U4 Issue | Natural resources and energy

Distributing mining wealth to communities in Ghana: Addressing problems of elite capture and political corruption

By Gavin Hilson and André Standing
Bergen: Chr. Michelsen Institute (U4 Issue 2013:5) 30 p.

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In the context of a mining boom in Africa, a critical consideration is how governments use increased mineral wealth to foster development, particularly in rural communities where mining takes place. While many African countries do not have a strong track record of managing mineral wealth well, Ghana is often considered a model of best practice, based on its policy of distributing a proportion of mining rents to local authorities and traditional leaders in mining affected communities. In this paper the authors review this policy and, contrary to the positive view of some experts, they explain that forms of corruption and mismanagement undermine it. The paper considers the policy implications. Two complimentary policy goals represent the usual remedies for combatting corruption; increasing transparency and improving social accountability. Both of these objectives are important, but the authors identify a number of potential limitations to their implementation. A third policy that is gaining more international support is also considered, which involves using the wealth from natural resource sectors to fund a universal cash transfer scheme. The paper considers the feasibility and potential benefits of this in Ghana, not only in terms of improving the developmental contribution of mineral wealth, but also how a cash transfer scheme may overcome corruption and poor governance.

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