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Energy Crisis Impacts Ghana's Mining Industry


In Ghana, mining companies are being forced to cut energy use by 50 percent to help the country through its worst energy crisis in nine years. The country's bulk electricity supplier, the Volta River Authority, says the cuts in the mining industry are needed as part of a nationwide power-rationing program. The cuts are expected to deeply affect the country's foreign earnings.

The West African nation, which supplies electric power to neighbors Togo and Benin, has been struggling to meet demands because of reliance on its over 40-year-old Akosombo Hydro Electric dam.

A shortfall in rain earlier this year has made matter worse by reducing water levels at the dam and forcing the VRA to start rationing power.

Ghana is also the largest gold producer in West Africa and mining exports make up close to 40 percent of the country's total foreign earnings.

The mining industry, which consumes about 20 percent of the country's total power production, is among the hardest hit by the crisis.

"Cutting back by 50 percent means that, it is almost like cutting back production by 50 percent, because, although we have installed capacity for self-generation, it's extremely expensive," said Joyce Aryee, the chief executive of Ghana's Chamber of Mines. "It will mean getting regular supply of diesel, at the cost that we get it will perhaps mean generating power at 15 cent per kilowatt hour, which is almost three times what we get from VRA."

Aryee says if urgent action is not taken to restore power to normal levels, the industry will be compelled to take drastic action to stay in business.

"If Ghana has a serious problem in power it affects our industry as well, because it's not only the fact that eventually if it doesn't change quickly that production will fall drastically, it will mean also that the workforce will have to be cut back and that is a very serious thing," she said.

The crisis has also affected small and medium businesses, with many cutting output drastically, because they are unable to afford substitute power.

The World Bank this month gave Ghana high marks as a place to do business, but analysts say without sufficient power the climate could change.

Dr. Kwabena Anaman, director of research at Ghana's Institute of Economic Affairs says if the situation persists, growth rates set out in this year's government budget will not be achieved. He says reliable energy is vital to the development of the country's economy.

"Power is one of the major factors that a firm will have to consider if it wants to invest in a country, foreign firm, so clearly, the unreliability of energy supply makes Ghana less attractive compared to other countries with similar endowment," he said.

Anaman also called for forward planning and the need to diversify Ghana's energy sources.

Ghana experienced a severe energy shortage between 1997 and 1998, which also affected Togo and Benin. The crises then triggered a renewed interest in a proposed West African gas pipeline.

The project, expected to be completed next March, would bring natural gas from Nigeria through Benin and Togo to Ghana. Industry watchers are hopeful, that the pipeline will help end the perennial energy shortages in the sub-region.

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