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Case study – Africa’s natural
resources: the example of
Ghana
Ghana is a resource-rich economy, but
the government faces challenges of
sustainable and inclusive growth.
Ghana has long been blessed with gold
reserves, valuable and relatively easy to
mine in comparison with the metal
found in other gold-rich African
countries, such as South Africa. And
Ghana has been fortunate: although
mines in other countries have become
dangerous or unproductive, it
registered a 10% increase in production
in 2008. The price of gold surged
following the financial crisis of 2008, as
investors sought safe havens. Ghana’s
mining companies have benefited, and
so has the country, but the government
is now looking at whether the country
is getting a fair return. President John
Atta Mills was elected in 2008, marking
the second peaceful transfer of power
in the country, an example that stands
out in Africa’s turbulent political scene.
The new government is now looking at
how best to exploit further gains for
the country while continuing to
encourage foreign investors.
Ghana introduced incentives to attract
foreign mining companies to invest in
1986.
Mining companies have invested $6.7
billion in the country since 1994. Seven
companies altogether made $2.1 billion
in revenues, $146 million of which
(about 7%) went to the Ghanaian state,
mainly through royalties and taxes.
Mining multinationals, Newmont of the
US and South Africa’s AngloGold
Ashanti, have led the investment in
Ghana’s goldmines, but both have been
implicated in cyanide spills and human
rights violations.
Ghana remains a very poor country.
Although the numbers living in poverty
have diminished to just under a third of
the population, progress in poverty
reduction has been disappointingly
slow in rural areas (IMF, 2009). Ghana
ranks a lowly 152 out of 182 countries
in the UN’s human development index
(UNDP, 2009). With gold prices now
rising, the Ghanaian parliament voted
to raise the royalties from 3% to 5% in
2010. However, the companies have
resisted stoutly. They argued that their
agreements were sacrosanct, incapable
of being overridden by new law (Burgis,
2010). They also said that future
investments which are being planned
would be jeopardized if the
government altered their terms.
Ghana’s government is well aware that
its reputation with foreign investors
could be dented if it imposed more
onerous terms, and the country
depends on gold for 40% of its exports.
But it is also aware that environmental
damage, particularly from cyanide
spills, have been an issue for
communities, leaving the perception
that mining companies take the profits
with minimal accountability to
communities. In a report of 2009, the
IMF found Ghana to have ‘weak
institutional capacities for
environmental management’ (IMF,
2009).
The government’s resolve is facing
another challenge in that oil discoveries
off its coast in 2007 look set to usher in
an oil boom. The Jubilee field is
forecast to pump 120,000 barrels of oil
per day from 2010 onwards. Oil
earnings could eclipse those of gold and
cocoa, its other primary natural

resource. The government is firm that
the oil investments must take into
account benefits to all sectors of the
economy. The world’s large oil
companies have eyed the prospects in
Ghana, which look inviting in
comparison to the resource nationalism
evident in countries such as Russia and
Venezuela. Tullow Oil of the UK, which
acquired three exploration licences
from the government, has been
successful in its oil explorations in a
number of offshore sites. It has worked
with other specialist foreign companies
in the field, including Kosmos Energy of
Texas. ExxonMobil came forward in late
2009, agreeing to buy the stake held by
Kosmos in Ghana’s oil fields. However,
Ghana’s government initially blocked
the bid by ExxonMobil, and was said to
favour a deal with CNOOC, the Chinese
state-owned oil company.
US President Barack Obama, on a visit
to Ghana in 2009, praised the country
for its governance, but warned that the
oil issue could detract from its success
(Hoyos, 2009). Ghana’s oil seemed to
be a prize dangling between an
established superpower and an aspiring
one: the strategic interests of both
were at stake. Ghana’s government had
many factors to consider. Which
potential investors had the technology
2016 update:
Production of oil in the Jubilee field
started to come on stream in 2011.
Tullow Oil has enjoyed success in
exploiting the Jubilee oil field, and has
embarked on developing other oil
fields. One of these developments,
known as TEN, involves the co-
operation of Kosmos, Tullow and
Anadarko Petroleum Corporation of the
US. Exports of oil from Ghana reached a
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and development expertise needed
over the long term? How can the
benefits for Ghana as a country be
maximized? Ghana’s president said,
‘We must make sure oil and gas
become a blessing. We must get
competent people to manage the
resources, to account for the resources
and we must use them to build a
stronger economy and invest in our
people (Wallis, 2009). Ghana’s
president remained reluctant to allow
the deal with ExxonMobil to go
through. In August, 2010, the
agreement Kosmos had signed with
ExxonMobil was ended.
Sources: Burgis, T. (2009) ‘Gold-diggers
boost production to help meet world
demand’, Financial Times, 4 December;
Hoyos, C. (2009) ‘Ghana moves to block
Exxon bid for stake in Jubilee field’,
Financial Times, 13 October; Burgis, T.
(2010) ‘Mining money fails to usher in
golden era for Ghana’, Financial Times,
23 March; Wallis, W. (2009) ‘Finds put
Ghanaians on a roller coaster of
expectations’, Financial Times, 4
December; The Economist (2010)
‘Carats and sticks’, 3 April; IMF (2009)
Ghana: Poverty Reduction Strategy
Report (Washington, D.C.: IMF); UN
(2009) Human Development Index, as
www.undp.org
total of $3 billion in 2012, displacing
cocoa as the country’s second-most
valuable export (Ghana is the world’s
second-biggest producer of cocoa.)
Ghana’s president, John Atta Mills, died
tragically in July, 2012, just months
before elections were due to take
place. The vice president, John Dramani
Mahama, took over as president, and
then won the presidential election that
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was held in December, 2012. His win
was a narrow one, and was contested
by the opposition candidate, through
demands for recounts and recourse to
the courts. After months of uncertainty,
Mr Mahama was eventually confirmed
as the legitimate winner. On his
election, Mr Mahama committed
himself to tackling Ghana’s extreme
poverty. To a significant extent, Ghana
can claim success in poverty reduction:
the country met the MDG of reducing
extreme poverty by half by 2015.
However, there are big discrepancies
across the country, with persistent
poverty in rural areas and in the north
of the country. The economic growth
generated by the extractive industries
have benefited urban areas, but this
prosperity has not spread to the very
poor rural areas where subsistence
farming is prevalent. Economic growth
has also brought growing income
inequality. Ghana is no longer classified
as a country with low human
development. In 2015, it was classified
in the category of medium human
development, but remained a lowly 140
out of 188 countries overall ranked in
the UN’s human development index.

Questions for discussion:

• Why are natural resources in Ghana, as in other African countries, considered a
curse as well as a blessing?
• What is the role of foreign oil companies in exploiting Africa’s resources, and
how is it changing?
• If you are an executive in a foreign oil company operating in Ghana, what
would you do to mitigate the accusations of resource exploitation?
• What advice would you give to Ghana’s government in deciding which foreign
investors to welcome and on what terms?