IMANI Policy Brief:

Introduction

Ghana has a thriving salt mining and winning industry that has consistently produced around 250,000 metric tons annually over the last decade. The primary method of salt production in Ghana is through solar evaporation of concentrated sea water in salt pans, usually in areas with sources very close to the sea. Notable among these are the Songor Lagoon area, Keta, Saltpond, and other smaller coastal enclaves.

The Observatory of Economic Complexity indicates that in 2022 for instance, Ghana exported $4.36 million worth of salt. This is 0.022% of Ghana’s total export earnings of $20 billion for the same period. This made Ghana the 59^{t h} largest exporter of salt in the world for 2022.

Any observer’s cursory look at the potential for salt production in Ghana will immediately notice the gross shortfall between potential annual earnings from the salt industry and the actual production. For such observers, this gross underutilization of the resource potential represents a missed opportunity for the salt value chain and its benefits to the country and the African continent as a whole.

A lot of talk and activity has gone into discussing the role of various stakeholders and how they benefit. The raging debate around the beneficiaries have over the years discouraged any significant investment and will to make the best of the resource.

Electrochem Ltd, a Ghanaian-owned entity, has recently been a beneficiary of a lease arrangement that puts them in the apex position to make the most out of Ghana and possibly West Africa’s biggest naturally occurring solar salt potential basin, the Songor Lagoon. At the background of a full parliamentary inquest and the commitment of the company to initiate and comply with a community-focused masterplan that should maximize local participation, there is a clearer path to the projected billion-dollar-a-year dream being fulfilled.

Internal documents sighted show that Electrochem intends to grow annual salt production volumes emanating from the Songor enclave from the usual range of 150,000 metric tonnes annually to about 400,000 metric tonnes annually with the current level of investment over the 2025/6 period. The difference is that salt production will not be focused on the domestic market, but on an international export market with industry-grade quality control measures projecting salt as a mineral commodity.

Revenue projection for 2025 will be around 350-400 million USD based on projected production based on current infrastructure. After subsequent investment rounds and infrastructure development spanning four years, it is expected that the Songor area alone will yield up to 1.5 million metric tonnes annually, leading to potential revenues in the region of upwards of 1 billion USD from 2028 onwards.

Currently, Electrochem is privately held, backed by the McDan group and a consortium of investors, with equity also held by the state-run Minerals Investment Fund (MIIF) through a capital injection of around 300 million Ghana cedis. Electrochem is undertaking activities aimed at an imminent listing on the Ghana Stock Exchange in order to raise the necessary heft of capital required for an intensive ramp-up of infrastructure to develop the lagoon for the targeted output.

It is projected that over 5000 direct jobs will be created by Electrochem alone. Over 1500 acres of adjoining land in the catchment area of the lagoon will be developed to create over 6000 salt pans fed with superior quality high-yielding brine from the Electrochem evaporation ponds from which over 30 adjoining communities and co-operatives will benefit directly. The communities will be allowed to off-take their salt and sell either to Electrochem or third parties as they so wish. An extra 12,000 jobs will be created from mining the salt pans as they will not be limited to single season yields, but a more predictable bi-annual salt harvesting season, quadrupling current revenue from the age-old artisanal method.

 

The Long Game

This has not been the first attempt to industrialize the salt sector in Ghana. Previous attempts have led to quite acrimonious outcomes, polarizing local communities and artisanal groups who have pitched themselves against investors. The major reason for this is that investors have had the sad tendency to downplay the reverence with which indigenes of Ada view their lagoon and its resources, which connote not only economic benefits but a firm spiritual bond for which the community will not compromise on.

Culturally, there is a great attachment to this means of livelihood, and several attempts to industrialize the salt opportunity have been vehemently opposed to protect this. Many attempts at serious private sector involvement have failed because of the overwhelming need to protect the interests of indigenous artisanal salt miners.

The main defences are summarized below:

1. Investment in the salt industry will alienate locals
2. Women who mine/win salt will lose their livelihood
3. Traditional rites cannot be performed if private players restrict access
4. The land around the lagoon will be taken over by concessionaires
5. Private players in the salt industry should be allowed access to the brine regardless of any investment by any industrial entity
6. The indigenes are left out in almost all of the salt industrialization plans developed since the 1970s
7. Thousands of individuals will lose their jobs and will be disadvantaged economically
8. Fishing and other activities will be prohibited and people will lose the right to freely fish and perform other activities on the lagoon, thus displacing them
9. Any industrial mining activity should involve paying royalties and dividends directly to community heads
10. Lands acquired for mining concessions should include direct consideration and leases from the chiefs and communities and not from governmental sources – i.e. lands used for salt mining should not be divested to third parties.
11. There are no lucrative alternative livelihoods or substitutes for livelihoods

To put this into perspective, there are a section of business entities who officially describe themselves as Artisanal and Small-Scale Mining workers, or ASM. They believe that they are part of the mining industry and ecosystem who play a very important role in ensuring that thousands of people do not lose their livelihoods to big businesses operating in the mining sector.

As a matter of fact, Electrochem has had to grapple with a few of these leading to the legitimacy of its concession being a matter of litigation and a parliamentary inquest. A collaborative approach and intensive public education will be required to keep industry and community relations at cordial levels. Several community-based organizations with close relationships will need to be courted to collaboratively shape the vision of the society that the Ada area could become if the full benefits are enhanced.

Indeed, the new masterplan for Songor which is an improvement of the PNDC authored masterplan has taken all of these into consideration to ensure future stability and reduce the initial tensions.

Without the investment of entities like Electrochem, the vast life and ecosystem-changing potential of the lagoon will remain a distant dream. Raw local artisanal capacity, as already described above, has only yielded enough for domestic consumption and just over $4 million in exports, whereas the investments and activities of Electrochem will lead to at least a hundredfold in terms of revenue alone in at least 24 months.

The Salt Industry Today

• Electrochem’s Operations

The concession granted to Electrochem comprises a total area of over 39,141 acres, including the Songor basin and adjoining lands. This concession is an amalgamation of three separate leases. The granting of these concessions by the Minerals Commission led to bitter acrimonious contention which pitted the company against a conglomeration of several community leaders, artisanal miners and community-based organizations suspicious of the benefits that will inure to the adjoining communities and fearing a disruption in the lifestyles of the indigenes especially when it comes to their livelihood.

This 39,141-acre concession is the result of previous legislative work in 1991 that created the PNDC Law 287. The original plan consisted of a joint venture with multiple stakeholders. These stakeholders could not optimize field activity for over 30 years, resulting in an almost negligent underutilization of the concession.

Environmentally, certain parts of the concession area have been classified as protected Ramsar sites, where the biosphere is a fragile and protected ecosystem of wetlands, mangroves, sea turtles and other protected and endangered species of birds, amphibians and other organisms.

Mining Activity and Revenue Metrics

Salt mining in the Songor Lagoon primarily occurs during the dry season, from October to March/April, influenced by weather conditions. The reliance on a dry season with minimal precipitation is crucial for achieving the necessary salinity in the brine for salt harvesting. Mining activities are limited, with most pans only producing a full harvest once a month during this period.

Characteristics of Salt Mining Activity:

• Peak Periods:October – April (7 months)   Harvest Frequency: 1 harvest per pan/month
• Labor Distribution:

o  Family-based/sole proprietorships: 2,000 workers o  Medium-scale operations: 3,000 workers over 2-30 acres/concession

• Storage and Sale: All year round

Mining Methodology:

Mining involves diverting concentrated brine from the lagoon into small concentration ponds, then channeling it into salt production pans where crude salt is formed. The salt is then washed and bagged, depending on the workers’ expertise and equipment availability. However, this simple methodology, often using rudimentary tools, results in inefficiencies. The production remains unmechanized and weather-dependent, limiting annual output to less than 100,000 metric tons from over 9,000 workers. This situation is akin to subsistence farming, with hard limits on growth potential.

Atsiakpo Activity:

The Atsiakpo miners (equivalent of salt “galamsey” operators), who operate with rudimentary tools, dominate the lagoon’s mining activities. These miners, often backed by wealthy individuals or chiefs, benefit from the inefficiencies in production, exploiting the resources cheaply without significant contributions to the local economy. Most of these operators do not pay taxes or royalties and do not invest in infrastructural, social, or economic development, nor do they contribute to skills development. As a result, the local population remains in a cycle of poverty, with 60% of salt pan labourers being women, who earn minimal income from their work.

Value Chain Characteristics Currently:

• Population Involvement: Approximately 9,000 out of 90,000 in the Ada area are involved in salt mining.
• Annual Salt Production: Around 80,000 metric tons.
• Revenue: Total annual revenue is approximately $12 million, with a revenue per capita of $1400. However, actual earnings for most labourers are much lower, with an average monthly income of around $70 during the dry season, leading to an annual income of about $420 for women in the sector (limited to one harvesting season). This income places most of the salt miners in poverty, earning less than $500 annually.

Economic and Social Impact:

The current state of the salt industry in the Songor Lagoon perpetuates poverty among the local population. Medium-scale operators benefit significantly, but their lack of social contracts and investments in the community keep the status quo, preventing any substantial growth or improvement in living standards. The absence of strategic investment and modernization has kept the industry at a subsistence level, unable to fully utilize the potential of the region’s resources.

It is therefore regretful that several community-based organizations and individuals are invested in keeping this cycle intact to the detriment of what could be achieved with more investment and better infrastructure development. With no investment, the industry remains dominated by smallscale, unregulated operators who exploit the resources without contributing to the community’s development.

Value Chain Transformation

Historically almost all investment activity directed towards the Songor catchment area has been in the form of Joint Ventures or Consortia due to the heft of capital required for full salt mining. This trend was bucked with the current concession which is in the hands of one entity. While this was seen by many observers as a danger and a potential monopoly, the investment by the government and the plans to publicly list the company will lend the stewardship of the company under very close scrutiny which is a very desired outcome.

Additionally, for over 30 years, there has been clear evidence that the work of co-operatives will not amount to the amount of capital (upwards of 100 million USD) that is required to transform Songor into the billion dollar a year machine it needs to be.

To understand the extent of how transformative investment can be, a view of satellite imagery of the same area before and after the allocation of the concession tells a story about the almost immediate impact of investment to keep the lagoon filled:

Picture 01: Satellite Picture of Songor Basin taken 5^th March 2019

Above is a satellite image of water deposits (brine) in the lagoon bed. This picture was taken on the 5^th of March 2019 with the Sentinel L2A Satellites. The total water in the lagoon is about 8 sq km in area.

Picture 02: Satellite picture of Songor Basin taken 12^th February 2024

This picture above shows the lagoon basin after just the development of the Western phase of the Lagoon infrastructure development taken from the same Sentinel L2A Satellites. The area filled by water and brine (coloured green) combines to about 72 sq km of just lagoon water.

This satellite picture clearly shows that at a peak period of salt mining, only about 10% – 15% of the lagoon bed had any moisture at all. This is good for artisanal salt collection but is very sub-optimal for any industrial mining, as well as any significant revenue generation either for locals, for chiefs and community, or in terms of economic potential for the nation. It is very important to understand the adverse effects on the environment, fishing activity among others.

Just over a year into phased operation, the impact of Electrochem’s management of brine ALONE is very clear:

Figure: Pre and Post Electrochem Dry Season Songor Lagoon Size

Lagoon size area:

Before ELECTROCHEM: 7KM² 

ELECTROCHEM 72 KM²

This is the result of a concentrated investment to ensure that there is full use of the resource for revenue as well as the preservation of the environment. For a roadmap to 1 billion USD annual revenue, the speed of development of the concession must be sustained.

Transformation

The improved salt industry will create 2 salt harvesting seasons instead of just one. The quality of brine, with 190 million litres of sea water pumped into the lagoon every hour, will be regulated through industrial dykes and systems to ensure high quality industrial grade salt which will be fed to all pans, including those allocated to communities adjoining the lagoon.

Already, Electrochem pays twice what the Atsiakpo operators pay to casual labourers, and the benefits will even be more since the salt pans are not owned by these middlemen, but by the communities through their family or clan heads. MOUs have been signed to ensure there is documentary evidence of their right to access the salt pans and the commitment of Electrochem to provide enriched brine to these salt pans.

Communities are direct beneficiaries of the investments and directly participate in the economic activity of salt harvesting thus preserving their age-old culture and practices, while enjoying the benefit of enhanced salt production.

The Blueprint for a Salt Mining Ecosystem

The salt mining ecosystem for Songor could be used as a national model going forward for related salt activity.

A brief view of the ecosystem and stakeholders are as follows:

Government

The government should hold the resources in trust for the communities. The benefits that accrue to the state and the government’s need for local investment to create jobs and livelihoods, tax revenue and forex potential far outweigh those of privateers. This is because, with the revenues, government can provide infrastructure and best secure the needs of its citizens. The much-needed revenue will provide much-needed infrastructure in the areas of health, education, roads, and other critical land use requirements for a thriving local economy and people.

The government should develop the groundwork and immediately establish the following:

1. An Independent Regulatory body for the Salt Industry, or
2. A salt desk at the Minerals Commission.
3. Set up a regulatory regime that governs and controls salt mining/winning at the   small, medium and large scale
4. Liaise with salt producing districts, municipalities and regions to create a Ghana Salt Producers Registry and guidelines for such operators to operate in each of the salt producing areas.
5. This regulatory framework should involve metrology standards governed by the Ghana Standards Authority
6. This regulatory framework should also include partnerships with FDA and other state agencies for quality inspection and control as well as for industrial applications.
7. Develop a community and artisanal framework for participation and collaboration with industrial-scale salt setups going forward.

Royalties to Chiefs/Clans:

The government should develop a framework for splitting some commissions to clans and allodial owners in an economically equitable way to ensure that chiefs and clans do not feel left out in terms of benefits that accrue from land utilized for salt mining/winning. This should be a collaborative process led by either the salt regulator or the Minerals Commission in conjunction with the Ministry of Lands and Natural Resources.

Investor

Electrochem is the major investor in the Songor Salt Project. By committing to investing upwards of $100 million, it needs a stable environment to generate satisfactory returns on investment within the lease period and onwards.

With this investment, the Government needs to create a favourable environment that allows for that investment to achieve in its lifetime the projected inflow of over $6 Billion into the Ghanaian economy over the next 10 years at the very minimum.

Foreign entities that contribute far less to the local economy are given huge protections and state assistance. For a largely homegrown entity that will retain earnings in Ghana, Electrochem is the ultimate litmus test for the promotion of local capital generation and wealth creation from locally sourced capital.

Keen observers are watching how Ghana’s stewardship of this investment will be to boost any kind of confidence in local capital generation.

Electrochem on the other hand has an implicit social contract to ensure that it retains as much local expertise and local employment as possible. This will enhance community confidence and justify the acquisition of the concession to ultimately fulfil the purpose of the lagoon – being to serve as a transformational and sustainable source of income.

Electrochem should also fully support the creation and establishment of the local salt-winning regulatory desk and where possible provide expert advice on how that entity can successfully support and grow the local salt industry in Ghana through research and development and a charter of best practices learning from data gathered by Electrochem operations.

Community

Communities are the most critical element to the stability of any investment. Just like the case of

Gold and other mineral concessions, communities feel attached to their land and natural resources. They should not be isolated in the process, as land ownership typical to other mineral deposits are slightly different in terms of resources like Ada’s salt.

It is imperative that communities are educated on the benefits of Electrochem’s activity in order that they position themselves effectively to take advantage. The biases planted in the minds of people through previous failures need to be corrected. This will only happen through government-led consultative processes, the work of NGOs and Civil Society actors.

Electrochem should lead work on engaging communities to assume a total sense of ownership of their community pans. These pans are their birthright and should be treated as such. Communities should be protected from encroachment by Atsiakpo and other players who might want to bully them out of access to their resources.

Finally, communities need to understand that for maximum benefit, capital injection in the form that Electrochem has executed ultimately will lead to growth of their communities, employment opportunities, increases in other indirect benefits like rental income, presence of infrastructure for education, health and other fixtures that will improve their quality of life. Without any capital injection and industrial attention, they are doomed to very humble circumstances.

Conclusion

Ghana is at a point where every economic benefit from its vast resource pool needs to be maximized for a stable and growing economy. The Republic of Ghana gains a lot of economic advantage from the use of a source of mineral deposits and revenue that literally replenishes itself till perpetuity. This unique and fortuitous nature of salt indeed is a blessing to Ghana in its bid to take advantage of new opportunities in the Africa Continental Free Trade Area and beyond.

Ghana by virtue of this project has the potential to catapult itself as the top salt producer in Africa with around 2.5 million metric tonnes annually due to the unique coastal geography and economies of scale. This could potentially rake in foreign exchange in excess of over 800 million initially to up to 1.2 billion USD annually by 2028 to put Ghana in the top 25 salt producers in the world. All top 20 salt producers are also heavily industrialized countries, which means that salt can have the ability to transform our industrialization, especially with new uses in green and renewable energy generation and storage, which is the direction of the future.

In terms of export earnings, salt revenue could contribute to about 5% of export according to 2022 rates, from the current level of 0.021%. This will diversify the country’s export commodity portfolio and positively affect our balance of trade significantly. Currently, total amounts accruing as revenue to the state from salt activity collectively do not amount to more than GHC100,000 (just over $6000) to the municipal authority.

The codification of a nationally accepted policy on how to deploy locally sourced capital and investments as a watershed to boost resource exploitation is urgently needed. The experience gained from the Electrochem and Songor salt basin activity should be reference point to refine such a strategy not only from an economic point of view but also from the perspective of nurturing and growing vibrant value chains.

The future is bright. The global salt industry is a 34-billion-dollar industry today projected to grow to around 48 billion by 2030, with annual growth of over 5% per year. This is the time to strike on a resource that does not destroy the environment, but rather creates unique and sustainable opportunities for its people. Ada should not fail, Ghana should not fail, and industry should not fail.

References

Complexity, O. o. (2023, January 31). Salt in Ghana 2022. Retrieved from Observatory of Economic

Complexity: https://oec.world/en/profile/bilateral-product/salt/reporter/gha

Electrochem. (2024). ELECTROCHEM INTEGRATED RESOURCE ROADMAP. Accra: Electrochem.

Ghana, G. o. (1991). PNDC Law 287. Accra: Ghana Government.