Natural Resources
- Tue Jul 05 2005
Source:
Third World Network Africa
In spite of being the third largest producer of gold in Africa, Mali remains one of the poorest countries in the world, thanks to reforms to the mining code that favour the foreign investor.
By Lindlyn Tamufor
The hills of Sadiola in Mali formerly filled with cattle herds and subsistence farmer families were taken over by La Societe d’Exploitation des Mines d’Or de Sadiola (SEMOS) for large-scale gold mining in 1996.
According to research carried out by Third World Network-Africa and GUAMINA on the effects of the mining policies of Mali and the resulting mining exploration of SEMOS in the community of Sadiola in which it operates, not only is Mali as a country losing from the activities of the company, but the communities in the catchment area of the mines are worse off.
The study, titled ‘The Impact of Mining Sector and Economic Reforms on Development in Mali and Socio-economic Conditions of Communities: The cases of SEMOS, Kokgnon and Bourdala Sites’, shows that the desired effect of liberalising the gold industry in Mali has been reached in terms of increased revenue from mining activities, but this revenue has not been translated into improving the standard of living and the environment of the communities directly affected by the mining activities, because of various policy and institutional flaws.
Mali has an estimated 500 tons of gold reserves and has followed the trail of several countries like Ghana, Sierra Leone and the Democratic Republic of Congo that have yielded to the economic advice of the Bretton Woods institutions to concentrate on extractive industries as the key to development, and thus reviewing their mining codes to attract and facilitate investment in the mining sector.
By 1991, both legislative and institutional reforms were introduced in the mining sector in Mali. A new mining code was introduced to boost foreign direct investment in the sector whilst institutional reforms were introduced to facilitate the efficient functioning of companies.
The World Bank invested about US$108 million (with US$6 million provided by IDA/IBRD and US$102 million by the IFC) to get a new mining code, detailed geological information and new state institutions for promoting and regulating the sector in Mali.
The legislative reforms redefined the role of the state in two fundamental ways. Firstly, the reforms imposed a limit in the state’s ownership and control of investment in the mining sector while expanding the role of transnational corporations. Prior to the reforms, the state had almost 100% ownership in mining investment. The new code downsized this to a maximum of 20% in shares of any mining establishment in the country. What this means is that the state has been angled out by this policy while providing sufficient space for transnational corporations.
Secondly, the reforms weakened the capacity of the state to effectively regulate the activities of transnational corporations. For instance, the role of the National Department of Mines and Geology (DNGM) as both a promoter and regulator makes the institution ineffective in the face of aggressive corporate lobby and influence. It has become almost impossible for the department to discharge those two functions equally in the face of corporate influence backed by their home countries and the World Bank.
In 2002, the DNGM was re-organised as a one-stop shop for mining in Mali. Several other departments were collapsed under this department and its powers expanded. This had the effect of concentrating powers related to mining in one body, hence making it simpler for investors to synchronise their activities.
However, the DNGM lacked the capacity to carry out all its mandated activities to efficiently regulate the industry. For instance, the DNGM was given additional mandate in the area of research, mining development and processing, among others. A Mineral Resources Development Programme (PDRM) was developed under the DNGM to provide support services for projects and investors.
Furthermore, the director of the DNGM per Chapter I of Decree No. 025833/P-RM of 20 December 2002 is appointed by a decree at cabinet level based on proposals made by the Minister of Mines. This appointment on its own subjects the director of the DNGM to be limited in his powers and hence less independent.
The mining code also introduced major fiscal reforms, which deny the state and its citizens the maximum returns of mineral wealth. Under the code, mining companies are free of corporate tax for the first five years of production. Thereafter, the tax rate is reduced to 35% or less when profit is reinvested in Mali. All equipment for the mining projects can now be imported duty-free during the exploration period and for the first three years of the exploitation period. Service tax to revenue and royalty on the value of production is both fixed at 3%.
As a result of the reform, the number of foreign mining companies in Mali increased. Two key projects are at Sadiola Hill, jointly owned by South African AngloGold and Canada’s IamGold, and at Syama acquired in 1996 by RandGold, after BHP-Utah pulled out. SEMOS, whose activities are the subject of the research carried out by TWN-Africa and GUAMINA, holds the mining permit for the Sadiola Gold Mine in western Mali. AngloGold Ltd owns 38% of SEMOS, the Republic of Mali holds 18% and the remaining 6% is held by International Finance Corporation, an affiliate of the World Bank.
As a result of increased mining activities and companies, total gold production as well as government revenue also increased. For example, government revenue from mining permits increased from 5.5 billion CFA in 1995 to 18 billion CFA in 1998. Total tax contribution from mining to government in 2002 was 15.7 billion CFA.
The economic implications of mining in Mali in terms of tax returns and dividends paid out on the surface look impressive, as the figures above show an increase in returns. However, policy-makers did not take into consideration the immediate economic impact on community livelihood and the implications – both long and short term – on the environment.
With the opening of the Sadiola mines there was massive destruction of the environment and the livelihood sources of the community by transnational mining corporations. Many families lost access to farmlands. Women who were originally economically active in farming, gold washing, market gardening etc became jobless because of loss of their lands to the mining company. Skilled labour migrated to work in the mines, which in turn led to a sharp rise in population, resulting in an overburdening of the already-limited social facilities.
Given the rise in population, the schools infrastructure and staff became unable to meet the demand for education. This led to school dropouts by pupils whose parents relocated but could not find schools for them to attend. Young women dropped out to serve as house help for the expatriate mining community.
The Sadiola health district was originally built to cater for about 450 people. With increased population and spread of diseases, mainly respiratory due to the high level of dust circulation caused by mining activities, the health facilities also became incapable to cater for the needs of the total population.
The communities have also expressed dissatisfaction over compensation packages of the government and mining companies. The Chief of Farabacouta noted that the rice fields in Sadiola have been partly destroyed by roads and mining activities, hence rendering the activity unprofitable, but this was not taken into consideration during payment of compensation.
In Tabacota a conflict between the community and the mining company arose when 14 cows died as a result of eating cyanide-contaminated food. The company refused to compensate for the loss of the cattle, the reason being that the pipe burst leading to the cyanide spill occurred long before the cattle were allegedly poisoned. The administrative authorities were unable to compel the mining company to compensate the community for the cattle loss.
There has been no effective framework or institution for dispute resolution. The communities have lost confidence in local authorities that have been mandated to settle disputes. Very little thought was given by decision-makers in Mali to address the conflicts that are inevitable with the introduction of any new project or scheme. Tension between the people and the community and the presence of immigrants from other neighbouring West African countries has made life difficult for the indigenous population. This has created deep mistrust between the community, the administration and the mining companies.
Mining is a unique activity which involves the depletion of non-replaceable resources. Like other extractive industry activities, mining, if not managed adequately, will result in wide differences in standards of living. The liberalisation of mining in the early 1990s in Mali has led to a weak state regulatory body, with implications of mining companies being left to their own benevolence to limit the hazardous effects of mining on the environment and the community.
The study carried out by TWN-Africa and GUAMINA in Sadiola shows a lack of goodwill on the part of SEMOS to limit the negative effects of its mineral exploration. Such a company should not be allowed to become essentially self-regulatory. Mali has to reclaim its policy and regulatory processes to equitably meet the needs of its citizens, especially those of the communities around the mine sites, to fully maximise the exploration of the minerals.
The above article originally appeared in African Agenda (Vol. 8 No. 2, 2005) and was then reproduced with permission by the Third World Network
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