Published: Thu, Aug 25, 2011
Type: Case study

Newmont recently developed its first project in Ghana (2006) and its only operation in Africa, which at the end of 2007 had over 17 million ounces of gold reserves, representing nearly 20% of its global gold reserves.

Newmont Mining Corporation is a leading gold producer with operations on five continents, employing approximately 34,000 employees and contractors worldwide.

The Ahafo Mine is located in the Brong Ahafo Region of Ghana, approximately 300 km northwest of the capital city, Accra. In 2006, the International Finance Corporation (IFC) approved US$ 125 million in loans towards the project, or about 21% of total cost. The IFC also contributed toward the aim of promoting environmental and social standards designed to benefit local communities.

Development context

The Ahafo Mine is located in the tropical, cocoa-growing region of mid-western Ghana. Agriculture and related sectors account for 68.2% of economic activities in Asutifi District (Ahafo South area) and about 71% in theTano North district (Ahafo North area). It is estimated that more than half of Asutifi adults and two-third of Asutifiyouths are illiterate. Tano adults and youths are comparatively more literate.

The incidence of poverty differs for the two districts, about 60% in the Asutifi district and 48% for the Tanodistrict. Given the agricultural background of this area, the understanding of market practices and use of formal business tools such as planning, accounting and marketing practices, are very low, with little support from governmental and non-governmental institutions.

Community engagement

The development of the Ahafo Mine presented both new opportunities and challenges to the communities around the mine site. Aside from providing jobs for up 3,500 people (32% of employees of the company and its contractors were local hires as of December 2008) the project has helped improve local infrastructure including mobile phone coverage, contributing to upgrading roads and transport access, strengthening the power supply grid and improving access to electricity supply, and others.

Ahafo Linkages Program

The company also established the Ahafo Linkages Program in partnership with the IFC. The overall objective of the program is to contribute to enhancing the performance and competitiveness of the MSME sector to support economic growth as well as widespread employment and income generation in the areas near the mine. More specifically, the thee-year linkages program has three primary goals:

To support the development of local businesses and to develop potential suppliers and providers of goods and services to the mine;

To improve the competitiveness of local non-mining related businesses to help develop a diversified local economy outside of the mining sector;

To develop and improve the capacity of local business associations and institutions that can provide long-term sustainable business support, training and other services to the local business community.

Microenterprises make up 90% of the businesses involved in the program and are defined as enterprises that employ up to 5 employees with fixed assets (excluding realty) not exceeding US$ 10,000.

The linkages program also places a special emphasis on supporting women entrepreneurs and incorporates HIV/AIDS into its training activities through the IFC Gender Entrepreneurship Markets and the IFC Against AIDS programs.

Newmont’s decision to assess the impact of the Ahafo Linkages Program emerged out of the interest to explore additional measurement techniques that could provide information on indirect and derived benefits generated by the Program in the host communities. Based on the pilot experience, Newmont could later assess the viability of applying the same methodology to the social investments at its Ahafo operations.

To develop the most appropriate approach to measuring impacts, Newmont, with the assistance of IFC, adapted the WBCSD Measuring Impact Framework with the view to integrating it with other approaches used by the company, in particular Newmont Ghana’s Environmental and Social Responsibility (ESR) and Monitoring Principles and IFC’s Monitoring and Evaluation (M&E) Framework and Indicators.

Impacts

Six months into the establishment of the Program, analysis of monitoring data revealed signs of economic growth attributable to the formalization of MSMEs in the intervention area (more MSMEs obtaining business registration certificates, local MSMEs establishing offices in the communities and starting basic formal practices such as book-keeping).

At the end of the first year of intervention (2007), the number of local MSMEs engaged in business withNewmont increased from 25 to 52 and the value of goods and services procured from these MSMEs was US$ 4.2 million. In 2008, the total number of local MSMEs jumped to 125 and the local content reached US$ 4.7 million.

One of the most encouraging signs of sustainable MSME growth is the fact that 78% of MSMEs have reinvested at least 2,000 Ghana Cedis (US$ 1,348) into their businesses.

Management response and lessons learned

As a whole, the company’s hypothesis of its contribution to economic development in the project area was positive. Through the stakeholder engagement sessions, the company was able to verify this hypothesis and begin building a strategy for improving these impacts.

Newmont management response

  • Sharpen intervention areas where results are below expectation – the results showed that most of the local MSMEs were not procuring locally when delivering contracts to Newmont Ghana Gold. As this action decreases the trickle-down effect of the development of local suppliers, the Local Suppliers & Contractors Development Unit and the Ahafo Linkages Program have intensified sensitization of local vendors with regards to doing local procurement as much as possible;
  • Engage major stakeholders on how to sustain outcomes and initial impacts;
  • Explore and strengthen complementarities with other social investments sponsored by Newmont Ghana Gold;
  • Include the Local Economic Development component in future studies to assess the impacts of the Ahafo Linkages Program.

Lessons learned

  • Assisting non-mining related sectors is a challenge;
  • Dynamics of local business community: Although 87% of the local business association members surveyed had seen positive changes in the business community, one-quarter of the respondents were not fully satisfied with the services of the association; setting clear expectations of engagement of local business participants is important;
  • Stakeholder interviews must be carefully designed to ensure objective and focused feedback; unlike other stakeholder consultations, avoid using open-ended questions.

Looking ahead

Mentoring of MSMEs in local supplier development and local economic development continues. As of April 2009, 101 local MSMEs had shown improvements in formal business practices (48 for local supplier development and 53 for local economic development).

Newmont plans to apply the WBCSD Measuring Impact Framework to conduct an overall assessment of the impacts of its operations on the local and national economy as part of a long-term evaluation plan.

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