Sparkling Reality: Can Foreign Direct Investments Alone Revive the Akwatia Diamond Mine and Diamond Exports in Ghana?—A Cointegration Analysis

Abstract

The Akwatia Diamond Mine has been responsible for most of the diamond-related activities in Ghana. This study analyses the factors responsible for the recent lack of investments inflows into the Mine and also assesses diamond export performance in Ghana using the annual time series data from 1987 to 2018. The Gravity Model, a well-known model for trade flow analyses is employed into the study to assess the relationship between diamond exports and foreign direct investments as well measure its impact on gross domestic product, diamond price, real effective exchange rate and inflation rate. The study found a positive but insignificant impact of foreign direct investments on diamond export over the period under study in the long run and also reports little or no direct impact on diamond exports in the short run. The study recommends that the Government of Ghana should introduce punitive laws and regulations to guide the next Akwatia Diamond Mine divestiture to avoid a repeat of the past divestiture failures. Additionally, the study recommends that the Government of Ghana should reconsider lifting the ban on artisanal diamond mining and rather formulate and adopt policies to manage and supervise their activities to boost diamond production, exports and revenue.