Authors: Amidu Kalokoh, Lada Kotchtcheeva
Site of publication: Journal of international development
Type of publication: Article
Date of publication: February 2022
Distinctively, both countries have only emerged from civil wars less than two decades ago in which the extractive sectors played a critical role in sustaining those conflicts. The artisanal gold sector could contribute significantly in meeting longstanding socioeconomic challenges in these countries, including employment, income inequality, and gross domestic product, if it is effectively and efficiently governed. Mineral proceeds make up a significant portion of the annual revenues to governments as well as individuals and household incomes across the sub-region.
For example, in Liberia, in 2015–2016 total government revenue from the extractive sector was $56 million, of which mining contributed 49% (Extractive Industry Transparency Initiative). In Sierra Leone mineral exports contributed about 0.7% to the national GDP in 2018 and accounts for 64% of total exports in 2018. The country received $29 million in revenue from its mining industry operations. However, the sector is loosely regulated, raising concerns of economic leakages, exploitation, and social and environmental implications, which challenge artisanal miners, mining communities and governments’ sustainable economic development drive.
ARTISANAL MINING GOVERNANCE PROBLEMS: AN OVERVIEW
What is artisanal mining? The term has been defined according to different features such as “techniques (‘low tech’), labour requirements, or legal status (‘absence of formalization’, ‘illegal’, or ‘lack of adequate regulatory framework’)”. According to the research presented by the World Bank, ASM is the most primitive type of informal, small-scale mining that is undertaken by individuals or groups that usually exploit minerals illegally using the simplest equipment.
Sierra Leone defines ASM by the depth of the operations (hole dug) as “mining operations that do not exceed a depth of ten meters”. ASM is usually labor-intensive, informal, sometimes illegal, with limited capital investment and subsistence. This article defines ASM as being informal, ineffectively monitored, less supported, and done without or with mechanized tools and on a small scale.
There are many factors to the governance problems of mineral mining in Africa, especially in ASM. Governance is broadly understood as the interaction of structures, processes, and traditions that determine the exercise of power, decision-making, and how citizens and different groups have their say in society. Good governance denotes the recognition of such principles as broad-based participation, transparency, accountability, the rule of law, consensus orientation, responsibility, equity, inclusiveness, effectiveness, and efficiency. In the context of artisanal gold mining, governance signifies the process of decision-making and implementation, as well as the productive outcomes of those decisions in the sector.
Artisanal gold sector constitutes an important economic source for thousands of individuals and households in Sierra Leone and Liberia, and their mining population has grown exponentially since the end of their civil wars in 2002 and 2003, respectively. Despite being associated with a multitude of environmental, health and safety, and social concerns, this article is focused on a range of other governance related factors, including: the informality of the sector, multiplicity of actors, ineffective monitoring, and differences in the price of gold in Liberia and Sierra Leone.
The debate on informal economy since it was first conceptualized by Keith Hart in 1973 has produced many terms, describing it as “subterranean, hidden, grey, shadow, informal, clandestine, illegal, unobserved, unreported, unrecorded, second, parallel, and black”. In other words, informal activities are those that fall beyond the scope of the state. In the context of artisanal gold mining, this study understands the informality of the gold sector as low-tech, low productivity, and mostly unsupported and unregulated by the government.
There is absence of a coherent system to effectively manage the mining sector as different agencies along with the MLME have complex and competing mandates and authority, and unclear responsibilities within the MLME and low-skilled personnel make it difficult for inter and intra agency coordination to attain the sector’s full potential. These issues undermine efficient administrative function. For instance, mining licenses have long been granted without clear-cut legal guidance of the process, and mining inspectors do not have related training, though it is required to conduct technical monitoring of the sector appropriately.
Additionally, payment for licenses and royalties are made to the Liberia Revenue Agency, but revenue authorities did not report non-payments of revenues to past institutions, which undermines the government’s revenue collection without previous records. However, the Mining Cadastre Administration Support Project (MCAP) program mitigates challenges that relate to organizational delivery by creating a centralized database for all license holders and enabling data sharing between revenue agencies in the mining sector.
Informality of the sector
Governing the extractive sector requires effective policies, regulations, and structures to manage its activities. In both countries, the gold sector is a subsector of the extractive industry and differs in procedures to some extent with other subsectors, such as diamond and bauxite.
Before the Artisanal Mining Policy 2018, Sierra Leone’s artisanal mining sector was somewhat regulated by the Mines and Minerals Act 2009 and the Mining Core Policy 2010, which regulated all types of mining. Unlike Sierra Leone, Liberia does not have a specific artisanal mining policy. The whole extractive sector is regulated by the Mining and Minerals Law of 2000 and the Exploration Regulations and the Minerals Policy 2010.
The informality of the sector increases its vulnerability to irregularities such as exploitation of miners, disregard of social factors like environmental protection, and communal development as there is an absence of specific gold policy and/or ineffective and inefficient implementation of available ones. These conditions affirm informality as a major problem in the governance of artisanal gold sector in both countries though, on a different scale with Sierra Leone being a step ahead with the adoption of the Artisanal Mining Policy 2018.
Multiplicity of actors
In Liberia, the MLME as the principal regulator of the extractive sector grants mining licenses. There has always been a contention on what constitutes artisanal mining based on the license issued. In Sierra Leone, the MMMR provides general management of the extractive sector and the NMA, which has administrative and regulatory power of the mineral sector.
Paramount chiefs, chiefdom committees, and lawful occupiers of the land also exercise control over the sector through directly negotiating lease agreements, and through the Minerals Advisory Board as provided for by the Mines and Minerals Act 2009 (Section 11[m]). Paramount chiefs are regarded as custodians of the land to whom land right is entrusted on behalf of the local people and whose role has also been contentious. Chiefs sometimes grant surface rent certificates to potential miners and deny their opponents.
Difference in price for gold
The gold from Liberia and Sierra Leone is traded locally and internationally at different prices. In both countries, license holders are restricted to the purpose of their license in the sense that exporters do not buy gold products from local miners, but rather purchase from the local dealers. Local dealers buy from miners and sell their product to exporters, however they cannot export. Therefore, the local dealers occupy the space between the gold miners and the gold exporters.
A challenge that miners face is taking their product to the dealers, who are mainly based in bigger towns far from the remote mining locations. Unlicensed dealers who move to those remote places to buy the gold from the miners, sometimes at mining sites buy at low prices. The transaction costs in gold in Sierra Leone and Liberia differ with neighboring Guinea and Ivory Coast. Guinea has a royalty rate of 0.5% and Liberia and Sierra Leone have 3%, respectively.
Both countries, however, have employed various institutions, and they are members of different international initiatives, which offer policy directives and administrative oversight, to govern the gold sector. For instance, they are members of the EITI that promotes transparency and accountability in the sector by requiring and encouraging dealers and member states to publish what they pay and what they earn in the mineral trade. The GIZ helps address the challenges in organizational development through the implementation of the Mining Cadaster Administration Support Projects that offers an effective database for licenses.