Gold mining operations recently restarted at the Loulo-Gounkoto complex in western Mali after being shut down for several months. In January, the Malian government started blocking exports from the mine owned by Canada-based Barrick Mining (formerly called Barrick Gold).
Authors
- Bonnie Campbell
Professeure émérite en économie politique. Département de science politique de l'Université du Québec à Montréal., Université du Québec à Montréal (UQAM)
- Moussa Doumbo
Enseignant-Chercheur, Faculté des Sciences Économiques et de Gestion, Université des Sciences sociales et de Gestion de Bamako
The government blocked exports and took control of three tonnes of bullion following a dispute with Barrick Mining over alleged unpaid taxes.
This particular case is too complex to be discussed here. But disputes over revenue distribution raise important questions about how mineral-rich countries can benefit from their natural resources.
According to the International Monetary Fund, tax avoidance by multinational mining companies costs African countries between US$470 million and US$730 million per year in tax income .
Generating government revenue through natural resource taxation is critically important for sub-Saharan African countries seeking to improve infrastructure, health services and meet social development goals .
A variety of reasons explain why mineral-rich countries in sub-Saharan Africa are not profiting appropriately from their mineral wealth.
Power imbalances, unfavourable revenues
The Intergovernmental Forum on Mining and the Organisation for Economic Co-operation and Development have identified different obstacles to mining revenue collection including faulty legislation, abusive transfer pricing and other artificial profit-shifting.
In addition, fiscal incentives commonly provided to attract mining investment, such as significantly lowering tax and royalty rates, rarely prove to be worth the loss in government revenue.
These excessive concessions to foreign mining companies have led to widespread discontent, poverty and underdevelopment in Africa, despite abundant mineral wealth. This situation has been condemned by leaders across the continent .
In response, the African Union's African Mining Vision and the policies it has inspired, notably the reform of mining codes, are attempts to ensure a more lasting contribution of the continent's mineral resources.
Yet the power imbalances between foreign companies and African governments remain very much in place and shape negotiations around mining codes, contracts and practices.
While situations vary from country to country, sector to sector and site to site, research has sought to identify key obstacles to increased State mining revenue.
The unequal influence in negotiations that favours mining companies leads to numerous irregularities. Examples include prolonging stability clauses despite regulatory reforms and prioritizing mining contracts over broader national regulatory frameworks.
At the international level, African states are hindered from implementing policies that benefit local communities due to international trade regime practices, tariff import privileges and bilateral conventions that act as powerful deterrents.
Mali's mining code
In Mali, the mining sector is a key part of the economy . In 2022, the sector contributed 9.2 per cent of GDP, 76.5 per cent of export revenue and 34.8 per cent of state revenue.
As is the case elsewhere on the continent, new Malian mining legislation aims to help rectify the legacy of environmental damage and disappointing mining revenue. Mali's 2023 mining code reflects reforms to improve national benefits from the sector similar to measures in Tanzania, Zambia and the Democratic Republic of Congo.
Such reforms included increased state ownership requirements (typically 10-30 per cent), higher royalty and tax rates, local content and employment requirements, greater environmental and social responsibility provisions and enhanced community development obligations.
The 2023 code aims to strengthen Mali's sovereignty over its resources and bring about a more equitable distribution of the benefits.
The fiscal regime has been reformed so that, among other measures, certain tax exemptions that mining companies received were abolished. Similarly, the new code puts an end to the fiscal concession of 25 per cent for a period of 15 years permitted by former codes. The new code introduces a royalty on production of 10 per cent for that exceeding the quantity projected.
In addition, several funds were created to respond to the needs of the sector and favour social inclusion.
Another important innovation is the law concerning local content in the mining sector . This law aims to encourage the participation of national enterprises and workers in the mining sector.
As occurs in other mineral-rich countries, Mali has faced strong pushback, particularly from the largest and most powerful companies. This has led to an escalation of conflict rather than negotiated solutions.
Significantly, several companies have reached agreements with the Malian government, such as Robex Resources . The U.K.-based Endeavour Mining has negotiated terms with the government to operate under the new mining code.
Two additional gold producers have also signed agreements to operate under the new mining code: Faboula Gold and Bagama Mining .
These projects, while less capital-intensive than others, illustrate the possibility of successful initiatives under the new code. They also provide important employment opportunities in rural areas.
Greater resource sovereignty
Some industry analysts have criticized mineral-rich countries for adopting a " resource nationalism " approach. However, research shows that well-managed, transparent and stable mining revenue in Mali and Senegal could help improve access to health care and social services.
Exercising greater sovereignty over natural resources to ensure the well-being of a country's population might better be commended as responsible resource nationalism.
There are serious military and security threats facing Mali and its neighbours. By providing revenue and employment, the mining industry can play a key role in addressing these insecurities.
This role involves respecting national regulations and paying a fair share of tax revenue. Ultimately, the industry's profitability is very much tied to the social stability of the country and the health, social and economic welfare of its people.
Bonnie Campbell has received funding from the Social Sciences and Humanities Research Council of Canada and the International Development Research Centre of Canada.
Moussa Doumbo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
