The Battle for Ghana's Illegal Gold Rush Uncovers Electoral Risks -

Gold undeniably permeates Tarkwa, found in the lush forests and beneath the soil of Ghana’s largest mining hub. It is the cornerstone of the local economy, evident in the large pits dotting the landscape—signs of illegal mining attempts that compromise the area’s integrity. The nearby river, tainted by pollutants, serves as a stark reminder of the environmental toll exacted by a rise in semi-industrial mining activities.

The degradation of the environment has ignited major protests in Accra, with calls for an outright prohibition on small-scale mining operations in regions like Tarkwa. In response, wary local politicians, facing national elections set for December 7, have sought to reassure licensed mines that the government will safeguard them during the crackdown on illegal mining, often termed “galamsey.”

“While they push for a ban in Accra, I am here to express my support for miners,” remarked George Mireku Duker, the deputy mining minister and local lawmaker, during visits to four underground sites in October. Although he acknowledges the significant issue posed by illegal mining, he is acutely aware of the potential voter backlash against the New Patriotic Party (NPP), of which he is a member, given that he won his seat by just 101 votes in the 2020 elections.

“The small-scale mining sector supports over a million Ghanaians, in contrast to large-scale mining, which employs fewer than 10,000,” Duker told Bloomberg News. “Are you really going to take away their means of survival?”

Two miners digging for gold at an unregulated mine on the site of a former cocoa farm in Kwabeng, in Ghana’s Eastern Region in July. Image: Paul Ninson/Bloomberg

The mines Duker visited have origins that date back to colonial times and are currently operated by either local communities or private entities, aiming to diminish foreign control in large-scale mining in this economically burdened West African country. Collectively, these artisanal and small-scale mining (ASM) operations—characterized as activities on less than 25 acres—contributed over 25% of the four million ounces of gold produced by Ghana in 2023, valued at approximately $10.6 billion at current market prices, a significant increase from just 10% in 2012.

Supported by heavy machinery and lax regulations, the ASM sector largely operates outside the formal economy; estimates suggest that approximately 70% of these operations, prevalent in regions like Tarkwa, lack regulatory oversight.

The uptick in illegal gold mining is spurred by soaring prices, which have skyrocketed by over a third this year, reaching an unprecedented peak of $2,787 per ounce in October, coupled with eager buyers in Dubai and elsewhere. The situation in Tarkwa reflects this surge: makeshift tents strewn across hills, with ragged clothes covering wooden frames, mask mining activities at the town’s nucleus, while young men linger outside Chinese machinery outlets, seeking jobs as operators in exchange for a share of their riverside finds.

The lines between legal and illegal miners often blur. “Many individuals may have licenses,” notes Ishmael Quaicoe, head of the environmental and safety engineering department at Tarkwa’s University of Mines and Technology, “but their activities frequently fail to comply with legal standards.”

Recent demonstrations in September and October have underscored the fallout of galamsey mining. When the Trades Union Congress joined the protests, it propelled the calls for a total ban on all small-scale gold mining, citing river pollution—it was reported by Ghana Water Company in August that 60% of the untreated water it processed was contaminated due to illegal mining, which adversely impacted cocoa production and devastated local forests.

Both major political parties—the ruling NPP and the opposition National Democratic Congress (NDC)—have traded accusations regarding the mining issue. With elections on the horizon, President Nana Akufo-Addo reacted to the ban demands by threatening military intervention in mining towns to combat galamsey operations.

Although he has not acted on this promise yet, his announcement has revived recollections of a stringent crackdown on illegal mining in 2017. This ASM mining ban lasted around two years but ultimately backfired on the government, with allies claiming it contributed to the loss of their parliamentary majority in the 2020 elections.

A 2020 government estimate indicates that roughly 4.5 million individuals, including workers and their dependents, rely on gold as their primary source of income. Thus, the timing of these protests presents a conundrum for the NPP, which polls suggest may face its worst electoral performance to date on December 7, according to data from Accra-based Global Analytics.

Young boys ‘wash’ gold to extract it from other metals in the Bonsa River, during October. The river’s color has shifted due to dredging machines stirring up the soil, causing cloudy water. Image: Francis Kokoroko/Bloomberg

A water quality supervisor from the Ghana Water Company tests a sample from the Bonsa River, which has required increased funding due to deteriorating quality levels. Image: Francis Kokoroko/Bloomberg

Despite the region’s mineral riches, nearly 20% of the populace in the Tarkwa-Nsuaem municipality—Duker’s electorate—live in severe poverty, contending with issues ranging from insufficient clean water to inadequate housing, according to data from the Ghana Statistical Service. The lack of educational resources often drives youth to seek low-skilled and dangerous jobs in the ASM sector.

“They are dying from poverty and will disregard warnings about risks like mercury or cyanide,” shares Elorm Ama Governor-Ababio, who was apprehended while participating in a protest for democracy in Accra. “They endure tremendous trauma, so when confronted with life-threatening situations, they view it as a chance for hope,” adds Governor-Ababio, who denies any wrongdoing.

Making the good delivery list

In schools across Ghana, children learn that their country—once called the Gold Coast during British colonial domination—has such an abundance of gold that the sand sparkled when the first Europeans arrived in the 15th century.

Back then, Akan traders exchanged their gold dust for various European goods including alcohol, copper, and textiles. Centuries later, Ghana remains Africa’s foremost gold producer, with major companies like UK-based Anglogold Ashanti, South Africa’s Gold Fields, American Newmont Corp, and China’s Chifeng Jilong Gold Mining Co actively involved in the sector.

Conversely, ASM operators stand at the opposite pole. Mining engineer Adwoa Pokuaa Boaduo, who completed a doctoral thesis on reforming artisanal and small-scale mining in Ghana, emphasizes that a lack of proper compliance checks allows licensed gold buyers to purchase from illegal mines, inadvertently legitimizing the source of such gold.

Rosemary Addico, who manages the responsible gold program at Solidaridad’s West Africa—a non-governmental organization championing adherence to global best practices among miners—asserts that it is the responsibility of buyers to verify the origins of the gold: “If international buyers start demanding specific standards, traders will take greater care with their gold’s source and mining practices.”

For a miner’s gold to be accepted by the most prestigious global buyers, including central banks, institutional investors, and luxury brands, it must originate from refiners on the London Bullion Market Association’s Good Delivery List. While this influential trade body does not certify mines directly, it holds the refiners it licenses accountable for the provenance of the gold in their supply chains, resulting in many refiners hesitating to accept any gold from small-scale producers that could endanger their certification.

However, many alternative buyers of Ghanaian gold apply less stringent oversight. Nana Akwuasi Awuah, the head of the state-run gold marketing company, along with several market players, claims that gold from smaller illegal mines often reaches Dubai refineries. Yet, none of those refineries are included on the LBMA’s Good Delivery List, although Dubai does impose regulations mandating refiners to ensure their gold is sourced ethically.

Once imported, this gold can undergo re-refining and be marketed as “recycled” bullion to jewelers in India and other eastern markets, eventually reaching LBMA-accredited refiners without revealing its original source. Although the LBMA requires refiners to conduct responsible sourcing checks, tracing the origins of recycled gold can be exceedingly challenging, a reality underscored by a 2022 study published on the trade association’s website.

Illegal mining also imposes substantial economic costs on Ghana, which is wrestling with over $30 billion in external debt and secured a $3 billion bailout from the International Monetary Fund last year.

If the mining sector were formalized, Ghana could potentially increase its gold revenue more than twofold this year, according to Martin Ayisi, the chief executive officer of Ghana’s Minerals Commission, which supervises both large and small-scale mining efforts. Ayisi estimates that approximately 75% of the country’s artisanal and small-scale gold output does not appear in export figures due to gold being either smuggled to neighboring countries like Ivory Coast, Togo, and Burkina Faso—where lower withholding taxes on unprocessed gold are observed—or misreported as transshipped from one of these countries despite being mined in Ghana.

“There are various methods of smuggling gold out of the country,” Ayisi explains. “One way to address this problem is to further reduce taxes,” which were previously lowered to 1.5% from 3% in 2022, leading to an immediate increase in production figures for Ghana.

The Dubai connection

In 2023, the United Arab Emirates reported importing $3.2 billion worth of gold (net weight of 52.9 metric tons) from Ghana. In contrast, Ghana reported only $1.7 billion in gold exports to the UAE (27.8 metric tons net weight), according to the United Nations’ Comtrade Database. This discrepancy reveals a shortfall of approximately $1.5 billion.

Dubai—one of the seven emirates of the UAE—does not possess gold mines but has established itself as a major trading intermediary for the commodity. The LBMA identifies the UAE as a high-risk region, subjecting it to intensified scrutiny regarding any gold sourced from there.

Nevertheless, Safeya AlSafi, the UAE’s acting undersecretary for commercial control and governance at the Ministry of Economy, informed Bloomberg News that this shortfall may stem from misreported data from the exporting nation, stating, “I can’t definitively assert that there’s any smuggling. We have a very rigorous system in place.”

At the Minerals Commission, Ayisi acknowledged the challenges in tracking gold exits from Ghana.

Ghana was one of the early adopters in Africa to legitimize artisanal and small-scale mining, a sector that globally represents about one-fifth of the world’s gold supply, as reported by the World Gold Council. Currently, officials widely agree that enhanced formalization is vital to curtail smuggling and mitigate environmental harm.

A miner rests against bags of ore while taking a break in an underground mine in a legal mine in Tarkwa. He will keep three out of every four bags, while the fourth will serve as a payment to the mine owner. Image: Francis Kokoroko/Bloomberg

A legal small-scale gold mining site in Tarkwa. The mine’s toxic waste, including mercury, has been contained, preventing it from contaminating the surrounding environment. Image: Francis Kokoroko/Bloomberg

The country has participated in a pilot program, alongside Peru, the Philippines, and Tanzania, aimed at pre-approving certain small-scale mines to enable direct sales of their gold to LBMA-accredited refiners. Nonetheless, detractors argue that without monetary incentives for responsible operation, miners have little impetus to engage with this initiative.

The LBMA is partly motivated by a need for more “clean” gold for its refiners, who currently forgo about a fifth of the global supply due to strict sourcing criteria. For governments, this allows them to sell gold directly to LBMA refineries, fostering a more organized gold market.

“Will we fix all of the world’s issues?” questions Neil Harby, the LBMA’s chief technical officer. “No, but we need to start somewhere.”

Meanwhile, in Accra, one of the only three regions in Ghana without gold production, the anti-galamsey movement is gaining momentum, even if protests have quieted as electoral attention shifted to the economy—marked by inflation rates exceeding 20% for over a year and high unemployment in a nation of 34 million. Billboards portraying images of polluted rivers and reports of birth defects allegedly linked to galamsey mining have raised public awareness regarding the issue.

Yet, neither of the two dominant parties stands in a strong position to fully capitalize on the public disdain for ASM. Each has, at various times, enforced crackdowns on illegal mining while simultaneously profiting from “illicit activities within the small-scale mining sector,” according to a 2021 report from former environment minister, Kwabena Frimpong-Boateng.

In 2022, Ghana enacted legislation allowing mining within designated forest reserves. So far, at least four licenses have been issued by the government in areas noted for their exceptional biodiversity, as reported by The Fourth Estate, an investigative project led by Ghanaian journalists.

The Frimpong-Boateng report, which accused politicians from both major parties of potential conflicts of interest, was dismissed by the presidency as unfounded. However, it prompted an investigation by Ghana’s Commission on Human Rights and Administrative Justice, which is still ongoing.

“For about two decades, parties have rewarded loyal followers with concessions,” notes E. Gyimah-Boadi, founder of the non-partisan research organization, Afrobarometer. “They are unlikely to commit to measures that could limit their autonomy.”

Richard Ahiagbah, the NPP’s communications director, disputes this assertion, claiming that the ban in 2017 illustrates the government’s dedication to addressing the ASM challenge. The NDC similarly rebuffs any accusations of conflict of interest during their time in power. Samuel Gyamfi, the party’s national communications officer, characterized the environmental crisis as “unprecedented,” attributing the problems to the NPP.

Miners process ore using makeshift sluices to extract gold at a small-scale legal mining site in Tarkwa. Photographer: Francis Kokoroko/Bloomberg

For Dora Kowfia, a 54-year-old former artisanal miner, this moment feels bewildering. Once a supporter of the NPP, she now finds herself unsure about whom to endorse. Presently, she sells textiles from a roadside stall that overlooks the Bonsa River, where the impacts of illegal mining are visible in the muddy waters.

When asked about her concerns regarding pollution, Kowfia echoes a sentiment prevalent in mining communities throughout Ghana: “Accra tells us to ‘stop galamsey.’ I seek leaders who will either protect our livelihoods or offer us alternative job options.”

Follow Moneyweb’s comprehensive finance and business news on WhatsApp here.