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High gold prices are boosting Ethiopia’s mining revenue and attracting more investor interest in a sector that is largely dominated by artisanal and smaller players. Border closures linked to the coronavirus have pushed miners back into the arms of the formal sector; a positive boost for Ethiopia’s central bank, which has been in search of hard currencies.
Ethiopia generated mining revenue of $ 303 million in the last five months, according to the Ministry of Mines.
- That total is more than six times the amount recorded – $ 49 million – in fiscal year 2018/2019.
- That’s more than what was earned last fiscal year, which was $ 207 million.
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While gold accounts for more than 90% of Ethiopia’s mining exports, the increase was supported by government reforms and border closures due to Covid-19, the ministry says. The reforms include:
- address supply gaps faced by mining plants;
- development of key infrastructure;
- and curb commercial smuggling activities.
Official mining exports have been declining for the past eight years following the expansion of illegal trade and the closure of large plants.
Small-scale operations and smuggling
“Ethiopia’s mineral exports depend on the small, traditional gold trade. To begin with, the nation does not have a large production, with the exception of MIDROC Gold at the Oromia and Ezana Gold mines in Tigray, ”says Kaleyesus Bekele, a mining expert. The Africa Report.
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“Most are small-scale and are activities that are linked to artisanal minerals. And in general trade, a substantial amount is linked to illegal trade pushed across various borders that brings them illegal currency, while the National Bank of Ethiopia can only pay them in local currency at an official exchange rate, ”says Bekele. “Covid had closed all the borders pushing all the actors to negotiate with the National Bank, giving the government agency a dominant role and unexpected income.”
Boom time
Two years ago, Ethiopia’s gold export earnings were just $ 27 million, down from its historical high of $ 602 million, recorded in 2012.
Although the coronavirus affected the mining sector of the East African country, the government increased the price it pays to artisanal miners, who account for more than half of gold production.
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“Mineral export earnings are showing a tremendous increase lately, thanks to the emphasis placed on avoiding bottlenecks at mining plants,” said Minister of Mines Takele Umma.
Earlier this month, the country’s council of ministers approved a 10-year economic plan, which aims to increase the amount of foreign exchange earned through the export and import substitution of minerals from $ 265 million today. to $ 17 billion by 2030.
Attracting investments
The government also offers various incentives to investors involved in the mining sector.
This includes a 25% corporate tax rate and allows for a 10-year loss carryforward, with royalties of 4% for industrial minerals, 5% for metallic minerals and 7% for gold, in addition to being exempt from duties and taxes on equipment. Crucial machinery and vehicles for mining operations.
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Investors also receive a guarantee of the licensee’s right to sell minerals and petroleum products at home or abroad. So far, international mining companies, including Kefi Minerals, Sun Pick Ethiopia and Africa Mining, among others.
Ethiopia’s mining potential
Ethiopia’s mining sector specializes in gold, which accounts for more than 83% of production. It also produces sapphire, limestone, salt, pumice, and tantalum.
However, most of the production comes from the informal sector, largely by 350,000 artisanal gold miners, according to the Ethiopia International Transparency Initiative Report of 2017.
Ongoing exploration for gold is underway, and commercially viable discoveries are being found.
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Umma recently asked investors to partner with the government to invest in the mining sector with a special emphasis on gemstones.
“We have begun targeted investment opportunities for those looking to expand their gemstone mining operations with a focus on emeralds, sapphires and opals,” said Takele, announcing his country’s willingness to welcome those with capital to create partnerships.
Bekele insists that Ethiopia still has “untapped potential in potash and tantalum, and massive gold deposits in several of its regions,” he said.
