Mineral companies spend 70% revenue on inputs – Eric Asubonteng

According to him, a robust manufacturing sector that is capable of meeting the input requirements of the mining industry is likely to internalize a significant share of the mineral revenue.

“Procurement of inputs is a major cost of item of mining firms. A research report by McKinsey suggests that mining companies spend between 40% - 80% of their mineral revenue on purchases of inputs,” he said.

Mr Asubonteng noted that “a thriving manufacturing sector is fundamental to unlocking the full potential of the mining industry to transform the economy. However, the industrial sector has been plagued by systemic and economic challenges that have undermined its ability to take advantage of the captive market opportunities presented by the mining industry”.

The Chamber of Mines President told participants at a forum on local production of mining inputs that a combination of deficit supply of electricity and volatile exchange rates have considerably slowed down the growth rate of the manufacturing sector.

This, he said, has averaged less than 4% within the period of 10-years. “Similarly, the sector’s share Gross Domestic Product declined from 9.1% in 2007 to 4.5% in 2017.”

He indicated that the mining sector is facing some challenges that have made it imperative to have a focused discussion on how the sector can be positioned to produce for the mining industry.

“This development in the mining sector implies that local content is more likely to yield sub-optimal outcomes in terms of its multiplier effect on the economy if the status-quo remains,” he added.

Mr Asubonteng explained that it will, however, culminate in lower employment creation, fiscal revenue and other economic parameters.

“This stems from the fact that manufacturing leads to higher retention of value in the domestic economy rather than supplies or retailing due to the marked differences in degree of value-added,” he stressed.

The forum which was on the theme 'Deepening value-creation in the mining industry through local production inputs' aims to play a critical role in supporting the local production of mining inputs as a useful step in the establishment of an integrated minerals industry.