Contract mining undermining workers welfare, tax revenues – Report

A new study examining Ghana’s mining sector has raised serious concerns about the unintended consequences of the country’s local content and resource nationalism agenda, warning that the growing shift toward “contract mining” is weakening worker protections, reducing state tax revenues and concentrating wealth in the hands of a small politically connected elite.

The report, jointly conducted by the Ghana Mineworkers Union and experienced finance and economic journalist Adnan Adams Mohammed, argues that the implementation of Legislative Instrument (L.I.) 2431 — intended to increase indigenous participation in mining operations — is producing outcomes contrary to the policy’s original objectives.

Under the policy direction, multinational mining firms operating in Ghana are increasingly being compelled to transfer core open-pit and underground mining operations to locally owned contractors as part of government’s broader push for local participation and economic empowerment in the extractive industry.

However, according to the study, the transition is triggering what researchers describe as a “race to the bottom,” where local contractors aggressively underbid each other to secure contracts from major multinational mining companies including Newmont Corporation, AngloGold Ashanti and Zijin Mining Group.

Data cited from the Minerals Commission indicates that operational contract rates have fallen by more than 17 percent under the contract mining model.

The report argues that this cost reduction is not being absorbed by company executives or shareholders, but rather passed directly onto workers through salary cuts and weakened labor protections.

According to the findings, average mining production costs have dropped from approximately $3.00 per ton under the traditional owner-operated model to below $2.50 per ton under contract mining arrangements.

At the same time, workers’ basic compensation has reportedly declined to nearly half of previous wage levels, while PAYE tax contributions have become “critically low.”

The report also warns that statutory compliance relating to pensions, SSNIT contributions and provident fund payments has become increasingly inconsistent among some local contractors, exposing workers to significant long-term financial insecurity.

General Secretary of the Ghana Mineworkers Union, Abdul Moomin Gbana, argued that the rapid expansion of contract mining is undoing years of progress made in labor protection within the mining industry.

He stated that many local contractors now pay significantly lower wages than multinational operators for identical roles while offering weaker job security and poor social protection mechanisms.

The study claims that during transitions from multinational owner-operated systems to contractor-led operations, many workers are forced to accept new employment contracts with reduced salaries, diminished benefits and lower safety standards.

The researchers argue that the situation has created a widening gap between politically connected local contractors benefiting from mining concessions and ordinary Ghanaian workers whose economic conditions continue to deteriorate despite the rhetoric surrounding local content policies.

Beyond the impact on labor, the report warns that the tax base is also suffering.

The reduction in worker wages under contractor models has reportedly led to a sharp decline in Pay-As-You-Earn (PAYE) tax collections by the Ghana Revenue Authority.

The report describes this development as a major irony of Ghana’s resource nationalism agenda, arguing that a policy designed to retain more value locally is instead reducing government revenues while enriching a narrow group of private business interests.

Concerns were also raised about reports that some contractors are failing to remit mandatory pension contributions and statutory deductions to relevant state institutions, further undermining worker welfare and weakening public finances.

The Chief Executive Officer of the Minerals Commission, Isaac Tandoh, has already acknowledged some of the pressures associated with falling contract rates.

Speaking at the second Africa Mining Health and Safety Series in Takoradi last month, he warned that significant underpricing among mining contractors is creating severe pressure on both contractors and workers.

According to him, the Commission is considering stricter oversight mechanisms to prevent pricing practices that compromise wages and operational safety standards.

The study further highlights growing industry concerns about the speed at which local content requirements are being enforced. It warns that highly technical and capital-intensive operations such as blasting and heavy haulage may be exposed to operational and physical risks if transferred too rapidly to contractors lacking the required financial and technical capacity.

The Ghana Chamber of Mines has also urged government to adopt a more gradual implementation framework to avoid disruptions to production and investor confidence.

Chief Executive Officer of the Chamber, Kenneth Ashigbey, stressed that while the policy direction toward local participation is understandable, implementation must be balanced carefully to protect operational efficiency and long-term industry stability.

The report concludes with a call for urgent regulatory reforms, arguing that Ghana’s oversight institutions must move beyond monitoring ownership structures alone and pay equal attention to labor standards, tax compliance and worker welfare.

Among the recommendations are the introduction of pricing benchmarks to prevent destructive underbidding, mandatory transparency in labor transition agreements, and the blacklisting of contractors who fail to remit worker pensions or statutory taxes.

Researchers warn that unless such safeguards are introduced and enforced, the mining industry risks creating a system where the benefits of local content policies are captured by a small connected elite while workers, communities and the national treasury continue to bear the cost.