ounces in 2024.
Cardinal Namdini Gold Mine alone is expected to produce 300,000 ounces annually in its first three years, making it the third-largest mine in the country and one of the largest single-stream gold mines in West Africa.
However, a decline in output is anticipated from Gold Fields’ Damang Mine and Newmont’s Akyem Mine due to planned life-of-mine reductions. Additionally, the output from large-scale mines not affiliated with the Ghana Chamber of Mines is expected to rise to 70,000 ounces, while small-scale production is forecast to increase to 1.2 million ounces in 2024.
Challenges
Despite the sector’s achievements, challenges such as environmental sustainability, the regulation of artisanal mining, security of mining companies, fiscal issues like the Growth and Sustainability Levy (GSL) and the volatility of global gold prices remain.
The Chamber of Mines, for instance, believes that the application of the levy will lead to an increase in the cost of operations. The cost of operations in the mining sector is measured by the All-In Sustaining Cost (AISC), which shows the cost of producing an ounce of gold. In 2021, the AISC of mining firms in Ghana stood at US$1,481 per ounce, higher than the global average of US$1,068 per ounce.
The chamber argued that the imposition of the GSL would widen the cost differential between gold producers in Ghana and their peers in other mining jurisdictions.
“Further, the differential impact of the GSL on individual mines means that some mines would have a negative cash margin, where their AISC would be higher than the price of gold. On the whole, Ghana’s mining industry’s cash margin is expected to be negative if the GSL is implemented in its current form,” the chamber stated in its report.
Meanwhile, the Lands Minister has proposed that the next government take the issue of Value Added Tax (VAT) on exploration seriously and work closely with the chamber to find a solution. Regarding security, he called for the deployment of specially trained forces to protect mining operations.
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