Evaluation of Country Risk of the Mining Industry in Ghana
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Date
2016-08
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Publisher
University Of Ghana
Abstract
Country risk factors pertaining to the mining industry in Ghana, particularly gold mining are evaluated using the weighted checklist technique. Through literature review research method 30 risk factors have been retained for evaluation. These are expropriation and resource nationalism; political and regime instability; NGOs and Civil Society militancy; political violence; concession and license; corruption and fraud; weak institutions; conflicting interests of local governments and traditional authorities; poor governance; excessive government bureaucracy; fiscal regime, inflation rate, currency transfer and convertibility restrictions, instability of foreign currency exchange rate.
The rests are lack or poor transportation networks, lack or insufficiency of public utilities, skilled labor shortage, lack or poor service sector, cultural diversity, high poverty level, environmental permitting requirement, high wage demands/requirements, local content requirements, instability of legislative environment, legal culture, mechanisms for dispute resolution, geology and mineral potential, availability and quality/accuracy of geo-scientific data, ease of access to information, availability of reports of previous exploration and mining activities.
Based on the above risk factors a questionnaire was formulated and distributed to representatives from active mining companies, mining consultants and mining policy makers in Ghana. For each of the factors, respondents were asked to give risk scores, risk weights, risk mitigation measures as practiced in Ghana and also give policy recommendations to the government of Ghana. The answers provided served to calculate average risk scores, average risk weight percentages, average risk rates for each factor using a modified weighted checklist technique. The calculated averages are then ranked from the highest to the lowest and presented graphically with bar chart using Microsoft Excel software.
The risk score ranking indicates that ‘lack or poor public utilities’ has the highest score of Four while ‘expropriation and resource nationalism scores almost two, on a scale of one (low) to five (very high). The weight percentage ranking indicates that the most important risk factor that affects mining investment in Ghana at the moment is still ‘lack or poor public utilities’ with weight of 6% while the least important is ‘lack or poor services with weight of 1%. Multiplying the risk score by its weight percentage, a risk rate is obtained. On the scale designed for the purpose, ‘lack or poor public utilities’ again has a very high rate of 0.28 followed by ‘fiscal regime’ which has high value of 0.21 while ‘lack or poor services’ still occupies the lowest rank with a very low rate of 0.03. Finally a country score for Ghana is determined by summing up all the 30 individual rates as required by the weighted checklist technique.
The country then has an approximated moderate risk level of 3 which means that, at present, Ghana is a moderately safe place for mining investment, particularly for gold. Two high rated risk factors, which are ‘lack or poor public utilities’ and ‘fiscal regime’, significantly contributed to this moderate country risk level. It is accordingly recommended to the government of Ghana to quickly resolve the electricity crisis and adopt a flexible fiscal regime to bring the overall country risk level to low even insignificant if possible.
Description
MPhil.
Keywords
Mining, Exploration, Risk Level, Ghana