Compensation in Mining Areas: Is It Time For A Paradigm Change?

Compensation in Mining Areas: Is it time for a Paradigm Change?
Eric Paul Tudzi

Kwame Nkrumah University of Science and Technology, Kumasi
Land Economy Department, K N U S T, Kumasi, Ghana
Tel: +233244221845
Email: erictudzi@yahoo.com
Jonathan Zinzi Ayitey
Tel: +233268611115
Email: jonathanzinzi@yahoo.com
Seth Opuni Asiama
Tel: +233208152826
Email: soasiama@yahoo.com
Abstract
The Minerals and Mining Act, 2006 (Act 703) of Ghana permits investors to enter upon land
belonging to individuals and communities to extract minerals which are held in trust for the
people of Ghana. In the process, such investors are expected to compensate those whose
properties have been adversely affected by the mining activities. Although much has been said
about the type and quantum of compensation payable, there has been very little on the aftermath
of the payment of such compensation. This conceptual paper explores alternative modes of
payment of compensation to project-affected persons in the Ahafo mine area of Newmont Ghana
Gold Limited who are predominantly farmers in a rural setting. It is with a view to promoting
sustained livelihoods and consequently sustainable rural communities. It is based on focus group
discussions with people in various communities affected by the mining activities. Such groups
were made up of representatives of traditional authorities, the youth, women and other farmers
who were organized by elected representatives in each community. The discussions gave insight
as to what happens after compensation payments have been made and also provided a good basis
to consider the need for change.
Key words: Compensation, Mining, sustainable rural communities
Eric Paul Tudzi, Jonathan Zinzi Ayitey, Seth Opuni Asiama

1. Introduction
The Minerals and Mining Act, 2006 (Act 703) of Ghana permits investors to enter upon land
belonging to individuals and communities to extract minerals which are held in trust for the
people of Ghana. In the process, such investors are expected to compensate those whose
properties have been adversely affected by the mining activities. Although much has been said
about the nature and quantum of compensation payable, and how this is to be assessed, empirical
evidence appears to suggest that in many cases the expropriated lose their means of livelihood
and this adversely affects their well-being. While some mining companies have introduced some
interventions to help enhance the livelihood of the expropriated in addition to the payment of
compensation as statutorily required, this has not helped much as the expropriated do not have a
steady flow of income to ensure their up-keep. The result has been that in spite of the often large
amounts of compensation paid to the expropriated, in a short while many of them become
indigent. Using the experiences of Project-affected Persons in the area of operations of Newmont
Ghana Gold Ltd., this conceptual paper explores alternative modes of payment of compensation
to expropriated farmers with a view to promoting sustained livelihoods and consequently
sustainable communities. The data is based on focus group discussions with people in various
affected communities which took place essentially in 2014 though in the preceding two years
activities of the community valuer had laid some foundation. The paper aims at influencing
policy with regard to payment of compensation in large scale land acquisitions particularly for
commercial purposes. It begins by presenting the setting in which the mining operations/
compensation payments take place, traces some developments in legislation and mining activities
in the area understudy and focuses on compensation, and the focus group discussions.
2. Newmont Gold and its Operations in Ghana
Newmont Mining Corporation which is one of the worlds largest gold producers has mines in
various countries including Ghana. In Ghana its operations are essentially located in two major
areas: Akyem in the Eastern Region and Ahafo in the Brong Ahafo region (which is the subject
of this study). It must be stated that the activities of the Ahafo mine extend beyond the Brong
Ahafo Region to other regions like Ashanti and Western. It is an organization that tries to adhere
to international best practices, ensure safety and also good community relations. These have
largely influenced its activities in the Ahafo mine area where about 90% percent of the locals
rely on farming for their livelihoods. The Brong Ahafo region itself has also been referred to as
Ghanas bread basket providing more than 30% of the countrys food. The Company, apart
from compensation to project-affected persons also provides various packages to individuals and
the communities. These include its identification of vulnerable community members for
assistance. The Company has been providing food, skills training, education facilities, and
agricultural assistance packages and health support. All these among others are being done by
Newmont to minimize impacts from the mine and enhance the standard of living now and into
the future for local communities (Newmont, 2007). It is in this regard that a critical look at the
above subject is very pertinent. It is interesting to note that the Brong Ahafo Region is also
among the 4 out of Ghanas 10 Regions with the largest of compulsory acquired lands (Larbi et
al, 2004)
3. Compensation payment
As per the Constitution of the Republic of Ghana, all minerals are held by the state. A mining
firm desiring to undertake any prospecting or mining activity needs to obtain a license/ lease
from the government through its appropriate agencies/ ministry before the activity can be
undertaken. Various payments like royalties are paid by the mining firm for such activities. It is
also acknowledged that though a firm is granted authority to undertake the said activity, the land
belongs to appropriate land owners (stool, family etc) who need to be negotiated with before the
Company can enter the said land to extract the mineral. There may be people working on the
land; having structures on the land; or living on the land. Such people need to be compensated
(English and Brusberg, 2002; IFC 2012a, 2012b; Constitution; Act 703). This may take a number
of forms including involuntary resettlement, cash payment for crops or structures affected.
Provision has also been made for deprivation of use under Ghanas current legislation which was
hitherto not the case. Mcleods (2000) paper on compensation in Fiji stresses the need for full
and fairly distributed compensation for the smooth running of exploration and mining activities.
From a UK legal perspective, Plimmer (2008) posits that compulsory acquisition is a creation of
statute hence rights to compensation do not exist at Common Law. It is only when Statute
specifically allows for compensation to be claimed that an affected person can exercise that right.
The legal regime is therefore important. She concludes that buying by agreement is preferred to
the use of compulsory purchase which calls for compensation and also stresses the challenge of
skills shortage in this technical area of compensation payment. Syagga and Olima (1996)
contend that compulsory land acquisition which in this case was for a water supply project to an
urban community affects land utilization, changes income levels, affects land-ownership
structure, cultural and social values, familial composition, norms and bonds, and farming
practices especially in the rural setting where the land is acquired. They question whether cash
compensation is the most ideal and wonder if alternatives like payment of land for land in similar
environment will not yield better results. They also raise the important issue of psychologically
working on the people through effective counseling and also training assistance and extension
services for the project-affected persons. Another critical problem with the payment of
compensation according to Larbi (2008) has been the lack of intergenerational equity in the use
of paid compensation. Larbi et al (2004) from their study in Ghana corroborate that compulsorily
land acquisition has resulted in adverse socio-economic conditions like landlessness, poverty and
heightened tension in state and community relationships. Quoting from other sources, they state
that compulsory acquisition should involve taking that is in the public interest. This could be for
public purpose or for a private company or individual which although may contribute to public
welfare, confers a direct benefit, including profit, on the user. They add that compulsory
acquisition in Ghana has not been approached from a strategic and economic standpoint, and that
the socio-economic costs of such acquisition in terms of compensation payments, deprivation of
indigenous communities of their land rights among others have never been assessed. They
conclude that all the theoretical underpinnings, benefits and justification of compulsory
acquisition have not been realized in Ghana. On the contrary, all the adverse socio-economic
consequences are manifest.
To ensure crop compensation rates are fair, Newmont Company in Ahafo, has a Committee made
up of about 60 community representatives which annually reviews crop rates based on local
market crop prices and other economic factors (Newmont, 2007). The Crops Rates Negotiation
Committee (CRNC) comprises representatives of the Newmont Company as one party;
representatives from affected communities as the other party; and others which include relevant
state departments and agencies like the Land Valuation Division, Ministry of Food and
Agriculture, and Non-governmental organizations like Modesty Foundation. The CRNC is
chaired by a Moderator who is a renowned person in the area and mutually agreed on by the two
parties (Company and Project-affected persons). Representatives of the Project-affected persons
are in two categories namely, those representing the affected farmers and those representing the
traditional authorities in each community. The representatives of the affected farmers in each
community are elected by members of the community through a supervised democratic electoral
process. The representatives of the traditional authorities in the various communities are
appointed by the respective traditional authorities. The membership is therefore not biased
against persons of any gender, religious background, political inclination or age group.
The current legal regime on mining in Ghana makes provision for [mining] project-affected
persons to engage the services of an expert to lead them in their negotiations with the mining
firm. This was informed by the thinking that a certain level of professional input is ideal to
ensure that fair, prompt and adequate compensation is paid in line with the provisions of the
nations Constitution. In this regard, there is currently a community valuer at Ahafo who is
leading the project-affected persons in their negotiations with the Company. The Community
valuer (a professional valuer) was chosen by the project-affected persons who are CRNC
members. The involvement of the community valuer and the processes of valuation, negotiation
and arriving at crop rates has guaranteed community involvement in a transparent process which
has greatly helped to maintain a peaceful working environment for the Company to pursue its
activities. It has also benefited the farmers in the sense that, agreed Newmont crop rates tend to
be among the best in the whole country whether compared with government rates or those of
private corporate entities like other mining firms operating in the country. This has brought some
satisfaction to project-affected persons. Each project-affected person is thus paid bulk
compensation after the rates for the various crops have been agreed on through the valuation and
negotiation processes that take place at the CRNC. The agreed rate for each crop is accordingly
multiplied by the quantum of the said crop that was affected by the activity of the mine and paid
in bulk to the farmer as his or her compensation. Such bulk amounts are usually quite high.
Therefore, aside its core mandate of leading the communities in its negotiations with the mining
firm, the community valuer seeks to advise the project-affected persons on how to handle
compensations received during community visits.
4. Problem
The problem is that, after the payment of huge sums of bulk money to farmers by way of
compensation, there is not much evidence in the communities or the lives of the recipients that
such amounts were ever received. There is poverty in the communities and a looming danger of
worsening situations in the near future if nothing is done. At Yamfo on 28 th August, 2014 a
participant succinctly summed up the issue; One-day- millionaire is not helpful so there should
be a pension scheme in place for farmers. Another participant from Adrobaa on that very day
also said the compensation received is used within a year so a more lasting package should be
considered. Furthermore, the principle that the land belongs to a great host, some dead, a few
living and countless host unborn stands the danger of resulting in reprisals in the future. The
resultant effect is the certainty of unrest in the communities by the youth/ younger and future
generations. This is because the bulk compensation comes to an individual at one point in time.
Either because of the lack of requisite knowledge or deliberately, he spend the whole amount
within a relatively short period. This person has lost the farm which was giving him and his
family something annually due to the mining activities and has also lost the bulk compensation
paid by the mining firm. Poverty thus stares him in the face and future generations are also left
with nothing to depend on. This is contrary to the view that in considering future costs and
benefits, it should be noted that this should be enjoyed by different generations (Padilla, 2002).
This therefore creates an environment for discontent. Such unrest poses danger to peace and
security in such communities which will in turn affect the operations of such mining firms,
adversely affect any meaningful agricultural or commercial venture by the youth and women in
such areas and ultimately perpetuate poverty. This is a threat to sustainability in such a
community.
5. Methodology
The researchers decided to use a qualitative method, specifically focus group discussions (FGD),
in an effort to secure the views of project-affected persons for the first stage of this on-going
conceptual study. Though the Company is undertaking activities in a vast area, the selected
communities are those that are currently core to the operations of the mine.
It was during the valuers community engagement, information gathering and sensitization
activities in the communities that the need for the current study became evident. Specifically,
during community visits in 2012 and 2013, project-affected persons dropped hints that the huge
bulk compensation received by many people was almost used up and poverty was setting in.
Some were even calling for the Company to provide them with some stipend on monthly basis
aside its vulnerability and other community support packages. The researchers therefore decided
to get a broader view about issues during this stage of the study by undertaking focus group
discussions. In the long run the full study is aimed at becoming a major basis to inform policy
decisions on the one-time payment of bulk compensation to [mining] project-affected farmers in
rural settings.
A focus group discussion is a form of research in which a group of people are asked about their
perceptions, opinions, beliefs and attitudes towards a product, service, concept, advertisement,
idea or packaging. Focus groups as a form of qualitative research are a useful tool to discover
how different people think and feel about a subject. Well executed focus groups create a
conducive environment that puts participants at ease and allows them to answer questions
thoughtfully (Eliot & Associates, 2005; Wikipedia, 2014).
FGD like other research methods has its strengths and weakness. The strengths include the fact
that focus groups allow interviewers to study people in a more natural and relaxed conversation
pattern. It gives the researcher the chance to notice his interviewees body language and better
appreciate their line of thought. It is cost effective and the interviewer can interview many people
at a time. The researcher is able to interact meaningfully with the participants and also has the
chance to ask follow-up questions for better understanding and clarification. Participants are also
able to interact with each other. The identified weaknesses include the tendency for
disagreements to occur which can be time wasting if not managed effectively by the researcher.
There is also the possibility that irrelevant discussions could arise and sway the main purpose of
the meeting. Furthermore, the researcher may find it difficult getting people to participate in the
focus group. There is also the possibility that some participants may find it difficult airing their
views as they may find other participants intimidating. Others too may be influenced by the
opinions of other participants (Eliot & Associates, 2005; Grnkjr et al, 2011;Wikipedia, 2014).
However, it was felt that considering the objective of this first stage of the conceptual study, the
FGD was ideal to achieve it: having a general baseline view of the issues at stake and the
perceptions of the project-affected persons and their leaders.
6. Choice of participants of FGD
For the purpose of the focus group discussion in each community, the CRNC representatives in
each community officially inform members of the community about the venue, date and time of
the visit. Each community has a public address system in place for getting all public notices to its
members. It is therefore the same medium that is used to announce the details of the meeting.
Upon arrival to a community, the announcements are made again to inform the community
members that the meeting time is due. In this way, the participants for the FGD come together
for the discussions. Appendix 1 gives details as to when the various communities were visited,
the number of participants, and the general views and concerns in each community. The
composition of participants was diverse including in many instances; representatives of
traditional authorities, women, men, the elderly, the youth and CRNC representatives from the
community. After the community FGDs there was a meeting of all community CRNC
representatives on the 5th of September 2014 during which the issues were raised again. The
meeting was also attended by the regional head of the Land Valuation Division, and a
representative of Modesty International.
7. Findings
In each community, using the pension scheme of workers in the formal sector as an illustration,
the researchers sought the views of the various groups as to whether they would prefer a payment
scheme which would allow for the payment of part of a persons compensation (in bulk) while
the rest is invested so as to provide a stream of regular income over a period. The general view
was that, such a way of compensation payment would be preferred to the current practice of a
one-off lump sum payment of compensation to project-affected persons by the operators of the
Ahafo mine. The major area of concern was the specific modalities. A synthesis of the major
issues is a follows:
7.1 General view
There is an overwhelming support among project-affected persons for the idea of making
an initial part payment of compensation (bulk), investing the rest and receiving periodic
incomes over time. According to Larbi et al (2004), in 1952, per Public Lands
(Leasehold) Ordinance (Cap 138) annual amounts were paid instead of lump sum
compensation. This general view should therefore not raise eyebrows in terms of
introducing change from the current normal practice.
7.2 Modalities
There were several views about how things should be done. For instance, there was the
view that the amount to be invested should be deducted at source before giving the rest to
the farmer. The idea was that if the project-affected persons received the full amount, it
would be difficult to convince them to deduct a portion for investment purpose. It was
also suggested that it should be optional because some individuals are good
entrepreneurs. Such people can manage the compensation received in a better way than
any other organization.
While some felt a percentage of the receivable compensation should be deducted for the
investment, others were of the view that there should be a minimum receivable figure
(bulk compensation) whether or not there was any agreed percentage. This way it would
ensure that the project-affected person receives something substantial in the first instance
even if it is only part of the amount due him/ her. Another view was that the implementers
should go to each project-affected person, identify his/ her pressing need, use a portion of
the bulk compensation for it and invest the rest.
Based on experiences elsewhere, it was also suggested that the investment portfolio
should be backed by an insurance policy so that if something happened to the money
invested or the fund managers, the project-affected persons or their descendants or
nominated beneficiaries will not be disadvantaged.
7.3 Administrator
The issue about who manages such deductions was a critical concern. There is so much
skepticism about who will be a trust worthy administrator who will have the interest of
the project-affected persons/ communities at heart. There were suggestions that the
community should manage the fund instead of the government. Though some felt that the
current government social security administrators should manage it, others were
vehemently against the idea. By way of a compromise, there was also the view that
Newmont could liaise with government social security administrators or an insurance
company to manage such a fund. Here again there was the view that the Company may
not wish to move away from its core business to focus on such issues. Other proposals
included the setting up of a Gold bank to play that role.
7.4 Expectations from the Company

The members of the focus groups felt the Newmont Company still had a role to play after
paying the compensation due the project-affected persons. Some were of the view that the
Company should also pay some amounts to project-affected persons annually aside the
compensation paid. Others felt the Company should add some seed money to whatever is
invested. In sum, the Company should commit extra funds to such an initiative to
guarantee its viability and sustainability.
7.5 Investment Avenues
Proposed investment avenues for the deducted amounts include ; Buying shares in the
Company; Investing in treasury bills or fixed deposits but putting in a clause that will
prevent the project-affected person from taking the principal till after a certain number of
years and also considering implication for the value of the money invested over time.
8. Conclusion
The focus group discussions have amply brought up the need to consider a shift from the
current way of paying bulk compensation to project-affected persons. It is nonetheless
conceded that though insightful, this stage of the conceptual study is premature to serve
as a basis for a meaningful paradigm shift. The next stage of the study should be a
quantitative one to ascertain the quantum of compensations paid, people involved, the use
to which the monies were put, and the nature and extent of poverty so as to provide a
more informed basis upon which to propose policy decisions. It should also be followed
by further research and a wider stakeholder consultation which will include Newmont,
other mining firms, Civil Society Organizations, relevant government ministries and
agencies, project-affected persons, traditional/ customary authorities, policy makers and
fund management organizations.
REFERENCES
Chron.com (2006). Advantages and Disadvantages of a focus group. [Online]Available:
www.evalued.bcu.ac.uk (September 22, 2014)

English, R. & Brusberg, F. E. (2002) International Finance Corporation Handbook for

Preparing a Resettlement Action Plan, Washington, IFC, Automated Graphic Systems
Eliot & Associates (2005). Guidelines for conducting a focus group. [Online]Available:
assessment.aas.duke.edu (September 21, 2014)
Gronkjaer, M., Curtis, T., de Crespigny, C. & Delmar, C. (2011). Analysing group interaction in
focus group research: Impact on content and the role of the moderator. Qualitative Studies, 2(1),
16-30.
IFC, (2012a) International Finance Corporation Guidance Note 5 Land Acquisition and
Involuntary Resettlement [Online]Available:
http://www.ifc.org/wps/wcm/connect/4b976700498008d3a417f6336b93d75f/Updated_GN52012.pdf?MOD=AJPERES (September 18, 2014)
IFC, (2012b) International Finance Corporation Performance Standard 5 Land Acquisition and
Involuntary Resettlement [Online]Available:
http://www.ifc.org/wps/wcm/connect/3d82c70049a79073b82cfaa8c6a8312a/PS5_English_2012.
pdf?MOD=AJPERES (September 18, 2014)
Larbi, W. O. (2008) Compulsory Land Acquisition and Compensation in Ghana: Searching for
Alternative Policies and Strategies, FIG/FAO/CNG International Seminar on State and Public
Sector Land Management, Verona, Italy, September 9-10, 2008
Larbi, W. O., Antwi, A. and Olomolaiye, P. (2004) Compulsory Land Acquisition in Ghana
policy and praxis, Land Use Policy, Vol. 21 pp 115-127
McLeod, H. (2000) Compensation for landowners affected by mineral development: the Fijian
experience, Policy Resources, 26, 115-125
Newmont (2007) Managing the Transition and Impacts of Resettlement [Online]Available:
http://www.beyondthemine.com/2007/?l=2&pid=240&parent=253&id=303 (September 20,
2014)
Padilla, E. (2002) Intergenerational equity and sustainability, Ecological Economics, Vol. 41 pp
6983

Plimmer, F. (2008) Compulsory Purchase and Compensation: an overview of the system in

England and Wales Nordic Journal of Surveying and Real Estate Research, Special Series, Vol.
3, pp 144-162
Syagga, P. G. and Olima, W. H. A. (1996) The impact of Compulsory Land Acquisition on
Displaced Households: The Case of the Third Niarobi Water Supply Project, Kenya, Habitat
International, Vol. 20. No 1, pp. 61-75
The Constitution of the Republic of Ghana, 1992
The Minerals and Mining Act, 2006 (Act 703)
CONTACTS
Mr. Eric Paul Tudzi
Land Economy Department, K N U S T, Kumasi,

Kumasi
GHANA
Tel. +233244221845
Email: erictudzi@yahoo.com
Mr. Jonathan Zinzi Ayitey
Kumasi
GHANA
Tel. +233268611115
Email: jonathanzinzi@yahoo.com
Prof. Seth Opuni Asiama
Kumasi
GHANA
Tel. +233208152826
Email: soasiama@yahoo.com


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Compensation in Mining Areas: Is it time for a Paradigm Change?

Eric Paul Tudzi

Eric Paul Tudzi, Jonathan Zinzi Ayitey, Seth Opuni Asiama