Saving Ghana’s Diamond Industry: Is Disinvestment The Best Option?

It is a well known fact that Ghana’s diamond industry is facing hard times.

Production volumes have been falling, and employment generation from the industry,

both formal and informal - has declined.

Production statistics do, indeed, indicate that in 2009 diamond production declined

by almost 50 per cent. While this, in part, is due to the diversification of the

portfolio of small-scale miners (or licensed galamsey operators), away from diamond

mining to gold, as a result of the better market prices prevailing for gold, it is

undisputed that the moribund situation of the major diamond mining company in West

Africa – the Ghana Consolidated Diamond (GCD) Limited - is a major contributory

factor. GCD Ltd. has since August 2007 closed down its operations, leading to the

severance of almost 807 workers, who are yet to be paid their severance package, and

who, while in employment, kept the small town of Akwatia alive and functional. The

township of Akwatia is reported to be hanging on critical life support in need of an

urgent new lease of life.

The survival of Ghana’s diamond industry is therefore connected to the survival of

the Akwatia mines.

In looking at the way forward in revamping the industry it is important to recall

that the structural weaknesses that precipitated the decline of GCD are known. When

the Acheampong regime partially nationalised the company in the 1970s and the

Selection Trust of London decided to pull out its 45 per cent shareholding, the

management of the now wholly-owned Ghana Government company became slightly

dysfunctional. With little governmental interest to demand accountability and a

dearth of plant and equipment renewal (the newest plant was commissioned in 1965),

the company began its downward slide, in sharp contrast to Ashanti Goldfields

Corporation where Ghana Government’s keen interest led to sharp improvements in the

fortunes of the Obuasi mines.

In the history of GCD, it appears that its good days were those associated with

foreign partners. This may perhaps be the reason why some, particularly the workers,

tend to be eager to call for foreign investors to take over the operations of the

mine as a way of resolving the difficulties the company has worked itself into.

Indeed, the Divestiture Implementation Committee has for close to a decade and half

now had GCD on its divestiture list. Previous attempts to divest the company were

remarkable failures and a new attempt, which it is hoped would be successful, was

initiated in March 2010 with the opening of tender. In the aftermath of the tender

the traditional leadership of the township where the diamond concessions are located

have petitioned the Ghana Government for its interest to be given to one Great

Consolidated Diamonds Limited (GCD Ltd. also) for reasons that relate, perhaps, to

their belief that the new GCD might be able to better run the mine. If the bidding

process brings out a credible company, that would be good development.

However, for the self-esteem, integrity and selfish interest of Ghanaians, I hold

the view that the Ghana Government should rather than follow the thrice repeated

attempt at selling off the mine, resuscitate the company and allow Ghanaian staff to

turn around its fortunes to show to the world that “after all the black man is

capable of managing his own affairs”.

Results from exploration projections show that the alluvial tailings of the Akwatia

concession of the GCD mine alone contain close to 4 million carats of diamonds (of

0.2 grade) and 2 million grams of gold. Also, initial exploration works on the

middle birim river and lower birim river suggest proven reserves in excess of over

14 million carats of diamonds. This excludes exploratory works on the terraces and

other deposits, where aside diamonds, there are great prospects for other minerals.

A rough financial estimation for the Akwatia concessions alone should therefore be

giving revenues in the region of US$50 million for the gold in the tailings and

depending on clarity, colour etc. close to US$2 billion for the diamonds in the

tailings. When the other concessions are brought on board the revenue projections do

indeed look promising. With this kind of revenue under consideration, the Ghana

Government should be in a position to assist the company access funding from the

public purse itself or provide support for the company to access international

credit at reasonable terms for its working capital and equipment.

It is understood that the company requires, in the short-term, US$15 million for its

liabilities, including arrears owed VRA and the severance package of retrenched

workers (that could, however, be paid in phases based on negotiations with the

concerned taking into account the expected revenue streams when the activities of

the company are reactivated). Also, it is understood that an additional US$20

million is needed for new plant and equipment, making a total US$35 million needed

to re-start operations.

Considering the revenue potentials, however, it would seem reasonable for the Ghana

Government to reconsider its long held view that the mine should be disinvested. It

would also be reasonable to expect that any further involvement by the Ghana

Government in re-capitalising GCD Ltd. would need to proceed along some clear-cut,

no nonsense business lines.

First, there would be need for a complete restructuring of the company, its

organisational structure, corporate governance principles and accountability regime,

conditions of service of staff, mode of operation, etc., aimed at ensuring

effectiveness and efficiency in the mining operations, adopting cost-effective and

competitiveness measures in comparison with global comparators and renewing the

personal and professional integrity of the staff. Audited accounts and some AGM

accountability would need to be in place.

Second, re-equipping decisions should be based on sound business argument. For

instance, new processing plants required should be close to the mine area to reduce

haulage costs which have bedevilled the company in the past just as modern security

tools would be required to reduce pilfering of diamonds. If self-generated

electricity from the water dams of the company could be deployed to augment the VRA

supplies and reduce cost that should also be considered. In other words, a new

business model should be developed as the old ways of doing business has not brought

sustainable result for the company.

Third, the mined diamonds and gold, etc should be enhanced by bringing in service

providers who can cut, polish the diamonds or refine the gold for prime global

markets to ensure that maximum value and returns for the products on the

international market.

Fourth, the Ghana Government must take the decision to offload a significant portion

of its 100 per cent share in the GCD (about 40 per cent) on the Ghana Stock Exchange

for the Ghanaian public. The traditional authorities on whose land the mining

activities take place could also be assigned a 10 per cent interest in trust.

Fifth, the reclamation of the mined out land should be done in such manner as can

provide employment for the youth of the mining area. In this regard, jatropha

cultivation could be carried out for the production of bio-diesel which would then

be processed and given to TOR or any such entity for blending. The benefits to both

the company and community are obvious.

Indeed, there are many more small ideas that can and should be generated to revamp

GCD and other distressed state-owned commercial enterprises, to justify the claim we

all believe and aspire to fulfil: that the Blackman is indeed capable of managing

his own affairs.

H. Agyeman, Antoa, A/R