Ethiopia’s central bank is offering higher prices for gold in a move aimed at curbing smuggling and spur investment in mining.
Small-scale artisanal miners currently dominate the country’s gold industry but there are also a few companies prospecting for the precious metal. The Ethiopian government is looking to cleaning up the informal mining by controlling gold sales through the central bank in a move aimed at attracting more investors.
Since late 2019, Ethiopia has been working to remove barriers to investment in the mining sector with a focus on minerals used in agriculture and construction. These two sectors will help drive the Eastern African nation’s industrialization.
Ethiopia is incentivising investors developing minerals used in agriculture such and construction minerals.
The country’s mining sector has a strong potential to contribute to the country’s long-term development, social progress and economic growth. However, Ethiopia’s riches in mineral resources, including oil and gas, remain largely untapped.
When fully exploited, the mining potential to contribute to economic growth and poverty reduction in the country cannot be underestimated.
In 2018, Ethiopia’s mining sector contributed less than 1 per cent of GDP, 14 per cent of exports, 1 per cent of government revenue and only created 4,000 formal jobs.
Ethiopia’s Growth and Transformation Plan targets the mining sector contributing 10 per cent of GDP by 2025.
The Economic Commission for Africa (ECA) has, with partners, developed a Country Mining Vision guidebook to assist African countries in domesticating the Africa Mining Vision at the country level.
In 2009, African Heads of States adopted The Africa Mining Vision to which the ECA significantly contributed and which presents a paradigm shift away from commodity export dependency towards enhancing Africa’s industrial base through greater local beneficiation and value addition of minerals.
ECA’s Director of the Technology, Climate Change and Natural Resource Management Division, Oliver Chinganya says that African countries should address the resource curse paradox that continues to negatively frame minerals-led development in the continent.
He adds that this goes beyond improving mining regimes to establish how mining can better contribute to local, national and regional economic development.
For Ethiopia, to achieve this target and to successfully leverage its mining sector for economic growth and sustainable development means that the country will have to learn from the experiences and good practices of more mature mining economies and make use of available frameworks and guidelines, according to Chinganya.
Chinganya, who doubles as the Director of the African Statistics Centre at the ECA, notes that historically, the narrative of the development paradigm of resource-rich African countries has been negative in most aspects of human development. This is the case on the continent except for Botswana which has succeeded in achieving prosperity through effective management of its diamond sector.
Over the past decade, African-owned initiatives have emerged advocating for a transformative policy directive to harness Africa’s natural resources for industrialization through linkages and diversification.
Ethiopia’s Ministry of Mines and Petroleum now has in place a mineral and petroleum policy which aims at articulating the potential contribution of the sector to the country’s growth and transformation, and how best to harness the benefits the sector could deliver.
Since Ethiopia’s Prime Minister Abiy Ahmed took over, he has been shaking up several sectors in the nation of 100 million which is seeking to become a middle-income country.
The liberalization drive to transform Ethiopia has seen the ministry of Mines and Petroleum organizing consultative meetings with stakeholders to contribute to the Country Mining Vision guidebook.
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Ethiopia’s new mineral policy extensively discusses the issue of creating linkages in the economy to support industrialization and is also inward-looking as it focuses on creating linkages with manufacturing, agriculture, construction, and jewellery, as recommended in the AMV.
Chinganya says that through these deliberate attempts to link mining to industrialization, Ethiopia can distinguish itself among African countries by turning resources into blessings, especially in light of its ambitious industrial policies that could support the establishment of mineral-based supply chains that can boost government revenues, exports and GDP growth.
Ethiopia’s geological formation shows extensive mineral resources with wide-ranging potentials for continuing development.
Minerals found in Ethiopia include gold, platinum, niobium, tantalum, nickel, copper, chrome, manganese, limestone, sandstone, gypsum, clay, lignite, opal, oil shale, laterite iron ore, bentonite, perlite, diatomite, potash, halite and oil & gas.
Cognisant of the climate change challenges, Chinganya adds that the mining industry has to be climate-resilient. This, he says, would see resources used efficiently to produce smart-energy systems through an integrated resource management approach for economic growth and environmental preservation for future generations.
In July and August this year, gold shipments increased four times to 700 kilogrammes which were more than what was exported a year earlier. The exports could increase further with the central bank’s boosted prices.
While the investments trickle in, the mining sector is not without controversy.
Media reports indicate that those living near Ethiopia’s largest gold mine, Lega Dembi, have been suffering life-threatening ailments and unexplained disabilities. These mysterious ailments, according to investigative reports, have become widespread with almost every household suffering an ailment.
The New Humanitarian has reported that villages around Shakiso have children born deformed with women suffering so many miscarriages while their livestock-especially cattle- break bones like twigs. Men have reportedly crumpled and collapsed without warning.
Several investigations by the Ethiopian government into these claims are yet to be addressed.
However, the country’s flagship mining project, Tulu Kapi, is scheduled to start production in 2021. The project will be the largest single export revenue generator in the country.
The open-pit gold mine and processing facility is located 360 km west of Addis Ababa in the Oromia Region of Western Ethiopia.
Tulu Kapi project is typical of many such “open-pit-CIL-gold-projects” around the world and uses standard technology and the latest industry practices, according to KEFI Minerals.
KEFI says that it has partnered with the Ethiopian government for the jointly owned Ethiopian project company, Tulu Kapi Gold Mines Share Company (“TKGM”).
The company says that it also reinforces alignment with local stakeholders at every reasonable opportunity, illustrated by the inclusion of Ethiopian private sector investors in the long-planned Ethiopian Public-Private Partnership (PPP).