Enclaves of wealth

Enclaves of Wealth andHinterlands of Discontent:

Foreign Mining Companies in Africa’s Development

Edited by Gavin Hilson

Published by

Third World Network- Africa (TWN – Africa)

Copyright © Third World Network – Africa (TWN – Africa) 2010

TWN-Africa is grateful to OSIWA, TrustAfrika, Novib, Development &

Peace and InterPares for their support in publishing this book.

Third World Network – Africa (TWN – Africa)

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Table of Contents

CHAPTER PAGE

Introduction iii

CHAPTER 1 1Mining Sector Policy - Making and the Donor Community in and for Africa : Lessons and Future Options - Bonnie Campbell

CHAPTER 2 38Strategies for Maximizing Mineral Revenue: The Zambian Experience - John Lungu and Sumbye Kapena

CHAPTER 3 52Mining Boom and Enclave Economy: Development Impact and Challenges in Mining Areas - Abdulai Darimani

CHAPTER 4 64Hiding Conflict Over Industry Returns: A Stakeholder Analysis Of The Extractive Industries Transparency Initiative (EITI) - Sarah Bracking

CHAPTER 5 86Re - agrarianizing Rural Ghana: Can Farming - Based

Alternative Livelihoods Reduce Illegal Gold Mining Activity? - Gavin Hilson and Mohammed Banchirigah

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ENCLAVES OF WEALTH AND HINTERLANDS OF DISCONTENT

CHAPTER 6 102Mining and Impoverishment: Beyond Direct Foreign Investment - Ray Bush

CHAPTER 7 117Organizing Small - Scale Artisanal Mining for Sustainable Livelihoods of Communities: The Regulator's Perspective- Ibrahim Bawa

CHAPTER 8 129Transformiong Artisanal and Small - Scale Mining for the Sustainable Livelihoods of Communities: Lessons and Options.- Oliver Maponga

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Introduction

This edited volume brings together some of the papers that were presentedat a conference organised in Accra, Ghana by Third World Network-Africa(TWN-Africa) and the Review of African Political Economy (ROAPE) inNovember 2008, on the theme: ‘Beyond Foreign Direct Investment inAfrica’s Mining Sector’. The conference brought together activists fromcommunity groups and NGOs, officials from African government institu-tions as well as intergovernmental bodies and academics to discuss the stateof mining on the continent and the experience of two decades of mining sec-tor policy dominated by strategies for attracting foreign direct investment.

The event provided a good opportunity to share mining experiences andperspectives from across Africa as well as from outside on the impact areformed mining economy has had on Africa over the past two decades.There was significant consensus among delegates inter alia that large-scalemining is contributing minimally to African economies, indigenous arti-sanal miners needed to be empowered, and that mining contracts – and per-haps more specifically, royalty agreements – are in need of renegotiation.Delegates critically reflected upon the terms under which multinationals hadgained access to, and were operating in Africa’s mining sector; what the per-petual expansion of the large-scale mining economy has meant for the con-tinent’s inhabitants; and, with the benefit of hindsight, which paths the con-tinent’s newly reformed mining economies – Mozambique, The DemocraticRepublic of Congo and Liberia – should embark upon. The range of partic-ipants, drawn from many different organizations, ensured rich and engagingdebates.

The conference took place against the backdrop of the then fast develop-ing global financial and economic crisis and the resultant downturn in theprices of most of Africa’s mineral and metal exports. The decline in pricesdid not only signal the end of the longest price boom in recent memory butalso intensified debates across Africa about the balance sheet of two decades

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of mining sector liberalisation and the consequent huge inflow of foreigndirect investment into the continent’s mining sector. A month before theAccra conference, the first African Union Conference of African Ministersresponsible for mineral resources development, held in Addis Ababa, adopt-ed a Declaration which summarised some of the concerns governments hadabout the limited contributions of the mining sector to the continent’s devel-opment. The Declaration, among other points, underscored “the need forgreater local beneficiation and value addition of Africa’s mineral resourcesand the enhancement of its industrial base through mineral sector upstream,downstream and side-stream linkages”.

In total, eight papers are contained in this volume. The first four papersexplore various financial aspects of mining sector reform in sub-SaharanAfrica. In the first paper, Bonnie Campbell provides a detailed historicaloverview of the mining sector reform experience in the region. She exam-ines the impacts of the earliest mining sector reforms implemented, whetherdifferent actions have been taken in later reforms, and what options exist forthe future. The author argues that reforms made in the past have had littlepositive effect on Africa’s populace, and that it is imperative that othercountries also looking to reform their mining economies learn from theseexperiences.

The second paper, by John Lungu and Sumbye Kapena, offers a glimpseof the conditions which led so many African countries to reform their min-ing sectors. The paper focuses on the case of Zambia, providing a histori-cal overview of mining policies in three periods of the country’s history:1928-1967, when all the country’s mining companies were privately-owned; a second period, 1968-2000, during which mines were state-owned;and a third period, 2001-present, during which mines have been re-priva-tized. Abdulai Darimani builds upon this analysis in the third paper,describing the mining regime in place in Africa, and revisiting how liberal-ization has triggered a rapid proliferation of transnational mining companieson the continent. The author furthermore – and importantly – investigateshow this activity has impacted rural communities, concluding that liberal-ization has inflicted more harm than good. Sarah Bracking concludes thissection by critiquing the Extractive Industries Transparency Initiative(EITI), an intervention which aims to bring together stakeholders to defeatthe ‘resource curse’ perceived by some to be plaguing African and other

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developing countries. She concludes, however, that the rewards are toosmall for inviting extractive MNCs to assist ‘development’ – that it is per-haps better to explore alternatives.

The subsequent four papers look at a neglected segment of sub-SaharanAfrica’s mining economy: artisanal and small-scale mining. In the firstpaper (and fifth of the volume), Gavin Hilson and Sadia MohammedBanchirigah explain why the region’s artisanal mining economy is expand-ing so rapidly. The authors argue that this is largely due to a growing num-ber of smallholder farmers ‘branching out’ into artisanal mining to supple-ment their earnings. The case of Ghana is used to illustrate this. Ray Bush,in the sixth paper, also looks at Ghana’s artisanal mining sector but in thecontext of land dispossession. He calls for the newly-elected government ofthe country to look beyond foreign direct investment, and to assist artisanalminers. Doing so, it is argued, could be the start of a process of genuinerural stakeholder empowerment and in the process, would significantly alle-viate poverty. Ibrahim Bawa’s paper provides a detailed overview ofGhana’s small-scale mining industry. It complements the previous paperwell by examining some of the challenges the government faces in bringingthis sector into the legal mainstream. The final paper, by Oliver Maponga,serves as a reminder of the socio-economic importance of artisanal miningin Africa. It addresses a range of issues, including employment, regulations,and the roles different stakeholders must play if the sector is to be formal-ized.

Collectively, these papers, and other presentations made at the confer-ence, offer fresh insight on the impact of the mining sector in sub-SaharanAfrica. They more importantly provide new ideas on what changes need tobe made to enable mining break out of its enclave and become a vector formore integrated and beneficial development across Africa. For this to hap-pen wholesale changes must be made to laws, and the roles of mining com-panies, the state and communities redefined in policy.

Gavin Hilson

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Chapter 1

Mining Sector Policy-Making and theDonor Community in and for Africa:

Lessons and Future Options

Bonnie CampbellFaculty of Political Science and Law, University of Quebec,

Montreal, Canada

Introduction: The Heritage of Past Reforms

This paper addresses the following three questions:

1. What is the record of the past reforms of regulatory frameworks for mining in Africa initiated by the donor community?

2. How can these results be explained and what have been certain attempts to respond to the problems they have raised?

3. The present context : Current trends and future options

Since the 1980s, at the recommendation of the international financial insti-tutions, new mining regimes have been introduced in what can be describedas a cumulative process of privatisation and liberalisation. For example,Ghana’s liberalized code of 1986 served as a model for that of Mali in 1991,with new versions subsequently introduced in order to align the formerMalian code on more recent and increasingly liberalized conditions.

The reform of regulatory and legal frameworks that took place in Africain the 1980s and 1990s created more favourable environments for foreigninvestment. In the process, however, the role of the state has been redefined,which is so profound that it has no historical precedent. In large part because

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of this, the reforms have had reduced institutional capacity, constrained pol-icy options, as well as diminished standards in areas of critical importance,including social and economic development, and the protection of the envi-ronment. They have entailed as well, a direct attack on the capacity of statesto exercise their sovereignty. It may, indeed, be argued that the emphasisover the last two decades by multilateral financial institutions on creating anenvironment favourable to attracting foreign investment in the extractiveindustries, through liberalisation and privatisation but in the absence ofmeasures for meeting development objectives and in the presence of fragilestate forms, has, in fact, impeded development. In the absence of redistrib-utive measures, such an approach may have contributed as well, even ifinadvertently, and may continue in the future to contribute to social exclu-sion and inequality in the countries concerned and consequently, to theincreasing instability and potential conflict. Strong evidence suggests thatthe latter tendency will continue in an increasing number of situations if pol-icy changes are not introduced (UNCTAD, 2005). The results of recentresearch (Campbell, 2003) were summarized for discussions at UNCTADusing the following categories identified by the organization:

1) Size and distribution of budget and export revenues;2) Employment and linkages;3) Industrial diversification and infrastructure;4) Environment and local communities; and5) Broader social development issues.Two of the above categories will be used to summarize this broader

topic. The first concerns the contribution of the sector to governmentreceipts and the second, the impact of mining activities on the environmentand local communities.

The Size and Distribution of Budget and Export Revenues from Existing ResourcesQuestions about the mine taxation agreements in place in sub-SaharanAfrica are now being raised. Two decades of reform, during which empha-sis was placed on keeping modest, the level of royalties, duties, as well asother forms of taxation, has brought this issue to the fore. Whilst obviously

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a very complex subject that varies widely among different mineral sectorsand country situations, the experience of Guinea, where considerableresearch has been carried out by the author, will be drawn upon throughout.

According to the 2005 estimates of the World Trade Organisation(WTO), Guinea1 has 20 billion tons of bauxite reserves which are excep-tional both in terms of their quantity and quality. The country is responsiblefor approximately 40 per cent of world commerce of this resource, as wellas between 30 and 40 per cent of the supply of bauxite to the United Statesof America (WTO, 2005b). National production remained at approximately17 million tons for nearly ten years, and experienced a slight decrease to 16million tons in 2004. The value of bauxite exports exceeded US$292 mil-lion, which meant that this resource represented over 40 percent of the valueof the country’s total export receipts if all sectors are considered.

But whilst the mining sector has represented as of 1995 on average, 80per cent of the value of national exports, since then it has contributed, onaverage, less than 20 per cent to central government revenue. This situationis in stark contrast to that which existed in the 1980s when the contributionof mining revenue to the fiscal receipts of the state exceeded 70 per cent.There is a considerable amount of speculation and debate as to the futuredevelopment of this potentially very rich sector. Rather than projecteddevelopments, what will be discussed here is the role that the sector hasplayed during the decade since the reform of the country’s mining code in1995 under the auspices of the Bretton Woods Institutions.

According to data produced by the International Monetary Fund (IMF),the contribution of the mining sector to Guinea’s total exports in 2004 rep-resented 92.3 per cent, which could be subdivided as follows: bauxite: 40.5percent; alumina: 22.6 per cent; diamonds: 6.7 per cent and gold: 22.6 percent (IMF, 2006, p. 48). The decrease in the country’s mining receiptswhich include exports of gold and diamonds but of which the bauxite and

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1 This section is based on Bonnie Campbell “Walking a fine line, Liberalisation, Policy Spaceand the Challenges of Development: Lessons from the Guinean Bauxite-Aluminium Sector”,Presentation to the World Bank Group Extractive Industries Advisory Group, Oil, Gas,Mining and Chemicals Department, IFC, Washington: June 20, 2006. To be published in aforthcoming volume of the Political Economy of Mining in Africa, in Y. Graham and B.Campbell (Eds).

alumina sectors represent by far the most significant share, has been suchover the last years that the contribution of the mining sector to central gov-ernment revenue has slipped from 73.7 per cent in 1986, to 26 per cent in19962 and to 18.27 per cent in 2004 (IMF, 2006), with projected figures of14.8 per cent for 2007 (see Table 1).

Table 1: Guinea: Central Government Revenue, 2000-2007 (in billions ofGuinean francs)

Based on: International Monetary Fund (IMF), Guinea: Selected Issues and Statistical Appendix, IMFCountry Report No 06/25, Washington D.C.: IMF, January 2006, p.55 and IMF, Guinea : 2004 ArticleIV Consultation – Staff Report; Staff Statement; and Public Information Notice on the Executive BoardDiscussion, IMF Country Report No 04/392, Washington D.C.: IMF, December 2004, p.29.

Just over ten years after the adoption of the reforms aimed at liberalizingthe mining sector, it is recognized now that, ‘[al]though appropriate, all ofthese reforms to the mining sector failed to produce the positive impact onthe national economy that had been hoped for’ (WTO, 2005a, p. 9). The par-adox of the decline in the contribution to fiscal receipts is all the more strik-ing in view of the relative stability of production figures (as illustrated inFigure 1). These trends take on particular importance when it is the leading

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2005 2006 20072000 2001 2002 2003 2004 (proj.) (proj.) (proj.)

Revenue andgrants 719.8 873 876.9 952.7 1,027.4 1,325.2 1,497 1,701.4

Revenue 594.5 670.2 763.9 754.1 936 1,153.6 1,311.3 1,509.7

Mining sectorrevenue 146.4 166.6 145.4 105.9 171 177 195.4 223.6

Share of miningrevenue in totalgovernmentalrevenue(excluding grants) 24.63% 24.86% 19.03% 14.04% 18.27% 15.34% 14.90% 14.81%

2 Integrated Framework, Guinea : Diagnostic Trade Integration Study, August 22th 2003,p.3, [PDF] http://www.integratedframework.org/files/guinea_dtis-vol1_25nov03.pdf

mining sector concerned – that is, the sector on which the country dependsto meet performance criteria of the international financial institutions andmore basically, to permit the restructuring and diversification of its econo-my with a view of stimulating growth and contributing to poverty reduction.

Figure 1: Guinea – national production of bauxite, 1975-2003

Based on: Raw Materials Data, November 2005

The study from which these observations are based draws attention to themanner in which price negotiations have taken place and specific contractsnegotiated over time. Moreover, as will be seen, the outcomes of certainrecent negotiations appear neither consistent with the objectives of the gov-ernment nor with those of international financial institutions – that is, tosecure stable revenue for the country from its rich mining sector.

There are obviously enormous differences concerning the capacity ofdifferent countries to benefit from budget and export revenues from existingresources. The varying conditions rest on a wide range of issues such as the

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terms of fiscal and customs incentives set out in mining regulations, and thenature of the negotiations which take place around specific contracts. Ananalysis of the experience of Guinea in comparison to that of differentAfrican countries illustrates that trends in the country with regard to disap-pointing budget and export revenues accruing from mineral resources, arein fact, part of pattern.

With regard to the nature of fiscal and customs incentives, two otherexamples illustrate overall trends towards increasing liberalization. In thecase of Mali, incentives offered to attract investment in the 1999 miningcode include a decrease in government participation in the shares of compa-nies, taxes and amortization. In Burkina Faso, the revised 2003 mining codedealt primarily with a reduction of tax rates (taxes on trade and industrialprofits and taxes on investments), the introduction of tax exemptions onactivities during the preparatory phase, and the extension of benefits to sub-contractors.

The objective in both cases translates a desire to use regulatory frame-works to create conditions to attract investment into these mineral-richeconomies. From hindsight, however, one can document the very real neg-ative implications of such generous conditions and in this regard, it is notvery surprising, particularly in the context of strong metal prices that thependulum should have swung in a different direction. This has taken placein a range of countries, and is illustrated effectively by the case of Tanzania(Edwin, 2006), where a number of initiatives have been undertaken to revisepast contracts. Key concerns in this case revolved around past agreementsthat the government had entered into with investors, resulting in meagrereturns and royalties, lack of transparency in the mining sector and at times,poor social relations. These led to the government carrying out in-depthevaluations to determine why revenue from mining activities is so small.Companies were obliged to pay US$200,000 annually to local authoritiesand a royalty of 3 percent of the value of exports to the government.Subsequently, legislators were demanding better profit-sharing arrange-ments and fuller accountability to the communities where mines are locat-ed.

With regard to the nature of the negotiations which take place aroundspecific contracts, certain observations have been made as to how these canimpact unfavourably on government revenues as did a study undertaken in

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2005 for the Guinean Ministry of Mines and Geology (Otto, 2005). Amongother things, the study recommended abolishing the procedure permittingthe negotiation of individual and parallel fiscal agreements for specificmines project. Through the negotiation of such specific agreements, compa-nies can benefit from fiscal exemptions which are over and above the advan-tages already set out in the 1995 mining Code, and which the authorities infact attempted to abolish in October 2004, further to one of the key recom-mendations of the Public Spending Review by the World Bank which waslinked to the implementation of the country’s PRSP (WTO, 2005b).Nevertheless, mining companies have continued to benefit from a specialstatus and as has been noted by the WTO: ‘The incentives given to approvedmining enterprises are still much more attractive than those for non-miningenterprises under the Investment Code’ (WTO, 2005a, p. 54).

The implications for central government revenue and consequently, forsocial expenditure and the future overall composition of public spending ofat least one of the more recently signed agreements for large projects fortransformation of Guinean bauxite, merit special attention. In October 2004,the Minister of Mines and Geology of Guinea signed an agreement withGlobal Alumina Corporation (the ‘Global Agreement’) providing for theconstruction and beginning of operations permitting bauxite to be trans-formed locally. The agreement provides a good illustration of the riskswhich are presented by this type of negotiation. This Basic Agreement, aswell as the amendment that was signed in May 2005 that modified certainterms of the former, subsequently unanimously ratified by Guinea’sNational Assembly and then adopted two months later by presidentialdecree (Global Alumnia Corporation, 2005), was also examined by thestudy of the Guinean Mining Taxation System, which concluded that (Otto,2006, p. 9):

- The agreement bears little resemblance to the fiscal system in the 1995 Code Minier and the 1996 Convention;

- The initial agreement fiscal terms, before amendment, are so much in favour of the investor, that it is doubtful whether future politicians will honour it. In the context of global best practice, the agreement clearly does not provide a ‘fair’ share to government;

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- The 2005 amendments are an improvement but will act as a dangerous precedent, as future investors will demand similar treatment.

The study, Guinean Mining Taxation System, illustrates that a tax system‘[…] which takes into consideration international competition’3 can, in the-ory, by compatible with a tax system which offers an appropriate portion oftaxes to the state. However, in spite of the clauses present in current miningregulations, the conditions governing the distribution of mining revenuespresently depend on specific contracts which can be negotiated between thestate and companies. The content of such agreements depends consequent-ly on the negotiating capacity and institutional coherence of the governmentconcerned, both of which have been significantly affected over the lastyears, notably by the forms of liberalisation which have been introducedinto the country; a point to which we shall return in the second section ofthis article.

The Environment, Local Communities and BroaderSocial Development IssuesThe issues in these broad areas are as numerous and complex. Two will bereferred to briefly here. The first concerns past trends with regard to typesof provisions contained in evolving regulatory frameworks and the secondconcerns the capacity of governments or lack of it, to ensure enforcement ofregulatory measures. Contrary to what might be assumed, there has notbeen a trend ensuring that positive modifications included in more recentregulatory frameworks which improve social and environmental protectionfor example, will be incorporated into more recent mining regimes.4 In this

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3 Organisation des Nations unies pour le Développement Industriel, Guide de l'homme d'af-faires. Investir en Guinée. Guinée : pays aux ressources multiples, pays d'avenir..., ONUDI,[PDF] http://www.unido.org/fileadmin/import/21714_Guinea_InvestorsGuide_French.pdf,p.21.

4 The following section is based on the research of Gisèle Belem who completed a doctoratedegree at the Institut des Sciences de l'Environnement at the Université du Québec àMontreal (2008) and on her forthcoming chapter: “Development policies and poverty reduc-tion: Lessons from the Malian gold mining industry” to be published in The PoliticalEconomy of Mining in Africa, Y. Graham and B. Campbell (Eds).

regard, positive developments can be illustrated by the Malian experiencefor, in contrast to the 1991 mining code, the 1999 code takes into account,for example, the relocation of populations affected by mining:

The relocation and resettlement of populations whose presence on mining sites might prevent extractive activities will proceed at the request of a mining title holder. The title holder will be responsible for the displacement and resettlement on a site chosen to this end.5

Moreover, the 1999 code requires the creation of a community develop-ment fund in which US$5000 must be invested every month. This fund ismanaged by a committee comprising representatives from the administra-tion, local collectives and the mine; and, it is used to finance projects select-ed by the said committee. In addition, mining directors have a discretionaryfund which is managed by the director of every mining site for developmentproject purposes.6 Since 2000, payments are also being made to the patenttitle for the benefit of the local collectives. Together, these funds are used tofinance community development projects. Additionally, mining companiesare required to provide housing, as well as sanitation, schooling and leisureinfrastructure to miners and their families. Finally, with respect to employ-ment, companies are required by the 1999 mining code to respect generalworking conditions and give preference, given equal qualifications, toMalian personnel.7 Health and occupational safety issues are governedthrough the mining code by regulations set forth for protection and preven-tion, in conformity with international norms established for occupationsdealing with the transportation, use or storage of explosives.

The 2003 Burkina code is in most respects, similar to the Mali 1999code. There are, however, certain noticeable distinctions. Although it ismore recent, it does not take into account the displacement of populations and

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5 MMEE (Ministère des Mines, de l’Énergie et de l’Eau), Code minier, 1999, Article 69.[Mali Mining Code]

6 The funds amounts to US$100 000 in the case of Sadiola, US$5000 per month in the caseof Morila, and US$100 000 in the case of Yatela.

7 MMEE, op.cit. Article 126.

does not require of the mining companies the preferential training oremployment of Burkinabe personnel. This relaxation of requirements in theBurkina code is also noticeable from the point of view of the environment.

With regard to environmental concerns, again, the Malian experience isinstructive. Currently, there are two mining codes which apply to environ-mental management in the mining industry in Mali. The 1991 code wasapplied by the three mines active in 2006: Sadiola, Yatela and Morila, andthe more recent mining code which is more demanding with respect to theenvironment, was only applied by new mines. Mining permits are issued fora period of 30 years, renewable for 10 years until a mine’s reserves areexhausted.8 A permit is issued as long as the following are provided: a fea-sibility study, a mining development and extraction plan containing an envi-ronmental impact assessment, a strategy for attenuating impacts and a planfor environmental follow-up. Mining permit holders must also set up andinvest in a trust fund which will serve to cover the costs of preservation andrehabilitation of the environment. Recognition of these requirements is par-ticularly noticeable in Mali’s mining codes.

The 1999 mining code is much more demanding than that of 1991. Thelatter imposes virtually no obligations on mining companies in the area ofenvironmental protection. Rehabilitation work and responsibility for inci-dents are mentioned only in passing. However, gold mining entails majorecological risks, including deforestation, soil erosion, water table and sur-face water pollution caused by chemicals used in the extraction process, airpollution caused by smoke and dust, and the disappearance of fauna due tonoise. The 1999 mining code has taken into account these environmentalrisks. As discussed above, the majority of mines are still operating under the1991 code. In spite of this situation, however, companies are carrying outenvironmental impact assessments, as recommended in the 1999 code.

The 2003 Burkina mining code contains environmental demands similarto those of Mali. However, there is one important difference between thiscode and both the Malian and the older Burkina codes, namely, the exemp-tion of environmental requirements during the exploration phase:

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8 MMEE, op.cit., Article 43.

All mining title applicants who wish to carry out work potentiallyharmful to the environment on their site must, with the exception of exploration permits and quarrying authorizations, in compliance withthe environmental code, provide a notice or, as the case may be,undertake an environmental impact assessment along with a publicenquiry and a plan for attenuating or reinforcing negative and positive impacts.9

This exemption also applies to the restoration of explored sites. But asspecifically indicated in the 1999 Mali mining code, exploration permitholders must carry out restoration work every time prospecting activitiesentail:10 Underground work using galleries or wells; the creation of an accu-mulation till; work on accumulated materials; probes affecting waterresources or modifications of the topography in excess of one metre.

This exemption, as with fiscal exemptions, is a significant incentivewhich might explain in part the important increase in the number of miningpermits delivered in Burkina since 2004. Thus, although it is taken intoaccount, it seems that environmental preservation remains a low priority, inlight of the relaxation of obligations apparent in more recent West Africanmining codes.

Concerning the capacity to ensure enforcement of regulatory measures,again, Mali provides an interesting illustration. The main environmentalproblem caused by mining in Mali relates to the use of cyanide for the treat-ment of ore. This is particularly significant at the Sadiola Mine, whererecent modifications in the extraction process have led to the application ofa greater quantity of cyanide. Specifically, the amount of cyanide used hasincreased from 500g to 1500g per metric ton, resulting in elevated concen-trations of the chemical in tailing dams from 50mg/l (which is the maximumrecommended by World Bank) to 150mg/l (CSA, 2004). Mismanagement ofthe chemical led to the death of animals in 2002 and birds (107 cases) inMay 2003 (DNGM, 2003). Water samples collected during the same period

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9 Ministry of Mines, Quarries and Energy (MMCE). Law No. 031-2003/AN on the MiningCode, Burkina Faso, July 31st, 2003, Article 77.

10 MMEE, op.cit., Article 117.

revealed a cyanide concentration of 300mg/l when the maximum recom-mended is 50mg/l. The mining company subsequently used detoxificationreactants to reduce cyanide concentrations and undertook some researchinto recuperation of cyanide and its impact on the death of birds, both aloneand in combination with other reactants.

Reports on water quality remain contradictory. Whilst a 2002 analysisundertaken for the Commission for the Monitoring of Mining Companiessuggests that well water consumed in Sadiola and Farabakouta containsarsenic levels in excess of accepted world standards, the CSA Group’sreport concludes that this water is of good quality. In Yatela, however, heavymetal concentrations (arsenic and lead) in excess of WHO recommendedlevels have been measured in groundwater. At the end of 2003, an increasein arsenic concentration was recorded at the Morila Mine. Moreover, acyanide tailings spill was reported at this mine in 2003, causing the death ofa few animals.

Currently, several health problems (miscarriages, illnesses, etc.) havebeen reported in studies by international NGOs, most notably, those of Lesamis de la terre (2003), and Coalition dette-développement (2003).However, to date, no study has been undertaken at the national level toassess the impacts of water quality and the environment in general on pub-lic health. As of 2006, two studies were underway: One socio-demograph-ic, and the other epidemiological, both aimed precisely at identifying theseimpacts.

These studies have been financed by SEMOS and were carried out by theMalian National Institute for Public Health Research. The first study, whichwas socio-demographic in nature, was completed several years ago. Thisstudy focused on the perceptions of the communities regarding the impactof mining activities on their health. The study found that it is stronglybelieved by the population that the high proportions of miscarriages whichhave taken place recently in certain villages located in the mining area werecaused by mining activity. In these areas, the highest proportion (0.8) hasbeen found in the village of Yatela with four miscarriages per five pregnan-cies for the last five years. This must be compared to a proportion of 0.37for the whole mining area (14 villages around Sadiola and Yatela) and a pro-portion of 0.36 for the control area (seven villages of a distance of at least20 km from the mines). However, although the communities perceive health

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problems to be related to mining activity, only the second study which hasas its objective: to establish the medical diagnosis, would permit confirmingthese presumptions. After several years, when the findings of the secondwere finally made public, these suggested that the results of the first wereinconclusive.

Generally speaking, environmental regulations and the capacity of gov-ernment authorities to enforce them have been insufficient with regard tomining activities. Thus, the use of cyanide in the extraction process has nei-ther been taken into account by the mining codes or any specific regulations.AngloGold-Ashanti, the company running all three currently active mines,has taken this aspect into account by voluntarily adhering to the‘International Code for the Management of Cyanide’. Compliance with thiscode is being monitored by foreign external auditors. Reports evaluatingmining companies have recommended that the DNGM adheres to this codefor monitoring cyanide use in Mali.

It is important to note that this voluntary code does not take into accountall the activities associated with safety or the environment during planningstages, the construction of storage systems for residual products or the long-term closure and rehabilitation of the mine. Given that problems associatedwith the increased usage of cyanide and acid mine drainage persist, plans forthe closure of mines, notably Sadiola, have been revised. The CSA Groupestimates that the costs of closure and long-term monitoring of this mineshould be revised upwards because ‘acid mine drainage is likely to be a realproblem over the medium and long term at Sadiola’.11

Problems with mine closure have been particularly significant at theSyama Mine, as no closure plan had been devised by its operating compa-ny, BHP. Randgold, which took over the mine, drafted a closure plan, butaccording to a 2004 report by the CSA Group:

• Tailings piles and the walls of the mine are unstable and dangerous;• Tailings dams show leaks and signs of water contamination; and • Surface water monitoring is inadequate.

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11 CSA Group, op.cit.

Moreover, the mine’s closure caused a deterioration in existing socio-economic conditions through the closure of the clinic, the break in the watersupply, and interruptions in garbage collection (Thiam et al., 2004). In 2004,the Syama Mine was acquired by Resolute Mining and this company hassince committed itself to undertaking the progressive rehabilitation of thevarious areas of activity once the Syama Mine becomes operational again.12

From an environmental perspective, mining companies are conformingto the 1999 code, but setting associate targets on their own. Mali, for exam-ple, does not have any environmental standards in the areas of water quali-ty, dust or air pollution. The country has environmental regulations whichspecify that companies must protect the environment and behave in con-formity with ‘high international standards’. Consequently, mining compa-nies follow World Bank, World Health Organization or South African stan-dards when addressing issues of environmental protection. No follow-up orcorrective measures currently exist.

With regard to the environment, as the Malian experience illustrates,although there may in fact be provisions for impact assessments, researchcarried out in this area points to the constraints weighing on the governmentbecause of the absence of resources, its lack of access to information andconsequently, the lack of headway made thus far in this regard(Soulemayne, 2000). Similarly, in Madagascar (Sarrasin, 2002), in spite ofthe introduction of legislation to ensure environmental protection and a new1999 mining code, there is good reason to question whether the governmentof this country, just as that of Mali, is in fact in a position to ensure theenforcement of environmental standards should they not be respected byprivate operators, for the reasons pointed out by the World Bank: ‘After sev-eral years of budgetary reductions, Government institutions lack the humanand financial resources to enforce the law, especially in the context ofdecentralization’ (World Bank, 1998, p. 6).

Under the circumstances, although countries such as Mali andMadagascar do possess legislation in the area of environmental protection,its application is far from assured, particularly in the context of the

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12 Resolute Mining Ltd, “Development Overview : Syama ”, [Online] http://www.resolute-ltd.com.au/res_d/syama.html, 2006.

increased liberalization contained in their respective mining codes. This sit-uation appears to leave responsibility for the monitoring and enforcement ofenvironmental norms largely in the hands of private operators and, becauseof the heritage recognized by the World Bank, there is good reason to havereservations concerning the capacity of local states to question or remedythe resulting practices.

How Can These Results be Explained and What HaveBeen Certain Attempts to Respond to the ProblemsThey Have Raised? Past approaches taken to reform mining regimes clearly attempted to pro-vide a general template for mining codes with the objective of attracting for-eign investment, disregarding to a large extent the diversity of situations andthe specificities of different countries which are characterized by distinctpolicy traditions, trends and objectives, reflecting an enormous variancewith regard to history and context. By way of illustration of this uniformapproach, the World Bank’s 1998 publication, Assistance for MineralsSector Development and Reform in Member Countries (Onorato et al.,1998), and notably its Appendix 2, ‘Summary of the Essential Elements ofa Modern Mining Code’, reads as both a blueprint and a call for financialsupport for the implementation of the recommendations proposed in 1992,Strategy for African Mining (World Bank, 1992). Accordingly, ‘There aremore than twenty projects where the World Bank has been involved in the1990s in the process of reviewing and revising the laws which affect miner-als development in developing countries and countries in transition to mar-ket economies’ (World Bank, 1992, p. 14). Whilst these countries of Africa,Asia, Eastern and Central Europe and Latin America are recognized to varygreatly (World Bank, 1992, p. 14-15):

They nevertheless share the common objective of reviving andexpanding development of their minerals sectors by stimulatinggreater private sector participation. Although the policy, legislative and regulatory solutions adopted bythese countries may have different features, some common themesare apparent. ‘Successful’ countries have well articulated policies and

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legal and institutional frameworks which support small and largescale mining without imposing uneconomic fiscal burdens.

Examples of successful countries identified included Chile, Indonesia,Papua New Guinea and in Africa, Ghana. In the latter, the resurgence of thegold mining industry was underlined and among the reasons given were thegovernment’s commitment to its private sector minerals development poli-cy, the adoption of new mining laws in 1986 and the privatization of theState Gold Mining Company’s assets in the 1990s. Moreover, it is noted that‘Taxes are not burdensome, and substantial foreign exchange sales revenuescan be held offshore’ (World Bank, 1992, p. 15).

The study identified the following 13 essential elements of a modernmining code:

1) the scope of the law, 2) institutional framework, 3) participation of affected people, 4) access to mining activities, 5) security of tenure, 6) regulatory aspects, 7) private land owners, 8) ancillary licenses and permits, 9) other project activities, 10) investment contracts, 11) fiscal issues, and finally, 12) environmental issues and 13) social matters. In order to envisage a broader developmental framework for the mining

sector, it is useful to analyze the ‘development model’ which informed pastreforms and the institutional reforms which were introduced to accompanyand legitimize that model. It is useful as well to examine how current poli-cy recommendations have attempted to respond to the problems and thecontradictions which the latter patterns have produced.

Three characteristics of the process of reform of mining regimes whichhas evolved over the last twenty years in Africa merit special attention.First, what was privileged was an approach informed by the needs ofinvestors which were formulated in answer to questionnaires designed tothis effect in order to determine what conditions might best attract invest-ment.13 As a result, consideration of what was needed was premised on asectoral approach rather than one which might have sought to articulate the

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13 This can be documented by the following World Bank (1992) and Naito et al. (2001).

contribution of the mining sector into broader macroeconomic objectivesinvolving inter-sectoral linkages for example, with a view of seeing to whatextent the sector could contribute to broader developmental objectives. Theapproach was premised on the idea that the sector’s role would be primari-ly one of bringing fiscal receipts. In fact, little provision, if any, was madeto build eventual backward and forward linkages, such as the possibility ofvalue-added processing of minerals, which in a resource extraction econo-my would normally be considered important development objectives. Suchan approach can be seen as obviously quite distinct from one which foreseesa transformative role for mining with the sector acting as a catalyst forchange to the rest of the economy.

Second, with regard to the environmental effects of mining activity, andsubsequently, the social impacts which remained much less developed thanother aspects of regulatory frameworks, these impacts were seen as sideeffects which could be regulated by the introduction of performance stan-dards. The voluntary application of such standards was seen to rest above allwith the mining companies rather than being considered as issues whichwere clearly interrelated and integral parts of development strategies entail-ing overriding government responsibility. In this perspective, concern foractivities of small-scale miners may be seen as somewhat of an ‘afterthought’ to be added on to a model which was concerned above all, not withnational development, but rather with the introduction of a specific form ofinvestment-driven ‘export-led growth’, introduced in a context of theindebtedness of the countries concerned and often through structural condi-tionalities.

Third, and most important, underlining the above approaches of the1980s and 1990s, one trend stands out above all others and it concerns theredefinition of the role and functions of the state and the new delineationbetween public and private spheres of authority which have accompaniedthis redefinition. It can be argued that these changes have had central impli-cations; not only for the social and economic development of the countriesconcerned, but have also entailed implications for the legitimacy of theactivities of mining companies and of states themselves. These implicationsdo not seem to have received the attention which they deserve.

In this regard, in the policy environment of the 1980s and 1990s andunder the leadership of the World Bank Group:

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[The] new agenda advocated comprehensive privatisation of statecompanies, an end to restrictions on foreign ownership and therepatriation of profits, lowering rates of taxation and royalties,restructuring labour laws to permit greater flexibility, and the termination of performance requirements such as those mandatinglocal sourcing or local hiring. In addition, mining legislation had tobe rationalised, administrative processes simplified, technical services to the industry (such as modernisation of the mining cadastre) improved and ‘subjective’ elements of bureaucratic discretion removed from the permitting and approvals processes.[Szablowski, 2007]

These were the policy implications which accompanied the major redef-inition which was recommended and in fact introduced, concerning the roleof the state. In its report, Strategy for African Mining, 1992, the World Bankset out that the role of government was to create a suitable environment forthe private sector. This required, ‘A clearly articulated mining sector policythat emphasizes the role of the private sector as owner and operator and ofgovernment as regulator and promoter’ (World Bank, 1992, p. 53). AsSzablowski (2007, p. 34) notes, government was to stop ‘being an owner-operator pursuing social or political goals through its operational involve-ment in the mining industry’. Instead, governments were encouraged ‘tobecome efficient and ‘apolitical’ regulator[s]’. Their role was to facilitateprivate investment. The myriad of policy that the World Bank promotedthrough the package of privatisation and liberalisation reforms was accom-panied by the assertion that the early reformers were ahead of their competi-tors. Africa’s experience over the last 20 years has been a cumulativeprocess of reform leading to several generations of increasingly liberalizedmining regimes.

One of the consequences of the liberalization of the African mining sec-tor has been the way in which past public functions of the state have increas-ingly been delegated to private operators. These include service deliveryand also rule-setting and implementation. The tendency has been for ‘anincreased (and often reluctant) assumption of state – like responsibilities bytransnational mining enterprises at the discreet behest of weak govern-ments’ (Szablowski, 2007, p. 120).

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Another coping strategy adopted by states to deal with new miningregimes was one of ‘selective absence’. As a result, ‘the retreat of the statefrom the mediation of socio-economic relations has left private enterpriseincreasingly subject to social claims’ (Szablowski, 2007, p. 60). The result-ing blurring of responsibilities and ambiguities which such situations mayat times produce results in companies finding themselves dealing with thedemands and expectations of communities, with the risk of potential degen-eration into conflicts and the resulting growing concern of companies withthe ‘securitization’ of mining activities.

The issue of the weakened institutional and political capacity and conse-quently of the regulatory capacity of host governments, as Szablowski hasunderlined, is particularly salient. As legitimacy and regulation are interde-pendent products of legal processes, the absence of attention to such issuescan only detract from the establishment of regulatory terms which aredeemed legitimate.

The responses to the issues of the legitimacy of the operation of privateoperators which have arisen in large part because of the weakened institu-tional and political capacities of states have been of three types. In the firsttwo, the issue that is being debated through the resulting process concern-ing the rights and obligations of enterprises is ‘the regulatory terms onwhich different audiences are willing to find that the entitlements of transna-tional enterprises will be deemed legitimate’ (Szablowski, 2007, p. 65). Inthe third, the answer is to turn to direct forms of ‘securitization’ through theemployment of private security forces.

A first response to issues of legitimacy has been the emergence of a com-plex body of norms and standards which in large measure have their originin the multilateral arena. This elaborate set of standards concerns a widevariety of areas, including, for example, environmental impact assessments(EIAs), and involuntary resettlement (IR) of project-affected people, andwhich collectively can be seen as the World Bank Group (WGB) safeguardpolicy regime. These norms and the practices which accompany them havebeen referred to by Szablowski as constituting a new ‘transnational legalsystem’. Whilst the body of these continually-evolving standards is obvi-ously very detailed and substantial, these developments raise several diffi-culties. These include the issue of the local appropriation of the new bodyof norms and how they cohere with national policy objectives, their

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segmented nature as a result of dealing with specific areas, or again, theoften unresolved question of the capacity of states to monitor, enforce andif necessary, deliver remedial solutions. Paradoxically, these issues, whichthe new regulatory frameworks were intended to resolve, are likely to poseproblems of legitimacy for mining operations in the future.

There are, moreover, several other drawbacks concerning the manner inwhich these new norms have emerged and the practices which accompanythem. An additional one is the preference for technocratic over politically-legitimating processes among project sponsors and corporate-orientedtransnational law-makers, such as the Multilateral Investment GuaranteeAgency (MIGA) and the International Financial Corporation (IFC)(Szablowski, 2007). This option raises problems of legitimating which havenot yet been addressed. For in the routine application of its social provi-sions, the WBG safeguard policy regime lacks the oversight required toensure that its goals are being achieved. There is also the difficulty relatedto the forms of participation which accompany the implementation of theWBG safeguard policy regime.14 Finally, and most importantly, the emer-gence of a body of norms and standards that have their origin in the multi-lateral arena, as with EIAs, legitimizes the operation of private operatorswhilst failing to clarify the regulatory responsibilities of governments. Thecurrent process may allow governments to shift the locus of responsibilityfor what were previously considered state functions (clinics, roads, infra-structure, etc.) to the private operators of large-scale mining projects. Sucha transfer, however, not only silences the legitimate and, indeed, necessaryright of governments to offer services to their populations, a precondition to

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14 Szablowski (2007) illustrates this issue with regard to the controversial policy ofInvoluntary Resettlement (IR). The argument made is that IR Policy represents a normativechange as compared with former state legal regimes. This is because of the manner in whichthe various responsibilities for policy implementation, including fact-gathering, local consul-tation, resettlement plan design, are assigned to the project sponsor. As a result, the form andcontent of the involvement of project-affected people are determined by the companies par-ticipating in the process and their input is mediated by the supervising agency via the com-pany’s reports. Thus ‘project-affected persons […] are not parties to the private contractualrelationship that exists between the WBG agency and its client’. They are, therefore, deniedrights of access to information and decision making that affects their IR. Szablowski (2007,p.119-120).

their being held publicly accountable, but also contributes to obscuring theissue of government responsibility itself.15

In a parallel manner to the introduction of norms and standards to ensurethe legitimacy of the activities of private operators in response to the weak-ened institutional and political capacities of states in many of the mineral-rich countries of Africa, a second response has been the tendency on the partof multilateral financial institutions and certain Western governments tosuggest that such issues, which are in fact deeply-rooted historically, insti-tutional and country specific, can be treated as ‘weak governance’.According to this approach, they can be resolved by the introduction of theappropriate set of good administrative practices and procedural measuresand monitored using ‘governance indicators’. This is problematic for sever-al reasons. Such an approach introduces parameters which seek to quantifythe performance of historically-constructed, country-specific, highly com-plex institutional relations, around notions which are themselves the sourceof evolving definitions, the object of debates, as well as at times highly sub-jective. Examples include ‘government effectiveness’, ‘regulatory quality’,‘voice and accountability’. The increasing technicization of decision-mak-ing processes runs the risk of sidelining important substantive debates andnotably of depoliticizing issues such as resource distribution which maythen be treated as a technical question when it is clearly a political one.Consequently, these issues are difficult to track, monitor and measure withindicators because they often involve political choices and not only techni-cal decisions.

Moreover, in the context of an overriding emphasis on technical andadministrative aspects of ‘governance’, current proposals to contribute to‘capacity building for resource governance’ in developing countries, unfor-tunately, miss the key point that past reform measures, which have soughtto open up the extractive sectors for investment, have been implemented in a

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15 Referring to one aspect of this broader process, EIAs, Szablowski (2007) notes that theirmost significant feature ‘is that it does not have any mechanism for fixing the ‘social respon-sibility’ of government’…‘The decision-making architecture of EIA provides no place fordiscussing the issue of governmental responsibility for social and environmental burdens thatwill not be assumed by the project proponent’ (Szablowski, 2007, p.57).

manner that has severely weakened the political and institutional capacity oflocal governments. Consequently, it becomes a circular argument to call forthe reinforcing of local capacity if the nature of past and ongoing reformswhich weaken local capacity is not questioned.

Guinea provides a particularly interesting example of these issues andmore specifically, the role of the multilateral financial institutions in the areaof improving governance. Whilst the more recent recommendations thathave been proposed by the WBG point to the need for greater transparencyand accountability, in practice, the resulting policies proposed remain large-ly ‘procedural’ rather than ‘substantive’ in nature. They have been directedat improving administrative and management issues and not the relations ofwhich such procedural issues are the reflection. Consequently, taken alone,they treat the symptoms of a particular ‘politics of mining’ and not the rela-tions of influence and power which make such dysfunctional processes pos-sible.

Similarly, with regard to the negotiations of particular mining contracts,as noted, the conditions governing the distribution of mining revenues havemost frequently depended on particular agreements which have been nego-tiated between state representatives and specific companies. The largesse ofthe concessions contained in some of these contracts reflects not only theoften weakened technical negotiating capabilities of the government repre-sentatives concerned, but as well, the nature of the political processes andmodes of political and social regulation which have been perpetuated overthe last decades.

In the case of Guinea, policy reforms framed in terms of the improve-ment of the ‘management of resources in the extractive sector’ appear tolegitimize a certain ‘politics of mining’ which could hardly be seen to becompatible with promoting sustainable development and ushering in atransparent and accountable political process. In fact, as the present situa-tion in Guinea suggests, it is worth questioning whether the past patterns ofreform of regulatory regimes initiated by the multilateral financial institu-tions have not paradoxically at times proven surprisingly compatible withthe prolonging rather than the redefining of forms of social and politicalrelations which are likely to engender corruption and lack of transparency.

In this regard, and to take this example one step further, in spite of therecommendations in 2000 of the Extractive Industries Review (EIR) to the

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effect that the World Bank Group should ‘develop explicit governance cri-teria, transparently and in a participatory manner, which should be metbefore investments for the extractives industry take place’, these conditionsdo not seem to have been heeded in the case of policies pursued in mineral-rich countries such as Guinea or the DRC since the publication of these rec-ommendations.

In the context of increasing mineral prices, three mega projects havebeen negotiated in the bauxite and iron ore sectors in Guinea. Concerningone of these mega projects, that of BHP and although much has happenedconcerning the project since that time, the IFC announced in September2008 that it would be investing US$500 million in a proposed mega alumi-na project with BHP in Guinea, which would include a huge bauxite mineand port facilities. The total project is estimated to cost US$5 billion which,with the participation of the IFC, will make it even bigger than the Chad-Cameroon pipeline project. Such involvement of the World Bank Groupgoes directly against the recommendations of the EIR, which stipulated thatthe WBG should not support projects in areas characterized by poor gover-nance.

The third type of response to the problem of weakened institutionalcapacity is the growing tendency towards the ‘securitization’ of miningoperations through the hiring of private security and policing forces by min-ing companies. Here again, the Guinean experience is revealing, as illustrat-ed by BHP, which has recently been given the authorization by the Guineangovernment to hire its own police force in order to ‘securitize’ the opera-tions of its mega project.

The Present Context: Current Trends and FutureOptionsAmong the issues most likely to play a central role in shaping mining sec-tor policy and facilitating an eventual paradigm shift, whilst in no wayexclusive of others, are the following:

1. The renegotiation of mining contracts and the revision of mining regimes in order to enhance the developmental potential of mining; and

2. The issue of policy space and the development of policy options.

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In terms of the former, the response to the disappointing results in termsof local benefits emanating from mining activities, the numerous calls forthe revision of fiscal, legal and environmental frameworks and mining con-tracts in countries such as Liberia, Zambia, Tanzania, Guinea and theDemocratic Republic of the Congo, illustrate the need to respond to newdemands for the social regulation of private sector development accompa-nying the rapid process of liberalization that has opened up mineral-richAfrican economies to investment. What needs to be underlined is the wide-spread nature of this process, which would have been difficult to imagine 10or even five years ago (Frédéric, 2008). By mid-2008, at least eleven coun-tries had decided to review their mining contracts.16 Also of note is the legit-imacy which the process has gained with countries such as Belgium forexample, endorsing the process of the revision of approximately 60 con-tracts in the Democratic Republic of the Congo.

A related but more encompassing issue concerns the revision of miningregimes and the debates which have arisen around the rethinking of the roleof the mining sector in development strategies. Here, one could mention theexperience of countries such as Liberia, which is attempting to ensure sucha role for its sector. At a regional level, one could mention the work of theInternational Study Group (ISG) of the United Nations EconomicCommission for Africa (UNECA) on the revision of mining regimes inAfrica. Its report was scheduled for release in June 2009. It should beunderlined that this process has worked under very tight constraints, bothfinancial and political. At the centre of the work of the ISG has been theanalysis of the potential transformative and developmental role of the sec-tor, which, in turn, entails a central role for public policies, and for inter-sec-toral and regional approaches such as ‘industrialising corridors’.17 These

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16 These are: South Africa, Ghana, Guinea, Liberia, Madagascar, Niger, Nigeria, theDemocratic Republic of the Congo, Sierra Leone, Tanzania and Zambia.

17 See in this respect the contribution of one of the members of the ISG, Dr. Paul Jourdan,the former CEO of South Africa’s Mintek: “FDI in Extractive Industries.: Resources-basedDevelopment?” presented to UNCTAD Expert Meeting, on FDI in Natural Resources,November 20-22, 2006 [PDF] http://www.unctad.org/sections/wcmu/docs/com2em20p0018_en.pdf.

issues raise the importance of certain preconditions and notably those con-cerning policy space and policy options.

In terms of the latter – policy space and the development of policyoptions – paradoxically, recognition of the need for supportive public poli-cies which have largely been excluded because of the manner the role of thestate in mining in Africa has been redefined was clearly present in a 1996World Bank study on mining. The document underlined that a mining boomwill not in itself lead to a process of economic diversification capable ofgenerating long-term sustainable development in the absence of effectivepublic policies which encourage such a process. In fact, in this study onLatin America and the Caribbean, the World Bank recognized that ‘explo-ration successes will not necessarily translate into mines, related industries,employment, and the increase in national wealth if the requisite conditionsare not in place’ (World Bank, 1996, p. 3).

Such recognition and the policy reforms which it implied do not seem tohave been present in the design of the development model underliningreforms in the mining sector in Africa over the last decade. In the contextof discussions of which the Extractive Industry Review (EIR) recommenda-tions of 2000 were a central element, reforms have subsequently been pro-posed by the multilateral financial organizations to improve the administra-tive capacity of states in the mining sector, as for example, through theWorld Bank recommendations with regard to reinforcing institutionalcapacity, adopting strategic plans reinforcing governance, transparency,infrastructure, telecommunications, energy, and roads, all of which are crit-ically important. What is of note is the apparent absence of recognition ofthe need to reinforce the ‘developmental capacities’ of states. In this regard,there appears to be little attempt to respond to the observations made, forexample, by the Commission for Africa, which recognized not only thelegitimacy of state interventions, but also the need to reinforce the capacityof states in Africa so that they might assume a developmental role: ‘Weakinstitutional capacity prevents the state from undertaking its responsibilitieseffectively, whether planning and budgeting, managing development assis-tance, providing services or monitoring and evaluating progress’.18

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18 Commission for Africa, “The Need for Peace and Security”, Our Common Interest, U.K,March 11, 2005, p.128.

Whilst there is discussion as to how development can be achieved bypromoting activities at the community level, which is without doubt impor-tant, much less emphasis – if any – appears to be given to the role whichstates need to assume in ensuring a positive impact on social and economicdevelopment at the national level. A broadening of policy space would sug-gest the need, however, of abandoning a sectoral approach to mining as hasbeen the past focus, and considering a wider integrated approach which con-siders the transformative role which mining could play. This implies mov-ing beyond seeing mining essentially as a source of revenue so that it servesas a catalyst to build intersectoral linkages, notably by integrating miningactivities into industrial policies.

For this to happen, it is key that countries should not be obliged to foregopolicy space. For example, with a view to providing additional certainty toinvestors, many developing countries have gone beyond opening up to for-eign investment in extractive industries by locking policy changes into fis-cal stability clauses as well as by signing various international investmentagreements (IIAs). The most important international investment agreementshave been bilateral investment treaties (BITs) on the promotion and protec-tion of foreign investment. In many mineral-rich countries, the number ofbilateral investment treaties has increased rapidly during the past decade.19

In this regard, most countries today offer national treatment to domestic andforeign investors with regard to mining rights – but there are exceptions. Forexample, in Ghana, small-scale gold mining is reserved solely forGhanaians.20

Clearly, there is a need to reset discussions concerning the developmen-tal role of mining in a broader context which takes account of trade negoti-ations and other areas of policy decision which may condition or limit pol-icy space.

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19 United Nations Conference on Trade and Development (UNCTAD), World InvestmentReport, Geneva, 2007, p. 161.

20 It is interesting to note that in China, foreign parties are prohibited from exploration orsecuring mining rights to certain minerals, and are required to have a Chinese domestic part-ner in order to acquire exploration or securing mining rights to certain other minerals. Ibid.

Policy OptionsSeveral policy alternatives serve to illustrate what can be described as aprocess of the narrowing of policy space for mineral rich countries of Africaand the need for a broader approach to be adopted. Three areas will be usedto illustrate this point: 1) choice and balance between growth sectors; 2)promoting intersectoral linkages; and 3) industrial diversification and infra-structure development. Each will be briefly examined in turn.

Choice and Balance Between Growth Sectors

The determination of the leading sector and the relations between sectors, asfor example between agriculture and mining, may be conditioned by exter-nal factors and pressures. The recent privatization of the cotton sector ofseveral West African states, a sector which has shown a capacity to con-tribute to food security and poverty reduction, signals on the one hand, thegreater importance which other sectors – notably mining – are expected toassume as a driver of growth and development, with the challenges that thispresents, and on the other, that structural conditionalities attached to conces-sional funding for poverty reduction strategies still heavily predeterminesuch policy options.21 External constraints appear to continue to the presentto bear an influence in the determination of the policy options available.

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21 Beyond the privatisation of the CMDT, the cotton parastatal by 2008, the other condition-alities which have been requested of Mali by the IMF as part of its Poverty Reduction andGrowth Facility include the privatisation of the public telecommunications company,(SOTELMA) and of the public company which produces pharmaceutical products (UMPP).As for the public water transport company and that which produces sugar, state participationis to be reduced to 20 per cent of total shares.

IMF, Country Report of June 2004: Mali: Request for a Three Year Arrangement under thePoverty Reduction and Growth Facility (PRGF), No. 04/184, pp. 16-17.

This information is from: Campbell, Bonnie Vincent Nabe Coulibaly and Gisele Belem.“Poverty Reduction in Africa: On Whose Development Agenda? Lessons from Cotton andGold Production in Mali and Burkina Faso.” Cahier de recherche de la Chaire C-A Poissant,Montreal: Research paper no 2007-01, 2007 [PDF] http://www.ieim.uqam.ca/spip.php?page=article-poissant&id_article=3423.

Promoting Intersectoral Linkages

With regard to promoting intersectoral linkages, requirements concerning aminimum local content with regard to sourcing are of central importance.When formulating their policies and objectives related to promoting greaterlocal value added, countries need to take into account commitments madein various international agreements. The Tanzanian experience provides aninteresting illustration. Whilst the previous 1979 Mining Act required appli-cants for mining licenses to present a plan for local procurement of goodsand services, such a stipulation was absent from the 1998 Mining Act.Moreover, the World Trade Organization’s Trade Policy Review of Tanzania2000 states: ‘The authorities indicate that Tanzania does not have any localcontent requirements’.22 Given that provisions to build backward and for-ward linkages (such as value-added processing of minerals) to resourceextraction within the economy would normally be considered importantdevelopment objectives, it appears that the Tanzanian Government has beenobliged to abandon these development objectives.

The 2007 World Investment Report discusses at some length the impactof trade and investment agreements with regard to extractive industries inits Chapter 6, ‘The Policy Challenge’. With regard to promoting forwardlinkages and downstream activities, in order to develop the ability to refinelocally and add value to raw materials before they are exported, whilst thevalue of downstream processing may differ among minerals,23 the scope fordownstream processing may sometimes be limited by the trade policies ofother countries. Hence, in order to permit developing countries to add morevalue to their mineral deposits and to encourage industrialisation, importingcountries may have to consider revising their trade policies.

Industrial Diversification and Infrastructure Development

These key issues raise the question of the development prospects of recentstrategies in the extractive sector. If one takes the example of countries such

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22 Ibid., p.14.

23 For example, a relatively small share of the total value chain is generated at the miningstage in the case of bauxite, whereas the converse relationship applies in the case of gold.

as Mali and Burkina Faso,24 although gold is currently the only commoditybeing mined or planned to be mined on an industrial scale in both countries,obviously there is a potential contribution to development from all miningactivities. Alternatives require that the entire mining sector be taken intoconsideration and that resource diversification towards other minerals thangold be promoted.

A focus almost exclusively on the exploration and mining of a singlecommodity, gold, may well contribute to the economy’s vulnerabilitybecause the price of gold fluctuates. And, in fact, evaluating other resourcesis part of the priorities of these countries. For instance, in Mali, part of thead valorem tax (3 per cent) will be used to create a mining fund dedicatedto evaluating other mineral resources.25 This investment in evaluation is allthe more useful, because mines currently in operation were discovered inthe 1970s in the context of bilateral and multilateral cooperation. With theState’s withdrawal and the drastic reduction of public spending followingliberalization and adjustment programs, geological and mining research ispoorly funded in Burkina as well as Mali.26

Both governments are attempting to finance modest projects aimed atdrawing attention to useful substances and construction materials that areintegral to the mining sector. Resources such as manganese, phosphates,zinc, granite and clay minerals are used in numerous areas: Construction,agriculture and ceramics. According to Burkinabe authorities, a good poli-cy permitting the development of these substances would improve yields inagriculture, for example through the use of phosphates, which would con-tribute to reaching food self-sufficiency. Moreover, such a policy wouldencourage the consumption of local materials and help to reduce the cost ofconstruction materials.27 According to the former Malian Ministry for

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24 This section draws on the contribution of Gisèle Belem to “Poverty Reduction in Africa:On Whose Development Agenda? Lessons from Cotton and Gold Production in Mali andBurkina Faso.” Edited by Bonnie Campbell, Vincent Nabe Coulibaly and Gisele Belem,op.cit.

25 Interview with the Minister of Mines, Mali Novethic, 2003.

26 Source : interviews

27 MMCE. Analyse sommaire de la situation du secteur minier burkinabé, Burkina Faso,January 2004. [Summary analysis of the Burkinese mining sector].

Mines, Mali certainly has the potential for the development of a cementindustry, but international operators are not interested. Both Mali andBurkina import their construction materials, even though their subsoilsabound with them. With the financing of small-scale mines in the context ofHIPC funds, Burkina Faso hopes to see its other useful mineral substancesand quarries sector developed.

Clearly, alternative policies exist and could potentially be integrated intointersectoral transformative development strategies.

Concluding RemarksThe more than disappointing results of the last decades may be seen to havecontributed to a very dynamic process of interrogation and demands forrevision of policies which explain that we are presently in a very differentcontext than that which existed 10 years ago. The increasing questioning ofthe inequitable terms on which activities have taken place and the resultingforms of resistance on the part of communities affected by mining, havecontributed to what has been described by Szablowski (2007) as a processof ‘decertification’, which has called into question the legitimacy of theactivities of many companies. In response to this process, numerous initia-tives have been put forward in different arenas, at different levels and sec-tors whether by the private sector or by multilateral and bilateral institu-tions. At the multilateral level, the decision of the WBG to call in 2000 fora review with the setting up of the Extractive Industries Review signalledrecognition of the mounting resistance and consequently, the controversialnature of WBG support to certain activities in this area. The ExtractiveIndustries Transparency Initiative (EITI), launched in June 2003, can alsobe seen as a response to the serious criticism concerning the lack of trans-parency of the conditions under which activities in the sector were takingplace. Both of these initiatives formulated recommendations which focusabove all on the implementation of norms and standards through essential-ly technocratic legitimisation processes which fail to question the ‘develop-ment model’ they accompany. The shortcomings of such responses havebeen addressed above. On the basis of the empirical research carried out ona series of mineral-rich countries of Africa, given the heritage of the struc-tural adjustment measures, it becomes clear that to limit reforms to

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simply implementing better norms and standards is clearly insufficient as ameans to ensure that the extractive sector serves as a lever for developmentin the countries concerned. Among drawbacks that can be cited and whichhave been documented, is the manner in which recommendations have leftaside central issues such as the reinforcing of the regulatory capacity ofstates, whilst attributing the overriding responsibility for developing themining sector of the countries concerned to private sector actors.

At the bilateral level, initiatives point to the mounting awareness in thecountries of origin of mining enterprises that there exist serious problems ofthe legitimacy of the operations of companies in this sector. Whilst illustra-tions could be given through the example of Belgium, or the Scandinaviancountries, reference will be made here briefly to the Canadian experience.

Further to a national consultation process set up in Canada by the feder-al government in 2006 on the overseas activities of Canadian companies inthe extractive sector, a unanimous report was submitted to the governmentthe following year. Its recommendations called for the adoption of aCanadian set of corporate social responsibilities (CSR) standards forCanadian extractive-sector companies operating abroad. These recommen-dations need to be set in the context of the rapid global expansion of transna-tional mining investment listed on Canadian stock exchanges or companieshaving their head office in Canada. The call for the adoption of CanadianCSR guidelines was clearly a response to the need for better ‘certification’and intended to ensure and reinforce the legitimacy of the operations ofCanadian companies in the extractive sector. This most recent CSR initia-tive came at a time of mounting pressure resulting from an increasing num-ber of cases of alleged violations of human rights and negative social andenvironmental impacts involving Canadian companies. Public awareness ofthese issues has been on the increase over the years and had already culmi-nated in a 2005 unanimous government report from the all-party StandingCommittee of Foreign Affairs. That report called for firm measures includ-ing the withdrawal of public support to a Canadian company accused ofhuman rights violations. The multiple forms of public support given toCanadian mining companies operating abroad and the fact that investmentsof Canadian mining companies in Africa are expected to increase fromaround CAN$6 billion in 2005 to over $20 billion in 2010, underline theimportance of the most recent initiative.

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However, despite an extensive process of national public consultation,half of the members of the government appointed group which drafted thereport representing different sectors of the mining industry, including thedirectors of the two major mining associations of Canada, and that it wasunanimously endorsed by all of its members, the present Canadian govern-ment has not responded to the report which was submitted to it in March2007. This particular example is quite striking because although limited tothe area of corporate responsibility, the proposed introduction of a set ofCanadian standards may be seen as a first step towards clarifying the socialand political responsibility of the various actors concerned, including that ofthe Canadian government. The refusal on the part of governments such asthat of Canada, to clarify such issues of their accountability and responsibil-ity illustrates the pertinence of the following observation of the Commissionfor Africa:

‘Responsibility for resolving conflict in Africa should lie primarilywith Africans, but there is much more the developed world can do tostrengthen conflict prevention. Investing in development is itself aninvestment in peace and security’.28

Moreover, it suggests the extent to which the reticence of the countries oforigin of companies operating in Africa can be an obstacle to the furtheringof not only the development objectives of mineral-rich countries, but alsothose concerning social and environmental issues and human rights.

The arguments presented here lead to the conclusion that it is essential toadopt an encompassing approach in order to take into account sharedresponsibilities for the past heritage which involves bilateral and multilater-al actors in a most direct manner, as well as to be in a position to understandpast patterns of reform and their impact on mining activities in Africa. Suchan approach needs as well to be historical, country-specific and two-pronged. On the one hand, there is a need to consider the design of past‘development models’, the role they have assigned to public and privateactors, and notably, the place they assigned or failed to assign to supportive

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28 Commission for Africa, op.cit., Chap. 5, p. 174.

development strategies aimed at meeting development objectives. On theother hand, and in very much interconnected manner, it is essential to exam-ine the compatibility of the particular ‘governance agenda’ put forward infavour of the introduction of particular development models and to stabilizeand legitimize particular patterns of resource distribution which accompanythem. In this regard, as has been suggested, much more attention needs tobe given to the issue of the legitimacy of the reform process itself. AsSzablowski (2007, p. 299) underlines, the fact that de facto legal authorityis being transferred from national to transnational regimes suggests the needfor work to be done regarding the development of rigorous public legitima-tion strategies in the context of the emergence of transnational legal orders.With regard to the thrust of the reform process itself, to the extent that theinitiative for this process remains externally driven, the issue of the rein-forcement, rather than the erosion of state legitimacy, remains unresolved.

The contradictions and problems of coherence which arise as a result ofthe attempt to reduce the analysis of social, political and economic process-es which have been determined historically, to management issues whichcan be resolved through procedural solutions, presented as universalityvalid as the governance paradigm used by much of the donor communitywould appear to suggest or raise two fundamental issues: First, the impos-sibility of managing from the exterior, issues which are as complex as thoseconcerning institutional and economic reforms; and second, the absence ofpolitical responsibility of multilateral and bilateral donors for the reformsand policies which they propose and at times impose.

Ultimately, responsibility to define, monitor and enforce norms and stan-dards must rest with national governments and the communities concerned.The past process of reform of the mining sector, including the redefinitionof the role of the state through the introduction of increasingly standardizedlegal and fiscal frameworks with a view of creating a favourable environ-ment for investment but at the expense of its capacity to respond to the chal-lenges of development is neither viable nor in the interest of either localpopulations or their governments.

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DNGM (National Directorate of Geology and Mines). Rapport de Suivi etde Contrôle des Sociétés d’exploitation Minière. Sadiola- Morila- Yatela,Bamako, August 2003. [Follow-up and monitoring report on mining com-panies. Sadiola-Morila-Yatela].

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Integrated Framework, Guinea: Diagnostic Trade Integration Study, August22th 2003, p.3, [PDF] http://www.integratedframework.org/files/guinea_dtis-vol1_25nov03.pdf.

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Maury, Frédéric. “Quand les États renégocient”. Jeune Afrique, L’État enAfrique 2008. Numéro Hors Série, pp. 84-86.

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Mazalto, Marie. 2005. “La réforme des législations minières en Afrique etle rôle des institutions financières internationales: la RépubliqueDémocratique du Congo”. In L’Afrique des Grands Lacs, Annuaire 2004-2005. S. Marysse and F. Reyntjens (eds), Paris: L’Harmattan, pp. 263-289.

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Sarrasin, Bruno. “Élaboration et mise en œuvre du Plan d’action environ-nemental à Madagascar (1987-2001) : construction et problèmes d’une poli-tique publique”. Doctoral dissertation in Political Science, Université deParis 1, 2002.

Szablowski, David. Transnational Law and Local Struggles. Mining,Communities and the World Bank. Hart Monographs in Transnational andInternational Law. Oxford/Portland: Hart Publishing, 2007, 336 pp

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Chapter 2

Strategies for Maximizing MineralRevenue: The Zambian Experience1

John Lungu and Sumbye KapenaCopperbelt University, Kitwe, Zambia

IntroductionMining has the potential to provide a host of economic benefits. Notably, itgenerates foreign exchange earnings and provides tax revenues capable ofsupporting government operations as well as facilitating social and econom-ic infrastructure development. In many countries in sub-Saharan Africa,however, the sector has, at one time or another, been crippled by insufficientinvestment in both exploration as well as mine infrastructure development.Upon independence, most governments seeking to stress their sovereigntyover mineral resources imposed rules and regulations, which often preclud-ed profitable investment by the private sector. In many cases, governmentsnationalized or took controlling interests in mining enterprises; as operators,rather than plan for long-term growth, activities were managed with the aimof maximizing revenues over the short term.

Mining revenues were largely diverted to support increased consump-tion. In some cases, rather than being reinvested in operations of other sec-tors of the economy, revenues were siphoned by leaders for personal gain.Many of the large state-controlled enterprises found across sub-SaharanAfrica today have experienced marked economic deterioration. They aresubject to government intervention for purposes often unrelated to efficientperformance and their operations tend to be less productive than those ofprivate companies. Failure to change obsolete machinery has impeded

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1 In this paper, ‘the state’ is used interchangeably with government.

many operators from responding flexibly to changes in market conditions.These dynamics, however, are changing. Under the guidance of World Bankofficials, many countries in the region have reformed national legislationand policies, and privatized their mining industries. These changes havefacilitated increased foreign direct investment.

This paper provides a historical overview of mineral revenue collectionin Zambia, and the changing contexts under which it has taken place. Theanalysis covers three unique periods in the country’s history. The first,1928-1967, was a period during which all of the country’s mining compa-nies were privately owned. During this period, all mining companies oper-ating in Zambia were legislated by the colonial statutes, which would con-tinue to be the country’s principal legislative instruments until 1972, whenthe Mines and Minerals Act was enacted. Although the Zambian govern-ment secured a 51% shareholding in the copper mines in 1969, the statuteto govern this came later, in 1972. The analysis of this period focuses pri-marily on the events that took place in Zambia after 1965, the year follow-ing the country’s independence from Great Britain, and when it beganimplementing its own budget and development plans. During this period,the Anglo-American corporation and the Roan Selection Trust flourished asthe major owners of the country’s mining companies. The fiscal regime inplace at the time is examined.

During the second period examined, 1968-2000, the country’s coppermines were state-owned and regulated under the Mines and Minerals Act of1972. The act formalized the ownership decisions that were made in 1969in the Matero reforms. The paper examines the efficacy of the country’sstate-ownership strategy as an approach to maximizing mineral revenue.Following this phase of unprecedented state ownership, a third period com-menced, circa-2000, during which mines were privatized once again. Thisperiod is subsequently examined. During this period, the quantity of min-eral revenues collected by the government has been determined by the‘Development Agreements’ (DAs), or ‘contracts’ it forged with individualmining companies during the period 1997-2000. The provision to enter intoDevelopment Agreements has now been revoked by Zambia’s parliament.The concluding section of the chapter reflects upon the lessons learned fromthe Zambian experience in the area of mineral revenue maximization strat-egy.

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Maximizing Mineral Revenue

Zambia is in dire need of industrialization. The structural transformation ofthe economy is an essential component of any long-term strategy to ensurethe achievement of the Millennium Development Goals (MDGs). The keychallenge, however, is the formulation and implementation of workablestrategies based on the country’s unique strengths, rather than the emulationof strategies that may have been effective in other contexts. Since Zambia iswell-endowed with natural resources, a resource-based development strate-gy should be rooted in the utilization of these assets. This has been the casefor resource-based economies in the developed world, including Finland,Sweden, Germany (especially in the Ruhr region), and the United States ofAmerica over a century ago; and, to some extent, more recently in middle-income countries such as Malaysia, Brazil and South Africa.

Resource-based development strategies are not a new mantra. Thevision that mineral resources can be used to catapult all of sub-SaharanAfrica to modernization has been articulated in many of the region’s plansand development strategies at national and regional levels (e.g. Lagos Planof Action, SADC Mineral Sector Programme, Mining Chapter of NEPAD,and, most recently, the Africa Mining Partnership). However, most of theseinitiatives are centred on developing ambitious and grandiose projects(Africa Vision 2050). Such strategies can only be effectively implementedif countries can maximize revenues from the resources available, which, inthe case of Zambia, are minerals. This requires reviving the mining sectorfor it to continue as a source of government revenue.

The World Bank has identified an expanded large-scale mining economyas an effective means for resuscitating African economies (World Bank,1992). A state’s strategy for maximising mineral revenue, therefore, isimportant, and not surprisingly, has become a topical issue for most Africancountries. For a state to maximise mineral revenue, however, the appropri-ate policy environment must be in place (World Bank 1992; AfricanDevelopment Bank 2008).

1928-1967Zambia’s initial strategy for extracting mineral revenue was designed dur-ing the colonial period and implemented in 1928, the year commercial min-ing commenced in Zambia. The same strategy was employed until 1972.

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This section of the chapter, however, focuses primarily on the period 1965-1972, the first eight years of Zambia’s independence from Britain. As pre-viously explained, the mining landscape at the time was dominated by pri-vate sector actors, led by the Anglo-American Corporation (AAC) and theRoan Selection Trust. From 1924 to the time of nationalization, the BritishSouth Africa (BSA) Company held all mineral rights and, therefore,received mineral royalties. The mining companies, however, paid corpora-tion taxes to the colonial government. The colonial government alsoreceived windfall taxes depending on the price of copper on the LondonMetal Exchange. This regime of taxes continued after independence.

During the period 1965-1969, three key taxes were used in the miningsector: Royalties, corporate tax and windfall tax (Lungu, 2008). But the newgovernment quickly recognized that it was not earning as much from themining revenues, and in 1969, proceeded to implement major reforms in themining sector. Things were set in motion by the Matero Economic Reformsof 1969 (Zambia, Republic of, 1969), which allowed the government toacquire 51 per cent of shareholding in the two major foreign-owned miningcorporations; the Anglo-American Corporation and the Roan SelectionTrust, leading to the establishment, in their place, Nchanga ConsolidatedCopper Mines (NCCM) and Roan Consolidated Mines (RCM). These wereto be overseen by a new government owned-company called the MiningDevelopment Corporation (MINDECO). A number of changes were alsomade to the mining tax regime. Perhaps most significantly, mineral rightshitherto held by the BSA Company reverted to the Zambian State: Mineralroyalties would be paid to the latter, rather than the former. The post- inde-pendence mineral tax regime consisted of the following: A royalty taxpegged at 13.5 per cent based on the London Metal Exchange price sales;an export tax of 40 per cent charged when the copper price exceededUS$300 per long ton at the London Metal Exchange; and a corporate orincome tax pegged at 45 per cent of the company profits. These taxestogether formed an effective tax rate of up to 74.4 per cent (Lungu, 2008a).

The mineral revenue maximization strategy was successful during thisperiod and the Zambian Government was able to collect sufficient revenuesto develop social and economic infrastructure. As was the case during thecolonial period, the Zambian economy at the time was one of the most pros-perous in Africa, experiencing a low annual inflation of 7.7 per cent per year

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and possessing GDP per capita in the range of US$950 (Fundanga, 2005).Copper mining revenues accounted for about 90 per cent of the country’sexport earnings and 70 per cent of the government’s budgeted revenue(Fraser and Lungu, 2007). The State was also able to use some of the cop-per revenues to invest in and develop manufacturing. In fact, the industriesthat surfaced after the Rhodesian Unilateral Declaration of Independence(UDI) from Britain were financed using copper revenues. Development andservices around mine sites was also fairly high. There were orderly hous-ing compounds for employees, weekly food rations were supplied toemployees, and hospitals and recreation clubs were found throughout thecountry.

1972-1995In 1969, an unprecedented period of state control of the mining sector beganwhen the government secured majority ownership in the NchangaConsolidated Copper Mines – formerly Anglo-American Corporation – andthe Roan Selection Trust. The nationalization of the copper mining sector,however, was officially completed in 1982. In this year, the two companiescreated as a result of the 1969 reforms (the Nchanga Consolidated CopperMines and the Roan Copper Mines) were merged into one company: TheZambia Consolidated Copper Mines (ZCCM).

To better reflect the changed political environment and ownership pat-terns in the country, a new Mines and Minerals Act was passed in 1972,which effected major change to the national mineral tax regime. The royal-ty (13.5 per cent) and export tax (40 per cent) were replaced by a mineraltax of 51 per cent but corporate tax remained at 45 per cent. Further, in1976, the mining companies were given the option to pay either 15 per centpaid-up capital of their companies or 50 per cent of their profit, whicheverwas less (Lungu, 2008a).

The performance of the mining sector during this period was poor.Copper production declined precipitously during the period of state owner-ship, dropping from 700,000 metric tonnes in 1973 to 226,192 metric tonnesin 2000 (United States Department of State, 2008). The economy, in gener-al, also performed poorly. Between the period 1976-1990 and 1991-1999,GDP per capita fell by 3.1 and 7.2 respectively. The mining sector’s contri-bution to GDP also fell from a high of 16.5 per cent in 1994 to 11.8 per cent

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in 1997, the year a second phase of mine privatization began (ZambiaConsolidated Copper Mines Investment, 2000). While the decline in cop-per price that dogged this period is acknowledged by many researchers asan important contributing factor to the poor performance of the sector, it isalso widely observed that mismanagement and low investment into themines also contributed to its poor performance (United States Departmentof State, 2008; Fraser and Lungu, 2007). It is also estimated that by the late1990s, ZCCM was incurring losses of as much as US$1,000,000 per day(Action for Southern Africa, 2007). Consequently, the government wasforced to subsidize activities using money mostly borrowed from the donorcommunity. At this time, Anglo-American corporation vacated Zambia, itsmanagers determining that the country was unprofitable and had fewprospects.

Chilipamushi (2001, in Mpuku and Muneku, 2001), quotingCunningham (1981) cites a number of reasons why the reform and subse-quent nationalization of Zambia’s copper mines led to a decline in produc-tion and revenue. First, the companies that had owned the mines beforenationalization invested large sums of money in prospecting, which led tothe opening of mines in quick succession, including Bwana Mkubwa in1913, Luanshya in 1931, Rokana in 1932, Chingola in 1934, Chambeshi in1956 and Konkola in 1957. By contrast, the Zambian government did notinvest in prospecting, at least not to the same extent, after seizing control ofthe mines. Second, the previous owners of the mines had interests in otherbusinesses related to mining and had invested in companies dealing in othertypes of minerals in other countries. This ensured a steady flow of incomewhich was invested in copper mining operations. The previous owners alsohad connections with well-established foreign banks and other financialinstitutions such as Rothschild, J.P. Morgan and Barney, from which theycould source funds when needed. The government, on the other hand, hadno such arrangements. Finally, the government failed to invest proceedsfrom copper mining during periods of peak production, which could havehelped offset the losses incurred during periods of stagnation (Osei-Hwedie,2003). In short, although the government changed the tax regime in order tomaximize mineral revenues, it failed to net significant benefit because of thecollapse of world copper prices. Rather, the government ended up subsidiz-ing the state-owned ZCCM in order to keep it functional.

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If anything, ZCCM has made important contributions to the community(Lungu, 2008b). Its managers subsidized housing, water and electricity.They also implemented day-care programs for miners’ children, providedfree education, as well as subsidized burial arrangements for miners andtheir (“nuclear”) family members. Apart from catering for miners and mem-bers of their family, ZCCM managers also provided a number of basic serv-ices to people residing in the mining townships, and helped to finance farmsto supply food to the mines (Lungu and Mulenga, 2005).

2000-Present It was against the background of the sector’s poor economic performanceunder state control that new mining policies were developed. At the turn ofthe century, the return to a privatized, more liberalized copper mining econ-omy was initiated. The government faced the challenge of finding new mineowners willing to invest in and expand existing operations. Privatization ofthe mines was conducted during the period 1997-2000. As explained byFraser and Lungu (2007), the new mine owners provided the sector with anew lease of life, extending, significantly, the lifespan of many projectsforecasted in the late-1990s to close within 10 years.

To facilitate the privatization exercise, a new law, the Mines andMinerals Act of 1995, was passed. Enacted during the time of poor miningsector performance, the Act provided a fiscal regime that aimed at attractingand retaining new investors. Thus, the provisions of the Act were veryfavourable to investors. Its main provisions included (Ministry of Mines,1997):

• A royalty payment calculated at 2 per cent of the market value of minerals free on board (f.o.b) less the cost of smelting, refining and insurance, and handling and transport from the mining area to the point of export or delivery within Zambia. Royalty payment could be deferred if a cash operating margin of a holder of a large-scale mining licence fellbelow zero.

• A low corporate tax for exporters of copper and cobalt, which waspegged at 35 per cent of taxable income, while for the other minerals(non-traditional minerals) the tax was put at 15 per cent.

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• For capital expenditure, an allowance of 25 per cent on plant, machineryand commercial vehicles; 20 per cent on non-commercial vehicles; and55 per cent on industrial buildings; among others.

• Relief from other surcharges including a 100 per cent exemption fromcustoms, excise and value added tax (V.A.T.) for all machinery andequipment for use in exploration or mining activities.

• No restrictions on the amount of profits, dividends, or royalties that acompany could externalize, although a withholding tax of 15 per centwould be levied.

The Act also made a provision for individual mining companies to nego-tiate DAs around the parameters stated in the Act; not surprisingly, differentcompanies had different arrangements. The large and influential companies(e.g. the Konkola Copper Mines) paid only a 0.6 pe cent royalty. For thesecompanies, corporate tax was 25 per cent, not 35 per cent, and they wereallowed to carry forward losses for a period of between 15-20 years (fromthe maximum 10 years provided for in the Act). Exemption from payingcustoms duty on consumables and mineral royalty was raised up to a cap ofUS$21 million in the first year and US$19.6 million annually for the nextfour years thereafter. Copper and cobalt participation fees were made taxdeductible, and there was no payment of excise duty on electricity con-sumed. Importation of capital equipment and utility (commercial) vehicleswould attract no duty. It was agreed at the time that the DAs in place werenot to be revised until the end of the 15-20 year period (the stability period)except if one party to the agreements did not honour the deal, in which case,the services of an international arbitrator would be solicited (Lungu, 2008a).However, though the DAs were signed by government officials (ministers),they were not discussed in parliament and passed as legally-binding agree-ments.

International donor agencies, notably the World Bank and theInternational Monetary Fund (IMF), played an influential role in these nego-tiations. Politicians in the ruling party and senior administrators in ZCCM,some of whom have since been accused of exploiting these agreements,were also instrumental in ensuring that the agreements were signed. Therewas no public discussion or consultation with citizens; either directly orthrough their MPs. In this respect, the DAs are confirmation that the State

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can be held captive by powerful groups in society and secondly, that exter-nal influences can exert pressure on the decision-making process within aState (Lungu, 2008a). It was not until six years after the signing of the lastDA that the people of Zambia began to gain some insight into the contentsof these agreements. Not surprisingly, there has been resistance in varioussections of Zambian society to the implementation of new DAs and overexisting agreements. This has culminated in the government revising theagreements unilaterally. Different groups, including those that had urged thegovernment to sign the DAs in the first place, emerged to pressurise thegovernment to renegotiate them in order to derive greater benefit from theunprecedented rise in value of mineral commodities. The pressurise groupsincluded local NGOs and the civil society in general; international NGOs,notably the Scottish Catholic International Aid Fund (SCIAF), Christian Aidand Action for Southern Africa (ACTSA), and politicians in opposition par-ties. A number of reasons were cited as justification for revising the DAs.Officers at Christian Aid, SCIAF and ACTSA, for instance, argued that lowroyalty rate on copper (0.6 per cent) that Zambia was charging was nowherenear the average (5-10) for developing countries, and that, therefore, theamount the government was receiving was not commensurate with theamount of profits that the mining companies were making. More precisely,at 0.6 per cent royalty, KCM in 2006/07 paid only $6.1 million while thecompany extracted copper ore worth $1 billion and netted a profit of $310million (Action for Southern Africa, 2007). Furthermore, when consideredin the context of other sectors of the economy, mining’s contribution did notreflect its status as the most important source of revenue.

With significant support for change from various groups, the governmentdecided to cancel all DAs, replacing them with a single tax regime. Theamendments were made to the Mines and Mineral Act of 1995 and effectedunilaterally. They came into force in April 2008. The amendments madeincluded the following (Lungu, 2008a, Cronje (2008): increasing the royal-ty rate to 3 per cent; increasing corporate tax to 30 per cent; the governmentintroducing a 15 per cent withholding tax on interest, royalties, managementfees and payments to affiliates or sub-contractors in the mining sector; andthe introduction of a windfall tax, to be triggered at different price levels forbase metals. For copper, the rate is 25 per cent when the copper price isbetween US$2.50 and US$3.00 per pound; 50 per cent when price is

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between US$3.00 and US$3.50; and 75 per cent when price exceedsUS$3.50 per pound. In addition, the government introduced a variable prof-it tax of up to 15 per cent, levied on taxable income which is above 8 percent of gross income, and allowance on capital goods was reduced from 100per cent to 25 per cent.

Not surprisingly, the mining companies resisted the new policy. Amongthe main arguments put forward were that there was need for the govern-ment to continue taking into account differences among the mines ignoredin the new tax regime. In the final analysis, these differences translated intodifferences in costs. Important differences cited were development projectscurrently taking place (Konkola in Chingola town is deepening the under-ground and is also constructing a new acid plant at the same time it isexpanding the open shaft mine to prolong its life, KCM in Kitwe city isexpanding the Nkana Smelter, and Equinox is developing Lumwana Mineas a Greenfield into the world’s largest low-grade copper mine).

A second factor cited was the age of the mines – that these policychanges would affect the profitability of mines of different ages differently.Older mines, it was explained, were more costly to operate and maintain.

Third, mining company officials argued that the new tax regime wouldmake mining unsustainable because the tax rates were too high. The miningcompanies pointed out that the original DAs, being documents signed byauthorized government officials on behalf of the government, were legally-binding, and that changing them before the agreed time was a breach of con-tract.

Having forwarded their arguments, the mining companies, through theChamber of Mines, made the following counter-proposals, inter alia, to theParliamentary Committee on Estimates and Expenditure: That they accept-ed the 3 per cent royalty but that this needed to be a ‘graduated’ rate of 1-3per cent; that the windfall tax rate needed to be halved to 12.5 per cent, from25 per cent; that they would only accept either the windfall tax or the vari-able profit tax and not both; and that capital allowance needed to remain at100 per cent. An important group that was in support of the mining compa-nies’ stance of rejecting the new tax regime was the main opposition party,the Patriotic Front. It was particularly not happy with the introduction ofwindfall and variable profit taxes and any cumbersome implementation ofthe mineral royalty. The government’s refusal to renegotiate DAs and move

47


to amend the Mines and Minerals Act 1995 and other pieces of legislationhave led some mining companies to threaten legal action. Some miningcompanies have also refused to pay the revised taxes, especially the wind-fall tax. By September 2008, only two mining companies had paid for thequarter ending 30th June 2008. The government’s reaction (through theSecretary to the Treasury) to this non-payment of taxes was to threaten thecompanies that had not paid and treat them as defaulters (Times of Zambia,10th September 2008).

A number of institutions/organisations have expressed the need to dealwith this impasse. Among the groups calling for renegotiation are theEconomics Association of Zambia (EAZ) and several NGOs. While the lat-ter had strongly called for the revision of the original development agree-ments, they did not expect the government to take a unilateral decision onthe revision (Lungu 2008). The Parliamentary Committee on Estimates andExpenditure has some of its members from the opposition parties, especial-ly the Patriotic Front (PF), who have shown sympathy to the mining com-panies regarding some aspects of the new tax regime. In spite of theimpasse, the new strategy for maximizing mineral revenue – that is, thedecision made to privatize and liberalize the sector – has generally beenjudged to be successful. A considerable amount of new money has sincebeen injected into the sector to refurbish operations and prolong their lives.Furthermore, production levels have been steadily increasing since the pri-vatization of the mines, which again was barely 250,000 tonnes at the startof privatization but has since risen to well over 500,000 tonnes. Profits havebeen rising since the time the mines were privatized, in turn netting the gov-ernment more revenue. The mining sector’s contribution to the treasury hasbeen steadily increasing since 2001 after falling close to zero in 2000(Fraser and Lungu, 2007). However, had Zambia put in place a flexible butprogressive tax regime, the benefits from the commodity price boom couldhave been greater.

Concluding Remarks

This paper has examined the efforts made by the Zambian Government tomaximize economic benefit from large-scale – principally, copper – miningprojects in three periods of its history, each with different policy environ-ments. The first period reviewed, 1928-1967, mining companies in Zambia

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were privately owned and continued to be legislated by colonial statutesuntil 1972 when the Mines and Minerals Act was passed. The second peri-od reviewed, 1968-2000, was a time when the government controlled themines. During the final period examined, 2000 to the present, the mineswere re-privatized, and legislated under a revised mining law, the Mines andMinerals Act of 1995. In the period shortly after independence in 1964, themining landscape continued to be dominated by companies such as theAnglo-American Corporation and the Roan Selection Trust. These compa-nies were subjected to a tax regime inherited from the colonial period inwhich the companies paid royalties to the BSA Company. With the statenationalizing land rights, the companies began paying royalties to theGovernment of Zambia, enabling it to finance social and economic infra-structure.

During the second period, royalties ceased to exist; rather, mining com-panies paid a mineral tax of 51 per cent. Failure to develop the copper min-ing sector during this period led the government to push a policy of re-pri-vatization in the late-1990s. Without much room for negotiation, the gov-ernment negotiated DAs, or contracts, with individual mining companiesbetween 1997 and 2000. The provision to enter into DAs, however, wasrecently revoked by Zambia’s parliament, in large part because of theinequitable nature of these agreements. With the sector somewhat revived,the Zambian Government hopes to maximize mineral revenue collection byincreasing the royalty payment from 0.6 to 3 per cent, windfall and variabletaxes and also corporation tax. Companies have resisted these changes, andin the upcoming months, negotiations will no doubt continue to take placeto resolve what has become a serious impasse.

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ReferencesAction for Southern Africa (2007). Undermining Development? CopperMining in Zambia. London; ACTSAF, Christian Aid and SCIAF

African Development Bank Group (AfDB) (2008). Briefing Note onRevenue and Tax Levels: Mineral Taxation in Africa. Tunis; AfricanDevelopment Bank.

Auty, Richard (2008). Political Economy of African Mineral RevenueDeployment: Angola, Botswana, Nigeria and Zambia. www.realinstitutoelcano.org (accessed 4th October 2008).

Chilipamushi, Davidson (2001). “The Mining Industry in Zambia;Retrospect and Prospects.” In Mpuku, H.C. and A. Muneku (eds) (2001).Impact of Structural Adjustment Programmes On the Zambian Economy.Pp.153-164. Ndola, Zambia: Mission Press.

Cronje, Freek, Charity Chenga and Johann van Wyk (2008). SADCResearch Report: Corporate Social Responsibility in Zambian MiningIndustry. Marshalltown, South Africa; Netherlands Institute for SouthernAfrica (NIZA).

Cunningham, S. (1981). The Copper Industry in Zambia. New York;Praeger Publication.

Economic Commission for Africa (ECA) and African Union ( 2008). AfricaMining Vision 2050. ECA. Addis Ababa, October 2008.

Fraser, Alastair and John Lungu (2007). For Whom the Windfalls: Winnersand losers in the privatisation of Zambia’s copper mines. Lusaka; CivilSociety Trade Network of Zambia and Catholic Centre for Justice,Development and Peace.

Fundaga, Caleb (2005). “Zambia’s Economic Outlook: What Have WeLearnt in the Last 40 Years and Where Do We Go From Here?” Paper pre-sented by Dr Caleb Fundanga, Governor of the Bank of Zambia, at theCIMA Zambia annual business discussion.

Lungu, John (2008a). The Politics of Reforming Zambia’s Mining TaxRegime. A Paper presented at the Mine Watch Zambia Conference: Politics,Economy, Society, Ecology and Investment in Zambia, Oxford University,19th-20th September, 2008.

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Lungu, John (2008b). “Socio-economic Change and Natural ResourceExploitation: A Case Study of the Zambian Copper Mining Iindustry”,Development Southern Africa. 25:5, 543-560.

Lungu, J. and Mulenga C. (2005). Corporate Social ResponsibilityPractices in the Extractive Industry in Zambia. Ndola, Zambia; MissionPress.

Ministry of Mines (1997). Zambia: Investment Opportunities in the MiningIndustry. Lusaka, Zambia. Government of the Republic of Zambia.

Mpuku, H.C. and A. Muneku (eds) (2001). Impact of Structural AdjustmentProgrammes On the Zambian Economy. Pp.153-164. Ndola, Zambia:Mission Press.

Osei-Hwedie, Bertha (2003). “Development Policy and Economic Changein Zambia: A Re-Assessment.” DPMN Bulletin: Vol. 10 No.2, April 2003.Times of Zambia, 10th September 2008. Lusaka.

United States Department of State (2008). Zambia. Bureau of AfricanAffairs. http//www.state.gov (Accessed, 6th September, 2008).

World Bank (1992). Strategy for African Mining. World Bank TechnicalPaper Number 181. Washington, D.C.; World Bank.

Zambia Consolidated Copper Mines Investment (ZCCM-IH) (2000). ReportNo. PID9676. Lusaka.

Zambia, Republic of (1969). Matero Reforms. Lusaka; GovernmentPrinters.

Zambia, Republic of (1995). Mines and Minerals Act 1995. Lusaka;Government of the Republic of Zambia.

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Chapter 3

Mining Boom and Enclave Economy:Development Impact and Challenges in

Mining Areas in Africa

Abdulai DarimaniThird World [email protected]

IntroductionFor centuries, rural communities have been founded or shaped based upontheir proximity and access to certain natural resources such as water bodies,forest, mountains and fertile lands. In Africa, the rural population is relative-ly large, most of which is marginalised with severe constraints to access theminimum levels of decent nationally recognized facilities and services. Intheir marginalized status, these natural resources have been central to theirlivelihood, social, political and economic organization. Land is particularlycritical to the survival as well as social and political relations in rural com-munities. For most rural communities, land and water bodies are not onlyfactors of production but are also intangibly qualitative objects which definea constellation of social, religious and political relations. Mining is one ofthe natural resource development activities that take place mostly in ruralcommunities. Most major mining investment decisions involve rural com-munities.

This paper discusses community demands for improved revenue distri-bution and management. The central argument of the paper is that commu-nity demands for improved revenue distribution and management is both aresponse and an illustration of policy failure to translate mineral wealth intointegrated rural and national development. The paper is divided into fourparts. The first part presents a balance sheet of mining in terms of revenuedistribution between the three principal actors: Mining communities, the

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state, and mining companies. The second part examines in brief, the modelof mining regime in Africa, explaining how liberalization of the mining sec-tor has triggered the proliferation of transnational mining companies on thecontinent. The third part examines the forms and character of communitydemands as well as responses from the state and mining companies. The lastpart draws some conclusions and makes some recommendations on ways ofimproving revenue distribution and management.

The Balance Sheet for Mining

In discussing the balance sheet for mining for Africa, one needs to locatethis in the context of levels of mineral resource income, the formula for dis-tributing benefits and whether it accounts for important opportunity losses,and the constraining effects on citizens' coping and livelihood strategies.Africa has substantial stocks of a variety of mineral resources. Theseresources represent potential catalysts for social and economic developmentin host countries and local communities. Nearly every country in Africa hassome type of mineral commodities in commercial quantities.

Africa and its people, particularly communities affected by mininginvestment, should necessarily be the main beneficiaries of the abundantand proven mineral resources through direct revenue accruement from equi-ty participation, royalty payments and taxes, as well as indirectly, throughemployment, skills, technology transfer, growth of subsidiary industries andservices; downstream processing; and development of social and economicinfrastructure such as education and health. The ECA (2004) points out thata successful minerals industry would spawn the establishment of numeroussupport industries, increase the levels of education and skills of citizens,facilitate the development of social infrastructure, and generate a strongflow of foreign exchange earnings capable of fuelling the growth of thecompetitive industries of the future.

Despite this potential, both the statistical and anecdotal evidence avail-able suggests that significant mining investment has a limited transforma-tive effect on communities in mining areas and the national economies ofhost countries as a whole. Such investment rather tends to expropriate therural economy and disrupt existing social and political structures and rela-tions. With particular reference to revenue, what the state collects is rela-tively marginal and there are no clearly-defined guidelines for determining

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how mineral revenue trickles down and benefits local communities directlyand indirectly. A parliamentary report of Tanzania (2008) points out that inTanzania, there are no proper procedures on separating revenue collectedfrom minerals. Due to lack of procedure, there are numerous doubts and ten-sion over proper usage of this revenue for the benefit of the government andcitizens.

The main sources of mineral revenue to host countries are state equityparticipation in each mine, royalties as well as traditional taxes such as cor-porate profit tax, reconstruction or development levies, personal income tax(PAYE-pay as you earn), fees and rents applicable to all other businesses. Inthe first instance, the level of revenue accruing to host countries for redistri-bution is relatively small. Royalties constitute one of the most effectiveways of splitting the economic rent accruing from mining projects betweenthe investors and the host state. Royalty taxes are generally the largest andconstitute a more stable source of revenue to host states than taxes on prof-its, which companies rarely pay due to excessive taxable allowances grant-ed to them by most mineral codes. In addition, it is predictable since pro-duction tonnages and mineral sales are easy to monitor. This notwithstand-ing, the level and range of royalties imposed on mining companies operat-ing in Africa have been terribly low and relate more to protecting the short-term commercial interests of investors than the long-term economic interestof host countries. Also, the levels of most of the other taxes are either keptvery low or out of national legislation. The situation is compounded bypractices of transfer pricing and tax avoidance. Table 2 shows the direct con-tribution of mining to the economy of five (5) selected African countries.

Where much larger revenue is expected, the tax levels are either low orcompletely not provided for under the law. As can be seen in Table 2, roy-alty is the largest and most predictable source of mineral revenue, yet itslevel is terribly low. In addition, mining companies are allowed to carry for-ward losses to the following year which further lowers the amount of royal-ty due for host countries. Capital gain tax is yet another important source ofgovernment revenue. This is because the nature of mining is such that thefrequency of assets disposal is high, most of which appreciates in value overtime. An imposition of capital gain tax would allow host governments toshare profits accruing from the disposal of assets. For now, this tax does notappear to exist in the mining regulations of most countries in Africa. Again

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Table 2: Levels of direct contribution of mining to the economy of hostcountries 2000 to 2006

Source: Tax study and field data, 2008

the total economic impact of mining in terms of employment generation isquite marginal in each of the five countries. This is due to the fact that thecurrent technology of mining is capital-intensive. The extraction of miner-als requires large, durable, location-specific investments (often referred toas site or location specificity). Such investments in facilities and equipmenttend to be unique to a particular mine. For the same reasons, Sachs andWarner (1995) observe that mineral resource development brings about fewpositive externalities to forward and backward industries.

The formula for distributing the marginal revenue governments derivefrom mining does not include local communities as part beneficiaries. In thecase of Ghana, for example, 80 per cent of the royalty collected goes to gov-ernment consolidated fund and 10 per cent goes into the MineralDevelopment Fund, which is not backed by any legislation. The absence oflegislation permits the minister and or the political class unfettereddiscretionary powers in the distribution and management of this fund.

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The remaining 10 per cent is distributed among the respective districtassemblies, traditional council, the stool, and the Administrator of StoolLands. An assumption is made that whatever goes to the district assemblyand the Stool would necessarily translate into development in the affectedcommunities. Unfortunately, the realities on the ground rarely confirm thisassumption. The Aggregator Report of Extractive Industries TransparencyInitiative (EITI) indicates that a large chunk of the royalty received by dis-trict assemblies is spent on recurrent expenditure. Some governments arenow introducing community development funds as stop-gap measures toaddress the policy gap. This is an area which requires further exploration tounderstand the ramifications and unravel any complexities of such funds inorder to offer appropriate policy direction.

The precarious state of many local communities is compounded by ahost of other adverse impacts, including human rights abuses. As Sindingand Peck (2001) note, the business of finding, extracting and processingmineral resources is widely regarded as one of the most environmentallyand socially disruptive activities undertaken by industry. This dim view ofthe industry is clearly demonstrated by specific events and images surround-ing a number of mines across Africa. Key examples include the sudden clo-sure of Bonte Gold Mine in Ghana in 2004, which left vast acres of unre-claimed lands; the alleged Buluyanhulu saga in Tanzania in which hundredsof villagers were reported to have been buried alive in order to secure spacefor large-scale mining; an incident in Zambia in 2005, where fiftymineworkers perished through chemical explosion; and several allegedreported human rights violations which are attested to by reputable institu-tions, including the United Nations Commission on Human Rights and theGhana Commission of Human Rights and Administrative Justice (CHRAJ)(see CHRAJ report 2008).

The Model of the Mining Regime in Africa From the colonial period through independence to structural adjustment, thechosen model for mineral resource extraction in Africa has prioritized theinterest of the transnational corporation, their local agents and politicalelites above integrated national development, the environment and commu-nity interest. While post-independent attempts at nationalization and

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increased state participation may have influenced the ownership structure ofthe mining industry in Africa, not much has been achieved in translating thismineral wealth into building the productive capacity of local communitiesthrough integrated national development. In countries such as South Africa,where there has been some manifestation of the impact of mining in nation-al economic transformation, it has occurred as an enclave with great ecolog-ical degradation and community exploitation by the few who held capitaland political power. Without going into a critique of the concept of theSouth African Black Economic Empowerment affecting the mining sector,its introduction is an affirmation of the poor balance sheet for a greatermajority of the population. Similarly, the emerging concept of communitydevelopment funds for local communities in mining areas across Africa isalso an admission of the disproportionate distribution and poor managementof mineral wealth.

The current process of liberalization represents a high point of continu-ity of the preponderance of corporate interest on Africa's mineral resourcesat the expense of local communities. Since the late 1980s through to themid-1990s, Africa has been among the major destinations of global miningexpansion. UNCTAD (2005) reports that FDI as a share of gross capital for-mation has actually been rising in Africa, particularly since the mid-1990s;since the turn of the century, it has become a more prominent source of cap-ital formation than in any developing region other than Central Asia. Forinstance, average annual FDI flows to Africa doubled during the 1980s toUS$2.2 billion compared to the 1970s, but increased significantly during the1980s to US$6.2 billion and US$13.8 billion, respectively, during the 1990sand the period 2000-2003. On a per capita basis, this translates into a morethan fourfold increase compared to the 1980s. A large chunk of these flowswent into investment in the extractive sector in Africa. Again, UNCTAD(2005) reports that the 24 countries in Africa classified by the World Bankas oil and mineral-dependent have on average accounted for close to three-quarters of annual FDI flows over the past two decades. Indeed, with thediscovery of new oil fields in Chad and Equatorial Guinea, all top ten recip-ients of FDI in Africa in 2003 have large mineral and petroleum reserves.

The development of the mineral sector along the logic of free trade andinvestment has been the transmission channel of transnational capital todeveloping countries and their rural communities. The logic of liberalization

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has put many African states and governments almost in a box that preventsthem from being able to optimize benefits from their mineral resources.Flowing from this logic, most African governments could not conceive ofthe development of their mineral resource sector without a significant roleof foreign direct investment. The centrality of foreign direct investment inpublic policy choice and as a key strategy for mining ignores the multipleand competing interests, and the potential for forward and backward link-ages to the rural economy and the national economy as a whole. Conceivedas the main strategy for the development of the mining sector, the terms andconditions under which FDI operates tend to legalize capital flight fromrural communities and the national economy. The main features of thisflight include extensive incentive schemes, rules for corporate protection,and the exercise of discretionary powers permitted by state mining laws.These features tend to limit the catalytic role of mining, making the sectoran enclave economy. Both the conception of the strategy and its 'opera-tionalization' make mining in Africa an enclave economic activity withoutlinkages to rural development priorities and national economic transforma-tion. Indeed, over the past 20 years, the mining sector operates in a de factoexclusion from any comprehensive national development strategy.

In operationalizing this economic logic, mining companies line up withthe machinery of the state to subject local communities to economicexploitation and political domination. Every large-scale mine comes along-side a strong presence of the state and mining companies who see the invest-ment as a faultless project which must proceed without dissent or hesitation.Yet, as Mate (2002) indicates, an increase in mining operations and theprevalence of surface mining has led to an increased loss of land; a criticalresource for many rural communities. Consistent with their economic logic,the state believes that the only rational investment in local communities isthe one conceived by the mining industry. This helps to explain why thestate machinery could be deployed to supervise the demolition of housesand homes, the displacement of whole villages from their farms and lands,destruction of water resources, and payment of pittance as compensation. Torationalize their behaviour and domination, corporate social responsibilityprojects are designed to demystify the real character of the industry andmake it unclear exactly what their practice means for the poor conditions ofrural communities. Indeed, one of the disorganizing influences of large-

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scale mining investment in rural communities is the appearance of the statepower coupled with its drastic redesign of the livelihood trajectory of thepeople, and the relations they forge with a variety of natural resources thatgive them identity and self-fulfilling.

Community DemandsThe poor balance sheet, coupled with the slow, cosmetic and many timesrepressive response by the state and mining companies to the concerns andinterest of communities have led to a questioning of the use of mineralresource revenue and demands. These demands are made for a variety oflegitimate reasons, including improved distribution and management of themineral resource revenue, the protection of the environment and livelihoodsources, a voice in public policy space, respect for their human rights, andownership and access to the minimum requirement of socially-recognizeddecent levels of human existence. For most communities affected by min-ing, every day opens up a spectrum of struggles, including the challengeswith obtaining and retaining land and other livelihood resources, and alsothe struggle to liberate themselves from the numerous restrictions and limi-tations imposed by state policy and corporate practice. Their demandsrange from belligerent acts as noticeable as in the Niger Delta region ofNigeria through protest, self-mobilising and organising, coalition andalliance building, enlisting the support of experts, and intervening in policyand political processes relevant to their agenda.

The National Coalition on Mining (NCOM) represents a particular formin which community demands find expression in the mining sector. It is agrouping of NGOs, communities affected by mining and individualsengaged in mining/extractive sector advocacy for environmental sustain-ability, community rights, and integrated national development. In 2001,there was a cyanide spill at Abekoase near Tarkwa in the Wassa WestDistrict of Western Region by Gold Fields Ghana Limited. TWN-Africaspearheaded the establishment of NCOM as a particular form of collectiveresponse to the specific problems arising from the cyanide spillage and gen-erally to the lack of developmental impacts of mining, including the margin-al or lack of benefits to local communities. Since its formation, NCOM hasoffered a framework for collaboration to strengthen collective actions that

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advance community interest, environmental sustainability and integratednational development in relation to the extractive industries sector, in par-ticular mining. In the specific area of work on communities affected by min-ing, the approach continues to facilitate and inspire the self-expression andself-organization of communities, and their wider linkages with organiza-tions in and out of the country.

ConclusionWhile mineral resources have been integral to the social and economicdevelopment prospects of mineral-endowed countries and local communi-ties in Africa, domestic measures have not been adequate to optimize thebenefits or translate marginal benefits into building the productive capaci-ties of local communities in mining areas. This has occurred largely as aresult of the processes of globalization which has emerged as policy, lawand practice for all countries. Local communities which suffer the directimpact of policy inadequacy and poor practice have employed a variety ofdemands to address their specific concerns.

Yet, the very policies which angle them out from the equation are set tocontinue as the EU negotiates the Economic Partnership Agreement withAfrica and Caribbean Countries, as the new emerging powers of Asia(China and India turn to Africa for their mineral resource demands; as theUS works to forge partnerships with oil-producing countries in Africa; andas northern governments forge bilateral investment agreements which setlow standards for Africa's mining sector.

Looking into the future role of mining in Africa, the paper makes the fol-lowing recommendations:

• Development of an integrated national and regional strategy for mining. This strategy must have rural development strategy as key element since most mines are rural location specific.

• Re-definition of the concept of investment, which narrowly focuses on investment only when it is big and essentially foreign. The reframed concept of investment is a new one by peasant farmers; women's productive economic activities and a holistic view of a community

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beyond an aggregation of human beings should be key elements of thisconception.

• The scope of policy-making is such that community demands need to expand beyond location-specific actions.

With specific reference to improved revenue distribution and managementthe paper makes the following recommendations:

• Improve the marginal gains by considering an upward review of the levels of some of the taxes, particularly royalty, and also a reintroduction of some of the taxes such as capital gain tax and additional profit/windfall tax, where applicable.

• Consider the creation of a permanent mineral resource investment fund backed by national law and managed by a clearly defined institution. Areview of experiences elsewhere would be valuable as a precursor. Some of the experiences worth reviewing include:

- Alaska Permanent Fund - constitutionally enshrined, dividend to all, highly successful, keep management out of the hands of spend-thrift politicians, preserve state's mineral wealth for indefinite future, returns distributed among entire Alaskan population.

- Alberta Heritage Fund - managed by politicians as a budget-balanc-ing tool, low return investment decision, cross-subsidization of poorer provinces, no dividend program.

- Norwegian Petroleum Fund - managed in European parliamentary tradition, independent board of investment managers, Central Bank-managed, annual deposits & withdrawals at the discretion of Parliamentary majority, investment portfolio spreads risk.

• There is also a need to formulate fiscal devolution principles, which transfer and or reverse revenue sharing arrangements to the local centres.However, such principles must be consistent with the larger integratednational development agenda.

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• The principles should also come with clear definition of guidelines forthe distribution and utilization of the mineral wealth.

• It might be worthy to consider the introduction of special production-based fees, taxes based on source principle. The stumpage fees concept in the timber sector could explore for possible applicability in themining sector.

• Finally, consider diversification of certain minerals which allowscommunity collective investment.

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References

Economic Commission for Africa-ECA (2004), Minerals Cluster PolicyStudy in Africa Pilot Studies of South Africa and Mozambique, ECA, AddisAbaba

Ferguson, James (2006), Global Shadows: Africa in the Neoliberal WorldOrder Durham, NC: Duke University Press

Mate, Kwabena (2002), Capacity Building and Policy Networking forSustainable Mineral-Based Development report prepared for UNCTADunder Project M of the UN Development Account

McAdam, Doug, McCarthy, D.John, and Zald, N. Mayor (1996),Comparative Perspectives on Social Movement

Sachs, Jeffrey D. and Warner, Andrew M. (1995), Natural ResourceAbundance and Economic Growth, National Bureau of Economic Research,Inc in its series NBER Working Papers No. 5398

The United Republic of Tanzania (2008), Report of the PresidentialCommittee to Advise the Government on Oversight of the Mining Sector,Vol. 2

UNCTAD (2005), Economic Development in Africa: Rethinking the Roleof Foreign Direct Investment, United Nations, New York and Geneva

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Chapter 4

Hiding Conflict Over Industry Returns:A Stakeholder Analysis of the ExtractiveIndustries Transparency Initiative (EITI)

Sarah BrackingInstitute for Development Policy and Management (IDPM),

University of Manchester, UK

Introduction

“3.5 billion people live in countries rich in oil, gas and minerals. With goodgovernance the exploitation of these resources can generate large revenuesto foster growth and reduce poverty. However when governance is weak, itmay result in poverty, corruption, and conflict. The Extractive IndustriesTransparency Initiative (EITI) aims to strengthen governance by improvingtransparency and accountability in the extractives sector. The EITI sets aglobal standard for companies to publish what they pay and for govern-ments to disclose what they receive.” (EITI, 2008)

“The EITI, in a nutshell, is a globally developed standard that promotes rev-enue transparency at the local level” (EITI, 2008).

This paper will explore the political context and effects of the ExtractiveIndustries Transparency Initiative (EITI), an intervention which aims tobring together in a common purpose, governments, companies, civil socie-ty groups, investors and international organizations to ostensibly improvegovernance in resource-rich countries in order to defeat the 'resource curse'and facilitate economic growth and poverty reduction. There are currently

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23 candidate countries1. There are currently no fully compliant countries -that is, candidate countries - which have successfully completed EITI vali-dation, a process managed in-country by the country multi-stakeholdergroup to assess compliance with the standard. The validation process, whichmust occur before a country has completed two years as a 'candidate coun-try', is further overseen by the EITI Board through the EITI Secretariat, withthe board also reviewing all Validation Reports.

We are told that the 'primary beneficiaries' are the governments and cit-izens of resource-rich countries. The principal mechanism which serves tobring these benefits is the transparent reporting of what companies pay andwhat governments receive in terms of mineral-related profits and rents.This, we are assured, will propel us some way along the road to greateraccountability and better governance as citizens now have the 'facts' withwhich to hold decision makers accountable for their use of revenues.According to the EITI:

'Civil society can benefit from an increased amount of information inthe public domain about those revenues that governments manage onbehalf of citizens, thereby increasing accountability and improving transparency'. [EITI, Fact Sheet, 2005]

As a representative of the in-country Multi-Stakeholder Group, someaugmented voice for 'civil society' is ensured. Meanwhile, the enhancedpower attributed to greater knowledge is assumed to further the interest ofthe weaker parties, although how this actually happens in practice is notclear.

The paper explores the initiative using a stakeholder analysis of the var-ious interests that it claims to further, and shows how these are chronicallyimbalanced. Critical conflicts of interest and unequal power between thevarious parties are obscured by an underlying reliance on liberal consensustheory, which suggests that all parties can be winners.

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1Azerbaijan, Cameroon, Côte d´Ivoire, Democratic Republic of Congo, Equatorial Guinea,Gabon, Ghana, Guinea, Kazakhstan, Kyrgyzstan, Liberia, Madagascar, Mali, Mauritania,Mongolia, Niger, Nigeria, Peru, Republic of the Congo, São Tomé e Príncipe, Sierra Leone,Timor-Leste, Yemen.

Stakeholder Analysis of EITIOverall, it is important not to evaluate the EITI for what it is not. It is not aFair Reward mechanism, or Fair Trade standard which has at its centre anydiscussion over the distribution of rents. It does indicate that considerationwill occur of whether the distribution of benefits is equitable and necessaryadjustments will be actions to ensure that the country's poor and naturalowners of subsoil resources are properly compensated for their extraction.That poverty reduction might occur, or sustainable development is an add-on which is not built into the process of EITI. This is simply a process ofhigh-level meetings, the appointment of an administration and the publica-tion of some accounts. And as the quotes above indicate, it is a top-downprocess of applying a 'global' standard in a 'local context'. It is not, also, aresponse to the World Bank's Extractive Industries Review, which just pre-ceded it, but arguably a distraction from it.

In other words, a whole load of development objectives - anti-corruption,poverty reduction, sustainable development, economic growth, better gov-ernance - are said to be attributable to the simple act of transparent account-ing. As Table 1 illustrates, the benefit of increased company profits andincreased social welfare can seem to exist side-by-side, even though in prac-tice a zero-sum contest has to occur over who benefits from mineral extrac-tion. That the EITI can simultaneously recruit the support of so many differ-ing stakeholders attests to the power of the developmental concepts itemploys and the overall veneer of assistance and benevolence that itimbues, but a look at what each of these is saying separately serves to high-light the deep contradictions of the approach.

Companies Stake in EITI

Companies continue to be criticized for their performance in developingcountries, particularly in terms of their environmental and social impacts(Stiglitz, 2006, 2008). A 'race to the bottom' is seen to have been occurringwhere countries compete to create the least restrictive and most profitableregulatory regime in order to entice multinationals where the supply of theirinvestment resources is finite and relatively scarce (see Licht, 1998).Certainly, persuasive illustrative data in Hilson and Maconachie (2009) sug-gest that companies have been able to feast on super-profits, whilst the

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burden of taxation has been comprehensively reduced in many Africancountries that have been successful at attracting FDI (2008, p. 36-38). Theseauthors cite figures to the effect that

'Ghana's large-scale mining companies produced not less than (sic) US$5.2 billion in gold between 1990 and 2002 (calculated from Yakubu, 2003), as reported by the Bank of Ghana, the government received only US$68.6 million in royalty payments and US$18.7 million in corporate income taxes from these companies during this period'. [Bank of Ghana, 2003]

Taking the 9 per cent of the royalties (US$68.6 million) that go to com-munity development as a separate item (Hilson and Nyame, 2006) (leavingUS$62.426 and US$6.174 respectively), and then adding the remaining roy-alties to the taxes (US$81.126 million), and converting the billions (at 1 isequal to 1,000 million) gives the shares depicted in Figure 1, to illustrate theslice of the pie available for domestic social expenditure and that whichreturns to the company.

Figure 2: Mine royalty distribution in Ghana

Hilson and Maconachie (2009, p. 34-36) argue that the current 'miningboom', which is also leading to the posting of impressive sounding growthfigures continent wide, is due predominantly to the 'overhaul of legislationfor the benefit of investors', at least in Ghana, Tanzania and Mali which theyreview. Various incentives to companies have been enhanced, in areas suchas land ownerships and security of tenure, import and export tax regimesand ancillary services and land access (see Filho and Vilhena, 2002). Hilsonand Maconachie (2008, p. 35) summarize that

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'the poor economic performance of Africa's conventional mineral producers is more a result of inequitable mining codes than poor governance - that even in situations where revenue mismanagement may be taking place, the quantities of money available to embezzle are insignificant'.

In assessments of relative power, political theorists have long stressedthat the powerful are often those who make decisive issues about theirbehaviour, such as profit sharing, 'disappearing' from view, and by stressinga problem which takes attention away from themselves, such as reportingtransparency. This would seem to be an example of that phenomena, whenthe case that corruption is critical to mal-development is actually weak, butis taken as a given, thus detracting attention from the critical a priori divi-sion of reward in mining.

Moreover, joining and supporting the EITI is a small commitment in theface of the benefits of the current neoliberal regulatory regime in Africa. Infact,

'Being a supporter of the EITI does not require any reporting or disclosure requirements in addition to those for all companies operating in the relevant sectors in countries implementing the EITI' [EITI, 2008]

Moreover, it does not oblige the company to do much else either, least ofall pay a higher price for the materials it extracts. But the benefits in termsof public reputation may be great. In fact, given models of corporate respon-sibility more generally applicable, the EITI is a frail relative, and may beexcessively cheap for the companies to participate in, given their expectedbenefits. Overall, the EITI demands only that which legal regulation wouldalso require: A full disclosure of accounts.

For example, a review of corporate social responsibility (CSR) by Kyte(2008), a Vice President at the IFC, stresses the 'material' case for thesetypes of initiatives in increased profitability in the long run, as they tend toreduce risks to investment. Kyte's piece also serves as a reposte to the 'moralsuasion and …behavioural examples' of Stiglitz, (who is depicted as 'wear-ing the cardigan of an armchair moral philosopher'), since it is squarely infavour of profitability and 'enlightened self-interest' as a guide to corporate

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affairs (2008, p. 560, 576, 560). But she still stresses that voluntary inter-ventions such as EITI are caused by the 'drivers' for CSR which come frombusiness and financial imperatives, 'effective regulation, including privati-sation and public private partnerships, competitiveness, profitability andshareholder/stakeholder value' (2008, 565). Here, there is 'plenty of evi-dence that the alternative world described by Professor Stiglitz, where italways pays to pollute, is changing' (ibid), and that companies themselvesare seeking out positive change for business reasons leading to a 'race to thetop' (2008, p. 565, citing Spar, 1998). This is apparently because the 'Bottomof the Pyramid' is the future market (citing Matten, 2006, using the conceptdeveloped by C.K Prahalad and others). In this, the poorest people becomean enormous untapped market of the future.

Interestingly, she points to CSR policy as directed at three broad areas: 1) a company running its business responsibly in terms of 'internal stake

holders', defined as shareholders, suppliers, employees and customers;2) in relation to the state, 'locally and nationally, as well as to inter-state

institutions or standards' and 3) 'business performance as a responsible member of the society in

which it operates and the global community' (2008, p. 563).

She claims that CSR requires the integration of environmental manage-ment systems, labour standards and fair consumer relations into the 'corebusiness' (ibid). In this, the EITI looks as if it is restricted predominantly to2), whilst not requiring extensive mainstreaming, or the consideration ofwider concerns, such as labour. As such, it looks like a thin requirement forcompanies to commit to, given the gains they make in influence, network-ing, reputation and risk reduction.

The EITI probably comes cheap in terms of reputational enhancement,whilst also protecting against areas of practice which are more costly, andsubject to litigation, such as practices contained in the US Foreign CorruptPractices Act (FCPA), or the OECD Corruption Convention. Indeed, Kyte(2008) sees CSR as business-driven, with its moral aspects inevitably pro-ducing 'dilemmas'. She poses a hypothetical dilemma as

'how, at the enterprise level, can we navigate differing views on the morality of making profit from the private supply of affordable water or some other fundamental service, versus the morality of allowing

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corrupt or inept governments to promise, but not deliver, free or cheap services?' [Kyte, 2008, p. 564]

This is a telling construction since the act of making profits is not themoral issue, only having to do it whilst observing a corrupt government. Itillustrates that the view of 'corruption' in play is that which sites it predom-inantly 'over there' in the developing world, waiting to ensnare worthy pri-vate actors. According to Senn and Frankel, in the Oil and Gas Journal, theEITI is 'good for business' but its increased transparency has to be managedto protect the firm's traditional sources of risk protection, since it has the'pitfalls' that firms could face legal liability for breach of confidentialityagreements or increased scrutiny under the FCPA.

In sum, companies' interest in the safety of their investment and protec-tion of their future profits finds voice in 'rule of law' initiatives such as theEITI. To companies, the EITI helps to safeguard the operating environment.The major financial institutions have used it to 'call for stability, transparen-cy and respect for the rule of law in the extractive industry, particularly inareas in which they have business interest through the multinational compa-nies they invest in' (EITI, 2006). Moreover, these moral high grounds arewon by EITI in the aftermath of the highly critical Extractive IndustriesReview.

Communities

The overhaul of mineral taxation agreements seems to be the key to coun-tries gaining proper compensation (Hilson and Maconachie, 2009, p. 38). Inthe EITI, there is a broad definition of 'communities' as a stakeholder, whichincludes civil society organizations that seem to be critically sponsored bydonors for the purposes of fulfilling this oversight function, on behalf of theimagined 'community'. There are also cases in which the EITI has givenvoice and a role to older types of leadership such as traditional authorities.For example, the role of traditional authorities in promoting the EITI wasemphasized by Aterkyi II to the National House of Chiefs in Ghana, whotook the opportunity to explain that traditional rulers are 'the fulcrum ofdevelopment in Ghanaian communities', as well as the 'custodians of theland and natural resources' (Aterkyi, 2007).

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In the role that the EITI gives to a liberal range of social agents, it alsoarguably sidelines some traditional sites of protest - for example, the socialforces and political strategies which have historically fought for increasedbenefits to workers and communities, including trade union representationand international trade union solidarity, and social democracy at a nationallevel. Arguably, some of these sites of protest, accompanied by more mod-ern representatives of 'community' found in social movements would give astronger resistance to exploitation by extractive industry companies. Tocounter the 'race to the bottom', mineral exporters should probably consideran exporters' cartel, disciplined by trade union activities, and a fix onexporting prices - either that, or a postponement of FDI-led growth entirely,on the 'leave the oil in the soil' precedent of social movementism (see Bondet al., 2007).

However, the EITI has done some work in highlighting the lack of devel-opment in mining areas. For example, a report in 2006 expressed some seri-ous concerns that there is no visible manifestation of the use of mineral roy-alties in mining districts, and that monies paid to communities are inade-quate (EITI, 2006b). In this sense, it is a 'name and shame' instrument, withthe production of evidence supposed to be enough to produce change. Giventhe weakness generally of mandatory or legislatable international law, it hasthis feature in common with many more widely known international legalcodes, such as the Universal Declaration of Human Rights and its associat-ed instruments. In short, it is a liberal precept which relies on parties beingable to reach consensus through moral convergence. For example, SteveManteaw (2007), at an EITI Conference in Accra in January 2007, stressedthe harsh realities that surround mining communities, despite promises ofgeneral improvements in life and welfare by both the government and thecompanies.

As can be seen in Table 3, the consensual approach taken by the EITIsuggests 'win-win' outcomes for companies and communities (and, byimplication, workers) but the 'increased profitability' and 'increased socialwelfare' envisioned for them, respectively, remain seriously in contest, aseach rely on access to the same revenue base. By presenting the process asa voluntary initiative where all gain, the Secretariat of EITI obscures this.

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Host GovernmentsThe principal benefit to a signatory government is the ability to make a fan-fare over little. The holding of a national conference and stakeholder meet-ing, the publication of a report and anointing of a secretariat all add to theanti-corruption credentials of an administration with little actual cost in thespoiling of nepotism or patronage. Examples of such speeches are numer-ous. For example, the Nigerian President, in his speech at the First WestAfrican EITI Conference in 2008, could confirm the existence of high levelcorruption in the oil industry, much of which was apparently being organ-ized by influential politicians. He hoped that the conference would 'serious-ly interrogate this issue, being propelled by the faith that extractiveresources can indeed promote growth, enhance poverty reduction and drivesustainable development' (AFP, 2008). Such claims to integrity and avowalsof others' lack of it is a common staple of public policy in the era of the 'anti-corruption campaigns', but the symbolic significance of the discourse is notgenerally matched by changes in practice (Bracking, 2007).

Nigeria is, in fact, claimed to be ahead in implementation, in relation tothe other 23 or so members of the global body, reported Binniyat during thehosting of the first West Africa Extractive Industry Transparency Initiative(WAEITI), in Abuja (Binniyat, 2008). The EITI has also given traditionalauthorities the chance to play a role, emphasized by Aterkyi II in theGhanaian case, who argues that 'traditional rulers are the fulcrum of devel-opment in Ghanaian communities, as well as being the custodians of theland and natural resources' (Aterkyi, 2007). In this sense, the positioning ofdomestic opposition and radical figures behind the initiative does empowerthose social forces relatively, in that they can lay claim to be the 'moral' cus-todians of the nation. However, this is often at the cost of a lesser critiqueof the mineral extractive companies, with whom they are forced intoalliance, and against whom they may have been previously campaigning inother ways.

Indeed, a pattern which emerged in a review of the anti-corruption cam-paign was that adherence to institutional procedures like those embodied inthe EITI can leave actual political practice largely undisturbed, whether interms of reform of patrimonial politics, criminal and/or elite nepotism on thepart of politicians, or in terms of bribing practice by companies which

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merely extend their supply chains, employ 'agents' and hide payments aspseudo-legal transfers (Bracking, 2007). In other words, constructing neo-liberal 'good governance' norms alongside a capitalist market can be pur-sued with great apparent zeal by performing elites, confident that patronageand spoils will remain hidden from view. Whether accountability as a socialpractice will 'catch up' and inhabit these spaces and institutional mecha-nisms as the populations grow more accustomed to exercising it, or whetherthe institutional forms will merely crumble for lack of meaningful use,remains open to debate. It is certainly not desirable that institutional reformshould, at this stage, be abandoned because it is slow to take effect, or dif-ficult to measure 'results'. There is also some evidence that civil societygroups have been able to engage with the EITI with some benefit to theirenhanced knowledge and campaigning. However, there are also few histor-ical examples of political elites who decide to give away greater accounta-bility and transparency to populations voluntarily, particularly when it mat-ters materially; a precedent which should make an evaluation of the EITIcautious in the absence of a wide democratisation movement which canforce reform in these areas more generically. Instead, political reform isnormally won by people against the odds and with threats of oppression andpolitical violence hanging above their heads.

Northern GovernmentsA public relations boon goes to the donors supporting the initiative since itplays to so many audiences. However, it is worth remembering that the UK,at least, is not as transparent as the code demands. Here is another exampleof where the South is being encouraged to do that which the North does not:in this case, the profitability of the mining companies is protected, as aretheir new investments, by opaque reporting standards at the company end ofthe supply chain. This makes it very difficult, even with the EITI, to accu-rately assess the distribution of benefit from extractive industries more gen-erally.

For example, and to illustrate this point of inconsistency, the UKNational Statistical Office has data on firms' destinations for investment byindustrial sector, but much of this data for sub-Saharan Africa are incom-plete to the public gaze, as can be seen in Table 4. Thus, the '..' in the table

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indicates that the data cannot be released because of confidentiality consid-erations. These considerations arise principally because there are so fewinvestors in these countries and sectors (perhaps only one company report-ing for each cell category) that they could be identified by a 'knowledgeableparty'2, and this is deemed unacceptable by current UK rules for governmentstatistics. From what is included for 'Africa as a whole', we can see that thefinancial services, retail and wholesale sectors are the largest earners,although the country-based data for the former are largely embargoed, withsome large investments also in mining and quarrying, particularly in SouthAfrica. It is worth noting that though investments are relatively slight inglobal terms, the earnings from African investments are still healthy, asillustrated in Table 5.

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2A helpful official at the ONS explained that “ '..' indicates data that may allow the returnedsurvey value of a single respondent to be identified by other knowledgeable parties, this isused to comply with the obligations of the Statistics of Trade Act 1947 which ensures suchconfidentiality for published data obtained from respondents under the Act in exchange forcompulsory and legally enforceable data collection by ONS. This is used to protect poten-tially commercially sensitive data where a respondent is a major or dominant contributor toa published data value. '-' indicates no data returned for this data cell. '0' indicates datareturned, but between -£0.5 million and £0.5 million” Special thanks to Simon Harrington,of the ONS, FDI Surveys for this explanation. An increase in transparency is obviouslyrequired here.

What is informative in these figures is the magnitudes of aid, debt andinvestment in relation to each other: The Department for InternationalDevelopment's (DfID's) bilateral assistance to sub-Saharan Africa was£1,107m in 2006/07, whilst the net foreign direct investment position inAfrica of UK companies in 2006 was £15,455 mill (15 times more), and netearnings from foreign direct investment in Africa in 2006 were £3,479(three times more) (DfID, 2008; ONS, 2008). In other words, the donor gov-ernments can claim a moral high ground for sponsoring the EITI, and indeedin the UK case for housing its Executive within DfID, safe in the knowledgethat the overall profitability of extractive industries in Africa, rewards sucha stance with dividends.

There are also more fundamental problems with donor agency, its effec-tiveness and representation. Indeed, the self-representation of developmentpractice by donor governments and the International Finance Institutions(IFIs) inflates their own moral consistency and effectiveness. Donors prefernot to talk about corruption and not to be reminded of the sanctions theyonce threatened to impose, when other geopolitical and strategic concernsprevail. Such inconsistencies have, historically, served to maintain many adictatorship, but they sit more uneasily with current norms of neoliberalismand they are more difficult to justify transparently. Corruption may also beoverlooked if it involves MNCs and domestic firms of the donor states or ifit highlights the more morally questionable features of global political econ-omy. In addition, corruption may be downplayed in the interests of stabili-ty, to avoid conflagration and state collapse, or where donors find it difficultto withdraw for humanitarian reasons. Lastly, talk of corruption is muchquieter generally when the geography moves to the 'home front', as seen inthis illustrative example of the lack of reasonable disclosure in UK statistics.

Discursive GenealogyThe EITI comes at the tail end of similar more generic processes of increas-ing transparency, in order to reduce corruption, at a global level, led princi-pally by Transparency International. It is also part of a trail of ideologicalreformulations and initiatives taken by donors on anti-corruption whichseek to broadly contribute to enhanced economic well-being. However, itshares the flaws of the earlier precedents. For example, the meanings of

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corruption which are strategically used by the IFIs and the governments ofrich 'donor' governments in international development, coalesce around the'abuse of public office for private gain' (World Bank, 1997, p. 8). Corruptionis largely understood in a neo-liberal, economistic, anti-state paradigmwhich emphasizes politics as a source of rents, such that anti-corruption pol-icy unduly blames the public sector and leaves the private sector without acase to answer. Policy on corruption is thus deeply embedded within thewider constructions of global neo-liberal governance (see Szeftel, 2000;Marquette, 2003; Brown and Cloke, 2004; 2005). Anti-corruption policy isused to positively encourage greater accountability and democracy, and con-ditionality employed as a punitive driver to persuade recalcitrant govern-ments into better governance practice (Doig and Marquette, 2004). This par-ticular instrument, the EITI, invokes these more generic meanings of anti-corruption, as essentially a public sector problem, and sited in the develop-ing country, rather than being instigated by the private sector and supportedby global processes of banking opacity. In this way, failures in developmentand economic growth in mineral exporting countries can be blamed oninternal corruption, rather than deficient company remuneration for drillingand extracting, and sharp corporate practice which simultaneously deniesand removes profits.

Corruption is perceived as being inimical to national development, butcritically, nationally sited, 'over there'. For example, DfID, in its 1997 WhitePaper on Eliminating World Poverty, proposed measures to help build soundand accountable governments in a bid to help poor people (1997: 30). Theconsequences of corruption advanced by DfID for the poor are higherprices, fewer employment opportunities (due to market distortion), pay-ments for public services which are supposed to be free, diversion of budg-etary resources from poverty reduction into unproductive expenditure andrepayment of debt accumulated by corrupt leaders, a loss of tax and customsrevenue, lowered economic growth as uncertainty puts off prospectiveinvestors, and reduced political representation as elites cling to power toexploit corruption opportunities (ibid). Whilst most of these negative effectsare undoubtedly true to varying degrees, the power of calling up the genie'corruption' is found also in its ability to obscure other things that may begoing on. The 'anti-corruption campaign' then serves to deny other types ofcausality, including where the demand for the corruption comes from within

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a global relationship.3 In terms of the EITI, this critically means takingattention away from paltry rents and compensation paid to developing coun-tries for the exploitation of their resources, by pathologizing domestic gov-ernance.

Pogge (2002) has also recently reviewed how the extractive basis of theglobal economy ill-compensates for resources extracted, and proposes a'Global Resources Dividend' to make payments more equitable. If un-devel-opment is instead attributed to the political economy of development (seeBracking, 2009b), then the 'problem of corruption' can be seen as needless-ly fore-grounded, when the behaviour in question is more accurately symp-tomatic of discrete or individual acts of theft or fraud, or more morallyambiguous, but universal, practices of networking or cronyism. The hazardsof this foregrounding, and the instrumental reasons for privileging corrup-tion in political discourse in particular contexts are evident, not least to slateone's political opponent (see Hall-Mathews, 2007). In terms of the EITI, theforegrounding of corruption shores up companies' reputations within a cor-porate social responsibility paradigm, whilst de-emphasising other aspectsof their extractive behaviour, such as the morally reprehensible norms oftransfer pricing and inflation of CEO salaries and benefits. Whilst support-ers of the EITI would argue, in relation to the latter, that the mechanism isdesigned to throw more light on these, it is unlikely that this will be the case,when global accounting practices themselves have conventions which pro-tect the perpetrators. A more wholesale global legal reform is needed ofaccountancy standards.

In the meantime, there are political hazards to be found in the anti-cor-ruption campaigns, some of which are mentioned above, which centrallyinclude the holistic de-legitimization of southern states and polities. If astate is seen as systemically corrupt, the pursuit of objectives such asdecolonisation, empowerment, and indigenization, which may involvewidespread wealth redistribution, are inevitably viewed as illegitimate actsof graft, punished by international investors and the IFIs. Indeed, political

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3 This assertion is not intended to imply that all anti-corruption policy is flawed, or that allanti-corruption policy comes from the IFIs: Developing countries' governments are initiatorsof policy in their own right.

culture can degenerate from discussions of substantive policy into accusa-tions of corruption and promises of integrity, as the anti-corruption agendatakes centre stage, promoted as it is by the powerful donor community.More generally, there are three central problems with the anti-corruptioncampaign: 1) it neglects internationalized networks and incidence in theNorth (an insight from the discipline of global political economy); 2) itadopts the language of moral crusade, not democracy (an insight from thediscipline of politics and development); and 3) it requires the regulation ofsociability, but this differs by spatial location (informed by economicanthropology). Other political hazards of this approach are distinctive to itscomponent policy mechanisms (see Bracking and Ivanov, 2007: 300-301).

The Political Economy of DevelopmentPogge (2002) pointed out that there is an 'international borrowing privilege',that 'regardless of how a government has come to power it can put a coun-try into debt”; and, an 'international resource privilege', that 'regardless ofhow a country has come into power it can confer globally valid ownershiprights in a country's resources to foreign companies' (summarized byPieterse, 2002, 1035; see also Pieterse, 2004: 75). Pieterse (2002, p. 1035):

'In view of these practices, corporations and governments in the North are accomplices in official corruption; thus, placing the burden of reform solely on poor countries only reinforces the existing imbalance'.

His argument can, however, be extended to development in general: whilstdevelopment policy unquestionably recognizes Pogge's 'privileges', it col-ludes and reproduces political and economic elites who have the power tothrow their own populations into poverty and abjection, with an approachwhich has been summarized by Joseph Ki-Zerbo (with reference to donorpolicy at the time of the Moi government in Kenya during the 1990s) as'Silence, Development in Progress' (cited in Murunga, 2007, p. 288).Development policy and finance can do this because it critically tips the bal-ance of power in elites' favour relative to the majority population, allowingthem to collect rents from the strategic use of the sovereignty they control(see also Harrison, 1999, p. 537-40 on 'boundary politics'; Bracking, 2009a).

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In short, the continuation of poverty and suffering is directly related tothe actions of the rich, a point discussed more generally by Pogge (2001, p.61), when he argues that radical inequality involves violation of duty by thebetter off because of

'the effects of share institutions, the uncompensated exclusion [of local people] from the use of natural resources and the effects of a common and violent history'.

For example, global social movements have produced convincing evi-dence since the days of SAPs that neoliberalism generates poverty.

The political economy of aid, whatever the quantifiable metrics of aideffectiveness, is also systemically guilty of reproducing the current system.In terms of the EITI, which is first and foremost a donor initiative, its roleis central in producing legitimacy for the extractive industries. Many in theWestern public and beyond believe that aid really does mean 'help'. In this,they have been recruited to a wider ideology of 'capitalist ethics', summa-rized proficiently by Zizek (2004, p. 503), where 'the ruthless pursuit ofprofit is counteracted by charity', which

'serves as a humanitarian mask hiding the underlying economic exploitation. In a superego blackmail of gigantic proportions, the developed countries are constantly "helping" the undeveloped (with aid, credits, and so on), thereby avoiding the key issue, namely, their complicity in and coresponsibility for the miserable situation of the undeveloped'. [Zizek, 2004: 504]

For such an important job, the relatively low cost of development grants,and in this case, the miniscule actual cost to operating profits of the EITI,can be seen as an efficient advertising budget for the greater public relationsjob for capitalism that they perform.

ConclusionThe costs of the accumulation that extractive capitalism demands, in lostbiodiversity, lost resources and lives, in environmental pillage and lostopportunity costs to do something else, under the guise of Western assis-tance, is far too great. The EITI, within the broader paradigm of the political

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economy of development, is an example of this wider structure of power.The balance sheet is a negative, as the SDCEA and its friends in Oil Watchhave recognized with their 'keep the oil in the soil' campaign (see also Bond,Dada and Erion, 2007). The achievements of trade unions, NGOs and socialmovements in the South and North, which have been providing consistentand cohesive evidence of the environmental and social costs of the extrac-tive industries, largely to deaf official ears, must now be recognized in newglobal systems of solidarity. The production of 'codes of practice' and 'glob-al standards', which are a feeble crutch for an illegitimate capitalism, mustbe discarded in favour of a proper assessment of what Ferguson describedas enclave investments (2005, 2006; see also Mhone, 2001).

Possible routes out of dependent post-colonialism are difficult to find,and face a traditional Marxist conundrum, that it is often better, or at leastseems to be so in the short term, to be exploited by capitalism than to not beexploited at all. Maintaining the 'confidence' of business people (or moretechnically, capital-owners) remains a central concern of even Left-leaninggovernments for this reason. Those areas, such as the poorest African com-munities, which receive little or no inward investment or industrialization,believe that they can be better off with more capitalist exploitation of labourthrough minerals extraction, a problem which explains the willingness ofworkers throughout history to work for poverty wages, since the alternativehas often been destitution. This is the also the chief motivation of govern-ments for applying to be a 'candidate' of the EITI: It underscores the chron-ic need for Northern investment, given the current inequality of power in theglobal economy. That the choice can be so structured explains the greatpower and innovative drive of capitalist social organizations, but does littleto further the argument of how to escape dependent development. The viewhere is that the rewards are too small for inviting extractive MNCs to assist'development': That it is perhaps better to explore other activities.

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Chapter 5

Re-Agrarianizing Rural Ghana: CanFarming-Based Alternative LivelihoodsReduce Illegal Gold Mining Activity?*

Gavin HilsonA and Sadia Mohammed BanchirigahB

A School of Agriculture, Policy and Development, The University of [email protected]

B Institute for Development Policy and Management (IDPM), School of Environment and Development,

The University of Manchester

IntroductionIn rural sub-Saharan Africa, livelihood diversification is now the norm(Barrett et al., 2001). Throughout the region, a growing number of small-holder farmers, struggling to subsist on earnings generated from sales oftheir crops, have 'branched out' into non-farm activities, in the majority ofcases to supplement incomes. One non-farm activity that has proved partic-ularly popular for hundreds of thousands of rural inhabitants in sub-SaharanAfrica over the past 10-15 years is artisanal and small-scale mining (ASM),a low tech, labour-intensive industry with low barriers to entry (Dreschler2001; Heemskerk 2003; Snyder 2006).

Despite failing to attract much attention in the mainstream livelihoodsliterature, ASM has become an important topic in international develop-ment, its social and environmental impacts spawning extensive discussion

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* A revised version of this paper has been published in the international journal PolicySciences.

(see Hinton et al. 2003; Kambani 2003; Maponga and Ngorima 2003; Kitula2006). The International Labour Organization (ILO, 1999) conservativelyestimates that ASM employs 13 million people directly worldwide. Therapid expansion of its activities in some of the most impoverished sectionsof the developing world has led many scholars (e.g. Aryee et al. 2003;Yelpaala and Ali 2005; Hilson and Pardie 2006) to conclude that it is a'poverty-driven industry', particularly in sub-Saharan Africa. Whilst variousconstituents of the donor community now concede that this may be the case,the prevailing view in policymaking circles continues to be that peoplebecome engaged in ASM because of a desire to 'get rich quick' (Barry 1996;USAID 2005; World Bank 2005). These - often-unfounded - views havepenetrated policy dialogues at all levels.

The belief that artisanal miners are opportunistic, rather than drawn togold and diamond-producing areas because of economic hardship, hasinhibited investigation aimed at determining the source of the povertyfuelling the rapid, and typically chaotic, growth of ASM. The purpose ofthis paper is to help bridge this gap, focusing specifically on the situation insub-Saharan Africa. It is argued that the continued expansion of ASM in theregion is due chiefly to the defunct state of smallholder agricultural andranching activities, which, in turn, is fuelling 'de-agrarianization'. Improvedunderstanding of this de-agrarianization movement is imperative becausemany African governments and corporate actors have recently launchedambitious re-agrarianization programs in an attempt to minimize the growthof illegal ASM. Several of the agrarian-orientated activities being promot-ed, however, are no longer considered to be viable, and are often abandonedin favour of ASM. The case of Ghana is used to illustrate these issues.

Livelihoods Diversification and the Expansion ofArtisanal Mining in sub-Saharan AfricaIn sub-Saharan Africa, as much as 45 per cent of average household incomeis derived from non-farm activities (Reardon 1997; Barrett et al. 2001;Bryceson 2002). The consensus in the literature is that this 'branching out'is due to agriculture is no longer able to support inhabitants economically;a situation brought about by Structural Adjustment Programs (SAPs). Themarked changes that have taken place under adjustment, including the

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opening up of crop parastatals to private sector competition, reductions inexport crop taxes, the devaluation of local currencies, and the removal ofsubsidies on vital crop inputs, have made smallholder farming unviable(Chilowa 1998; Bryceson and Bank 2001; Bryceson 2002). Direct links areyet to be made in the mainstream livelihood diversification literature butthroughout the past decade, ASM has emerged as one of the popular - andperhaps the most important - remunerative activity outside agriculture inrural sub-Saharan Africa.

According to the ILO, more than 2.5 million men, women and childrenare employed in the sector directly in the region (ILO, 1999). Activities areexpanding rapidly in countries such as Ghana, Burkina Faso, Mali, SierraLeone, Tanzania and the Democratic Republic of Congo (Gueye 2001;Keita 2001; Banchirigah 2006; Kitula 2006; Banchirigah 2008). Whilst thegrowth of this 'wildcat' industrial sector has caused its share of problems(environmental degradation, the spread of infectious diseases such asHIV/AIDS, etc.), most of which are owed chiefly to the illegal nature of itsoperations and governmental negligence, there is little denying that it hasbecome an indispensable source of income for millions of rural Africans.

This, however, runs counter to a strategy for controlling the expansion ofASM that has gained significant popularity in policymaking circles: re-agrarianization. Specifically, rather than taking stock of the de-agrarianiza-tion process unfolding in the region, and coming to grips with the impor-tance of ASM as a source of supplementary income for marginalized farm-ers, many African governments, under the guidance of donors, havelaunched projects that aim at promoting the expansion of subsistence activ-ities that are agrarian-orientated. These 'alternative livelihoods' are nowbeing seen as the key to curbing the growth of environmentally-destructiveillegal artisanal mining in sub-Saharan Africa. But their rapid implementa-tion raises several questions for discussion; the most significant of which is:how sustainable are these activities? 'De-agrarianized' groups in sub-Saharan Africa who are heavily immersed in ASM are now being calledupon to revert to the farming and livestock rearing activities that they hadabandoned as full-time occupations because of their limited income-earningcapacity. It is argued here that unless policymakers work to address the veryfactors that have made subsistence agriculture unsustainable in many cor-ners of sub-Saharan Africa, the re-agrarianization approach will do little toslow the growth of illegal ASM activity.

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Many multinational mining companies operating in sub-Saharan Africahave launched an array of alternative livelihood projects which their officersproclaim will help bring illegal mining under control. Specifically, by gen-erating alternative income-earning opportunities, company and governmentofficers are confident of minimizing the number of 'jobless and underem-ployed people [who] resort to artisanal mining for subsistence' (Labonneand Gilman, 1999, p. 2) on large-scale mining concessions. AngloGoldAshanti, for example, reports of having solicited inputs from the TanzanianSmall Industries Development Organization concerning alternative liveli-hoods for artisanal miners in Geita.1 As part of a US$3 million communitydevelopment program, officers at Anvil Mining, currently the largest copperproducer in the Democratic Republic of Congo, have identified local busi-ness opportunities which they claim are adequate alternative income-earn-ing activities to illegal mining. The company has constructed two perma-nent marketplaces to support more than 200 local micro-enterprises, estab-lished a cooperative gravel venture to provide safe employment for legalartisanal miners, and converted a section of land into a market garden forwomen (Anvil Mining, 2007). Many other large-scale mining companieswith operations in sub-Saharan Africa, including Barrick Gold Corporation,Gold Fields Ltd. and Golden Star Resources Ltd. have launched similarlivelihood exercises.

De-Agrarianization and Re-Agrarianization inGhanaian Artisanal Mining CommunitiesOver the past five years, 'alternative livelihoods' has become a popular strat-egy for tackling illegal mining in Ghana; perhaps more so than any othercountry in sub-Saharan Africa. On its mining gateway, under the heading'A Case for the Establishment of Alternative Livelihood Project in MiningCommunities in Ghana', the Ghanaian Government indicates that 'thoughmining cannot employ every member of a mining community, the activitycreates opportunity for the development of other economic activities or

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1 'Case studies - Tanzania: 5.5. Understanding and working with artisanal miners in Africa''http://www.anglogold.co.za/subwebs/InformationForInvestors/ReportToSociety05/values_bus_principles/community/c_cs_tzn_5_5.htm (accessed 5 January 2008).

Alternative livelihoods… [which makes it necessary] to develop AlternativeLivelihood Projects (ALP) otherwise known as Local EconomicDevelopment Projects (LED).2 Whilst several corporate partners haveresponded positively to the government's call (see Table 6), the challenge isnevertheless daunting: Countrywide, illegal artisanal mining employs anestimated one million people directly and has created hundreds of thousandsof additional jobs in burgeoning downstream industries (Banchirigah,2008).

Aside from a small collection of analyses, few attempts have been madeto contextualize the de-agrarianization pattern rapidly unfolding in ruralstretches of Ghana; there is even less analysis identifying the types of activ-ities into which impoverished rural farmers are diversifying. Whilst 90 per-cent of Ghana's agricultural produce originates from smallholder farming(Nyanteng and Seini 2000), there is little disputing that the marked changesin agricultural policy that have occurred under adjustment have made thesector increasingly unviable, which has spawned a frantic search for viableincome alternatives in rural environments. The removal of subsidies on fer-tilizers and fungicides (Nyanteng and Seini, 2000)3 has proved particularlyburdensome for the country's smallholders. The sudden rise in costs, cou-pled with the devaluation of the exchange rate, have made the acquisition ofthese vital farm inputs - now sold in dollars and other foreign currencies -difficult. The deterioration of extension and credit services, which begantoward the end of the 1980s, has made smallholders' situation even moreprecarious:

'[The] breakdown in…extension services has hit the smallholder farmer particularly hard. When the service was operating, government emphasis on small farmer production ensured that a

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2 'A Case for the Establishment of Alternative Livelihood Project in Mining Communities inGhana' http://www.ghanamining.org/ghweb/en/ma/mincom.html (accessed 15 January2008).

3 The Ghanaian Government agreed to eliminate subsidies by 1990. By 1992, fertilizerprices had increased by 32 percent, and the costs of insecticides and herbicides has tripled.For example, the price paid by farmers for compound fertilizer in 1983 was 58 cedis/bagcompared to 3600 cedis/bag in 1989. During the same period, the cost of sulphate of ammo-nia rose from 45 cedis to 2350 cedis (Weissman 1990; Sarris and Shams 1992; Nyanteng andSeini 2000).

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Sour

ce:

OIC

I, 2

006

certain proportion of inputs, mainly fertilizer, hand tools and seeds,reached the subsistence farmer through the field extension staff…Over the years, some 40 percent of the small farmers in the country have [also] received credit. Credit in Ghana, however, is [now] plagued by high intermediation costs and poor loan recoveries…At present, with lending rates at 26 to 30 percent, few businesses can afford to borrow as financial costs are excessive' [Sarris and Shams, 1992, p. 205-206, 186]

Whilst explicit links have not been made in the literature, there is evi-dence pointing to Ghana's smallholder farmers diversifying into non-farmincome-earning activities 'to ensure self-sufficiency for their families'(Jamal, 1995, p. 19). During the early stages of Ghana's adjustment pro-gram, Weismann (1990) reported that currency devaluations and stringentcredit restrictions were crippling the country's rural farmers. Followingremoval of these subsidies, rural livelihood diversification patterns began toemerge, largely because small-scale farmers '[did] not have much opportu-nity to avoid or internalize the many risks and uncertainties which theyface[d] in production and post-harvest activities' (Nyanteng and Seini, 2000,p. 281). Appleton and Collier (1990) confirmed at the time that rural house-holds of all strata were, in fact, engaged in a range of income-earning activ-ities apart from farming. It was also at about this time that policymakersbegan to express concern over the sudden upsurge of ASM operations. TheWorld Bank declared, in the early 1990s, that as many as 30,000 wereinvolved in the sector's activities (World Bank, 1995).

Today, at least 40 percent of rural Ghanaians are engaged in non-farmactivities (after Barrett et al. 2001; Lanjouw and Lanjouw 2001), in largepart because the situation is even bleaker for smallholders than it was 15years ago:

'About 35 per cent of Ghana's farmers are poor, practising mixed forms of agriculture that are risk-prone and heavily dependent on rainfall. With many farmers hampered by poor infrastructure, marketing systems have remained underdeveloped, locking poorer farmers into subsistence agriculture. Too much dependence on petroleum and other indirect taxes which constitute about 67 percent

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of tax revenue, is taking its toll on the real incomes of citizens and consequently on purchasing food'.4

Over the past 10-15 years, ASM has emerged as a popular - and perhaps,the most attractive - non-farm option in the country: there is a burgeoningbody of evidence that points to an unviable small-scale farming sector, andthe general uncertainties surrounding subsistence agriculture, fuelling thegrowth of ASM. Mate (1998), for example, reported nearly ten years agothat in Ghana, 'artisanal gold mining may employ some 40,000 people, par-ticularly in the dry season'. Today, many of the country's chief large-scalemine operators share the same view. For example, in the most recent annu-al report of AngloGold Ashanti, Ghana's largest gold producer, it is report-ed that 'artisanal miners are often simultaneously engaged in subsistencefarming and other similar low-income livelihoods' (AngloGold Ashanti,2006, p. 124). Yakovleva (2007), who has carried out one of the most com-prehensive analyses on de-agrarianization in Ghanaian ASM communitiesto date, reinforces this claim. Drawing upon findings gathered in Noyem, atown in the Eastern Region of the country, the author argues that local farm-ers often sell their produce to local communities that lack purchasing power;are limited in their production because of ineffective agricultural processesand a shortage of resources; and that their consequent impoverishment is themain reason behind many 'joining galamsey activities in the region'(Yakovleva, 2007, p. 35).5 A more recent analysis of ASM activities in thetown (Banchirgah, 2008) corroborates these conclusions, reporting that 'theemerging pattern in Ghana is the rural subsistence farmers moving intoASM to complement their earnings…[with] all signs point[ing] to farmingbeing unviable due to climatic uncertainties and market fluctuations forcrops' (Banchirigah, 2006, p. 7). There are numerous other studies (e.g.Amankwah and Anim-Sackey 2003; Aryee 2003; Aryee et al. 2003; Hilsonand Potter 2005; Hilson et al. 2007) which confirm the existence of vibrant

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4 'Barriers to Agricultural Trade' http://www.africanexecutive.com/modules/magazine/sec-tions.php?magazine=84&sections=30 (Accessed 23 December 2007).

5 Galamsey is a local term for illegal mining.

ASM communities in many of the so-called 'agricultural breadbaskets' ofGhana, including Dunkwa, Tarkwa, Bibiani and Obuasi.

Within the towns where large-scale mining and mineral explorationactivities take place, the unemployment rate for Ghanaians aged 15-24 hov-ers between 70 and 90 per cent. Not surprisingly, artisanal mining activityhas taken root in many of these localities because the 'farmers and small-scale miners who lose their land to mining companies have very few meansfor survival in the formal economy' (Carson et al., 2005, p. 41). The ubiq-uitous occurrence of gold and low barriers to entry makes galamsey activi-ty attractive. In a futile attempt to control illegal mining, the governmenthas coordinated periodic military 'sweeps' to remove galamsey from compa-ny concessions. The most recent effort, Fight Against Illegal Mining or'Operation Flush-out', was carried out in September-October 2006. Theseefforts, combined with escalated backlash from rural communities over thelack of jobs generated by large-scale mining and mineral exploration activ-ities, have fuelled a frantic search for potential income-earning alternativesto illegal mining in recent years.

Ghana's alternative livelihood 'facility'6 for ASM emphasizes 'forced' re-agrarianization, its constituents championing agrarian activities as safer andmore attractive income-earning alternatives to illegal artisanal mining. Thepriority has been to develop - and in many cases, establish - a host of farm-ing and livestock activities traditionally undertaken in the country, includ-ing cocoa farming, snail cultivation and 'grass-cutter'7 rearing, as well as'non-traditional' activities such as sericulture and mushroom farming.Whilst it is perhaps too early at this stage to draw concrete conclusionsabout the effectiveness of the facility, in each of the areas where these agrar-ian activities are being promoted, including New Abirem, Prestea, Obuasiand Dunkwa, galamsey activities have, in fact, increased. This raises thequestion: How sustainable are these activities, many of which were initiallyabandoned in favour of artisanal mining because of production and financial

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6 The word 'facility' is used here in a metaphorical sense. There is, of course, no nationalalternative livelihoods program per se but rather a collection of different exercises, eachemphasizing similar things.

7 The grass-cutter (Thryonomys swinderianus) is a rodent of the suborder Hystricomorpha,whose natural habitat is the tall grassland of the Guinea Savannah.

challenges? As one key stakeholder put it in an interview, in order to dis-courage illegal artisanal mining in Ghana, 'we must prove that moving themwill get them at least what they are getting as galamsey'8 - in other words,ensure that these alternatives are capable of generating equivalent or greaterfinancial returns than gold panning. This requires, inter alia, subsidizingthe crucial farm inputs that rural smallholders can no longer afford, as wellas improving their market positions.

Whilst there is little evidence to suggest that this is taking place, it hasnot prevented certain companies from branding the agrarian activities theyare promoting for catchment communities as 'sustainable'. For example,Gold Star Resources, a US-based and Canadian-listed gold mining compa-ny with operations in Bogoso in the Western Region of Ghana, has launcheda series of projects under the auspices of its 'Sustainable AlternativeLivelihood Project', including sericulture and chicken farming. The jury isstill out on both initiatives. In the case of the former, only a handful of farm-ers have been trained, and the country is neither a major consumer nor anexporter of silk; and in the case of the latter, only 100 chickens have beendistributed throughout the town, which has a population over 30,000(Hilson and Banchirigah, 2009). Similarly, Newmont Ghana Gold Limitedhas launched an array of agrarian activities within the communities sur-rounding its Kenyase and New Abriem operations, one of which is snailrearing (Anderson, 2006), despite evidence that 'raising snails alone doesnot produce enough income to sustain a family's survival' (Carson et al.,2005, p. 62). These standalone projects, most of which provide menial eco-nomic returns, will likely do little to discourage illegal mining activity.How aware are Ghana's principal large-scale mine operators of the driversof livelihood diversification in rural areas of the country, and the limitationsof farming and ranching as a source of livelihood in a de-agrarianized arti-sanal mining landscape?

Criticism could mount against the country's large-scale miners in upcom-ing years over the promotion of ineffective agrarian-orientated activities forrural populations; but in their defence, community development officers

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8 Interview, company official, Accra, August 2005.

have been provided little guidance on how to go about identifying appropri-ate alternative livelihoods for artisanal miners. Whilst pursuing what isclearly a policy of 'forced re-agrarianization', it could be a case of corporateactors assuming that many of the agrarian alternatives being promoted,including cocoa farming, snail harvesting and cassava cultivation, are viablealternatives, as they have long been economic mainstays in rural Ghana.The presumption could be that people have been driven to work at artisanalmines because they lack the start-up capital for their farms, with diversifi-cation seen by mining officers as a desire on the part of rural inhabitants tocontinue farming, and decisions taken to promote supplementary 'non-tradi-tional' agrarian activities such as sericulture being genuine efforts to diver-sify galamsey communities.

To their credit, each of Ghana's major mine operators have solicited theservices of Opportunities Industrialization Centers International (OICI), aPhiladelphia-headquartered NGO that has been working to improve thequality of life of low-income groups in the developing world since 1970, toassist with the identification of appropriate alternative livelihoods. Theorganization, however, is promoting similar activities in environments withdifferent climates and markets. Whilst perhaps premature at this stage tolabel these activities as failures, recent research undertaken by the authorsin selected galamsey communities (see Hilson and Banchirigah, 2009) indi-cates that they are doing little to discourage illegal mining. Their analysisreveals a failure on the part of OICI to take into account the factors fuellingde-agrarianization in rural Ghana, as well as the challenges with netting suf-ficient incomes from the agrarian-orientated activities it is promoting.

In summary, the efforts being made in Ghana to 're-agrarianize' ASMcommunities should by no means be viewed as best practice at this stage.There continues to be a poor understanding in policymaking circles of whypeople are abandoning farming in favour of ASM in the first place, as wellas why smallholder farming has become an unviable economic activity formany of the country's rural peasants. Until government officials and corpo-rate partners - in Ghana and elsewhere in sub-Saharan Africa - come to gripswith these issues and act accordingly to make agricultural production andlivestock rearing more sustainable, illegal mining activity will continue toexpand unabated.

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ConclusionThis paper has argued that the continued expansion of ASM in sub-SaharanAfrica is owed chiefly to the defunct state of its smallholder agricultural andranching activities, which, in turn, is fuelling 'de-agrarianization'. Despitethe movement of a growing number of rural Africans from farming intonon-farm activities, foremost ASM, governments and private sector partnershave launched ambitious agricultural-based 'alternative livelihood' pro-grams in an attempt to minimize the growth of illegal ASM. Several of theactivities being promoted, however, are no longer considered to be viable,and are often abandoned in favour of ASM in the first place. As the case ofGhana has shown, there continues to be a poor understanding in policymak-ing circles about why people abandon farming in favour of non-farm activ-ities such as ASM, and until this gap is bridged, the latter will continue toexpand rapidly.

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Mate, K. (1998) 'Boom in Ghana's Golden Enclave: Major NewInvestments Boost Output, but Environmental Concerns are Growing',Africa Recovery 11(3):11. http://www.un.org/ecosocdev/geninfo/afrec/sub-jindx/113ghan4.htm (Accessed 3 January 2008).

Opportunities Industrialization Centers International (OICI). 2006.Sustainable Livelihoods & Community Development. Philadelphia:Opportunities Industrialization Centers International (OICI).

Reardon, T. (1997) 'Using Evidence of Household Income Diversificationto Inform Study of the Nonfarm Labor Market in Africa', WorldDevelopment 25(5): 735-747.

Sarris, A.H., Shams, H. (1992) Ghana Under Structural Adjustment: TheImpact on Agriculture and the Rural Poor, International Fund forAgricultural Development: New York University Press.

Snyder, R. (2006) 'Does Lootable Wealth Breed Disorder? A PoliticalEconomy of Extraction Framework', Comparative Political Studies 39(8):943-968.

USAID. (2005) Minerals and Conflict: A Toolkit for Intervention. Officeof Conflict Management and Mitigation. Washington DC: USAID.

Weissman, S.R. (1990) 'Structural Adjustment in Africa - Insights from theExperiences of Ghana and Senegal', World Development 18(12): 1621-1634.

World Bank. (1995) Staff Appraisal Report, Republic of Ghana, MiningSector Development and Environmental Project. World Bank Report No.13881-GH, Industry and Energy Operations, West Central AfricaDepartment, Africa Region, World Bank, Africa.

Yakovleva, N. (2007) 'Perspective on Female Participation in Artisanal andSmall-scale Mining: A Case Study of Birim North District of Ghana',Resources Policy 32(1-2): 29-41.

Yelpaala, K., Ali, S.H. (2005) 'Multiple Scales of Diamond Mining inAkwatia, Ghana: Addressing Environmental and Human DevelopmentImpact', Resources Policy 30(3): 145-155.

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Chapter 6

Mining and Impoverishment: BeyondDirect Foreign Investment?

Ray BushPOLIS, University of Leeds, UK

Introduction: Challenging ImpoverishmentThe enormous challenges that confront mining-dependent economies andcommunities affected by mining can be broadly grouped into three cate-gories: Empirical, theoretical and policy. In many respects, these issueshave been central to concerns confronting mine-affected communities formore than 25 years (Lanning 1979). Indeed, this is one of the issues weneed to explore: Why has there been so much continuity in the debates aboutthe impact of mining in Africa? Why do the international financial agen-cies, especially the World Bank, continue to argue that developing mineralextraction is a key to development in the 21st century for Africa? And whydoes development not take place at the promised pace or with the declaredbenefits espoused by corporations, governments or many traditional lead-ers? This paper will briefly examine some of these questions, and will thenlocate the broader general concerns with mining-affected communities inthe context of two villages in Ghana's Western Region.

One of the most overarching continuities in relations between communi-ties and companies is the dispossession of villagers from land. The failureof land to be effectively substituted by a replacement source for productionand community reproduction is a persistent feature of Africa's rural under-development - of the active impoverishment of peasants who become dislo-cated from their means of production and social reproduction as mine oper-ations remain within enclaves of largely expatriate wealth and activity.

The three themes of empirical, theoretical and policy that this paperexamines relate to the consequences of mining in Ghana's rural communities;

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how we might understand the connection and interrelationship betweenmining companies, the state and communities; and what policy implicationsemerge that do not simply call for either more or less regulation of MNCs.

Are there policies, informed by field research, of how communities copewith displacement and impoverishment resulting from mining that can gobeyond debating FDI per se? And, are there issues relating to characteriza-tions of artisanal mining and challenges to property rights that have emergedfrom 'illegal' (galamsey) operations?

Hopes and Aspirations

Africa's history has been structured by European demands for its resources.Resources have included trade in human beings during the slave trade andvariations in colonial transformation from the most brutal actions ofBelgium in Congo for rubber and ivory, to formal British colonialism inWest Africa for gold and agricultural produce (Hochschild 1998). Theexploitation of Africa's resource base has been well documented andincreasingly well theorised (Rodney 1973; Bond 2006; Bush 2007). Thecontinent’s development history since World War II has repeatedly beenviewed with waves of optimism and pessimism that economic growth willbe driven by extracting its resources. Most recently, in 2006, the highestmetals prices for 20 years ushered in the most recent period of heightenedexpectation and aspiration but it was short lived. By July 2007, as indicatedin Figure 3 below, the commodity price index plummeted and the interna-tional financial institutions were once again trying to explain why, amongstother things, mining could still be in the vanguard of development opportu-nity. But this opportunity would not be realized until capitalism's mostrecent and acute crisis recovered from the mayhem blamed on unregulatedbankers.

Recent empirical analysis of mining and resource-led growth has beenconfronted by the continuity of confidence that mineral extraction can drivegrowth and development. Yet, except for the African case of Botswana,there is little evidence of sustained mineral-led growth. And, indeed, evenin the Botswana case, recent analysis has not parroted the southern Africansuccess story but indicated how blighted dependence upon minerals - in thiscase, diamonds - has actually been. There has also been a view that miner-al-led growth in Botswana has been driven by or at least accompanied by

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Figure 3: Commodity Price Index, 2005 = 100, includes both Fuel and Non-Fuel Price Indices

Source: Index Mundi: http://www.indexmundi.com/commodities/?commodity=commodity-price-

index&months=300 (accessed 7 July 2009)

authoritarianism, and that political structures have overseen internal dis-placement and failure of generalized wealth creation (Good 2008). Insteadof focusing on whether or not there is a new 'scramble' for Africa'sresources, it now seems more appropriate to ask how the continent willmanage resource development in the downturn. What are the possibilitiesfor the economies like that of Ghana to manage decline in mining revenues(although gold continues to buck the trend of calamitous falls)?1 It is impor-tant to also ask how effective judicial oversight is of mining corporate

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1 While the price of copper fell from $7,118 a metric tonne in January-December 2007 to$4,046 mt in January-June 2009, gold increased in value from $697 troy ounce to $915 in thesame period (World Bank 2009)

activities. Ghana's new government has the mandate to re-visit issues linkedto scrutiny of corporate taxation and levels of royalty and to explore therobustness of the national regulatory regime. But does it have the currentcapacity to deliver a more robust and equal relationship with the miningcompanies, and an ability to mediate between corporate interests, thenational development agenda and the demands of local mine-affected com-munities?

In many ways, the debate of control and regulation in Ghana's miningsector was foregrounded by the outgoing New Patriotic Party (NPP) govern-ment. That government was keen in election year 2008 to show its supportfor communities affected by mining. It wanted to garner votes from an elec-torate many residents in the country's Western Region felt had been forgot-ten. The outgoing Western Regional Minister noted to mining executives:

...we are all aware that the affected communities have lived on your concessions where they earned their livelihoods for centuries, and to displace them without assuring them of a regular and sustainable source of livelihood is to say the least, unfortunate... (The Chronicle 22 August 2007).

Understanding Rural TransformationPolicymakers have argued over the importance of mineral-led growth forAfrica, and they have done so indicating the importance of the continenttaking advantage of comparative advantage from mineral availability andthe need to benefit from globalization. Yet, this has done little to explain thesystemic character of Africa's crises of accumulation, production and distri-bution. And, it has certainly excluded effective debate about the impact ofmining on communities. Instead, donors and policymakers continue to offerthe mantra of the need for improved governance to facilitate increased DFIand more efficient management of the continent's resources (World Bank2000; McPhail 2000).

The preoccupation of donors with governance has skewed debate aboutresource-led growth towards reiteration of the 'resource curse' - that poorresource-endowed economies grow less quickly than economies lessdependent upon rents from mining. The explanation for this assertion is thatrent leads to authoritarian government and 'Dutch Disease'. 'Rentier' states

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maintain authority by distributing largesse rather than governance based oncitizenship, taxation and electoral politics. And, ‘Dutch Disease’ contributesto this authoritarianism as increases in the value of exchange rates, follow-ing increased rents from mineral or other resource sales, sucks in importsand undervalues local economic activity, especially in non-tradable andagricultural goods (Ross 1999; Auty1995). The difficulty with the theoret-ical approach to resource-led growth that employs the resource curse as thelens through which to view the relationship between companies, states andcommunities is that it fails to locate discussion at the level of capital accu-mulation. The idea of the resource curse does highlight empirical patternsof similarity between different states but does not adequately allow for ananalysis of the contested terrain between states, MNCs and communities;neither does it explore the competition within states regarding struggles forcapital accumulation.

To enable a more thorough and clearer exploration of the consequencesof mining in general, and Ghana in particular, it is important to explore thedebate on abjection (Ferguson 1999; 2006). Abjection refers to the processof people 'being thrown aside, expelled or discarded,…thrown down,debased and humiliated' (Ferguson 1999: 236). Ghana's poor or those affect-ed by mining in other parts of Africa are not poor because they have beenexcluded by the process of development but because they have activelybeen expelled in the process of underdevelopment. While there has been acontinuing debate on de-peasantization and de-agrarianization (Bryceson1997), the idea of abjection enables an analysis that can also be grounded inpatterns of persistent primitive accumulation (Harvey 2003).

One of the distinguishing features of capitalist development in Africa isthe repetition of processes associated with original capitalist accumulationin Europe. These are, as Harvey has noted, for example, the privatization ofland, peasant populations being expelled from the land, and a reduction orerosion of rights to the commons. A further recurring feature is the presenceof coercive labour regimes, despite rhetoric of the improvement in condi-tions of labour and the spread of wage labour (Harvey 2003: 74). The pat-terns of displacement and resource extraction in Ghana's Western Regionare better described as accumulation by dispossession (Harvey 2003;Perelman 2000; Luxemburg 1968). The tools made available by recentMarxist analysis of accumulation in the Global South help to explain

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theoretically, the patterns of underdevelopment in Ghana. The notion ofaccumulation by dispossession also helps contextualize why the strategiesemployed by companies to demonstrate their corporate social responsibilitythrough the implementation of large numbers of alternative livelihoodstrategies, for example, will simply not work. They cannot substitute forland loss. Corporate-devised strategies of generating income do not gener-ate sustained wealth creation and employment creation.

Policy Questions

Understanding the type and pattern of accumulation in Ghana becomes cen-tral in asking what strategies the state may be able to pursue in its negotia-tions with MNCs. This takes on added significance in the contemporarycapitalist crisis. Are the previously employed strategies of 'control' or 'reg-ulation' of DFI the only apparatuses available to the neo-liberal post-colo-nial state, or is it feasible to ask if there is now a new opportunity for the'post' neo-liberal state to intervene in promoting capital accumulation thatdoes not dispossess, displace and disrupt rural Ghanaian social formations?Do we need new tools to understand what is happening, and if so, what arethey? What kind of social and political constituency is important to assem-ble to promote state and public policy reform? Is it possible for Africanstates to explore different relationships beyond the 'traditional' corporateinterest of the western mining houses to engage on a more equal footingwith China and India? And if so, what would be the possible impact oncommunity development? Finally, if one of the difficulties that emergesfrom accumulation by dispossession is the persistent recreation of enclavedevelopment, how might mining development avoid the tiny and narrow butalso socially calamitous exploits of the enclave?

Within the list of empirical, theoretical and policy questions, there is alsothe need to ask what might be generic questions and what will be specific tocountry cases. Here, the analysis will need to examine the social class con-stituency that shapes policy and accumulation; what mineral resource isbeing discussed, which companies are involved in the extraction, and howpolitically robust is the state to hold companies to account? And, just as thesocial constituency of the state is important and the institutional mecha-nisms to hold companies to account, governments must also be heldaccountable by community advocacy groups and worker interests.

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Three Villages: Accumulation and Resistance?Fieldwork was conducted in three villages that were all affected my mining.Two of these were in Wassa West in the Western Region, and one nearObuasi in the Ashanti Region. One of the Wassa West villages had beenresettled because of the development of open cast mining. Villagers weredenied access to their historical lands. Another village had not been reset-tled or relocated but there was increasing pressure for land as a neighbour-ing mine concession had expanded. There were also increased environmen-tal concerns for villages at the second location. Land and waterways hadbeen polluted and air-borne pollution from dust created by huge ore-carry-ing trucks passing daily through their village in large numbers impacted onvillagers' health

The third village in Ashanti experienced chronic neglect. There was par-tial access to historical land but also evidence of pollution of waterways.Grievances expressed by respondents were many - common and widelyshared. Inadequate and insecure access to land was the most overarchingexpressed concern. For the first Wassa West village, there remains confusionregarding resettlement. Many noted that promises accompanying plans toresettle the village were not met by either the Government of Ghana or themining company. Unemployment in all villages was high, especially amongthe youth who had received promises of work from the government andmining companies but these had not been delivered upon. It was also evi-dent that a cleavage had emerged (and perhaps deepened) between tradition-al authorites and the youth. Chiefs and elders in all three villages wereaccused of being too sympathetic with the mining companies. Chiefs wereoften used in the development of patron-client relations by companies ascorporate largesse was distributed to them to encourage traditional authori-ty to control their youth, and to fulfil some tasks of labour hire for routinebut mostly occasional mine maintenance. One respondent noted how shehad never received compensation from the mine after losing her farm. Themining company had paid the chief compensation for all villagers and it washer responsibility, she was told, to get the money from him (Interview,Village Respondent, 25 August 2009). The issue of compensation from themine, or rather the lack of adequate compensation and the feeling of beingcheated were systemic in all three villages. On contesting the absence of

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declared compensation for the loss of immature teak trees, one respondentwas told by a mining company to seek redress from the courts. Povertymeant the respondent could not afford to employ a lawyer or take the com-pany to court. The respondent, who had worked for 10 years as an artisanalminer, noted: 'The mining companies are not interested in developing thisvillage…If nothing is done to solve these problems then we will all engagein armed robbery' (Interview, Village Respondent, 25 August 2008).

There were two major clusters of response from respondents who reflect-ed on the consequences of mining in their locality. One was the repeatedlament regarding dislocation from land. The other was the failure of villageauthority to adequately contest and transform decisions by government andcompanies that were recognized as subverting village livelihoods. Thesetwo clusters of issues have significance for trying to think beyond DFI. Ifat the core of village transformation is a process of abjection - depeasanti-zation driven by corporate activity that is constantly reproduced - then theactivity of MNCs needs to be opened out further than rhetoric regarding cor-porate responsibility initiatives. Those communities and households thatretain some access to land also retain self-provisioning, despite varyingdegrees of economic crisis and male exodus. The empirical case in the threelocations reinforced the centrality of land. The theoretical implications raisequestions about the process of underdevelopment where poverty is createdby corporate activity as households lose access to land, livelihoods, foodand guaranteed, albeit low levels of livelihood. And, policy implicationsbecome located in whether mining companies can be encouraged to com-promise on issues of property rights, access to concessions where the com-panies may not be mining and where there can be relations establishedbetween mine executives and communities that go beyond platitudes ofopenness and transparency. Nowhere is the issue of problematizing DFImore important and how mine companies might rethink property rights thanthe debate regarding artisanal and small scale-mining.

The debate about galamsey is extensive (Hilson 2007a; Hilson et al.2007). Yet, the policy implication of imposing the erosion or formalizationof artisanal mining has largely missed two crucial issues:

1) the significance that galamsey plays for community survival; and 2) the way in which artisanal mining might be seen as a resistance to

DFI, and certainly to government authority.

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By so doing so, the resistance offered by artisanal miners to governmentpolicy might become a vehicle for opening the debate on the implicationsfor rural development and by extension, property rights and the sovereign-ty of concessions.

In all three villages, women-headed households noted that neighbouringgalamsey operations provided a lifeline to their survival and that of the vil-lage. Women work with and for the galamsey gangs. They also provide theworkers with food. Several respondents noted how government-enforcedclosure of artisanal mining operations led to the dramatic income loss of vil-lages and female-headed households were especially challenged as solebread winners. Women who provided food for the miners lost incomeovernight and were left with debts that had emerged following loans to buypots and food to supply the galamsey workers and operators.

The way resettlement and removal of artisanal miners from the vicinityof village communities impacted on women is dramatically reported by onerespondent. She was 45 years of age and married with seven children in theresettled Wassa West community.

I sell rice and stew to the people in this community. Currently, life has become unbearable for me as I do not have enough money to cater for my children since my husband is unemployed. When I was in (the old village) I used to make a lot of money from the sale of rice and stew, mainly because galamsey was in operation and business was booming. Now I sell the rice once a week due to lack of a mar-ket. My children have only been educated to the basic level and have not been able to further their education because of no money. They are now in the house doing nothing. . . [Before we were resettled] we had a farm which sustained us. Now we lack water, roads or hospital. The taps flow twice a week at dawn and we have to walk long distances for water. We did not face this problem in the old village as we had a stream that was clean…The mining company promised us that life would be better in the new location but I realize we have been deceived’ (Interview, Village Respondent, Wassa West 25 August 2008)

New and dramatic debts led to acute family survival strategies, includingchanges in household diets, the removal of children from school and

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increased burden placed on extended family networks in the search for food.The removal of galamsey by the police and military in the summer of 2007meant a decline in effective demand in village markets and significant male'out migration', especially of youth from one village in search of galamseywork as in gold sites further afield.

An alternative response to the issue of Ghana's more than four millionartisanal miners would have been to understand more clearly the links min-ers had with neighbouring communities, the importance of providing broademployment and income-earning opportunities and how the Government ofGhana might more creatively use the pressure from small-scale miners toimprove access to benefits from DFI. It was clear from village interviewsthat the local fabric of community life, without romanticizing 'the village',was receiving a massive challenge. Yet, the Government of Ghana respond-ed to the initiative of local youth and migrants who tried to benefit fromgalamsey by demonstrating commitment to the agents of DFI. Viewing arti-sanal mining as a law-and-order issue would never enable the state toexplore what subsidy galamsey actually provided to rural development inGhana. The erstwhile NPP government of Ghana had no effective responseto the challenges in the countryside of male exodus, undermining social fab-ric resulting from economic crisis that led to increased prostitution, theft andunemployment of both skilled and unskilled sections of rural Ghana.Removing galamsey showed the mining companies that the governmentwas serious about 'law and (dis)order' and protecting investor interests butit did little to address declining effective demand that drained communitiesand wasted lives.

Artisanal mining continues to be commented upon in Ghana as a crimi-nal activity - when it is not pursued on government demarcated concessionswith registered miners - and operators are variously described as vandalsand environmental polluters. The rhetoric of criminalization provides therationale for police roundups and military impounding of equipment. Butthe persistence of artisanal mining and the failure of a law-and-order stateresponse indicated not only the vibrancy of galamsey, the prospect andallure of a quick return with the discovery of gold but also a resistance toenclosure of community land.

It may now be important for Ghana's new NDC government to be morecreative in its dealings with such an important sector within mining. This

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can be promoted if there were to be a debate on how exactly a mining strat-egy could emerge that places at its core, the communities hitherto dispos-sessed of their assets in making way for corporate expansion and state main-tenance of order. Law-and-order strategies have been employed to show theseriousness of Ghana's state to defend and promote DFI but in the process,issues of community development have been lost. The protection of com-panies rather than communities (and the failure to address mutual interests)has denied villagers access to wealth generated by artisanal mining. And,this is after communities under investigation have already been denied cor-porate and government promises that DFI would deliver employment,growth and development.

But villages cannot be viewed as homogenous units. I have noted howthe youth and elders are often at loggerheads and how female-headed house-holds and children's wellbeing has been challenged by the removal of arti-sanal mining sites and the militarisation of parts of gold-bearing Ghana.The response of sections of the galamsey operators is to rhetorically claimknowledge of militant struggles in the Niger Delta. Many respondents,especially in Obuasi, angered by perceived local authority passivity andAngloGold Ashanti's aggressive defense of its concession, have claimedthey could become more violent in their struggle for a livelihood.

The corporate response to community claims of impoverishment is thatthis is not the responsibility of mining companies. They are not develop-ment agencies and they pay royalties and taxes to governments whose legit-imate responsibility is to promote rural development. Companies nowengage with and advance the notion of corporate responsibility and theiradvocate in Ghana is the Chamber of Mines. Its chief executive has notedthe commitment of the Chamber to;

core values of honesty, transparency, good governance, good corporate citizenship and total commitment when providing leadership to solve national issues relating to mining.

Yet, what exactly that leadership role actually involves is moot. It isfashionable in the contemporary era to talk about stakeholder interestswhere the tripartite relationship between companies, governments and com-munities are mutually reinforcing - they all meant to have the same shared

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interest in boosting mineral extraction and sales. But as this paper has indi-cated, the assumed axiomatic concern to reify equality of interests is at bestmisplaced and at worst, helps to impoverish communities impacted by min-ing. The impoverishment has extended to human rights abuses (CHRAJ2008) and challenges amongst other statements, those made by Gold Fieldsthat they 'factor communities into every aspect of mine development'(Interview Gold Fields Official, Tarkwa, August 2007). AngloGold Ashantihas gone as far as to assimilate the mine interests with those of the town,thus it is not uncommon to hear mine executives parrot the mantra, 'Obuasiis the mine and the mine is Obuasi' (Interview AngloGold Ashanti official,Obuasi, August 2007).

Mines have initiated for many years now the idea that while recognizingthat they are not development agencies, they can compensate communitiesfor land loss and promote 'alternative livelihoods' and rural development.The shortcomings of this strategy are now well known (Hilson andBanchirigah 2009) and they have served to displace a systemic reappraisalof DFI.

Moving ForwardThis paper has sketched an agenda for debating the movement of ideasbeyond DFI. It has done so by suggesting there are three clusters of themesthat need to be interrogated when examining the impact of mining in Ghana.These are empirical questions - just what is the extent of the contemporaryinvolvement of multinational capital; theoretical questions - just how canwe explain the empirical observations of the impact of FDI in Ghana's coun-tryside and in particular, in communities affected by mining; and finally,policy questions that need to be explored and that should follow the analy-sis of the previous two groups of questions.

The Government of Ghana, during the last years of NPP rule, concededthat the persistence of galamsey seemed to be a feature of rural Ghana andran a twin-track policy towards them. The first track was the one I indicat-ed here which concentrated on attacking them, removing them from conces-sions and confiscating their equipment. The second track has been to tryand license some galamsey on government approved sites. The purpose ofthat was to control and regulate these miners and the numbers of sites but

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the numbers of miners who have had the energy, money and knowledge toregister has been small. Licensing is unlikely to meet the felt need of indi-viduals and communities affected by mining. The needed scale of registra-tion is beyond the level of investment provided by the government and theland allocated for the miners is inadequate in both the abundance of gold orin the scale of territory demarcated.

The courageous strategy the Government of Ghana needs to begin tomap out is one that unapologetically problematizes property rights. After aprocess of decriminalizing the artisanal mining sector, the Government ofGhana will be in a politically stronger position to counter global miningstrategies. This would allow a conversation to emerge between government,companies and communities, where artisanal miners were well representedas well as other sections of village groups to assess ways in which compa-nies no longer had unchallenged sovereign rights over concessions. Whilecompanies and the international financial agencies and donors would nodoubt stress the need for all private investors to have continued untram-melled security of property rights it is precisely this assumption, and theways in which companies recreate enclave development that has created theanimosity between 'stakeholders' in the contemporary period.

If mechanisms were developed to incorporate artisanal miners into con-cessions as equal partners who could not be expelled when it suited the com-panies to do so - for example, when there is a spike in the gold price or ifgalamsey operators discover gold missed by the companies - there could bethe start of a process of genuine rural stakeholder empowerment. Thiswould also be a way of negotiating an alternative relationship between com-panies and DFI and the collective management of a joint mechanism toextract gold. This would still leave big issues of how the government willaccess increased royalties and taxes from mining companies. But thiswould seem an entirely legitimate proposal to explore in the context of con-temporary capitalist crisis, worsening conditions in villages affected bymining and the desirability of revisiting the idea of a development state inthe Global South.

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ReferencesAuty, Richard, M 1995 Patterns of Development: Resources, Policy andEconomic Growth. London, Edward Arnold

Bryceson, D.F. 1997 Farewell to farms: Deagrarianisation andEmployment in Africa. Aldershot, Ashgate Publishing

Commission on Human Rights and Administrative Justice (CHRAJ) 2008,the State of Human Rights in Mining Communities in Ghana, mimeo, Accra

Ferguson, James 2006, Global Shadows: Africa in the Neoliberal WorldOrder Duke University Press, Durham and London

Ferguson, James 1999, Expectations of Modernity: Myths and Meanings ofUrban Life on the Zambian Copperbelt. Berkeley, University of CaliforniaPress

Good, Kenneth, 2008, Diamonds, Dispossession and Democracy inBotswana (African Issues) James Currey, Oxford

Harvey, David 2003, 'The “New” Imperialism: Accumulation:Accumulation by Dispossession' in Leo Panitch and Colin Leys (eds) TheNew Imperial Challenge, Socialist Register 2004. London, Merlin

Hilson, G., Banchirigah, S.M., 2009 Are Alternative Livelihood ProjectsAlleviating Poverty in Mining Communities? Journal of DevelopmentStudies 45(2), 172-195.

Hilson, Gavin, (eds) 2007, Small-Scale Mining, Rural Subsistence andPoverty in West Africa, Warwickshire, Intermediate TechnologyPublications Ltd.

Hilson, Gavin, N. Yakovleva and S.M. Banchirigah, 2007, 'To Move or Notto Move': Reflections on the Resettlement of Artisanal Miners in theWestern Region of Ghana' African Affairs 106 (424), pp413-436

Hochschild, Adam 1998, King Leopold's Ghost: A Story of Greed, Terrorand Heroism in Colonial Africa. Boston, Houghton Mifflin

Lanning, Greg, 1979, Africa Undermined. Harmondsworth, Penquin

Luxemburg, Rosa 1968 [1923] The Accumulation of Capital. New York,Monthly Review Press

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McPhail, Kathryn 2000, 'How Oil, Gas and Mining Projects Can Contributeto Development' Finance and Development 37 (4) December

Perelman, Michael, 2000, The Invention of Capitalism. Durham andLondon, Duke University Press

Rodney, Walter 1973, How Europe Underdeveloped Africa , Bogle-L'Ouverture Publications, London and Tanzanian Publishing House, Dar-Es-Salaam

Ross, Michael 1999 'The Political Economy of the Resource Curse' WorldPolitics 15 January 297-322

World Bank 2000, World Development Indicators. Washington, WorldBank

2009,http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21148472~menuPK:476941~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html (accessed 7 July 2009)

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Chapter 7

Organizing Small-Scale Artisanal Mining for Sustainable Livelihoods of

Communities: The Regulator's Perspective

Ibrahim BawaMinerals Commission, Accra, Ghana

IntroductionArtisanal and small-scale mining (ASM), particularly of gold and diamonds,is practised in a number of rural communities in Ghana as a means of liveli-hood. Gold mining is predominant and has been carried out in Ghana forcenturies. Such ASM has largely been practised at a subsistence level, fea-turing the use of rudimentary technologies such as pickaxes, shovels, ham-mers and chisels, metal mortars and pestles, with the resultant materialwashed into a concentrate and the gold recovered with mercury. The objec-tive of this paper is to provide an overview of Ghana's ASM sector, and toprovide a regulator's perspective on the challenges of formalizing its activ-ities.

Historical BackgroundThe mining of precious minerals on a small-scale is an age-old activitywhich was practised long before the Europeans arrived in Ghana in the fif-teenth century. Historical evidence suggests that it was not carried out as alivelihood venture but largely as a supplement to farming and other occupa-tions. In fact, it was not until the 1980s that ASM - the extraction of gold,in particular - gained prominence as a livelihood venture, when Ghanabegan experiencing 'gold rushes' in some mining communities like Prestea,Tarkwa, Enchi, and in the mid-1990s, Bolgatanga. Today, it is estimated thatthe sector employs over 500,000 people directly country-wide.

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By 1988, a significant amount of gold was being produced in Ghana, andsince artisanal gold mining was largely illegal, there was no official marketfor it and so it was traded through a well-orchestrated black market in thesub-region. Diamonds, on the other hand, were well catered for through the'Tributor System' operated by the Ghana Consolidated Diamonds Limitedand later through the Diamond Digging License Scheme issued by the thenMines Department. The Diamond Marketing Board was responsible for themarketing of the diamonds. Industrial minerals such as sand, gravels,aggregate stones, salt and to a lesser extent, brown clay and kaoline are alsomined on small scale, all of which impact significantly on the livelihoods ofseveral rural communities.

Impacts of ASM on the Livelihoods of CommunitiesOver the years, ASM has impacted significantly, not only on host miningcommunities and mining camps, but also on a number of communities with-in their respective political districts. The impacts have been of a socio-eco-nomic, socio-cultural and environmental nature. Mining camps which sur-faced during 'gold rushes' have turned nearby communities into bustlingcommercial towns with petty traders, barbering shops, food vendors, shop-keepers, transport owners and landlords all having a field day. The attrac-tion of people to mining sites, however, at the same time, has led to anincrease in social vices including prostitution, drug abuse and child labourin these areas. Moreover, with the influx of people from all over the coun-try, there has been significant cultural dilution in camps and surroundingareas.

Since most activities in 'gold rush' areas are not formal, mining and pro-cessing are typically carried out indiscriminately, often with disastrous envi-ronmental consequences. Almost every inhabitant in these localities isaffected either positively or negatively by the activities of the miners. Inmost cases, committees are set up to manage the work and control the largenumbers of people who migrate to the area. Chiefs usually have a hand onthe management, imposing deterring fines on culprits.

For example, in Achimfo near Enchi, in the 1980s and 1990s, dwellingswere interspersed with active and abandoned pits. Here, the chief's palaceserved as the courtroom for settling cases emanating from the activities of

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artisanal small-scale miners. Indeed, at a point in time, Achimfo was called'Small London' because of the beehive of activities that came alongside the'gold rush'. These setups, however, are generally short-lived as ASM is forthe most part improperly planned and managed and by extension, cannot becarried out sustainably. The three communities of Sewum, Amonia andMonchekrom near Enchi suddenly became very busy commercial centresfollowing the discovery of gold deposit at Ajebrim in the vicinity.Classrooms, kitchens and such structures became 'hotels' and there wasimmense pressure on local social amenities like toilets and potable water;food prices soared in the locality.

A similar situation occurred in Bolgatanga and Gbani. In 1994, bothexperienced a 'gold rush' of similar magnitude, during which thousands ofpeople of all shades rushed to the area to engage in various livelihood ven-tures. Mining camps were established and this triggered a variety of incomegenerating businesses, including transport, food vending and other associat-ed livelihood ventures. The camps had names like 'Obuasi', 'Accra' and'World Bank'. People abandoned their own livelihood occupations - farm-ing, trading, artisanal works such as carpentry and even formal jobs liketeaching - to take advantage of the gold boom. In a number of cases, how-ever, entire families, including children, accompanied the migrants makingthem school dropouts. The spread of STDs and other communicable dis-eases were also obvious by-products of such mass movement of people.With gold being a depletable asset, and more so as the reserves were notestablished and the mining planned, people who entered the activity experi-enced fluctuations in their earnings.

Organization of ASM in a Typical GhanaianCommunityIn the informal setting, the landowner or the chief 'owns' the minerals andsells the mineralized land to prospective miners. Measurement is in 'poles'(acres) and the anticipated mineral content of the land determines its price.It strictly follows the demand and supply principle: the higher the demand,the higher the price.

The miner then employs workers who work on contract based on the'tributor system'. The miner generally buys all the minerals produced in

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the land and also sells it to a dealer who may be domiciled in the locality.There are, in most cases, other big-time businessmen controlling it under-cover. Committees are sometimes formed at the community level to assistthe miner in the management. In 'gold-rush' areas, community leaders, withthe approval of the chief, take control of the operations by forming commit-tees to manage the operations.

A typical alluvial mining site at Dunkwa-on-Offin

Sustainability and technical issues are generally not taken into consider-ation and, for that matter, people who initiate such livelihood ventures couldsoon become jobless, when faced with depletion or some technical obstacles(e.g., a high water table).

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A typical mining site at Wassa Dadieso

Formalizing ASM in Communities for SustainableLivelihoodRecognizing the potential of ASM to create jobs both, direct mining as ameans of livelihood and indirect beneficiaries through other forward andbackward socio-economic linkages, the government formalized small-scalemining in 1989. This was based on the recommendations of a study under-taken by a consultancy, Mackay and Schnellmann Ltd., in 1987. A numberof measures were put in place to enhance the contribution of the sub-sectorto the economy of Ghana, as well as to ensure its sustainability.

To ensure optimal contribution of the sub-sector to the economy, certainmeasures/interventions were taken. These included:• Legalizing the hitherto illegal small-scale mining of gold through the

Small Scale Gold Mining Law (PNDCL 218 of 1989)1 Minerals & Mining Act, 2006 (Act,703).

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1 Recently incorporated into the Mining Act, 2006 (Act 703).

• Other laws enacted in support of the regularization included the Mercury Law (PNDCL 217) and the Precious Minerals Marketing Corporation Law, PNDCL 219 (repealed).

• Establishment of seven district offices of the Minerals Commission to provide technical support to small-scale miners and prospective small-scale miners.

• Establishment of the Inspectorate Division of the Minerals Commission and the Environmental Protection Agency (EPA) are to assist in safety, health and environmental issues.2

• Provision of code of practice to guide the small-scale miners in their operations by the Chief Inspector of Mines (CIM).

Formal mining site at Abomosu

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2 Formerly the Mines Department

Formal mining site at Tontokrom

• Continuous education and training of target groups, which include illegal miners, mining communities and prospective SSM on the need to acquire licenses and assist them technically to mine efficiently and to use appropriate mining techniques.

• Continuously setting aside prospective areas to be assessed by prospective small-scale miners.

• Geological investigation of blocked-out areas to assist small-scale miners in tracing ore deposits in their prospective concessions.

• Introduction of new appropriate technologies including mercury pollution abatement programs to improve mineral recovery and conse-quently to reduce poverty.

• Making ready markets available to small-scale miners to sell their products through the establishment of Precious Minerals Marketing Corporation (PMMC), Miramex, Atasay, etc. and their licensed buying agents.

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• Facilitating access to financial resources to SSM through funding from GTZ, World Bank, BGR and Ghana Government.3

• Assisting miners to form cooperatives and associations.• Pilot reclamation of areas degraded through illegal mining.4

The Commission, through World Bank funding, successfully undertooka pilot reclamation and re-vegetation of degraded lands.

Concluding Remarks: Lessons Learned and OtherOptions Sustainable livelihoods, through mining, would involve sustaining efficientmining as well as generating other non-mining sustainable socio-economicactivities supported by mining. Mining livelihood sustainability wouldrequire geological data of acquired areas, use of appropriate technology,economic feasibility, sound environmental impact assessment, and remedi-ation and legal compliance. Others are satellite industries to produce

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3 In line with its policy of creating jobs and wealth, especially for women and youth in themining communities as well as the vulnerable, the government, under the Micro Finance andSmall Loans Scheme, has kept sharp focus on programs like Youth in quarrying, Youth inAfforestation, and Rural Micro and Small Enterprise Scheme (RUMSEC). In order to deep-en service outreach and to extend service to the grassroots communities and other targetgroups, a total amount of seven billion old cedis (07billion) was made available to theMinistry of Lands, Forestry and Mines (MLFM) in the 2007 budget to undertake its sector'scomponent of the program. The introduction of the MLFM/MASLOC Fund for AlternativeLivelihood Projects in the mining and forest-fringed communities and other ecologically sen-sitive areas is, therefore, to provide seed capital for members of such communities to estab-lish alternative businesses/enterprises for sustainable livelihoods since they have beendeprived of their lands and forests which hitherto served as the bedrock of their economicactivities.

4 The reclaimed lands were:• 95 hectares of land which had been degraded by small-scale sand winners at Ablorman

near Amasaman;• 65 hectares of land degraded by small-scale gold miners at Nueng North Forest Reserve

near Tarkwa; and• 45 hectares of land degraded by diamond diggers at Buadua in the Eastern Region.It should be noted that whilst the lands at Ablorman and Nueng were rehabilitated and re-vegetated with indigenous plants, those of Buadua were used for citrus and oil palm cultiva-tion.

mining inputs, downstream processing of mining products, alternativelivelihood system (such as transport business, petty trading, food vending,etc.), as well as willing financial institutions to support the industry.

These factors were overlooked during the inception of the Small-ScaleMining Project, but have been achieved to an appreciable extent through theinterventions listed above. However, some lessons have been learned, andfurther measures are being taken to address the challenges through otheroptions. Some critical reflections on what has happened to date include thefollowing:

1. The regularization highlighting small-scale mining as a viable economic activity and the increase in commodity prices has led to an overwhelm-ing increase in the numbers patronizing the industry. Thus, the available mineable land could not cope with the ever-increasing numbers of people entering the industry.

2. It was envisaged that large-scale exploration companies, through the compulsory shedding off of areas, could make areas amenable to small scale mining available, but this has not been done to a desirable extent.

3. Lack of funding to undertake systematic exploration of areas with prospects for ASM. Being a risky venture, the government, as well as donor agencies, have not been too willing to release funds for detailed exploration of areas earmarked for ASM activity.

4. Small-scale miners lack bankable feasibility reports to attract financial assistance from banks and other financial institutions.

5. Government assistance packages to small-scale miners are misconstrued as 'gifts', rather than loans to be repaid to enable assistance to others.

6. Equipment modules that were imported for ASM were too expensive for the average small-scale miner - especially the module for hard rock which included jaw crushers, Knelson concentrators and shaking tables. Instead, simple equipment, such as the Chinese hammer mills ('Chang-Fa'), is preferred.

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7. Despite the mandatory acquisition of permits from EPA, with few exceptions (eg. E.K. Agyemang mining group at Npatuom), small-scale miners generally do not restore the land adequately enough to make the land useable, post-mining.

8. Illegal mining or galamsey still thrives throughout Ghana largely as a result of perceived difficulty in licensing procedure and lack of mineable lands.

9. Hammer mills, pickaxes, trommels and other tools are being fabricated locally but these compete with imported ones that are some-times cheaper.

10. A processing plant as a custom mill was established at Bolgatanga but the miners could not produce enough ore to feed it and its operation has been stalled. This was expected to be a pilot one to be replicated at other suitable areas. Unfortunately, due to socio-cultural practices, Ghanaian small-scale miners prefer to operate individually with their own mining plants. Significant education and incentives would be needed to get the custom milling concept embraced.

11. One important lesson learned in organizing small-scale mining was the assumption that the operators would continue to work the surface and near-surface without the use of explosives. Experience has shown that as long as the ore is rich, miners would follow it to any depth, possibly blasting with explosives, with or without a permit. The law had to be revised in the Minerals and Mining Act, 2006 (Act, 703) to incorporate hard rock mining and blasting with explosives.

12. Despite educational campaigns for small-scale miners to form credible associations as well as a vibrant national one, there is currently no active strong one operating in the country. National Associations of Diamond Winners, Sand Winners, Gold Miners and several co-operatives in the gold, diamond and salt industry have all been formed. Unfortunately, none of the said associations is very vibrant and influen-tial. The problem appears to be lack of funds to mobilize operators and good leadership.

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13. Through training of small-scale miners on entrepreneurial skills, quite a number of operators have diversified their business ventures to include transport, hospitality industry, trading and farming.

14. Some large-scale miners and the government are promoting 'Alternative Livelihood Projects' at various communities. Unfortunately, most rural youth prefer ASM to any other livelihood venture such as snail and grass cutter rearing, palm oil plantation, all of which have long gestation periods and insufficient remunerations.

15. Taxes and royalties are seldom paid by ASM, even though the law requires them to do so.

16. Law enforcement on unlicensed operators is not adequate as security agencies claim they lack sufficient numbers and logistics.

17. Similarly, regulatory agencies, particularly the Minerals Commission and Environmental Protection Agency, lack adequate human and financial resources.

The following tasks are being/should be undertaken to improve the per-formance of ASM in Ghana:

• Government should continue to set aside areas for small-scale mining and also supplement the NREG program by releasing more funds to prospect the areas and establish bankable ore reserves;

• More logistics should be provided for efficient extension service delivery system;

• The officers themselves are being trained both locally and abroad to sharpen their skills as Trainer-of-Trainers;

• Value addition or beneficiation should be encouraged through the establishment of facilities to produce gold and diamond jewelry;

• Alternative Livelihood Projects should be extended to other mining communities, following the successful implementation of the Prestea Palm Oil Plantation initiative;

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• Hopefully, with the new mining regulations being compiled, miners will begin paying taxes and royalties so that these could be ploughed back into the communities to establish cottage industries for sustain-able livelihood opportunities;

• The government may consider undertaking EIA on designated lands; not only to improve upon the sustainable use of mineable lands, but also to lessen the burden on prospective small-scale miners in acquiring licenses.

It is evident from the foregoing that the Government of Ghnana hasundertaken a number of interventions to ensure sustainable livelihoodsthrough ASM in rural communities; both now and in the future.

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Chapter 8

Transforming Artisanal and Small-ScaleMining for the Sustainable Livelihoods of

Communities: Lessons and Options

Oliver P. Maponga1

Economic Commission for Africa, Southern Africa Office, Lusaka, Zambia

IntroductionAbout 40 per cent of Africa's population lives below the poverty datum lineand derives livelihood mainly from a myriad of formal and informal eco-nomic activities, including artisanal and small-scale mining. The number ofthe continent's poor continues to increase in response to shrinking econom-ic opportunities. The recent international financial crisis will further exacer-bate Africa's economic challenges as investment inflows and the demand forcommodities decline. Prices of solid minerals and petroleum products havedeclined by almost 75 per cent during the last half of 2008.

Mining is a key sector for many countries on the continent through itscontribution to export revenues, GDP, employment and government tax rev-enues. For example, in Namibia (2007), mining contributed 12 per cent toGDP and 60 per cent to merchandise exports; in Botswana (2006), its sharewas 40 per cent of GDP and 88 per cent of export revenues; in Tanzania itwas 3 per cent of GDP and 45 per cent of export; and in Zambia, the sectorcontributed 6 per cent to GDP and 73 per cent of exports. Export earningsfrom the sector in Ghana are similar: 34 per cent in 2006. Given their levelof economic dependence on mining, many African countries can be

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1 Views expressed are those of the author.

described as 'mineral dependent' (see ECA, 2008; Davis and Tilton, 2005 fordiscussion on mineral dependency). However, with further beneficiation,the African minerals sector could play a much bigger role through linkagesand multiplier effects.

Whilst medium and large-scale mining dominates the industry in termsof value and volume, a large and growing ASM sector exists on the conti-nent. An estimated four million people are directly involved in artisanal andsmall-scale mining (ASM) in Africa. Further, the ASM sector is also esti-mated to provide support to the livelihoods of about twenty million people(Hilson and Maponga 2004). Despite the lack of census data on the size andextent of the sector, anecdotal evidence suggests that ASM has indeedgrown in importance in sub-Saharan Africa in the last twenty years. Today,over 1.5 million people are involved in formal small-scale mining activitiesin the Southern African Development Community (SADC)2 alone(Dreschler, 2001). The sector is attractive as a refuge from poverty becauseof the low barriers to entry (generally low capital requirements, and ease ofentry and exit) and the short gestation period (short price cycles for preciousminerals).

The Harare Declaration of 1993 marked a key turning point in thegrowth of the sector on the continent. It produced important recommenda-tions for the development of a formal ASM sector, emphasizing mainly pol-icy and legislation requirements to support the growth of the sector. Sincethen, the United Nations, the World Bank and other key international devel-opment partners have assisted many countries in developing appropriatelegislation and operating frameworks for the sector. In the majority of cases,actions have been directed at legalizing the sector, setting up of appropriatelegal marketing channels, developing financing models and initiating tech-nological support initiatives with the overall objective of assisting ASM toovercome challenges to sustainable mining. For example, the provision oftechnical support to artisanal and small-scale miners has been part of theoverall reform approach in Ghana, South Africa, Namibia, Tanzania,Zambia and Zimbabwe.

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2 SADC comprises Angola, Botswana, DRC, Lesotho, Madagascar, Malawi, Mauritius,Mozambique, Namibia, Seychelles, Swaziland, South Africa, Tanzania, Zambia andZimbabwe

The recent upsurge does not imply artisanal and small-scale mining is anew phenomenon on the continent. The ASM3 sector has, historically,played an important role in the economic transformation of the continent,although it has taken on a primarily-illegal character in most countries. Pre-colonial African modes of production included exploitation and trading inminerals, mainly precious and semi-precious stones. In the SADC, ASM hasa long history and continues to grow as appropriate support mechanisms areput in place in most countries. Maponga (1997) reports that some of the sub-region's large mines evolved from ASM activities (e.g. Banket Mine inZimbabwe) and thus argues that this sector has a role to play as a precursorto large mines. Growth of the sector in recent times has been fuelled by adiverse range of factors but these have generally been centered on highpoverty levels4 within large sections of the population. Maponga and Meck(2003), employ a push-and-pull framework to illustrate the growth of thesector in Zimbabwe and contend that the decline of the agricultural sector,caused by high input costs, intermittent droughts and economic contraction,a result of structural adjustments, were critical push factors. Focusing ongold, they also observe that a reasonably supportive operating environmentand high gold prices in the early 1980s were equally important pull factors.5

Yet, their analysis shows growth during price troughs, indicating the impor-tance of other factors in fuelling the gold rush. Banchirigah (2006) alsoattributes the growth of the sector in Ghana to, among other factors, eco-nomic structural adjustment programmes6 and rising levels of poverty (seealso Dreschler, 2001, Aryee, 2003 for similar analyses). To support the link

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3 The discussion in this paper uses a broad definition of ASM to include both formal (legal)and informal (illegal) entities. Such an approach, though an over-aggregation, makes it pos-sible to provide recommendations to address constraints faced by the whole sector. In thelong run, the objective is to ensure that the sector is formalized.

4 This is general poverty including; low income levels and a poor asset base. Assets include;access and rights to land, human and capital endowments. Thus both absolute and relativepoverty included in this definition.

5 See also Heemskerk (2001) for an analysis of the influence of international price booms onASM in Suriname

6 These programmes caused transient poverty which fuelled ASM activities.

between poverty and growth of the ASM sector, other analysts haveobserved an inverse relationship between a country's human developmentindex and ASM but they caution that the effects of shocks on the sector'sgrowth cannot be discounted (Hoadely and Limpitlaw, 2004).

Target minerals vary amongst miners but gold, diamonds and othercoloured gemstones usually dominate the 'shopping' list due to their highreturns and the 'ease' of their marketing. For example, in Angola, a rush foralluvial diamonds dominates; in Namibia, precious and semi-precious gem-stones are the primary target; in Mozambique, it is gold; in Zambia, gem-stones; in Malawi, limestone, building materials and gemstones; inTanzania, gold and gemstones, in the DRC, coltan,7 diamonds, copper,cobalt and gold; and in Zimbabwe, gold, emerald, diamond, tantalite andchromite. The Zimbabwean cooperative chromite sector grew out of a delib-erate government policy at the height of low-base metal prices in the mid1980s. Similarly, Namibia's small-scale tin mining also evolved as a resultof government support after the demise of the large-scale operations due toviability problems. Industrial minerals such as sands and gravels are anoth-er exception in the sub-region, where the demand from construction sectorand also the ease of extraction has resulted in the growth of the small-scaleextraction of these products. The West African experience in terms of targetminerals mirrors that of Southern Africa, with gold and diamonds being theprincipal focus in the ASM sector. Analysts have argued that the search forquick returns and the ease of processing and marketing influence target min-erals, and this reinforces the view that the sector is indeed poverty- driven,as miners search for quick riches and some of them retreat to their formerforms of livelihood. This often gives the sector a transitory and temporarycharacter, where miners expect to overcome poverty from seasonal mining.Yet, seasonal mining is not the optimal way of using resources.

However, the complementarity of small-scale mining and agriculturehighlighted in studies in Malawi, Zimbabwe and Ghana (see Labonne,

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7 Columbite and tantalite demand have been fuelled by the mobile phone industry during thelast ten years because the use of the mobile phones has increased dramatically and tantaliteis used in the manufacture of capacitors

2003; Banchirigah, 2006 and Maponga and Meck, 2003) shows the impor-tant linkages between the two sectors, albeit on a small scale. In these analy-ses, farm workers and communal farmers engage in small-scale mining dur-ing the off-season as a temporary activity to supplement income. The sea-sonal earnings from mining provide a resource base for agricultural inputswhen the rainy season commences. George-Kumirai (2002) reports changesin the numbers of panners along rivers during different times of the farmingseason and links this to the need to supplement resources.

In their study, Maconachie and Binns (2007) observe the important con-tribution which alluvial diamond mining makes to the economy of SierraLeone through its links with farming. They contend that these links couldplay a key role in rejuvenating market-oriented food production and henceexports, and provide the much-needed impetus for post-war rural develop-ment. They emphasize that meaningful rural development can be achievedthrough strategies based on a detailed understanding of the nature of theinter-locking livelihoods in the agricultural and mining sectors.

Whether transitory or permanent, the potential contribution of the sectoras a source of livelihood and contributor to regional and national economicgrowth and development has never been doubted. It possesses the potentialto engender multiplier effects at local levels through for example, the com-plementarity between ASM and agriculture discussed earlier which demon-strates the role a vibrant sector can play in rural development. Miners areable to purchase seed, fertilizer and labour services from income earnedthrough mineral sales.

If these localized linkages can be magnified by a vibrant ASM, immensepotential to transform African economies and also strengthen the continent'srenaissance exists. Empirical evidence has shown the exploitation of miner-al resources at whatever level, large or small, can contribute to economicgrowth and development. African countries have to realize that minerals arenot a curse as other countries have successfully used the sector as a spring-board for modernization on a smaller scale. Australia, Canada, Norway andthe USA have all used the mining industry as a catalyst for wealth creationand broad-based economic development. Although ASM's role as a devel-opment form has never been empirically tested, the micro-level experienceshave in various studies shown the positive impacts, especially through link-ages and complementarities with agriculture.

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Despite this potential, ASM has generally failed to evolve into sustain-able productive industry, and some analysts regard it as a stop-gap measurewith limited prospects for sustainability and call for people to abandon theirwork in the sector. Similarly, some analysts consider the sector wasteful asthe benefits are outweighed by costs and therefore, ASM is not worth sup-porting (Hoadley and Limpitlaw, 2004). This paper argues that despite thesemisgivings and the sector's poor record on economic, social and environ-mental sustainability, ASM can make a meaningful contribution to Africaneconomies, especially at the local level. Its transformation into viable busi-ness entities will open opportunities for sustainable livelihoods and the pro-motion of complimentary activities and the emergence of a sector that con-tributes to regional economic growth and development, supports the devel-opment of micro-clusters and the development and strengthening of forwardand backward linkages. This transition can only occur if technological,financial and legal constraints faced by the sector are overcome. This willenable it to play a social welfare function as it possesses low barriers toentry and can absorb large amounts of both skilled and unskilled labour.Such attributes will provide communities with opportunities for survivalthrough its cash-generating function and an economic safety net.

After reviewing the sector's challenges, possible approaches which couldbe used to strengthen and transform the sector into a sustainable alternativesource of livelihood for communities using experiences from SouthernAfrica are presented in this paper. Whilst recognizing the need for an effec-tive management scheme for the mining and marketing of minerals, forexample, through a community-based, integrated management system, thepaper argues that despite the enclave nature of mining in general and thesubsistence nature of ASM as bottlenecks to the sector's contribution toregional economic development, appropriate policy support could elevatethe sector's role in regional development and overall contribution to pover-ty reduction. The paper invokes the sustainable livelihood approach todevelop a case for transforming the sector for the overall benefit of commu-nities. In conclusion, the paper advocates for a holistic approach to facilitatethe evolution of ASM into sustainable sources of livelihoods for communi-ties and argues for their incorporation into rural development programmes.

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The ASM Vicious Circle of PovertyThe effect of high precious metal prices on the international market is oftennot reflected in the livelihoods of small-scale miners. They continue toremain in a self-reinforcing poverty loop characterized by poor standards ofliving, low income, a high prevalence of disease, social dysfunction andenvironmental degradation. Figure 4 depicts the ASM poverty loop, identi-fying the constraints faced by miners in their quest to derive livelihoodsfrom the sector.

Figure 4: ASM and the Perpetual Poverty Cycle

Large numbers of minerswith limited assets and entitlements chasing

an unknown resource base

Low income and inability to save and invest

Low recoveries Poor knowledge of geologyLow productivity Inappropriate technology (Figure 2)

Environmental degradation, healthand safety hazards, social dysfunction

Source: Adapted from UNDP, 1999

Although other analysts have argued that this view is overly simplisticand rather generalized, it does provide insight into the character of the sec-tor, especially the reasons why ASM remain poor whilst medium to large-scale operators exploiting similar resources declare profits. The sector usu-ally features large numbers of poor people converging at an area in responseto discoveries of rich mineralized zones - for example, the recovery of goldnugget diamond. A 'rush' mentality characterizes the growth of the ASM

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sector worldwide. In Southern Africa, for example, episodes of gold, dia-mond, gemstones and tantalite rushes have occurred in DRC, Namibia,Tanzania, Zambia and Zimbabwe. The target deposits vary from high-gradeand easy-to-access minerals to marginal ones which are usually mined-outwithin short periods. As shown in Figure 4, a poor knowledge of geologicalpotential and rudimentary technology lead to low productivity and lowrecoveries and, with a poorly developed marketing information system,miners obtain prices often lower than those obtaining internationally. Poortechnology contributes to environmental degradation, disregard for healthand safety issues, and generally poor standards of living. Low levels ofincome (due to low prices usually paid by middlemen) perpetuate the cycleof poverty even during periods of high prices. Thus, small-scale miners findthemselves in a poverty trap where they are barely able to sustain subsis-tence and fail to build social and physical capital for future generations.

Picture 5: Typical ASM Technology and Working Conditions in PegmatiteMining8

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These characteristics have led others to question the rationale of support-ing the sector and others have advocated for programs to ensure that minersleave the sector for better life-sustaining opportunities. Yet, this paperargues that despite its current shortcomings, the sector has potential to besustainable, especially if developed as part of the national strategy focusingon its role in rural development so that entry into the sector is driven byopportunity from an efficient and profitable activity and exit should be avoluntary decision for those who cannot make a livelihood.

Studies have shown that the optimal operation of small-scale miners isconstrained by a lack of skills (technical, business and management) andlimited access to mineral deposits, capital and markets. Hence, ASM activ-ities result in negative socio-economic impacts evident in the inefficient,unsafe and environmentally unfriendly operations. The commonly used sus-tainability framework in Figure 5 depicts the complex nature of the require-ments for complete sustainability. By definition, sustainability is about liv-ing legally within limits, understanding the interactions among the econo-my, society and environment, and about equitable distribution of resourcesand opportunities. For complete sustainability, ASM has to be internally bal-anced and has to be in sync in relation to the operating environment. It hasto be for the equitable and sustainable use of environmental and naturalresources for the benefit of current and future generations.

For economic sustainability, miners have to earn enough to be able tomeet their daily needs, save for future use, purchase equipment, invest infurther exploration and mining and take care of life-sustaining require-ments. Similarly, the social system has to be functional with guaranteedrespect for human rights, gender equality, elimination of child labour,healthy workforce and society, safe working environment and a knowledge-able society (high levels of education). From an ecological perspective, thesector has to manage the environment by attending to challenges such asdeforestation, siltation, backfilling of mined-out areas, ensuring that mined-out areas have alternative economic uses such as recreation, for example.Sustainability is assured when all three facets are satisfied and the gover-nance system ensures enjoyment of all the benefits; miners have property

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8 Kamativi, Zimbabwe

rights and can trade and enter into contracts involving their claims withoutrestrictions, if it simultaneously satisfies economic prosperity conditions,maintains environmental quality and promotes social equity and operateswithin the confines of the law. The approach calls for participatory andmulti-stakeholder approaches to dealing with development issues.

Figure 5: The Sustainability Framework

Using this framework, it is, therefore, not difficult to understand whythere is serious resentment about the sector, as it fails to satisfy a majorityof these conditions - hence, the need for targeted intervention to promotesustainability. Picture 6(a) shows one of the social vices of ASM, childlabour. Picture 6(b) shows a stamp mill in use on pegmatite.

The ASM sector has to be transformed into an activity that producesvalue whilst allowing for the generation of more value, within generationsand through generations. In its current form, it is not but has the potential toeconomically empower communities and enrich regions (ECA, 2008). Whatis needed is to break the cycle of poverty or at least reduce the impact ofsome of the constraints to sustainability so that a prosperous community

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Picture 6: Processing Ore Using a Stamp Mill9

Picture 6 (a) Gold Ore Picture 6 (b) Pegmatites

emerges. The sustainable livelihoods approach (SLA), with its focus onwealth creation, is a potential transformation approach which African coun-tries could employ. It is defined as a way of approaching development thatincorporates all aspects of human livelihoods and the means whereby peo-ple obtain them. Livelihood comprises the capabilities, activities, entitle-ments and assets (physical, human and financial) required of a means of liv-ing. A sustainable livelihood is one which can cope with and recover fromstress and shocks and maintain or enhance its capabilities both now and inthe future, whilst not undermining the natural resource base. Central to theSLA is poverty, which we have defined as the principal driver of the growthof the sector in the majority of cases. By focusing on poverty, this approachdevelops a key link with the attainment of the Millennium DevelopmentGoals (MDGs), the first being the 'eradication of poverty'.

Sustainable livelihoods, therefore, is about: Meaningful work, meetingbasic needs, health, security, gender equality and living in an equitable andjust society (Singh and Lawrence, 1997). In this description, assets includenatural; resources, knowledge, skills and employment opportunities; activi-ties are things people do to earn a living and entitlements are those thingsthat people rely on because of legal and common property rights. As a wayof understanding the poverty around communities, the approach also helps

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9 Gold Ore in Chiweshe area and Pegmatites at Kamativi, Zimbabwe

develop strategies to overcome it. The guiding principles of the SLAinclude: Being people-centered, holistic, dynamic, building on strengths,promotion of micro-links, encouragement of broad partnerships and aimingat sustainability help in developing strategies to transform the ASM sector.

As a development approach which encompasses tenets of communitydevelopment, integrated rural development, and employment and income-generating schemes used to promote sustainable development, the SLA fur-ther emphasizes strengths and assets in evaluating sustainability. For theASM sector, the approach seeks to identify sources of strength and theassets which the miners have which can enable them to be sustainable. Inaccordance with this approach, the ASM sector, in its current configuration,is an unsustainable livelihood for poor communities. It has to be elevated toa sustainable livelihood if the poverty it seeks to protect communities fromis to be eliminated. Sustainability, poverty reduction and the attainment ofMDGs should be the key tenets in the promotion of ASM in line with theSLA.

We have to seek to answer the question: how can the extraction ofresources contribute to providing meaningful work, meeting basic needs,health, security, gender equality and enable a just and equitable society toemerge? How can ASM result in wealth creation within communities? Howcan social, human, physical, natural and financial capital be built from ASMstrengths and assets?

The Transformation Process - A Holistic ApproachA linear schematic representation of the possible route to the potential trans-formation of the sector is shown as Figure 6. Yet, the process itself is muchmore complex and as the discussion here will show, the outcomes of inter-ventions are not always as intended. The transition could be smooth andcould follow gradual stages such as: From artisanal to small-scale mining;from precious minerals to industrial minerals; from ASM to other businessventures (e.g. farming), and from ASM to medium and large-scale opera-tion, but 'leap-frogging' cannot be discounted.

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Figure 6: Transforming ASM for Sustainable Livelihood of Communities

Source: Adapted from CASM, 2003

Any transformative approach designed to address the challenges of thesector should be holistic, consultative and involve all stakeholders in orderto effectively tackle the underlying constraints identified in Figure 4. Usingthe neoclassical approach to economic growth represented in Figure 6, theneed to build the various facets of capital in order to facilitate growth andthe sustainability of mining communities becomes easy to appreciate. If we

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assume ownership of mineral resources10 by ASM, natural capital alreadyexists, and what is needed is human capital (skills, education), financial cap-ital (investment), technological capital and social capital. These forms ofcapital interact to generate/stimulate economic growth and economic sus-tainability in the sector. Conversely, if they do not exist, growth is con-strained and so is economic sustainability. Although this model does notguarantee social and environmental sustainability, it allows for the pursuitof these other goals using the economic benefits from the sector.

Figure 7: Capital, Growth and Sustainability in ASM

Source: Adapted from Gylfason, 2007

For ASM communities, the route to economic growth and hence, sustain-able livelihoods, includes the input and participation of the following stake-holders: mining communities, government (national, local and regional lev-els), community-based organizations (CBOs) non-governmental organiza-tions (NGOs), the private sector and regional and international developmentpartners (ECA, 2002). The roles of each of these stakeholders are examinedin turn in this section.

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10 Defined broadly to include the resource base of unknown size since ASM do not haveknowledge to delineate reserves

The Role of GovernmentsThe government has to develop a conducive operating environment forASM. It should develop well-integrated policies for the sector to contributetowards alleviating poverty, enhancing integrated rural development, avoid-ing or minimizing adverse environmental, health and safety effects, achiev-ing a productive business climate and stabilizing government revenue.Since minerals are vested in the state and their extraction has to take placeaccording to the laws of the land, a legal environment allowing access tothese resources, therefore, is an important pre-requisite for sustainability.

(i) Legal and Regulatory Environment

One of the major challenges to sustainability of the sector revolves aroundlegal recognition of ASM as a legitimate economic activity. Legality influ-ences also impact on the ability to transfer the resource owned by small-scale miners. It is about access to land and security of user rights. Even incountries where the sector has a long history, the legal and regulatory frame-work for the sector remains riddled with difficulties despite recognition ofthe sector's importance. Apart from appropriate legislation, governmentstructures should have departments for the ASM; such a structure shouldideally be decentralized. The ability to legally access mineralized lands isimportant. Models of reserving surveyed/delineated mineralized lands inparticular areas for ASM have been used in some countries on the continent(for example, Ghana, Mozambique and Tanzania). A system of reservationprotects ASM from unnecessary competition from larger companies andalso ensures that small but prospective areas are not left idle for speculativepurposes by the large mining companies. Ideally, the mining licences forASM in reserved areas should include obligations to develop the depositswithin specific time frames so as to avoid sterilization of the resources.

The legal environment has to provide clarity on ownership regulations,community consultation, environmental and social responsibilities and anyempowerment requirements. The tradability of ASM rights has to be madeclear so that miners can enter into possible partnerships with privateinvestors. Simplified application procedures, decentralized mineral admin-istration systems and flexible registration policies are key requirements for

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the sector to flourish. Studies have shown that artisanal and small-scale min-ers find the registration systems in most countries a deterrent to formaliza-tion and thus remain illegal; this further minimizes their chances to accessassistance or enter into partnerships (joint ventures) with other investors(see Maponga 1997; Traore 1994). A formalized ASM sector would, in themedium to long term, contribute to the national tax base, in turn, leading tomore resources being available for further assistance to the sector.

However, one of the major challenges to achieving sustainability in theASM sector relates to environmental management, especially use and dis-posal of process chemicals and tailings, and the rehabilitation of mined-outareas. Requirements for the preparation of detailed EIAs and EMPs are con-sidered complex and not within the capacity of artisanal and small-scaleminers. To overcome these challenges and ensure that compliance isenshrined in the work of the sector, flexible, appropriate and enforceablelaws and regulations have to be in place. This will indeed enhance environ-mental sustainability.

(ii) Finance

As shown in Figure 6, low incomes perpetuate the poverty loop since nosurpluses are generated, thus resulting in limited investment in explorationand expansion. Low incomes emanate from illegality leading to inability toaccess formal markets, poor knowledge of market dynamics, long distancefrom formal markets, and the use of middlemen who often offer lowerprices. These financial constraints remain a major drawback to the efficientoperation of the sector, as they limit further investment. Given the nature ofthe sector (high-risk, lack of collateral, unknown resource base), traditionalloan-financing models involving commercial banks, other lending institu-tions and other international agencies are not easily accessible without someform of state guarantee. Miners are, in most cases, unable to submit bank-able projects to potential investors and often lack track record and collater-al, key requirements for accessing commercial loans. Intervention by thegovernment as part of an overall development strategy, through the provi-sion of soft-finance for working capital (mine development and for equip-ment purchase), thus becomes a route to tackling the sector's capital con-straints. However, the challenge in operationalizing this strategy often

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relates to the source of these resources from the state's perspective.Royalties and additional profit taxes are a potential source of funding forsuch initiatives. These resources are generally used to finance government-sponsored mineral exploration programs. A proportion could be committedto a revolving fund or mineral development fund11 for providing soft-loansto ASM through a micro-credit scheme managed through a dedicatedagency. Other models of government-led financing have included directbudgeting for loans for the sector as part of the national budget, and giventhe importance of the sector's contribution to national income through taxesand foreign exchange earnings, this should not be too difficult to achieve.

Further, a financing model initially supported by a government can facil-itate the emergence of local junior mining companies, which can facilitatethe transformation of ASM into medium-scale enterprises. Local juniormining companies will also be able to enter into meaningful and sustainablejoint venture arrangements with foreign investors to facilitate the develop-ment of larger projects. This will also contribute to meaningful empower-ment as indigenes would own means of production

A sound financial resource base will also enable the sector to migrate upthe value chain through the development of small-scale processing indus-tries, including jewelry, from gold, cutting and polishing (lapidary) fromgemstones, tiles and slabs from dimension stone, and bricks and ceramicsfrom clay and sand. The small-scale exploitation of industrial minerals pres-ents more opportunities for the development of supply linkages, whichcould contribute to local economic development compared with preciousminerals. The key is the provision of seed funding. In this regard, strategiesused successfully to prop up small-scale agriculture in the sub-regionthrough the establishment of dedicated banks could be adopted for the ASMsector with the government assuming the role of risk-taker. The governmentcould put up attractive schemes to mop up resources from the local finan-cial sector, including the informal sector, to prop up ASM.

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11 For example, an ASM fund along the limes of Community Funds now common in the min-erals industry could be established as an investment vehicle.

(iii) Skills Training

The skills base of ASM is generally poor: miners often lack exploration,mineral identification, mining, processing and marketing skills and informa-tion about markets. This perpetuates the poverty cycle as it impacts on pro-ductivity and returns from the sector. Technical and numeracy skills shouldbe provided through short courses or train-trainer programs, which havebeen used successfully in the agricultural sector in many countries. Easilyaccessible and affordable extension services could be used to assist the min-ers in acquiring the necessary assistance and skills.

Targeted training programs for ASM are a common feature of develop-ment strategies employed in most countries in SADC: in South Africa,through Mintek, Zimbabwe (School of Mines), Tanzania (SEAMIC), andNamibia through the Small Scale Mining Section in the Ministry of Minesand the Namibian Institute of Technology and other providers. The trainingincludes geology, mineral exploration, business skills, mineral identifica-tion, mineral markets and marketing, legal and regulatory requirements.South Africa developed social and labour plan requirements, which incor-porate training for miners and communities as part of corporate socialresponsibility. The Zimbabwe School of Mines training programs at techni-cian level in metallurgy, mineral processing, geology, exploration and min-eral economics draw their students from Botswana, Namibia andZimbabwe. However, ECA (2008), whilst supporting training and generalassistance to the sector, calls for profiling of the ASM sector in order todetermine the exact skills required by miners before developing programs.This will facilitate the design of targeted training programs and hence helpbuild human and social capital and contribute to sustainable livelihoods.

The general shortage of skills in the minerals industry region-wide, evenfor large mining companies, means that the challenge is even much biggerfor ASM and hence resources have to be directed at boosting the skills base.A deeper collaborative regional strategy which would allow for standardiza-tion of qualifications and the sharing of capacities, is needed.

(iv) Technical Assistance

The ability to access to appropriate exploration, mining processing andenvironmental technology is important to enhance the sector's productivity

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and efficiency. Typical processing technology in the sector is shown inFigure 7. Appropriate mining equipment is expensive and in most countries,it is imported. This exerts pressure on artisanal and small-scale miners, asthey lack financial resources to purchase the equipment. Larger operatorshave the financial resources to benefit from generous tax concessions (dutyrebate schemes) when they import equipment whilst ASM operators areunable to do so.

Countries such as Zimbabwe and Ghana have used equipment hireschemes financed by the State to overcome the equipment 'gap, providingboth basic technology (wheelbarrows, hand shovels) and higher level equip-ment (diggers, mechanical shovels, compressors). Supporting the growth offabrication plants to either develop substitute technology or develop otherappropriate technologies could be a solution to some of these technicalproblems. Other technical assistance programs have been provided to min-ers through donor-funded projects, including the Intermediate TechnologyDevelopment Group (ITDG) programs in Zimbabwe, EU MiningDiversification Programme in Zambia, and the Global EnvironmentalFacility (GEF) programmes in Tanzania and Zimbabwe on mercury abate-ment technologies. However, sustainability beyond the project life hasalways been a problem, as many of these donor projects do not build capac-ity for sustenance beyond the project life.

Given the growth of the sector in the sub-region, a long-term regionalapproach is required to overcome the technical constraints. A larger marketmakes the construction of technology plants (equipment centers) for fabri-cating some of these technologies cheaper than countries going it alone.South Africa, Zambia and Zimbabwe have built local small-scale manufac-turing industries which could be consolidated to become regional in natureand serve the SADC market by sharing competencies.

(v) Marketing and Market Intelligence

Another key component of sustainable livelihoods has to do with the abili-ty to cope with short-term stress or long-term change such as a suddendecline in prices of commodities. Thus, an ASM strategy which ensuresoptimal returns during price peaks is imperative and this should be comple-mented with planning, budgeting and investment skills. A training regime

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which equips miners with business skills is important. A marketing strategywhich ensures that miners receive a fair price for their output, generates sur-pluses and allows for the building of capital reserves for investment in othereconomic activities is key to the survival of the sector. The sector needsassistance to generate surpluses by addressing pricing and marketing chal-lenges. Without licenses, miners are unable to sell their output through theofficial channels and have to rely on middlemen who buy at suboptimalprices. Other disincentives of the current marketing systems, especially forprecious minerals include: Delays in receiving payments and the lowerprices paid through the official system.12

Despite the immense challenges associated with mobile buying centres,some countries have employed this strategy, especially for gold, diamondsand tantalite (Zimbabwe, Namibia, for example). This helps overcome thepricing challenges faced by the miners and diminishes the predatory strate-gy of the monopolistic middlemen. However, the transactions costsinvolved, such as distribution of miners and the security of the product, arechallenges which this strategy faces.

Another strategy has involved the consolidation of products (output)from the miners by a government agency and then the sourcing of marketsfor larger volumes. This has been applied in Zimbabwe and Namibia, fortantalite products. However, because of the nature of production in the ASMsector, this approach is not amenable to long-term contracts, as output is notguaranteed and, therefore, cannot take advantage of hedging. In Zambia andTanzania, for example, calls for the establishment of gemstone marketingcentres have been made to ensure that miners are able to obtain fair prices.Other analysts have advocated for regional minerals exchanges as a strate-gy to assist the ASM sector.

(vi) ASM as part of National Development Strategy: Integrated Rural Development and Clusters

Medium and large-scale mines have made a significant contribution to thedevelopment of infrastructure, roads, rail and power connectivity and the

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12 Occurs due to differences in the official and unofficial exchange rates

development of clusters. With proper support, a vibrant and commercially-driven ASM sector can also contribute to such development. Although mostanalyses of the sector's contribution to development have focused on pre-cious and semi-precious minerals, small-scale industrial mineral exploita-tion has the potential to foster much greater linkages. Small-scale agro-min-eral development is a labour-intensive activity which can reduce agricultur-al costs significantly by extracting and developing agro-mineral depositscloser to farming sites. This enhances agricultural productivity (improvessoil fertility) and improves the sustainability of farmers, and creates condi-tions for improved livelihoods in the community as employment opportuni-ties are created and additional income-generating opportunities emerge.Access to fertilizer will increase food production and contribute to foodsecurity and poverty alleviation. Opportunities for cluster development andlinkages are larger in small-scale industrial minerals development than inthe precious minerals sector. Other sources of linkages from small-scaleagro-mineral operations include opportunities for local entrepreneurs in pro-viding crushing or grinding services, for example. The experience of small-scale industrial mineral extraction in China (bauxite) and Indonesia (tin) hasshown the huge forward and backward linkages which can emerge withinthe mining areas.

Cluster-based growth strategies can be developed and implementedaround a permanent ASM sector. Such strategies have been developed invarious nations/regions to address a host of issues, including cyclicalchanges in economic conditions, increased global competition, populationgrowth, low-growth economies, unemployment, and making the shift fromcomparative to competitive advantage. Clustering helps create competitiveadvantage around mineral resources as the sector becomes part of a broad-er national development process and is to some extent insulated from com-modity-specific cyclical developments.

As a concentration of expertise among closely-linked industries andcompanies in which extensive investment in specialized factor of produc-tion, a cluster can catalyse a growth trajectory. As noted in Porter (1990), theagglomeration of producers, customers and competitors, whether based ongeographical proximity or linked by complementary expertise, promotesefficiency and increases specialization. A cluster-based development strate-gy can generate numerous economic benefits, at both the macro and micro

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levels. On a larger scale, clusters can generate additional national revenuesand foreign exchange earnings through increased exports, produce globalcompetitiveness, enhance productivity, and result in a higher standard of liv-ing within the resident population, create and generate sustainable compet-itive advantages. The competitive advantages can be through the develop-ment of upstream and downstream industries; increasing the level of com-petitive inputs (such as services, machinery and equipment); increasing thelevel of employment in all business activities related to the cluster; increas-ing the rate and exports of value-added products and services; attracting for-eign investment; increasing inter-firm co-operation; ensuring linkages andinteractions are high-quality and beneficial; generating new start-up compa-nies; increasing trade performance; and generating higher corporate profits.However, the overall economic impact of a specific mining project, partic-ularly at the local level, is highly dependent on the fullness and depth of the'cluster' of activities that form and agglomerate around it, for the 'indirect'effects are strongly associated with the degree of 'cluster' maturity. Eachdirect spin-off from the initial industry provides the impetus for furtheremployment spin-offs either in supporting industries and enterprises or theservice sector. The indirect effects of cluster development are: Fiscal contri-bution of the plant to local tax revenues, value added originating in inputs,equipment, services and engineering produced by domestic suppliers to theplant('upstream' and 'sidestream' industries), the value added in the domes-tic processing of minerals and metals, in products made from such metalsand minerals and the transportation and marketing of the same ('down-stream' industries) and value added in local improvements and innovationsthrough integration with technological consultants, suppliers and producers.Each indirect effect assists in broadening the local employment base andenhancing the skills in the local population.

To enhance linkages and promote the development of viable clusters, theASM should be part of development plans, integrated rural development(IRD), regional development plans and local economic development strate-gies. This will help to nurture and strengthen linkages. The small-scaleindustrial minerals sector provides the easiest source of linkages to localeconomic development. Any policies aimed at transforming ASM into asustainable livelihood should encompass integrated rural developmentemphasizing the link between various facets of the rural economy.

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Modernization of the ASM sector should place at its core programs tostrengthen economic, social and environmental objectives, including inter-action with the agricultural sector. Integrated rural development, as a bot-tom-up model of rural development, empowers communities and empha-sizes sustainability, and places greater emphasis on the potential to fosteropportunities for growth by mobilizing opportunities for growth andexploiting linkages between sectors. Instead of ASM evolving as an islandwhose survival depends on mining only, IRD allows for a broad-baseddevelopment strategy which would include growth of rural community busi-nesses involved in trading activities that meet local needs. Micro-clustersaround ASM activities can develop as long as integrated planning betweensectors and within sectors is the guiding principle. The involvement of com-munities and local authorities is a key to the success of integrated ruraldevelopment programs, especially those based where projects are located. Acommunity-driven development strategy which incorporates ASM is need-ed for sustainability.

Thus, by capitalizing on linkages arising in the production chain, thereare opportunities in which the vast mineral wealth in Africa can beemployed to ensure maximum industrial development throughout the conti-nent.

(vii) ASM and Africa-Wide Development Initiatives

The African Union Vision of Spatial Development Initiatives (SDI) andDevelopment Corridors provide a framework which could possibly incorpo-rate ASM as part of a wider development approach on the continent.Development Corridors are expected to generate economic growth throughthe mobilization of the private sector to empower communities via employ-ment creation. Corridor development is in line with economic integration onthe continent premised on greater developmental benefits to member statesby the collective use of development policies. Most of the major projects inthe corridors are based on a partnership between the public and private sec-tors, and are set to provide opportunities for participation in sectors such asagriculture, mining, tourism, environment, forestry, infrastructure and ports.Although the specific focus is on development corridors which are usuallyalong existing transport networks in order to unlock the inherent economic

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potential that exists in these corridors, mainly in mining, but also in agricul-ture, power generation and tourism, all sources of resources are potentialcatchment areas. The ASM sector could be a micro-node for the develop-ment corridors or they could be within the catchment area of the corridors.It could also feature in development zones linked to the corridors, and hencewould benefit from the benefits generated by the economic activity in thecorridors.

(viii) ASM and Poverty Reduction Strategies

The ASM sector should be included in national development strategies,especially through the National Poverty Reduction Strategy Paper (PRSP)process. This is one of the key recommendations that came out of theYaounde Vision, adopted during a joint ECA/UNDESA Seminar on'Artisanal and Small Scale Mining in Africa', which provided a comprehen-sive framework for the development of a sustainable ASM sector on theAfrican continent. The framework, premised on the internationally-accept-ed view that ASM is mainly poverty driven, advocates for the incorporationof the sector into PRSPs as twin-pronged medium to long-term strategy toalleviate poverty and also transform the sector into a provider of sustainablelivelihoods. Many governments on the continent have developed PRSP-demonstrating commitments, at least at the policy level, signifying a desireto reduce poverty through the resources sector. The sector provides a possi-ble route and, therefore, should be a key part of the strategy, especially inthose countries which have a significant ASM sector. The promotion ofalterative livelihood projects within mining communities can enhance sus-tainability as linkages can be forged and micro-clusters could emerge.

Yet, despite their appeal, the first generation of PRSPs fails to providestrategies on how revenues from mining will be used to alleviate poverty.Further, they fail to clearly establish the link between investment in the sec-tor and poverty reduction (ECA, 2008). The assumption of a linear relation-ship between the sector's growth and poverty alleviation has also been crit-icized by analysts of this approach as there is no guarantee that this willoccur without a clearly articulated program. Further, in the PRSP machin-ery, no priority is given to pro-poor policies in the utilization of windfallsfrom the sector. Whilst these misgivings applied to the first generation of

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PRSPs, the expectation is that as countries draft new policies, cognizance istaken of the need to develop focused pro-poor policies and programs to besupported by revenues from the sector.

The issue, therefore, is not about developing a PRSP which discussesASM, but rather that promotion of the sector is part of the government's pro-poor strategies. Governments should commit financial resources towardsassisting the sector to overcome its constraints and also have in place a pro-gram that ensures that benefits from the sector find their way back into help-ing the sector enhance efficiency. The overall ASM strategy in the PRSPshould also address child labour and gender issues in the sector - key issuesthat must be addressed in order to develop a complete vision of sustainabil-ity.

These actions by government will contribute towards the evolution of asustainable sector, one that contributes to sustainable livelihoods, povertyreduction and the attainment of the MDGs. A proactive governmentapproach will have positive demonstration effects on other actors. It is eas-ier to support a legally-recognized activity than one which is illegal. As theexperiences in Southern African will demonstrate, policy is in itself not apanacea, its implementation, monitoring and the ability to incorporate newissues are key factors.

The Private SectorThe private sector, either mining companies or lending institutions, has tra-ditionally shied away from the ASM sector. Yet, its contribution throughlinkages, collaboration and the provision of financial assistance can facili-tate the growth and prosperity of the ASM sector. A symbiotic co-existenceis indeed possible with a proper operating environment.

(i) Financial Institutions

For the purely commercial financial institutions, the high commercial, geo-logical and technical risks inherent in the sector have been the source ofresentment to lend. As noted earlier, the sector is usually unable to providethe security required in commercial lending, and thus fails to satisfy theminimum lending requirements. This is further compounded by the fact thatthe minerals industry is still a virgin area for the lending sector in Africa.

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There is a need to develop strategies towards changing the attitude of thefinancial sector towards mining in general, and ASM in particular. Thebanks often lack the skills to evaluate mining prospects, especially the factthat at times, the gestation period is rather long but positive returns willemerge. Deficiencies on the part of ASM in project preparation skills alsocompound this problem, as projects are poorly prepared and hence fail toattract funding. Whereas large companies have resources to engage profes-sionals to produce feasibility and pre-feasibility reports, small-scale minersare unable to fund such upfront expenses. There are many deserving ASMprojects which the lending institutions could participate in. NationalDevelopment Banks could open a special window for the ASM sector.

(ii) Mining Companies

Although often regarded as hostile competitors, mining companies andsmall-scale miners can co-exist in a mutually beneficial relationship. A legalASM sector can amicably co-exist with large mining companies, if the lat-ter purchases ore and provides laboratory services (at a cost), R&D fordeveloping appropriate technology (smaller plants). Further, whereas thecommunity is usually the source of labour (unskilled, semi-skilled andskilled), mining companies can be a source of skills upgrade. The ASM sec-tor can also economically work on marginal deposits on claims owned bymining companies or even work on tailings, provided contracts are devel-oped. Examples of cooperative type-arrangements between ASM and large-scale miners for the purchase of inputs such as mercury and in-skills train-ing have been cited in the literature (Maponga and Ngorima, 2002). In suchcases, ASM would benefit from the discounts offered for large purchasesand also from the training offered by the large mining companies. Mapongaand Ngorima (2002) argue that in the long-run, a properly trained ASM sec-tor will appreciate the benefits of proper mining and processing which willlead to better recoveries and higher levels of income. However, it is impor-tant to appreciate that striking this relationship is difficult, as these entitiesare indeed in some 'competition', though not that fierce as large operationshave several advantages. AngloGold Ashanti and De Beers13 report of coop-erative arrangements with ASM in Tanzania, and argue that the programsare designed as part of their corporate social responsibility.

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13 Through the Mwadui Community Diamond Partnership, a multi-stakeholder initiative.

Civil Society Organizations

The full participation of communities is important for the success of the sus-tainable livelihoods approach. Civil society organizations and NGOs areimportant in ensuring that communities are indeed part of the process ofdesigning strategies to enhance sustainability in the sector. Dealing withissues such as gender, social impacts of mining, resettlement, revenue dis-tribution challenges and child labour in ASM requires the input of CBOsand NGOs who can work at the community level in assisting communitiesand empowering them with the required skills to deal with these challenges.

Gender configurations within mining areas can impact on overall sus-tainability. Issues such as unequal access to resources for both men andwomen can impact on the distribution of the benefits of ASM, within a fam-ily, a community and a region. Thus, civil society organizations can play animportant role in advocacy towards equal legal access to mineral resourcesand equal access to the proceeds from mineral sales. However, as noted byMaponga and Meck (2003), the way the ASM sector is configured, wherewomen play a subsidiary role, impacts households, especially in communi-ties where women do not legally own claims or mines. These are the issuesthat need to be addressed with lobbying and advocacy. The civil societymovement played an important part in the formation of Women MinersAssociations in the sub-region, and continues to support these organizationsthrough financial assistance.

Many NGOs and CBOs have also contributed to the development ofappropriate mining and processing technology, and have facilitated the dif-fusion of technology developed in other areas in many countries on the con-tinent (for example, Ghana, Zimbabwe, Zambia, Tanzania). Equipment suchas mercury retorts were initially promoted through the efforts of theseorganizations. These organizations have been vehicles for technology adap-tation in the ASM sector in Africa.

Financial assistance programs have also been promoted by NGOs, suchas the European Union-funded Mining Diversification programme inZambia and the Austrian-funded Chrome Fund in Zimbabwe. In the case ofthe former, however, access by ASM proved difficult because it was admin-istered through the banking system and hence carried the same stringentconditions and thereby limited its access. However, training programs under

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this project were accessible. In the case of the latter, there were problemswith repayment, as the project life was too short to allow miners to earnenough to repay loans.

The preceding section has outlined some of the strategic approaches thatcould transform ASM into sustainable activity, and has emphasized the needfor a holistic approach. In addition to addressing technical issues impactingon sustainability, the holistic approach has to address many of the socialissues plaguing the sector. One of the main challenges threatening the sur-vival of the sector is the HIV/AIDS pandemic, which plagues small-scalemining communities. There is a need for the government, the private sector,civil society and target communities to work together in designing preven-tative and care methods.

In the following section, some experiences taken to improve the sustain-ability of ASM in Southern Africa are reviewed.

Experiences from Southern AfricaFor the SADC region, assistance to ASM is clearly articulated in Article 7of the SADC Protocol on Mining, which commits states to: promoting poli-cies to encourage and assist small-scale mining, facilitate the developmentof small-scale mining through, amongst others, the provision of technicalservices, establishment of marketing facilities, including exhibitions andestablishment of mineral exchanges and encourage provision of training,institutional and financial support for the ASM sector in the region. TheSADC mining sector strategic plan further emphasizes the importance of thesector with an overall objective around the development of a commerciallyviable small-scale mining sector. The priorities of the strategic plan include;development of a regional strategy to promote and regulate ASM, develop-ment of support mechanisms, promotion of ASM and development ofappropriate ASM regulations.

The framework for harmonizing policies in the mining sector approvedby SADC Ministers responsible for mining in 2006 outlines strategies to beadopted by member states, including formalizing and supporting ASM. Theframework reiterates the importance of ASM as a tool for economic devel-opment, a route towards the empowerment of communities and indigenouspeople, and an avenue for poverty alleviation. In light of this, the framework

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identifies the creation of a conducive environment to nurture the sector andthe provision of the necessary technical, human and financial support, ascritical elements for the sector's growth.

Specifically, the framework encourages member states to:• Reposition ASM policies and legislation with a view to alleviating

poverty;• Develop ASM policies and legislation that address constraints

faced by the sector with focus on improved access to land, financing, marketing, technology and skills development, especially entrepreneurial;

• Develop, adopt and enforce appropriate and uniform health, safety and environmental standards for the sector; and

• Integrate ASM into rural development programs.

To date, the general approach taken to provide assistance to the sector hasincluded government-supported programs implemented alongside theefforts of NGOs and international cooperating partners. All countries in thesub-region have dedicated sections/departments within mining ministriesfor the ASM sector. Further, all countries have supported the formation ofassociations representing the sector, including separate associations forwomen miners. Associations are an important source of social capital for asector that has to continue fighting for recognition as a legitimate econom-ic entity. In terms of evolution into sustainable entities, a legally-recognizedassociation will be important to further the aspirations of miners.

In Mozambique, for example, the last decade has witnessed improve-ment in the operating environment in the ASM sector, through, for example,the establishment of a laboratory of gemology in Nampula to provide sup-port to the evaluation of gemstones and the training of miners on mining andsection of gemstones; the enactment of a mining law (Law 14/2002, of June2002), which provides for a more simplified form of registering for artisanalmining; and the demarcation of reserved mining areas for ASM. Further, asan empowerment strategy, the local trade in gemstones in the mine site isonly restricted to national operators. Fiscal incentives on activities undermining certificate (small-scale mining) and mining pass (artisanal mining)are exempted from paying royalties, and reduced fees for the obtaining of

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respective licences and permits apply. Whilst activities under mining certifi-cate are subject to the payment of surface tax, the same does not apply to thesmall-scale and artisanal mining activities where a reduced tax has been set.Simplified registration of artisanal miners enables government to collectstatistical information for use in designing support programs towards ASM.

In Namibia, support for small-scale tin mining following the demise oflarge-scale operations, establishment of small-scale mining division in theministry, and provision of mobile analytical and marketing services for thesector demonstrate the government's commitment to assisting the sector.The establishment of a revolving fund from Sysmin seed funding has beena key support strategy for the sector. To overcome challenges encounteredby ASM in satisfying environmental regulations in terms of preparing elab-orate EIAs, a simplified environmental contract has been developed for thesector and a simpler claim registration procedure for the sector has beendeveloped. Creation of the National Small Scale Miners Assistance Centrein 1997 has been important in assisting the sector address its challenges.

The South African model of support for ASM has focused on businessskills training, support of small-scale mineral beneficiation and value-addi-tion projects, and development of appropriate technologies for the sector.The Department of Minerals and Energy (DME) and organizations such asMintek and the Council for Geosciences, for example, are the main agenciesthat provide assistance to the ASM sector. For example, Mintek's SmallScale Mining and Beneficiation Division has undertaken work on promot-ing appropriate technology and value-addition in the sector, and providesappropriate training. The development of the mercury-fee Igoli process forgold recovery is the result of appropriate technology development work byMintek. Further, government support led to the formation of the SouthAfrican Small-Scale Mining Chamber, a first in the sub-region. The decen-tralization of service points by DME to regional centres has facilitatedaccess to services for the ASM sector.

Zimbabwe's support to the ASM sector has included government assis-tance as well as input from other sectors. This has entailed the establish-ment of gold price-support schemes, development of mobile gold buyingunits, promulgation of regulations facilitating the formation of mining coop-eratives (chromite), launch of mining equipment hire schemes, promulga-tion of regulations in 1991 legalizing gold panning, development of

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frameworks for custom milling centres and provision of loans for workingcapital. In addition to these state-funded programs, other stakeholders haveprovided assistance. Examples include: The establishment of a gold millingand training centre (the Shamva Mining Centre); the loans and equipmentprovided under the Austrian Chrome Fund; and initiatives carried out underthe auspices of the Global Environmental Facility-funded programme onmercury abatement technologies and capacity building for local equipmentsuppliers.

These regional experiences demonstrate the commitment of govern-ments to assist the sector and employ it as a vehicle for economic develop-ment and empowerment. But apart from South Africa, which has continuedto fund these schemes and has focused on value-addition, most countries inthe sub-region continue to struggle to maintain funding for the sector. Whatis also clear from this analysis is that as long as the support to the sector con-tinues to depend on government and donor goodwill, transformation intosustainable entities will remain elusive in the majority of cases. The supportschemes have to graduate into sustainable revolving funds. Instead of awholesale approach type of assistance, targeted schemes focusing on a fewdeserving projects should be used to provide a positive demonstration effectfor the rest of the sector.

A major weakness of these regional strategies has been the limited atten-tion on social and environmental issues; key aspects of sustainability.Gender-sensitive programs are not clearly articulated (although in somepolicies, women are classified under previously disadvantaged groups andare supposed to receive preferential treatment), environmental challengesfrom the sector do not have 'special' policy space given the challenges asso-ciated with developing comprehensive EIAs for ASM (except for Namibiawhich has developed an environmental contract for the ASM), and specificprograms to eliminate child labour have not been articulated. As shown inFigure 5, whilst legislation contributes to sustainability, it is not a panacea.

ConclusionsThe paper has argued that, despite its widespread nature, ASM, in its currentform, can only serve as an alternative source of livelihood for distressed

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communities but is not a sustainable form of livelihood due to technical,social and economic limitations. However, with proper support, it has thepotential to contribute to the sustainable livelihoods of communities. Aproperly structured holistic approach involving all stakeholders is needed toeffect this change. Governments' commitments to the growth of the sectorand poverty alleviation are key requirements; other stakeholders can thenrally around a pro-active government policy for ASM. In this regard, thecritical facilitator to the growth of the sector is legal recognition, whichbrings with it property rights and ownership, and further opens possibilitiesto enter into joint ventures, access funding, training and technical assistance.

The paper has emphasized the role of governance in ensuring sustainableeconomic growth and improvement in the livelihood of mining communi-ties and surrounding environs through developing systems which capture allincome generated by the sector and channel them to local developmentactivities. Through instruments of change such as development of regionalpolicies, capacity building (government capacity to deliver services, skillsfor the miners in all activities in the mining cycle, etc.), provision of finan-cial resources (micro-credit) and development of relevant implementationplans for regional development initiatives, governments can, indeed, launchthe sector onto a path of sustainability. An improvement in prices paid tominers through government intervention, is one way to minimize losses.Flexible buying and selling systems which ensure prompt payment areneeded. International concern over the fair trade of minerals from the ASMsector has resulted in organizations such as Communities and Small ScaleMining supporting initiatives for the possible certification of artisanally-mined minerals as a tool for stimulating sustainable development in miningcommunities. Mineral certification (certification of origin and certificationof ethical quality) is motivated by the need to continually improve the eco-nomic, social and environmental sustainability of the mineral supply chain,as operators compete for 'ethical' buyers. This will ensure that the exploita-tive middle-men are eliminated, and that miners earn highest possiblereturns. Governments on the African continent should support such initia-tives to enhance sustainability of the ASM sector.

The challenges of poor technology could be overcome through the pro-vision of mobile extension services to improve mining, processing technol-ogy, marketing and environmental management to enhance efficiency. A

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regional approach to developing appropriate technology has to be adopted,as this will create a market big enough to sustain such a business. Similarregional approaches could be adopted for training in the ASM sector.

For sustainability at the local level, the emphasis should be on develop-ing systems to address the unbalanced relationship between beneficiaries ofmining and the risk and cost bearers which further illustrates the importanceof a holistic approach. Whereas the local communities bear the full costs ofenvironmental degradation, destruction of local social fabric and norms bymigrant workers, non-locals reap the positive social and economic benefitsfrom mining.

The paper has argued that although ASM may not fit perfectly into thebox of sustainability as defined in the literature, it nevertheless leveragesdevelopment in rural areas and generates wealth and is thus an importantpart of the social structure. The sector has to be supported to enhance andmagnify its role in sustaining livelihoods through proper integration intodevelopment programs in mining areas. The key to the sustainability ofASM communities is a consultative process involving all stakeholders: gov-ernment, the private sector and the local and international developmentcommunity, so as to foster working relationships, build capacities and there-by improve opportunities for sustainable development.

Since African countries have embraced ASM as an important sector inpoverty alleviation and economic empowerment, it is important that the pol-icy space for the success of these entities be flexible enough to nurturegrowth and sustainability. If the continent was able to abandon the resourcenationalism of the 1970s and 1980s and embrace liberal regimes to accom-modate foreign investors in the 1990s, there is no reason why flexibleregimes cannot be created to accommodate indigenous entrepreneurs tofacilitate ASM growth. The recent international financial crisis, which isanticipated to result in reduced investment flows to developing nations,including those of Africa, presents an opportunity to pursue an inward-look-ing development approach which focuses on small- and medium-scaleindustries, including ASM, as engines for growth to ensure sustainabilityand the development of linkages and prosperity through value-addition.

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14 Most countries are currently re-examining at the liberal policies for the mining sector andtheir impact on sustainable development as the investment boom has not translated intomeaningful development

Selected ReferencesAryee, B.N.A (2003) Small-scale Mining in Ghana as a SustainableDevelopment Activity: Its Development and Review of ContemporaryIssues and Challenges. In Hilson, G. (Ed) The Socio-Economic Impacts ofArtisanal and Small Scale Mining in Developing Countries. A.A. Balkema,The Netherlands, 379-418

Banchirigah, S.M. (2008) Challenges to Eradicating Illegal Mining inGhana: A Perspective from the Grassroots. Resources Policy 33 (29-38)

Banchirigah, S.M. (2006) Have Reforms Fuelled the Expansion of ArtisanalMining: Evidence from Sub-Saharan Africa. Resources Policy 31(3), 165-167

CASM (2008) Certification and Artisanal and Small-scale Mining: AnEmerging Opportunity for Sustainable Development, April 2008

Davis, G.A. and Tilton, J.E. (2005) The Resource Curse. Natural ResourcesForum 29, 233-242.

ECA (2002) Compendium on Best Practices in Small Scale Mining inAfrica, ECA/RCID/OO3/02

ECA (2008) Sustainable Development Report on Africa: Managing Land-Based Resources for Sustainable Development

George-Kumirai, J. (2002) “An Assessment of Factors that Constrain theImplementation of S.I. 275 of 1991 (Mining (Alluvial Gold) PublicStreams Regulations), by Rural District Councils in Zimbabwe: The Case ofInsiza Rural District Council”. Unpublished Master of Policy StudiesDissertation, University of Zimbabwe, Harare. 2002, 58 pages.

Gylfason, T. (2007) The International Economics of Natural ResourcesGrowth. Minerals and Energy: Raw Materials Group 22(1-2), pp7-17

Heemskerk, M. (2001) “Do International Commodity Prices Drive NaturalResource Booms? An Empirical Analysis of Small-scale Gold Mining inSuriname”. Ecological Economics, 39: 2001, 295-308.

Hoadley, M. and Limpitlaw, D. (2004) The Artisanal and Small-scaleMining Sector and Sustainable Livelihoods, Paper presented at the MintekSmall Scale Mining Conference, Johannesburg, South Africa, September,Proceedings 1-9

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Maconachie, R. and Binns, T. (2007) "Farming Miners" or "MiningFarmers"?: Diamond Mining and Rural Development in Post-ConflictSierra Leone Journal of Rural Studies, 23.3 p367-380 Jul

Maponga, O. (1997) Small-scale Mining and the Environment: The Case ofAlluvial Gold Panning and Chromite Mining in Ghose, A.K. Mining on aSmall and Medium Scale: A Global Perspective. Intermediate TechnologyPublications: London, 185-211.

Maponga, O. and Ngorima, C. (2003) Overcoming Environmental Problemsin the Gold Panning Sector Through Legislation, and Education: theZimbabwean Experience. Journal of Cleaner Production, 11(2), 147-157

Maponga, O. and Meck, M.L. (2003) Illegal Artisanal Gold Panning inZimbabwe- A Study of Challenges to Sustainability Along the MazoweRiver in Hilson, Gavin M. (ed) The Socio-Economic Impacts of Small-scaleMining in Developing Countries: A.A. Balkema Publishers. ISBN 978 905809 615 9

Traore, P.A. (1994) Constraints on Small-Scale Mining in Africa. NaturalResources Forum 18(3), 207-12.

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