The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Golden opportunities, complex risks

By Henry Hall, Critical Resource associate

A fast changing socio-political environment presents challenges for gold miners in West Africa

Raising the bar for West African gold mining

West Africa has had a long and complex relationship with gold, an important export for over 2000 years. Across the region runs the Birimian greenstone belt, a formation rich in the yellow metal, with high gold prices recently intensifying the search for new reserves. Yet countries in the region suffer variously from unpredictable politics, sporadic conflict and widespread poverty, making it difficult for mining companies to establish a ‘license to operate’.

Several countries in the region are also contemplating the simultaneous possibility of an oil-fuelled boom which, if realised, may cast gold revenues in to the shade. This article provides a snapshot of the various socio-political challenges to gold mining in the region, as well as of some of the solutions that gold miners might consider to combat them.

Starting with conflict, while parts of West Africa have recently become more stable, others have suffered significant turbulence, testing the confidence of companies and investors. In Cote D’Ivoire, for example, the contested outcome of the 2011 presidential elections caused Cluff Gold’s Angovia mine to temporarily close.

Fluid borders mean that conflict can spread fast. Instability quickly spread from Cote D’Ivoire into northern Liberia and southern Guinea as refugees and fighters fled. In a similar vein the recent coup in Mali, Africa’s third biggest producer, was indirectly triggered by the return of well-armed mercenary fighters from Libya. Randgold Resources, which has a number of gold mines in the country, suffered a share price drop of 13% the morning after the coup, highlighting the fragility of shareholder confidence. However the quick and decisive action of ECOWAS, the West African regional body, to condemn, sanction and pressure coup leaders is a source of optimism.

Gold mining has also driven social change in previously peripheral areas. In Senegal, bars and brothels have appeared to service the growing gold industry in certain areas, angering some local communities. Islamist groups like Al Qaeda in the Islamic Maghreb and Boko Haram are a growing concern in the wider region and could even find support from local communities concerned about such new influences. The rising threat of Al Qaeda has been recognised by the Heidelberg Conflict Barometer which reports heightened conflict risk in Mauritania (an issue that is no doubt being carefully monitored by Kinross which operates the Tasiast mine in the country). In general, security provision for projects in West Africa can be complicated by a history of human rights abuses and the presence of latent and active armed militias.

One well-known global initiative that mining firms can use to reduce such risks is the Voluntary Principles on Security and Human Rights. It is notable also that the World Gold Council has recently been developing a ‘Conflict-Free Gold Standard’. This is designed to help miners operating in conflict-risk regions to be sure that they are not fuelling conflict, funding armed groups or causing human rights abuses; and to identify gold produced within its framework as ‘conflict-free’. This should allow West African gold miners to offer assurance to downstream players and refiners and ensure that their product remains saleable.

Whose mine is it anyway?

Ramping-up production

Employment and artisanal and small-scale mining (ASM) issues present another key challenge. ASM employs many in West Africa, and government attempts to clean up and consolidate traditional mining areas have often met with local opposition. High community expectations for employment and benefits are counterbalanced by pre-existing artisanal mining groups, hostile towards large companies moving in on their sites. AngloGold Ashanti’s long-standing Obuasi mine in Ghana faced a related issue reported in 2008 when thousands of small scale miners in the area proved impossible for security to control.

West Africa’s mining boom is not limited to gold, with significant growth in investment in mining for other metals as well as extracting oil and gas. Competition for the small skilled and semi-skilled local labour pool will likely become more intense. Meanwhile traditional mining communities which have in cases worked mining areas for centuries often lack necessary literacy and mechanical skills to work in modern mines, which employ far fewer people than labour intensive artisanal practices.

Chris Anderson, former Executive Director Corporate Affairs Africa for Newmont, cites the linkages program with the International Finance Corporation at the company’s Ahafo project as a useful tool in this regard: “The Linkages program proved very successful in creating local jobs around the Ahafo project area, ensuring local communities benefitted from the project despite little direct employment.”

The problem of free-riders in this area – that is, companies who fail to invest in training yet poach staff from those that do – requires an industry level solution. Collaboration between oil companies in West Africa on environmental capacity, another industry-wide issue, may provide a model here: GIWACAF, a partnership between the International Maritime Organisation and IPIECA in West and Central Africa, collects contributions from oil and gas explorers to fund spill clean-up facilities. In terms of mining skills, the Nelson Mandela Foundation is currently establishing a mining school in Mali, while the African Union (AU) and AusAid, the Australian state aid agency, are both investing in mining training. Industry collaboration with one or more of these organisations could help combat the free-rider issue and alleviate the long term skill shortage.

Turning finally to pressures from governments, high gold prices have inevitably increased state demands on the industry in West Africa, with calls for higher taxes, royalties and equity stakes. Government attempts to maximise resource revenues over the long run may be perfectly reasonable, but  populist pressures and a lack of ministerial and bureaucratic expertise can lead to arbitrary and punitive policy which is not conducive to long-term growth. In Guinea, for example, some miners have complained that the country’s new mining code provides the government with a right to too significant a stake in mining projects (up to 35%).

Equally, however, the government’s stronger emphasis on partnerships with mining companies and on transparency has very positive aspects. AngloGold Ashanti’s Senior Vice President Sustainability, Continental Africa, Laurent Coche says, “It is encouraging that the government has begun addressing these issues. The industry also has an important role to play in improving trust, not just by building the internal capacity and systems required to be fully transparent, but also by supporting capacity building with local institutions in partnership with international leaders in the field such as Revenue Watch Institute”.

Viewed as a whole, the socio-political climate for gold mining in West Africa may present as many opportunities as challenges. Conflict remains a concern, but a growing middle class and improving democracies should play a role in reducing this risk. Ghana’s implementation of EITI, and improved government capacity and labour pool provide a benchmark for neighbouring countries. With proactive, cooperative approaches by companies and governments, gold mining may help countries on the transition toward middle-income status (even if this currently seems far off) and provide important support for strengthening state capacity on the way.

Equally, however, the social changes unleashed by major gold mines, if inadequately managed, could interact negatively with underlying risks, adding to the volatility of the region. Gold mining firms – like other extractive companies – need to be intensely aware of the social and economic context of their operations, and seek collaboration to help solve the complex issues raised.

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Photos: (c) iStock/Stack of gold bars; (c) iStock/miners