Ghana as a Regional Hub
Cross-border Opportunities and Challenges
West Africa service and equipment providers have experienced very steep highs and lows since 2020. Project closures, border restrictions and higher raw material prices coincided with increased demand from across the region. The exploration and mining activity hype, but also the mining industry’s growing preference for contractors as a means of controlling operating costs, revealed a gap in the supply of services and equipment in countries like Ivory Coast, Mali, Burkina Faso, Liberia and Senegal. This gap puts Ghanaian support services on the spot. So can West African countries manage their services deficit by borrowing Ghanaian capabilities?
At the Ghana Chamber of Mines, President Sulemanu Koney has a dream to see Ghana becoming the services hub for the region and is funding a study to understand what this would take. Ghana is well qualified for the job and it already serves as the home-base for many international and local service and equipment companies serving the mining industry across West Africa. The country has a competitive contracting sector, complete value chains for equipment and deliverables, as well as specialized services including metallurgical laboratory capacity. Ghana’s decades-long expertise in mining reinforces local contractors and consultancies in other African countries that are just starting their mining journeys. For example, Nigerian small-scale miner Tree Mines Global chose a Ghanaian contractor with experience in alluvial mining. Ghanaian service providers enjoy the reputation of international expertise that is not too international, lending them an advantage over Western contractors.
“Ghana is clearly a second-to-none jurisdiction in the region. When setting up a business in West Africa, companies will not only check Ghanaian assets but also Ghanaian service capabilities. Other countries are getting the attention of investors, but it will be a long time before Ivory Coast or any other country can catch up with Ghana’s hundred years of experience and history in mining.”
Sampson Koduah, West Africa General Manager, Intertek Minerals
Both Ghanaian and international companies operating from Ghana have a history of projecting their services across the region. In 2021 blasting company Maxam entered Mali and Burkina Faso, and Orica, present in Ghana since 2005, also works in Mali with companies like Resolute Mining (ASX: RSG), and in Burkina Faso for West African Resources (ASX: WAF). Both are eager to consolidate this footprint. Companies with established bases in the top three producing countries are looking further afield, Epiroc planning to open new entities in Liberia, Ivory Coast, Sierra Leone and Senegal, as well as increasing its West African team by 20%. Ghanaian firm EDM African Services hopes to become one of the key suppliers of rock drilling tools outside of Ghana.
A few things are promulgating further expansion in the region. At the broader level, the African Continental Free Trade Agreement (AfCFTA) entered into force in January 2021, creating a huge trading bloc of 1.3 billion people. In the context of a liberalized pan-African market, Ghana has a competitive advantage over other countries in the continent because it can supply diversified products and services required in other markets, whereas many African nations have very similar production and export structures that do not lend themselves to intra-African trade. For example, a lack of locally produced electric cables in ECOWAS countries will allow cable manufacturer Nexans Kabelmetal to leverage both the AfCFTA and the ECOWAS membership to export its products in countries with this supply gap.
“I get the feeling that Ghana is satisfied with the mines already in operation, so I am fearful for the future of the Ghanaian industry since the mines are exhausting their deposits. Ghana should increase exploration investment to pave way for new mines springing up in the future.”
Kwame Amponsah, General Manager, Ramoth Services
Market dynamics make these expansions timely. Intertek, which has a minerals facility in Tarkwa, Ghana, has observed significantly higher mining and exploration activity since October 2020, giving it the opportunity to grow capabilities across the region: “Many new players are joining the market, while those who have kept a low profile over the years are now resurfacing stronger, which is translating into clients approaching us for the first time, or returning after a long exploration break,” said Sampson Koduah, West Africa general manager.
It’s not only gold that drives demand. Peter de Leo, the managing director of Australian EPC leader Lycopodium, has noted many emerging West African projects in battery minerals, fertilizers and mineral sands being reviewed or reassessed: “As a trend, the energy transformation is gathering more pace in the mining sector. Resource companies are outpacing governments in terms of their quick adoption of greener solutions especially as lower-carbon sources are starting to make more economic sense.”
There are also negative reasons why Ghanaian equipment and service providers should look over borders. Service and equipment suppliers in Ghana feel that countries like Ivory Coast or Mali will be the future bread-earners as Ghana gradually matures. Samuel K. Gyan, the regional managing director for SGS Ghana, Liberia and Sierra Leone, said he cannot remember the last new mine developed in Ghana. Whereas brownfield developments like the Ahafo North investment are certainly creating great movement in the services sector, explorers have diverted their budgets to neighboring countries like Ivory Coast or Burkina Faso where land ownership and VAT fees are lower: “The number of new mines in Ghana has plateaued because greenfield exploration is lacking, thus the government must improve the fiscal environment to allow junior exploration companies to thrive. While first in Africa for gold production, Ghana ranks fourth in terms of exploration investment,” said Gyan.
“West African governments must learn how to better engage the private sector and stay open to private-public relationships that benefit both sides. While in the past, we would wait for international players to take over grounds and invest in Africa, I believe the right time has come for local people to lift Africa out of poverty, collaborate fairly with authorities, and invest in our own assets.”
Peter Quarm, Director, Dutylex
Ghanaian service and equipment providers have all the reasons to expand, but this is not easy during normal times and has certainly not been easy during the pandemic. For dealers of consumables and equipment, planning became a headache, having to build on inventories and find adequate storage for the higher stocks. Service companies also had a tough time mobilizing staff to different mine sites in light of travel restrictions. As for logistics companies, they were caught in the middle of keeping the industry moving - all while the mining industry needed more support and could not afford delays.
Each of these challenges is also exacerbated by poor infrastructure, a significant bottleneck for continental expansion. It can take weeks for a contractor to transport large equipment over single-lane roads between different countries. Because contractors expand into new countries on a project-by-project basis, relocation needs to be justified by long-term projects. This is why Ghanaian local mining and civil engineering company Ramoth Services will only accept projects abroad where the advantages outweigh the challenges.
Ghana’s infrastructure is comparably better to other West African countries, ranking 2nd best in the region, and 12th in Africa, according to the 2020 Africa Infrastructure Index. The country’s transport ministry announced positive developments, including the near competition of Sunyani Airport’s rehabilitation. Ivory Coast is also seeing significant investments. French logistics company Bolloré has inaugurated a second container terminal together with its JV partner, AMP Terminals and the Ivorian government. The new port will be key as a transshipment hub for neighboring coastal countries, as well as an entry point for landlocked countries: “The Ivory Coast terminal will foster intra-African trade, creating high-performance logistics systems and bolstering the development of local processing industries,” said Dolores Biamou, mining projects director for Africa at Bolloré Logistics.
Image courtesy Bolloré Logistics