While ongoing declines in Ethiopia’s formal mining sector are no surprise, the flow of mineral resources to contraband parties in the African republic is still disappointing. In the year to July 31, 2019, mineral exports were down to less than US$50 million or just 20% of the projected US$450 million earnings sum for the year.
Earlier this year I flagged last year’s disappointing drop-off in mining export earnings in Ethiopia by US$470 million, or 78%, to $130 million.
The result saw the northeast African country’s mining investment attractiveness decline to a notably-poor 77th out of 83 countries worldwide in ranked in the annual Fraser Institute Annual Survey of Mining Companies survey.
Ethiopia had become the continent’s least attractive African jurisdiction in the survey, according to the institute, and I expressed my hope in May incentives for explorers and developers could be a potential game-changer in the jurisdiction.
But the strength of the contraband or informal or illegal mining sector has continued to grow this year.
Ministry of Mines and Petroleum public relations director Michael Mengesha acknowledged the disappointing result just a few months ago, highlighting “The foreign currency earnings from the mining sector has declined over time.”
In better days back in 2010, the formal mining sector had put US$650 million in government coffers from export earnings.
The results this year and last are so disappointing, not only for the government and its efforts to back the industry with better minerals policy but for the 160 or so mining companies trying to get efforts off the ground.
Mengesha says “the decrease in revenue is due to contraband trade and illegal trade” and not reduced produced production. Such a disappointment.
When will the redirection of mineral resources to illegal sources decline? When will mineral export earnings — a measure of legitimate mining sector income gains — increase in the country?
This year the Ethiopian government identified incentives for explorers and developers could be a chance to moving things forward. Four years ago the government decided the mining sector should contribute to the country’s transformation from an agriculture-led economy to an industrial economy. When will the fruits of these efforts show in official figures? When will mining policy reforms lead to real reform?
While a prime ministerial task force charged with turning around the tide of resources to illegal sources is encouraging, we need a culture change here. All parties — legitimate parties and their proponents — should try and work towards change in the country too.
An integrated market might be one way to ensure that as more people are employed in the mining industry income is shared outside the contraband economy. The fruits of an increasingly-large workforce can then be circulated in the wider community and add to government revenue and company earnings.
Peace and security should be valued in Ethiopia, corruption frowned upon and rent-seeking abolished to make real progress. Let’s hope for some real change in the second half of this year ahead of next year’s Fraser survey release in February.
As I said mid-year, a sector that has the chance to explore and build new projects is one that has a chance to flourish. Ethiopia could really benefit if legitimate efforts get off the ground. Let’s hope for some progress in Ethiopia on the contraband front this year. After all, even a little progress has the chance to benefit many with a fairer distribution of resources.
On a positive note for Ethiopia, the country’s Prime Minister Abiy Ahmed received this year’s Nobel Peace Prize which recognises advancements made by the country in relations with its neighbours, and in particular Eritrea.
Ahmed’s recognition is for his pursuit of democratic reforms and regional peacemaking efforts and “in particular, for his decisive initiative to resolve the border conflict with neighbouring Eritrea,” said the chair of the Nobel Committee.
While the award is meritorious and well deserved, let’s hope it acts as an example of what can be achieved by the nation in further developing its economy, supported by mining.
In a statement, Ahmed’s office said: “This victory and recognition is a collective win for Ethiopians, and a call to strengthen our resolve in making Ethiopia - the New Horizon of Hope - a prosperous nation for all.”
Among the progress made in advancing Ethiopia-Eritrea relations include a peace accord between Ahmed and his Eritrean counterpart, Isaias Afwerki, which formally ended a 20-year military standoff that followed Eritrea’s secession from Ethiopia in 1993 and a border war in 1998-2000.
The two leaders have vowed to improve political, economic and diplomatic ties, and re-open the border. After signing an agreement to restore ties, the countries have reopened embassies and resumed flights between the nations while Eritrea has agreed to open its port to landlocked Ethiopia.
This is a positive step forward for Ethiopia and has potential to open up mining opportunities.
- Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact: email@example.com