The Ministry of Mines drafts a bill to prohibit regional governments from giving small scale mining licenses at a regional level. If ratified, regional governments will not be able to issue artisanal and small scale mining licenses.
According to Takele Uma (Eng.), the mandate granted to regional states by the current mining operation proclamation, amended in 2020, left loopholes for contraband, especially gold. This week, the minister announced the cancellation of 850 mining export companies’ licenses that are found engaging in illegal mining export.
A further 122 licenses were also canceled, for sitting idle for three to ten years after taking the license.
“Most of the companies whose licenses were revoked are thieves, contrabandists, brokers, and even spies,” said Takele.
The mass revocation came after a six-month study on illegal mining trade was conducted by the ministry, the Addis Ababa University’s school of Economics, and the National Bank of Ethiopia. The study, conducted on six gold mining woredas, discovered that only half of the gold mined is being supplied to the NBE.
The existing proclamation also allowed regional states to issue licenses for small scale mining licenses of industrial minerals and small and large mining licenses for construction minerals for domestic investors. Coal, marble, granite, limestone, and other mines are among the construction and industry input mining licenses.
Artisanal mining, including gold, is a manual mining operation carried out by individuals or small-scale and micro-enterprises. Approving largescale mining licenses is solely the power of the ministry.
During a press briefing held on June 23, 2022, Takele criticized regional states for going beyond their mandate and licensing large mining projects like coal.
“We have only one country. In order to grow, it must have its own set of rules. We can’t do it in bits and pieces,” he said, criticizing regional states.
Though the regional states are authorized only to issue licenses for domestic investors, foreigners are taking advantage of it by making local youths receive the licenses but take up to 70 percent of the output.
“Then the foreigners smuggle out the minerals. This is one of the corrections we have made in the amended bill,” said Takele, suggesting that the mandate of regional states will be removed from the proclamation.
Nasir Mohammed, director of Mine Resource Development Agency at Benishangul regional state, agrees there are legal irregularities in the existing mining law.
“After obtaining the license, the small-scale miners began negotiating with foreigners and smuggling gold. This is the primary activity causing concern in the gold market,” said Nasir.
Benishangul, located in a major gold belt in the Horn of Africa, supplied 2,200 kilogram to the NBE in the past eleven months. Ethiopia exported USD 513.9 million worth of gold over the last 11 months.
Besides revoking licenses, the government has taken measures to stop gold smuggling which mainly happens due to the premium offers found in the parallel market. The NBE increased its premium rate from 29 percent to 35 percent.
The revision intended to increase gold supply, and benefit all those who supply gold to the National Bank, beginning with 50 grams. Previously, only those who offered more than five kilos of gold were eligible for the premium.
In a bid to tighten mining license issuance process, the ministry is also conducting its due diligence through embassies and diplomatic missions abroad.
“Given the foreign currency shortage Ethiopia is currently facing, we cannot afford sit back and watch the country’s resources misused,” Takele underscored.
