Ghana Economy


Ghana’s mineral sector had started to recover by the early 1990s after its severe decline throughout the 1970s. One indicator of the scale of decline was that by 1987, only four gold mines were operating in Ghana, compared with eighty in 1938. Throughout the 1970s, the output of gold, as well as bauxite, manganese, and diamonds, fell steadily.  Foreign exchange shortages inhibited mine maintenance, new exploration, and development investment. The overvalued cedi and spiraling inflation exacerbated mining companies’ problems, as did smuggling and the deteriorating infrastructure. Energy supplies failed to meet the industry’s growing needs; foreign exchange shortages constrained oil imports, and domestically generated hydroelectricity was unable to make up the shortfall.
After 1983, however, the government implemented a series of measures to enhance the sector’s appeal. In 1986 new mining legislation for the gold and diamond sectors replaced the previous complex and obsolete regulations, and a generous incentives system was established that allowed for external foreign exchange retention accounts, capital allowances, and a flexible royalties payment system. Since then the sector has benefited from a wave of fresh investment totaling US$540 million since 1986, and by the early 1990s mining was the country’s second highest foreign exchange earner.
Under legislation passed after 1983, the government liberalized and regularized the mining industry. For the first time, the government made small claim-holding feasible, with the result that individual miners sold increasing amounts of gold and diamonds to the state-operated Precious Minerals Marketing Company. In 1990 the company bought 490,000 carats of diamonds and 20,000 ounces of gold and earned a total of US$20.4 million through sales, 70 percent of it from diamond sales and 30 percent from gold bought from smallscale operators. Diamond output totaled 688,000 carats in 1991 and 694,000 carats in 1992, while gold production amounted to 843,000 fine ounces in 1991 and 1,004,000 fine ounces in 1992. Furthermore, the government succeeded in attracting significant foreign investment into the sector and, by early 1991, had signed over sixty mining licenses granting prospecting rights to international companies. To forestall domestic criticism of large-scale foreign control of the sector, the government announced in mid-1991 the establishment of a state-controlled holding company to buy shares in mines on behalf of private, that is, foreign, investors.


Ghana has produced and exported gold for centuries. In precolonial times, present-day Ghana was one source of the gold that reached Europe via trans-Saharan trade routes. In the fifteenth century, Portuguese sailors tried to locate and to control gold mining from the coast but soon turned to more easily obtained slaves for the Atlantic slave trade.  Most gold mining before the mid-nineteenth century was alluvial, miners recovering the gold from streams. Modern gold mining that plumbs the rich ore deposits below the earth’s surface began about 1860, when European concessionaires imported heavy machinery and began working in the western areas of present-day Ghana. The richest deposit, the Obuasi mine, was discovered by a group of Europeans who sold their rights to E.A. Cade, the founder of Ashanti Goldfields Corporation (AGC). Since the beginning of the twentieth century, modern mining in the Gold Coast has been pursued as a large-scale venture, necessitating significant capital investment from European investors.

Under British colonial rule, the government controlled gold mining to protect the profits of European companies. The colonial government also restricted possession of gold as well as of mercury, essential in recovering gold from the ore in which it is embedded. Following independence, foreign control of the sector was tempered by increasing government involvement under the Nkrumah regime; however, production began to decline in the late 1960s and did not recover for almost twenty years. In the mid-1960s, many mines began to hit poorer gold reefs. Despite the floating of the international gold price in the late 1960s, few investors were willing to invest, and the government failed to provide the capital necessary to expand production into new reefs.  Of the two major gold mining enterprises, neither the State Gold Mining Corporation nor AGC (40 percent controlled by the government) expanded or even maintained production.

Under the ERP, the mining sector was targeted as a potential source of foreign exchange, and since 1984, the government has successfully encouraged the rejuvenation of gold mining.  To offer incentives to the mining industry, the Minerals and Mining Law was passed in 1986. Among its provisions were generous capital allowances and reduced income taxes. The corporate tax rate was set at 45 percent, and mining companies could write off 75 percent of capital investment against taxes in the first year and 50 percent of the remainder thereafter. The government permitted companies to use offshore bank accounts for service of loans, dividend payments, and expatriate staff remuneration.

Companies are permitted to retain a minimum of 25 percent of gross foreign exchange earnings from minerals sales in the accounts, a level that can be negotiated up to 45 percent.  Reconnaissance licenses are issued for one-year renewable periods, prospecting licenses are valid for three years, and mining licenses are in force for up to thirty years. The government has the right to 10 percent participation in all prospecting and to extend its share if commercial quantities of a mineral are discovered. In response, between 1985 and 1990 eleven companies became active with foreign participation, representing investments totaling US$541 million. Since 1986 there has been a gradual recovery in overall production.

More than 90 percent of gold production in the early 1990s came from underground mines in western Ashanti Region, with the remainder coming from river beds in Ashanti Region and Central Region. AGC, the country’s largest producer, mined 62,100 fine ounces in January 1992, the highest monthly production ever recorded since the company began operation in 1897. The company also lowered its costs in relation to production during the last quarter of 1991 from 0.26 percent in October to 0.24 percent in December. Production during the company’s fiscal year of October 1990 to September 1991 was 569,475 fine ounces, 42 percent more than the previous year’s figure of 400,757 fine ounces and the largest amount ever produced by the mine. The second largest amount produced was 533,000 fine ounces, produced in 1972.

AGC planned major expansions in the early 1990s funded by World Bank loans. In early 1991, the corporation announced the discovery of new reserves estimated at more than 8 million ounces, in addition to its known reserves of 22.3 million ounces. The new reserves include lower-grade and remnant ores that the corporation had been unwilling to mine because of high costs. AGC planned to lower costs through capital-intensive operations and a sharp reduction of labor costs. It also planned then to raise output from a projected 670,000 fine ounces for 1992 to more than 1 million fine ounces a year in 1995. The expansion was to be funded by an International Finance Corporation loan package totaling US$140 million. AGC was to put up the balance, estimated to exceed US$200 million.

AGC was not the only company to benefit from an upsurge in production. Despite its increased production, the company’s overall share of the domestic gold market declined from 80 percent to 60 percent in the same period that other operators entered the industry. Provisional figures for 1991 showed that two new mines, Teberebie and Billiton Bogoso, produced 100,000 fine ounces each, while other companies, including State Gold Mining Corporation, Southern Cross Mining Company, Goldenrae, Bonte, and Okumpreko, were stepping up production.

Several other enterprises were on the drawing board or were about to open by mid-1992. The British company Cluff Resources had raised US$10.2 million to finance a new mine at Ayanfuri. The company had been involved in exploration since 1987 and planned to produce as much as 50,000 ounces of gold annually. A CanadianGhanaian joint-venture gold mine and associated processing facilities was commissioned in mid-1991 in Bogoso, western Ghana. Finally, in May 1992, a joint-venture company was created to prospect for gold in the Aowin Suamang district in Western Region. Shareholders in the new company included the Chinese government (32.68 percent), private investors in Hong Kong (32 percent), the Ghanaian government (10 percent) and private Ghanaian interests.

In 1992, Ghana’s gold production surpassed 1 million fine ounces, up from 327,000 fine ounces in 1987. In March 1994, the Ghanaian government announced that it would sell half of its 55 percent stake in AGC for an estimated US$250 million, which would then be spent on development projects. The authorities also plan to use some of the capital from the stock sale to promote local business and to boost national reserves. The minister of mines and energy dispelled fears that the stock sale would result in foreign ownership of the country’s gold mines by saying that the government would have final say in all major stock acquisitions.



The government also is trying to expand Ghana’s diamond mining industry, which has produced primarily industrial grade gems from alluvial gravels since the 1920s (see Diamond Jewelry). More than 11 million carats of proven and probable reserves are located about seventy miles northwest of Accra. The main producer is the state-owned Ghana Consolidated Diamonds (GCD), which operates in the Birim River Basin. In the 1960s, the company mined 2 million carats of diamonds a year, but annual production in 1991 amounted to only 146,000 carats. This downturn resulted from technical problems and GCD’s weak financial position.  Production from all mines came to 688,000 carats in 1991 and to 694,000 carats in 1992.
In the early 1990s, the government announced plans to privatize its diamond-mining operations and to expand production. At Accra’s invitation, De Beers of South Africa agreed to undertake an eighteen-month feasibility study to determine the extent of the Birim River Basin diamond reserves. The survey was to cost US$1 million. A De Beers subsidiary will be the operator and manager of GCD, while Lazare Kaplan International, a New York-based diamond polishing and trading company, will produce and market the diamonds.

In 1989 the government established the Precious Minerals Marketing Corporation (PMMC) to purchase minerals from small producers in an effort to stem diamond smuggling. Estimates suggested that as much as 70 percent of Ghana’s diamonds were being smuggled out of the country in the mid-1980s. In its first sixteen months of operation, the PMMC bought 382,423 carats of diamonds and 20,365 ounces of gold and sold 230,000 carats of diamonds worth US$8 million. The corporation also earned ¢130 million in 1991 on its jewelry operations, up 48 percent from the previous year, and it planned to establish joint marketing ventures with foreign firms to boost sales abroad. Nevertheless, because of new complaints over raw gem sales, the government in March 1992 ordered an investigation into the operations of the state agency and suspended its managing director.

Diamond Jewelry

There are four main criteria used to describe the quality of a diamond, and they are generally referred to as the Four C’s: Color, Clarity, Cut, and Carat .One might argue that the most important “C “ of all is actually a “B”, Beauty.  Although the independent gemological labs we use are renowned in the trade, the most accurate and detailed description in the world is only a poor attempt to put into words how beautiful a diamond can be. In addition to being familiar with the four C’s it is also important to make sure that the diamond you are purchasing has been certified by one of the top independent gem laboratories. The two most widely trusted labs among diamond professionals are the Gemological Institute of America (GIA) and the European Gemology Laboratory (EGL). These reports will describe the four C’s for you in minute technical detail.  COLOR: A diamond’s color is graded on an alphabetical scale from D-Z to describe how much or how little color a diamond possesses. With very few exceptions, diamonds that are graded as colorless are considered to be the most valuable. Truly colorless stones, graded D, are extremely rare and very valuable.
D-F: Colorless, perfect or almost perfect color.

G-J: Near colorless, good to very good color. This diamond may “face up” colorless when mounted.
K-M: Light but noticeable yellow or brown tint. May “face up” near colorless when mounted, especially when mounted in yellow gold.
While many diamonds appear colorless, or white, they may actually have subtle yellow or brown tones that can be detected when comparing diamonds side by side. Diamonds were formed under intense heat and pressure, and traces of other elements may have been incorporated into their atomic structure accounting for the variances in color. A single change in color grade can significantly affect a diamond’s value. Although the presence of color makes a diamond less rare and valuable, some diamonds come out of the ground in vivid “fancy” colors—well-defined reds, blues, pinks, greens, and bright yellows. These are highly prized and extremely rare.

CLARITY: Clarity is an indication of a diamond’s purity. It is the term used to describe quite literally the clearness or lack of flaws in a diamond. All diamonds have some, naturally occurring marks in them, which may or may not be visible to the naked eye. These are known as imperfections or inclusions. In all diamonds, except the most rare, tiny traces of minerals, gasses, or other elements were trapped inside during the crystallization process. These are called inclusions, but are more like birthmarks. They are called this because they are “included” in the diamond! They may look like tiny crystals, clouds, or feathers and they’re what make each diamond different and unique. Many of these birthmarks are not visible to the naked eye. In fact, it is very rare to find a diamond that is completely clean to the expert eye using magnification. The clarity of a diamond is graded by how many, how big and how visible the inclusions are. The fewer and smaller the inclusions, the more rare and valuable the diamond. Less than 1% of all diamonds ever found have had no inclusions and can be called internally flawless (IF).

The following are abbreviations for terms that are used world wide to describe the clarity of a diamond:
IF,VVS1,VVS2: Internally flawless or near flawless.  Impossible to extremely difficult to find any inclusions, even under 10x magnification. IF is Internally Flawless, and VVS1 and VVS2 are “Very, very slightly included”.
VS1,VS2: 100% clean to the naked eye, and moderately difficult to very difficult to find inclusions with 10x magnification. VS1 and VS2 are “Very slightly included”.

SI1, SI2, SI3: Should be completely to almost completely clear to the naked eye (eye clean) when viewed from the top.  Fairly easy to find imperfections with 10x magnification. SI diamonds are “Slightly included”.
I1, I2, I3: Borderline “eye clean” to fairly easy to find imperfections with the naked eye. Very easy to find imperfections with 10x magnification. I1 through I3 diamonds are “Included”.

CUT: This is one of the most important of all characteristics, and among the hardest to judge. All other factors being equal, a poorly cut diamond can be worth less than half the value of a well “made” stone. The proportions of a stone as well as its polish and precision of faceting determine how much of the diamond’s potential fire and beauty may be released.

Diamond cutters are paid to retain the maximum weight from rough stones. You will find poorly cut diamonds such as overly long or fat Marquises, extremely deep Heart Shapes and Emerald Cuts, and Ovals and Pear Shapes with big shoulders, or overly deep or out of shape Rounds. A poorly made stone tends to result in a higher yield (less waste) from the rough while a better made diamond “wastes” more of the rough. A well cut round diamond typically weighs only about 40% or less of the original weight of the piece of rough the cutter started with. This is why better cut diamonds and near ideal cut stones command a premium.

The way a diamond is cut will most certainly influence its sparkle, fire and brilliance, as well as its perceived size and even, to some degree its apparent color. In order to maximize the diamond’s brilliance it must be cut in a geometrically precise manner. This means properly aligning the facets so light will enter the diamond and reflect back through the large top facet, or table of the diamond. Shown below is an example of how a finely cut diamond will reflect light.
Symmetry, polish, and faceting are the most noticeable features of cut, but also important are percentages for depth, height and angles. Light should enter and exit a diamond through the top facets. A cut that is too shallow or too deep reflects it through the bottom facets, and lets the light “leak” out of the bottom or side of the gem.  CARAT WEIGHT: The standard unit of measure for diamonds and other gemstones is the carat. One carat is equal to 1/5 of a gram, or 1/142 of an ounce. The carat is also referred to as containing 100 “points”. Therefore, a 50-point diamond weighs ½ carat, a 25-point diamond weighs ¼ carat, and so on.

The price per carat of diamonds can at times increase exponentially with size, due to the rarity of larger gemstones.
A one-carat diamond typically costs 3.5 to 4 times what an equivalent ½ carat costs, and the same goes for subsequent increases in size.


Ghana is one of the world’s leading exporters of manganese; however, only 279,000 tons were produced in 1992, compared with the all-time high of 638,000 tons in 1974-75. Ghana has reserves exceeding 60 million tons, and considerable rehabilitation of the sector took place in the 1980s. Ghana National Manganese Corporation’s mine and the surrounding infrastructure were repaired, helping to raise production from a low of 159,000 tons in 1983 to 284,000 tons in 1989 and 247,000 tons in 1990. The corporation earned US$20 million from its exports in 1991, up from US$11.6 million in 1989 and US$14.2 million in 1990. Approximately US$85 million was also invested by private investors at the newly explored Kwesikrom deposit.

Oil Exploration

Although commercial quantities of offshore oil reserves were discovered in the 1970s, by 1990 production was still negligible. In 1983 the government established the Ghana National Petroleum Corporation (GNPC) to promote exploration and production, and the company reached agreements with a number of foreign firms. The most important of these permitted US-based Amoco to prospect in ten offshore blocks between Ada and the western border with Togo. Petro Canada International has prospected in the Tano River Basin, and Diamond Shamrock in the Keta Basin. In 1989 three companies, two American and one Dutch, spent US$30 million drilling wells in the Tano basin. On June 21, 1992, an offshore Tano basin well produced about 6,900 barrels of oil daily.

In the early 1990s, GNPC reviewed all earlier oil and gas discoveries to determine whether a predominantly local operation might make exploitation more commercially viable.  GNPC wanted to set up a floating system for production, storage, off-loading, processing, and gas-turbine electricity generation, hoping to produce 22 billion cubic feet per day, from which 135 megawatts of power could be generated and fed into the national and regional grid. GNPC also won a contract in 1992 with Angola’s state oil company, Sonangol, that provides for drilling and, ultimately, production at two of Sonangol’s offshore oilfields. GNPC will be paid with a share of the oil.

The country’s refinery at Tema underwent the first phase of a major rehabilitation in 1989. The second phase began in April 1990 at an estimated cost of US$36 million. Once rehabilitation is completed, distribution of liquified petroleum gas will be improved, and the quantity supplied will rise from 28,000 to 34,000 barrels a day. Construction on the new Tema/Akosombo oil products pipeline, designed to improve the distribution system further, began in January 1992. The pipeline will carry refined products from Tema to Akosombo Port, where they will be transported across Lake Volta to northern regions. Distribution continues to be uneven, however. Other measures to improve the situation include a US$28 million project to set up a national network of storage depots in all regions.

The Tema Lube Oil Company commissioned its new oil blending plant, designed to produce 25,000 tons of oil per year, in 1992. The plant will satisfy all of Ghana’s requirements for motor and gear lubricants and 60 percent of the country’s need for industrial lubricants, or, in all, 90 percent of Ghana’s demand for lubricant products. Shareholders include Mobil, Shell, and British Petroleum (together accounting for 48 percent of equity), Ghana National Petroleum Corporation, and the Social Security and National Insurance Trust.


At independence in 1957, the Nkrumah government launched an industrialization drive that increased manufacturing’s share of GDP from 10 percent in 1960 to 14 percent in 1970. This expansion resulted in the creation of a relatively wide range of industrial enterprises, the largest including the Volta Aluminum Company (Valco) smelter, saw mills and timber processing plants, cocoa processing plants, breweries, cement manufacturing, oil refining, textile manufacturing operations, and vehicle assembly plants. Many of these enterprises, however, survived only through protection. The overvalued cedi, shortages of hard-currency for raw materials and spare parts, and poor management in the state sector led to stagnation from 1970 to 1977 and then to a decline from 1977 to 1982.

Thereafter, the manufacturing sector never fully recovered, and performance remained weak into the 1990s.  Underutilization of industrial capacity, which had been endemic since the 1960s, increased alarmingly in the 1970s, with average capacity utilization in large- and medium-scale factories falling to 21 percent in 1982. Once the ERP began, the supply of foreign exchange for imported machinery and fuel substantially improved, and capacity utilization climbed steadily to about 40 percent in 1989. Nevertheless, by 1987 production from the manufacturing sector was 35 percent lower than in 1975 and 26 percent lower than in 1980.

Ghana’s record with industrialization projects since independence is exemplified by its experience with aluminum, the country’s most conspicuous effort to promote capital-intensive industry. This venture began in the mid-1960s with the construction of a 1,186-megawatt hydroelectric dam on the lower Volta River at Akosombo.  Built with assistance from Britain, the United States, and the World Bank, the Akosombo Dam was the centerpiece of the Volta River Project (VRP), which the Nkrumah government envisioned as the key to developing an integrated aluminum industry based on the exploitation of Ghana’s sizable bauxite reserves and its hydroelectric potential. Foreign capital for the construction of an aluminum smelter in Tema was obtained from US-based Kaiser Aluminum, which acquired a 90 percent share in Valco, and from USbased Reynolds Aluminum, which held a 10 percent share. Valco became the principal consumer of VRP hydroelectricity, using 60 percent of VRP-generated power and producing up to 200,000 tons of aluminum annually during the 1970s.

Changing global economic conditions and severe drought dramatically affected the Ghanaian aluminum industry during the 1980s. The discovery of vast bauxite reserves in Australia and Brazil created a global oversupply of the mineral and induced a prolonged recession in the aluminum trade. Under these conditions, Valco found it far more economical to import semi-processed alumina from Jamaica and South Korea than to rely on local supplies, despite the discovery in the early 1970s of sizable new deposits at Kibi. Valco’s refusal to build an aluminum production facility brought Kaiser and Reynolds into bitter conflict with the government.

Severe drought compounded the effects of unfavorable market conditions by reducing the electricity generating capacity of the Akosombo Dam and by forcing a temporary shutdown of the smelter from 1983 to 1985. Aluminum production was slow to recover in the wake of the shutdown. In the early 1990s, aluminum production and exports continued to be negligible.

Drastic currency devaluation after 1983 made it exceptionally expensive to purchase inputs and difficult to obtain bank credit, which hurt businessmen in the manufacturing sector. Furthermore, the ERP’s tight monetary policies created liquidity crises for manufacturers, while liberalization of trade meant that some enterprises could not compete with cheaper imports. These policies hurt industries beset by long recession, hyperinflation, outmoded equipment, weak demand, and requirements that they pay 100 percent advances for their own inputs. Local press reports have estimated the closure of at least 120 factories since 1988, mainly because of competitive imports. The garment, leather, electrical, electronics, and pharmaceuticals sectors have been particularly hard hit. In 1990, even the New Match Company, the only safety match company in the country, closed.

ERP strategies made it difficult for the government to assist local enterprises. Committed to privatization and the rule of freemarket forces, the government was constrained from offering direct assistance or even from moderating some policies that had an obviously detrimental impact on local manufacturers. Nevertheless, the Rawlings government initiated programs to promote local manufacturing.

In 1986 the government established the Ghana Investment Center to assist in creating new enterprises. Between 1986 and 1990, the vast majority of projects approved--444 of 621--were in the manufacturing sector. Projected investment for the approved ventures was estimated at US$138 million in 1989 and at US$136 million in 1990. In the initial phase, timber was the leading sector, giving way in 1990 to chemicals. In 1991 the government established an office to deal with industrial distress in response to complaints that “unrestrained imports” of foreign products were undermining local enterprises. The 1992 budget included assistance for local industrialists; ¢2 billion was set aside as financial support for “deserving enterprises.”
The dominant trends in manufacturing, nonetheless, were the involvement of foreign capital and the initiation of joint ventures. Significant new enterprises included a US$8 million Taiwanese-owned factory, capable of turning out ten tons of iron and steel products per hour, which began trials at Tema in 1989. Although approximately 500 projects had been approved since the investment code came into force in 1985, almost half had still not been launched by the end of 1989. Between 90 and 95 percent of the approved projects were joint ventures between foreign and local partners, 80 percent of which were in the wood industry. Restructuring of the sector was proceeding through divestiture, import liberalization, and promotion of small-scale industries.