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Interview with
Mr. Fred Ohene-Kena
former Minister of Mines and Energy,
July 16th 1999
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Ghana is presently attracting a lot of investment in the mining sector, what are the benefits for Ghana as whole?
The mining sector in fact has been the fastest growing sector as far as the its contribution to the economy is concerned. The phenomenal growth of the sector started in the mid 80’s when government launched the Economic Recovery Programme which among other things aimed at getting the mining sector reactivated. Ghana has been a mining country for a long time but because of bad economic policies that we had before 1983 the industry had virtually collapsed. Perhaps Ashanti Goldfields was the only mining company that was making progress. So we had to completely change things, review fiscal policies, introduce new incentives, generally making it more attractive for investors to come into the sector. It has progressed tremendously up to now, and we will think that it has helped to move our economy to a high level of improvement.
How many private investors would you say there are in the mining industry now?
In 1985, I think there was only one company that looked like being privatised and that was Ashanti Goldfields. At the moment prospecting licenses have been issued to 226 private companies (135 local and 91 foreign) to carry out exploration in the country. 24 of these companies have been granted gold mining leases and 9 of them have already started producing.
And what would you say are the benefits for these private companies to be working here in Ghana?
I am sure they like working here other wise the number would not have increased. As I said in the early stages there were few companies in the mining industry because there was nothing in it for them. But since we liberalized the economy and also made it easier for them to transfer their profits, dividends and also pay their debts outside, it has been easier for them to be involved in the economy. And that has also helped in increasing production because in 1983 we exported about 300,000 ounces of gold but at the close of last year we exported over 2 million ounces of gold and that goes to show the tremendous increases that we have been able to achieve because of the way we have packages our incentive schemes for private capital.
What efforts is the government or ministry putting in place to attract more investors, especially from abroad? What is your strategy for making people come to Ghana?
Since we started putting into practice our new incentive scheme, the intention has been to operate transparently and also give the new investors the confidence to go on. There is the confidence that things will change, and that if they will change it will be for the better. Unfortunately there are certain areas that we do not have control over, like the price that are paid for the commodities that we produce in this country: gold, bauxite etc. Most of these primary products have seen a slump in prices and these are the areas that have really cost us as a developing country.
As you just said, last year Ghana exported 2 million ounces of gold. Now, just a few weeks ago, we heard that Ghana experienced some mining strikes. How has this affected the output of gold?
That affected the operations of Ashanti Goldfields. I imagine that is what you are referring to. It did affect it, but that was a temporary hiccup. We will overcome it eventually in the course of the year. But it was unfortunate that there had to be a strike, especially at a time when the price of gold was so low, it was something that was totally unwelcome but we feel that as far as that area is concerned we can overcome it. We cannot overcome it if the prices continue to slump but to make up for what the loss was, even though it will show up in the end, I think that we can go ahead and increase production to make up for what we have lost.
What were the causes of the strike?
The cause was to do with some payments that the workers thought they were due but which management did not have that much to pay. Eventually of course they agreed on something else.
The Trade Union action?
In fact the Trade Union leadership was not in favor of the strike. It was an unofficial strike.
It was last year that Ghana experienced the energy crisis, and that derailed the productivity of the country. Would you say that the country now has overcome those problems?
I think so. I think to a large extent we have. It was a real serious problem that we faced at the time and as you know that was caused by the drought situation that we got ourselves into. But now we think we have taken enough measures to make sure that we never get into that situation again.
What measures?
At the time that we had the drought we were almost totally dependent on getting our power from a hydro-generation station. We have within a short time at least increased our reliance on thermal generation and therefore reduced our dependence on hydro-generation. And this is going to be the order of the day. We are going to have to complement our hydro-generation with thermal generation and with that we do not expect to get into that situation again.
There is also the West Africa Gas Line project which is on the drawing board at he moment. At what stage are the plans of this project?
This is a very important project for us in Ghana in particular and in West Africa in general. It must be the most important ECOWAS project that has been taken by members of ECOWAS. We are working very fast. In fact our intention is to place this on a fast track basis and our target is that the pipeline construction should start early next year and produce gas for all three countries; Benin, Togo and Ghana by the year 2002. We are working very fast. Now we are at a stage where we are working out the draft agreement with the private and parastatal companies which have combined to build and operate the pipe line. We are having a series of meetings with the commercial group that is going to build it and we hope that by the close of the year we will have sorted out all the legislative and legal issues to be able to get the contractors to start work early next year.
| And when is it due for completion?
2002 That is when we expect the gas to be available from the pipeline.
How much of this gas do you think Ghana will actually use? How much of the country will benefit from this gas line?
Close to about 80% initially will come to Ghana.
During his visit, President Clinton promised Ghana a $67 million loan for the purchase of 2 barge mounted power plants for the generation of a 130 megawatts of electricity. Has this project been completed?
Unfortunately not because those barges are going to use gas as the fuel to produce electricity. The development of the gas deposit is not yet completed, that is why we have not acquired the barges yet. When we do we will get them.
So when once the pipeline is completed you will get them?
Whichever comes first; either the development of the Effasu Gas field or the South Tano Gas field. When it is developed the gas from there will be used as the fuel for power generation and that is when these barges will be of use. If that is not completed by the time the gas from Nigeria is in place, the gas from there will be used.
From your personal point of view, how do you see the state of the mining and energy sector at the moment?
I see the energy sector as going to progress in a right way as expected because the intention is to bring a lot of private capital into the sector. Hitherto it has all been state-owned enterprises that have been running the energy sector. We will see a complete change in this area within the next few years and it has already started. An American company, C.M.S. Energy for instance is forming a joint venture with the main generating company, the Volta River Authority, and they have started generating power in Tema. And there are a few other American companies that are going to get involved, like Marathon Power, K.M.R.Power, and we expect that in the next few years most of the power generation, especially the thermal sector will be dominated by private companies. So we see a lot of progress in this direction. In the mining sector we are working on getting some diversification done in the sector. Hitherto it has all been gold, gold and gold. But with the gold price been so unstable we are also encouraging the involvement of private capital.
What do you think about this decision by several countries like Great Britain, the Swiss or the IMF to sell all parts of their gold reserves? Don’t you think that it is a bit ironic about the whole point of it is that it is to alleviate world debt anyway and that the fact is that emerging markets are going to suffer from this decision?
We do not understand why they should use such a method to assist the highly indebted poor countries because it is not really going to benefit any of us who produce gold. In the first place the amount is so small it will not make a dent in debt servicing of our respective our countries. Right now developing countries owe about $220 billion and the amount that is going to be derived from the I.M.F. sales will be about $46 million a year. It just will not improve the situation at all. At the same time the loss that is due to the slump in price since the announcement has been about $58 million a year so you can just see. I do not know why they felt that this was going to help us when in fact it was obvious that in announcing this there was going to be increases in supply of gold on the market to dampen the prices of the commodity. Since the announcement was made there has been a drop in prices. Since the British announced theirs, even before the I.M.F. one, there has been a drop of over $30. That is really devastating to the economy.
Are you getting together with the other Ministers or other leaders in South Africa for example?
Yes, that is right. The South African Deputy Minister of Minerals is here and we just had a meeting and we will be making a concerted effort to formulate a strategy.
Do you expect some positive results?
We expect that there will be positive results. If in fact the original intention was to do this for us, we are saying that we do not need it because it is causing much more harm to our economy than expected.
Moving on to something more different. What would you say has been your greatest achievement since you have been Minister?
Me! I do not think there has been one. There has been a general improvement in the economy of Ghana and I am glad that I am part of the team that did it.
And as a final question, what would be your final message to the readers in the United States concerning investment opportunities in the mining sector?
Well, I think I have had the occasion to say something about it before. It has always been difficult for private companies as far away as in the United States to feel confident to get involved in the economies of emerging countries, especially in Africa. We have done enough in the last few years to show that we mean business and that it is in the interest of all those who want to expand their activities to get involved in countries like ours that are just emerging because the opportunities are wide. And there are many, many ways in which one can get involved in the economies of our countries. Specifically in the mining sector, as I said, we are encouraging involvement of companies in industrial mining and in the minerals that are closely related to industrial activities like bauxite, manganese, lime stone, clinker, granite, and many others. We are encouraging companies to get involved. I did mention that mainly American companies are involved in the energy sector. We still encourage more to do so. The pipeline project, which as I said is the main project to be developed by a consortium led by Chevron. Chevron is the main player in this project and we will start awarding contracts to other American companies, I imagine. So there are a lot of investment opportunities in Ghana for private investors. |
© World INvestment NEws, 1999.
This is the electronic edition of the special country report on Ghana published in Forbes
December 13th 1999 Issue.
Developed by AgenciaE.Tv |
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