Ghanaian government imposed ban as part of efforts to end illegal mining and its negative impact on the environment

Ghana’s Lands and Natural Resources Minister, Peter Amewu, imposed a freeze on the operations of small scale mining (also known as “galamsey”) in March 2017. Although this ban was originally intended to be imposed for only has been declared t last six months, the minister has stressed that the ban will not be lifted until the objectives for the imposition are met. The Ghanaian government imposed the ban on small-scale mining as part of efforts to end illegal mining and its negative impact on the environment, such as a serious degradation of water quality in the water sources used by these miners.

The government has also warned the small scale miners that any attempt to breach the six-month freeze on all forms of small-scale mining will be considered a violation of the laws of the country and will be met with the deployment of the action from security forces to enforce the ban.

The Ghana National Association of Small-Scale Miners has expressed its displeasure with the ban.

The illegal mining is commonly done in two ways: people who are conducting mining activity without a permit, and permit-holders who are mining outside of the claim limits.

The impact of the ban

The government in imposing the ban didn’t consider the economic effects on the small scale miners and their employees. It is estimated that hundreds of thousands are employed in this sector, and currently they have no income to support their families, which has a massive effect on their communities.

There will also be an effect on the government income from the reduction in royalties and foreign currency will have a toll on the Ghanaian economy..

Other sectors are heavily impacted as well, from banks, consumer suppliers to the miners’ communities, equipment suppliers to the small scale miners sector, therefore many small to medium businesses are suffering, especially in the areas where small scale mining is a substantial industry.

Klapton’s position:

The ban created a negative sentiment on some of the businesses which are covered by Klapton’s guarantees.

So far, Klapton worked together with the customers and the beneficiaries by rearranging their payment schedules and trying to avoid damaging the customer’s credit rating and credit history, and assisting in getting the customers through this challenging period. These efforts are fruitful, mainly due to the joint efforts and the understanding of the beneficiaries, and their wish to maintain the customers on their books for better times after the ban.

Klapton did not participate in transactions with illegal miners, and one of its preliminary conditions for guaranteeing a payment is that all permits are duly in place and that no illegal activity is conducted.

As Klapton sees this ban as a temporary measure, based on the assumption that there will be a relatively speedy resolution to finalise the government actions aimed to insert more law and order into this sector. Klapton assumes that the ban period will end by the second quarter of 2018, and that the small scale mining sector will return to work, with excessive activity for at least one year, trying to recover its losses gained during the ban period.

Klapton’s Reinsurance, Underwriting and Claims Committee (RUC) is monitoring the small scale mining sector activity and status in Ghana.