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Cover pictures courtesy of: Allana Potash Afar Plc., PACT Ethiopia, The Swedish Geological AB and Yara Dallol BV.
STRATEGIC ASSESSMENT OF THE
ETHIOPIAN MINERAL SECTOR
FINAL REPORT
ÕpÛĜØΎÕÃáΎÅ0ij
Hß¹Ύß36
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4HE7ORLD"ANKTEAMINCLUDED+IRSTEN(UND44, AND!NTIA0ORTILLO'ARCIA!GROUPOFEXPERTSFROMTHE7ORLD
"ANK'ROUPINCLUDING"RYAN,AND2EMI0ELON!DRIANA%FTIMIE!SFERACHEW!BATE!BEBEAND-ESlN'IRMA
"EZAWAGAWPEERREVIEWEDMAJOROUTPUTSOFTHESTUDY/THERPROJECTDONORSREPRESENTATIVESINCLUDING3UE
-OORE!USTRALIA %LISE.ALBANDIAN!USTRALIA #ORRY6AN'AAL#ANADA AND3HEWIT%MMANUEL$&I$ PROVIDED
INSIGHTFULCOMMENTSANDGUIDANCEINlNALIZINGTHISREPORT
4HE7ORLD"ANK'ROUPISGRATEFULTOTHE%THIOPIA-INISTRYOF-INES-O- UNDERTHESTEWARDSHIPOFTHE-INISTER
(%!TO4OLESA3HAGIFORHISLEADERSHIPANDCOMMITMENT4HETEAMISALSOGRATEFULTO-O-AND2EGIONAL-INING
"UREAUSSTAFFASWELLASMININGCOMPANIESCOMMUNITIESANDARTISANALMINERSFORTHEIRINPUTSANDSUPPORTIN
GATHERINGINFORMATION3PECIALTHANKSGOTO-O-SSTAFF!LMAZ"ELAYNEH(UNDIE-ELKAAND!BAYNEH4ILAHUN
/THER7ORLD"ANK'ROUPPUBLICATIONSANDRESEARCHONEXTRACTIVEINDUSTRIESAREAVAILABLEFORDOWNLOADFROMHTTP
WWWWORLDBANKORGENTOPICEXTRACTIVEINDUSTRIES
FOREWORD
Ethiopia Mineral Sector Assessment | July 2014
#AN%THIOPIASMINERALRESOURCESBEUSEDFORGROWTHANDTRANSFORMATION
%THIOPIASMININGSECTORSHOWSSTRONGPOTENTIALFORLONGTERMDEVELOPMENT!LTHOUGHLARGESCALEMININGHASUP
TONOWBEENMINIMALSEVERALLARGEPROJECTSAREINDEVELOPMENT)NADDITIONTHECOUNTRYHASGEOLOGICALPOTENTIAL
FORTHEDISCOVERYOFNEWSIZEABLEMINERALDEPOSITS%THIOPIAALSOHASANEXTENSIVEANDUNIQUEARTISANALMINING
SECTORWHICHMAKESITANIMPORTANTSOURCEOFJOBCREATIONINADDITIONTOITSPOTENTIALASANIMPORTANTSOURCEOF
FOREIGNCURRENCYANDGOVERNMENTREVENUE)FEFFECTIVELYMANAGEDTHEMININGSECTORCANPLAYATRANSFORMATIVE
ROLEFORSOCIALANDECONOMICDEVELOPMENTOF%THIOPIA-ININGISANEXPORT
ORIENTEDSECTORTHATSATISlESINCREASING
DEMANDFROMINDUSTRIALPRODUCTIONAGRICULTUREANDHIGH
TECHSECTORSANDHAVETHEPOTENTIALTOCREATELOCAL
LINKAGESFORSOCIALANDECONOMICDEVELOPMENT
4HISREPORTISTHElRSTCOMPREHENSIVEASSESSMENTOFTHE%THIOPIAN-INING3ECTOR)TEXAMINESTHESECTORSPRIMARY
OPPORTUNITIESANDCHALLENGESFORGROWTHANDTRANSFORMATIONWHILEALSOPROVIDINGANINITIALANALYSISOFPOLICYOPTIONS
FOR%THIOPIANDECISIONMAKERS"UILDINGONTHEIRPOLITICALCOMMITMENTTOTHISSECTORTHE'OVERNMENTOF%THIOPIA
'O% NEEDSTODEVELOPABROADVISIONFORREALIZINGITSPOTENTIALINCLUDINGSOCIO
ECONOMICBENElTS4HEINTERESTS
OFANARRAYOFSTAKEHOLDERSNEEDTOBEBALANCEDANDSOCIALENVIRONMENTALANDECONOMICIMPACTSHAVETOBE
MANAGED)NADDITIONTO'O%SFACILITATINGANDLEADINGROLETHEREPORTHIGHLIGHTSTHENEEDFORTWOIMPORTANTSTEPS
TOBETAKEN
THECOLLECTIONANDMARKETINGOFHIGH
QUALITYGEOLOGICALGEOPHYSICALDATATOCLEARLYIDENTIFY%THIOPIAS
MININGPOTENTIALAND
THEESTABLISHMENTOFANEFFECTIVEMINERALMANAGEMENTSYSTEMANDINSTITUTIONSTOENSURETHEDEVELOPMENT
OFARESPONSIBLEMININGSECTOR
4HISREPORTISONLYAlRSTSTEPINANEXPANDINGPROCESSOFDIALOGUEANDCOLLABORATION7ELOOKFORWARDTOENGAGING
WITHPUBLICANDPRIVATESECTORPARTNERSTOADVANCETHEDISCUSSIONANDACCELERATEACTIONTOREALIZETHEBENElTSOF
THEEXTRACTIVEINDUSTRIESFORALL%THIOPIANS
IV FINAL REPORT
3TAKEHOLDEROVERVIEW
3TAKEHOLDERSANDKEYSECTORINVOLVEMENT
2ECOMMENDATIONS
-INERALPOLICYANDLEGISLATION
)NTRODUCTION
%THIOPIANMINERALPOLICY
-INERALLEGISLATIONANDMODELMININGAGREEMENT
2ECOMMENDATIONS
)NSTITUTIONALFRAMEWORK
-INISTRYOF-INES
'EOLOGICAL3URVEYOF%THIOPIA
/THERINSTITUTIONS
2ECOMMENDATIONS
&ISCALREGIME
&ISCALREGULATIONS
2EVENUECOLLECTION
4RANSPARENCYINITIATIVESINTHEEXTRACTIVESECTOR
2ECOMMENDATIONS
-INERALLICENSINGMANAGEMENT
"ACKGROUND
!DMINISTRATIVEPROCEDURES
2ECOMMENDATIONS
!RTISANALMININGMANAGEMENT
'OVERNANCEOF!3-
+EYlNDINGS
2ECOMMENDATIONS
%NVIRONMENTALANDSOCIOECONOMICMANAGEMENT
,EGISLATIONANDREGULATION
%NVIRONMENTALANDSOCIALBASELINE
0OTENTIALIMPACTSFROMMINING
2ECOMMENDATIONS
)NFRASTRUCTUREANDDEVELOPMENTPLANS
)NFRASTRUCTUREDEVELOPMENT
2ECOMMENDATIONS
2ECOMMENDATIONS
2EFERENCES
)NDEX
VI FINAL REPORT
© Allana Potash Afar Plc.
EXECUTIVE SUMMARY
Introduction
4HISREPORTPROVIDESAREVIEWOFTHE%THIOPIANMININGSECTORANDASSESSESITSPOTENTIALTOCONTRIBUTETO
SUSTAINABLEECONOMICGROWTHANDDEVELOPMENT)TFURTHERPROVIDESRECOMMENDATIONSFORTHEINITIATIVESAND
ACTIONSTHATWILLBEREQUIREDFORSUCHDEVELOPMENTTOTAKEPLACEANDIDENTIlESTHERISKANDOPPORTUNITIES
THATTHISENTAILS4HENEEDFORTHISTYPEOFSTRATEGICANALYSISFOLLOWSFROMTHE'OVERNMENTOF%THIOPIAS'O%
AMBITIONTOASPARTOFTHE'ROWTHAND4RANSFORMATION0LAN'40 DEVELOPTHEMININGSECTORTOBECOMEA
MAINPILLAROFTHEECONOMY
4HEREPORTWASPRODUCEDINTHEPERIOD-AYTO-ARCH)TWASCOMMISSIONEDBYTHE7ORLD"ANK
ANDITSPARTNERS)&#$&!4$THE!USTRALIAN'OVERNMENTAND$F)$ WITHTHEAIMTOASSISTTHE'O%INITS
EFFORTSTODEVELOPTHEMININGSECTOR4HUSTHEREPORTHASBEENPRODUCEDINCLOSECOOPERATIONWITHSTAFFATTHE
%THIOPIAN-INISTRYOF-INES-O- )TSlNDINGSAREMOSTLYBASEDONDESKTOPREVIEWSOFEXISTINGDOCUMENTS
ONALARGENUMBEROFMEETINGSANDINTERVIEWSWITHAFFECTEDANDINTERESTEDSTAKEHOLDERSANDALSOONSOME
lELDWORKPERFORMEDINTHESOUTHERNANDWESTERNPARTSOFTHECOUNTRY2EGULAROVERSIGHTANDFEEDBACKHAS
BEENPROVIDEDBYREPRESENTATIVESFROMTHE7ORLD"ANKANDITSPARTNERS
Ethiopia is also endowed with a range of industrial minerals deposits.#EMENTRAWMATERIALSANDDIMENSION
STONEAREMINEDATASMALLINDUSTRIALSCALEWHILEOTHERINDUSTRIALMINERALSAREORHAVEBEENMINEDATA
SMALLEROFTENARTISANALSCALE-OSTENCOURAGINGLYFORSECTORDEVELOPMENTTHEREISALARGESCALEPROJECTFOR
POTASH!LLANA0OTASH WHICHHAS)&#INVOLVEMENTANDWHICHISEXPECTEDTOSTARTPRODUCTIONBYMIDTO
LATE4HECURRENTPLANFORTHE!LLANAMINEISTOPRODUCE-TYEARDURINGALIFEOFMINEOFSOME
YEARSANDTOEMPLOYSOMEPEOPLE
Figure i. Geological map showing Proterozoic terrains, the oldest rocks in Ethiopia, in dark green, black and grey. These areas
are prospective for a variety of metallic minerals.
Based on an assessment of Ethiopia’s geological endowment, the current status of the exploration industry,
and general success rates in exploration globally, this report presents three scenarios for future development
OFTHESECTORGRAPHBELOW 'IVENTHElFTEENTOTWENTYYEARSTHATWILLBENEEDEDFORTHEMINERALSECTORIN
%THIOPIATOGENERATECRITICALMASSTHEECONOMICPOTENTIALFROMTHESECTORISCLEARLYDIFlCULTTOPREDICT
(OWEVERTHREESCENARIOSCONSERVATIVEPOSSIBLEANDPROBABLEAREGENERATEDANDTHESEARECONCERNED
WITHGOLDPOTASHTANTALUMANDCOPPERTHESEBEINGTHECOMMODITIESPRIMARILYEXPLOREDNOW
2 FINAL REPORT
)NTOTALSALESFROMTHEMININGSECTORIN!FRICAWHEREVALUEDAT53$BILLIONTHISDOESNOTINCLUDE
MININGFORINDUSTRIALMINERALS REPRESENTINGNEARLYOFTHECONTINENTS'ROSS0RODUCT)N!FRICAMETAL
MININGANDCOALMININGAREABOUTTHESAMEMAGNITUDEINTERMSOFVALUE!MONGTHEMETALSGOLDCOPPERAND
IRONOREMAKEUPMORETHANHALFOFTHEVALUE)FONEASSUMESTHATTHEGEOLOGYOF%THIOPIAISASPROSPECTIVE
ASTHE!FRICANhAVERAGEvTHENTHESENUMBERSWOULDIMPLYTHATTHEPRESENTDAYECONOMICPOTENTIALFORTHE
DEVELOPMENTOFTHE%THIOPIANMININGSECTORWOULDBETOACHIEVEANANNUALTURNOVEROFNEARLY53$BILLION
WITH%THIOPIACOVERINGKMÜOF!FRICASSURFACE
3000
2500
2000
USD Millions
1500
1000
500
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Conservative Probable Possible
#ONSERVATIVE$UETOTHEMANYPOSSIBLERISKSFACINGMINERALSECTORINVESTMENTEXPLORATIONIN%THIOPIAISNOTINTENSIlED
0ROBABLE/NLYSMALLINCREASEINMININGPRIMARILYDUETOTHECURRENTLYLOWNUMBEROFADVANCEDPROJECTSANDRATHERLOW
INTENSITYOFEXPLORATION
0OSSIBLE7ILLREQUIRESTRONGINTENSIlCATIONOFEXPLORATIONACTIVITIES
Figure ii. Estimated total sales revenues based on mining development scenarios for gold, copper, tantalum and potash.
4HROUGHCORPORATEINCOMETAXANDROYALTYPAYMENTSTHESCENARIOSGRAPHABOVE GIVETHATTHE3TATECAN
GAINBETWEEN53$AND53$MILLIONBY&URTHERDIRECTEMPLOYMENTFROMTHEMININGSECTOR
CANRANGEFROMTODEPENDINGONWHICHSCENARIOISFULlLLED
4ABLEI%STIMATIONOFECONOMICIMPACTCORPORATETAXANDROYALTIES ANDEMPLOYMENTBASEDON
development scenarios for gold, copper, tantalum and potash mining.
%CONOMIC)MPACT53$MILLION 2024
#ONSERVATIVE
0ROBABLE
0OSSIBLE
$IRECT%MPLOYMENT0OTENTIAL.UMBER
#ONSERVATIVE
0ROBABLE
0OSSIBLE
The draft Mining Policy, which is currently under review, is comprehensive in its scope and provides a good
basis for the future development of the sector and its contribution to wider sustainable economic development.
4HESCOPEOFTHEPOLICYISBROADREQUIRINGAWIDERANGEOFGOVERNMENTALINSTITUTIONSTOBEINVOLVEDINTHE
FURTHERREVISIONOFTHEPOLICYINTHEFORMULATIONOFMOREDETAILEDPOLICYACTIONSANDINITSIMPLEMENTATION
!POLICYANDLEGALFRAMEWORKWHICHCLEARLYDElNESTHEROLEOFTHESTATE
WHENOTHERTHANREGULATORYnIS
important for the orderly and successful development of any mineral sector.&URTHERMOREITISBENElCIAL
TOBOTHINVESTMENTANDGOVERNANCETHATTHISROLEISCLEARLYCOMMUNICATEDTOSTAKEHOLDERSANDINVESTORS
ANDTHATITISREmECTEDINALLACTIONSTHATRELATETOSTATEINVOLVEMENTINTHESECTOR4HE%THIOPIANPOLICY
ENVIRONMENTEXPLICITLYENVISIONSMINERALSECTORDEVELOPMENTTOBEDRIVENBYPRIVATESECTORINVESTMENTAND
RECENTATTEMPTSTOPRIVATIZESTATE
OWNEDMINESLENDSSUPPORTTOTHISINTENTION!TTHESAMETIMETHEPOLICY
ANDLEGALFRAMEWORKDOESPROVIDEFORSTATEINVOLVEMENTINMINING@BYITSELFORINPARTNERSHIPWITHPRIVATE
INVESTORS4HE%THIOPIANGOVERNMENTCOULDCONSIDERTHELESSONSLEARNEDFROMELSEWHEREANDDEVELOPAND
IMPLEMENTPOLICIESTHATAREINLINEWITHTHEWEALTHOFEXPERIENCESTHANEXISTWITHREGARDSTOSTATEINVOLVEMENT
INMINING4HEREAREEXAMPLESOFPARTLYORFULLYSTATE
OWNEDMININGCOMPANIESSUCCESSFULLYCOEXISTING
WITHTHEPRIVATESECTOR3UCHSUCCESSESAREGENERALLYBASEDONLONGHISTORIESANDSIGNIlCANTCONTRIBUTIONS
FROMTHERESPECTIVECOMPANIESTONATIONALDEVELOPMENTBUTALSOONCLEARPOLICIESANDRULESFORHOWSUCH
COMPANIESSHOULDBEMANAGEDANDRUNASWELLASTHETRANSPARENTIMPLEMENTATIONOFTHESERULES
In a mineral sector driven by the private sector, investments in exploration are mainly made on the basis of
geological prospectivity.)NTHEABSENCEOFRECENThSUCCESSSTORIESvAPARTFROM!LLANA0OTASHINTHECASE
OFTHEINDUSTRIALMINERALSSECTOR ANDWITHLIMITEDGEOLOGICALGEOPHYSICALDATAPERTINENTTOEXPLORATIONTHE
COLLECTIONOFNEWHIGH
QUALITYDATAANDTHESUBSEQUENTMARKETINGOFTHESEDATATHROUGHALONGTERMSTRATEGY
FORINVESTMENTPROMOTIONASSUMEVITALIMPORTANCE4HEFACTTHATINVESTORSAREMAINLYDRAWNBYGEOLOGICAL
PROSPECTIVITYISEXEMPLIlEDBYLARGEINVESTMENTSBEINGMADEINCOUNTRIESWITHWHATISREGARDEDASUNSTABLE
ANDORCOMPARATIVELYLESSATTRACTIVEMININGREGULATORYREGIMES'IVENTHELARGECAPITALTHATISNEEDEDTO
STARTANYSIZEABLEMODERNMINETHEINVESTMENTNEEDEDWILLBYNECESSITYHAVETOCOMEFROMINTERNATIONAL
SOURCESANDCOMPANIES
The existence of a modern and well-functioning Mining Cadastre and Registry System and clear rules for the
award of licenses are key features for the promotion of investments in the mining sector.0OTENTIALINVESTORS
AREMORELIKELYTOINVESTINACOUNTRYWHERETHEMININGCADASTREISOFAHIGHQUALITYANDTRANSPARENTNATURE
.OTONLYISITIMPORTANTTHATTHE-INING,AWITSELFGUARANTEETHISSECURITYOFLICENSESANDTENUREBUTTHE
ADMINISTRATIONOFTHE,AWNEEDSTOBETRANSPARENTDECISIVEANDEFlCIENT!NUMBEROFPROVISIONSINTHE
-INING0ROCLAMATIONHAVERESULTEDINRULESWHICHNEGATETHEPOLICYOBJECTIVEOFALEGALREGIMETHATIS
ATTRACTIVETOINVESTORSANDTHATCANBEPERCEIVEDASCONTRADICTORY4HUSDIFFERENTARTICLESPROVIDEFORI THE
DEALINGWITHEXPLORATIONLICENSEAPPLICATIONSINORDEROFRECEIPTWHICHMAYBEUNDERSTOODTOIMPLYA@lRST
COME
lRST
SERVEDSYSTEM II PRIORITYTOBEDETERMINEDBYTHEAUTHORITIESONTHEBASISOFTHECOMPANIES
TECHNICALANDlNANCIALABILITIESACCORDINGTODElNEDCRITERIA
ADIRECTIVETHATBECAMEEFFECTIVEIN/CTOBER
PROVIDESFORTHECOLLECTIONANDASSESSMENTOFEXPLORATIONLICENSEAPPLICATIONSONAMONTHLYBASISIII
DISREGARDOFAPPLICATIONSALTOGETHERANDTHESUBSEQUENTBIDDINGFORTHEAREAINQUESTION4HEPROCESSAND
CRITERIAINVOLVEDINCOMPETITIVEBIDDINGARENOTYETESTABLISHED4HEREISCURRENTLYACONSIDERABLEBACK
LOGIN
THEASSESSMENTOFEXPLORATIONLICENSEAPPLICATIONSWHILETHEINTENTIONISTOASSESSTHESEONAMONTHLYBASIS
4HISMAYINPARTBEDUETOEFFORTSTODISCOURAGESPECULATIVEAPPLICATIONSANDORCOMPANIESTHATDONOTHAVE
THENECESSARYKNOW
HOWORRESOURCES)TISHOWEVERALSOCLEARTHATTHEREEXISTSOMECRITICALCAPACITYCONSTRAINTS
THATPREVENTTHELICENSINGAUTHORITYTOASSESSAPPLICATIONSONTIME)NADDITIONTOTHEABOVETHEREHAVEBEEN
CASESWHENTHESTATEDOESNOTRELINQUISHGROUNDINCASEOFCOMPANIESNOTCONFORMINGTOLEGALREQUIREMENTSOR
WHENACOMPANYLEAVESANAREAFOROTHERREASONSANDTHEAREATHENBECOMESRESERVESFORPOTENTIALBIDDING
)NALLTHEREMAYEXISTCONSEQUENTLYSCOPEFORBIASEDORCOMPROMISEDHANDLINGOFEXPLORATIONLICENSING
4 FINAL REPORT
!COMPUTERIZEDMININGCADASTRESYSTEMWASCOMMISSIONEDINBUTSINCETHENITHASPARTLYFALLENINTO
DISUSEANDDURINGPARTOFITHASNOTBEENFUNCTIONING4HEREASONSFORTHEPARTIALNON
FUNCTIONINGOFTHE
EXISTINGSYSTEMISPARTLYREPORTEDTOBEDUETOSOFTWAREPROBLEMSANDTHEABSENCEOFABUDGETTOPERFORM
NECESSARYUPDATESANDPERFORMhBUGlXESvANDPARTLYDUETOTHEGOVERNMENTSCHANGEINPOLICIESWITH
REGARDSTOHOWLICENCESFORMININGANDEXPLORATIONSHOULDBEAWARDED
A clear legal framework is important both to attract investors and to facilitate regulation of the industry. The
KEYLEGISLATIONGOVERNINGTHEMINERALSECTORISTHE-INING/PERATIONS0ROCLAMATION.OAND
ARECENT AMENDMENTTOTHEPROCLAMATIONWHILETHEREGULATIONTHATISCURRENTLYINUSEWASDRAFTED
PURSUANTTOTHEOLDMININGPROCLAMATIONFROM4HEREISALSOA-ODEL-INING!GREEMENT--! THAT
WASDRAFTEDPURSUANTTOTHEOLDMININGPROCLAMATION)NPRACTICEEXPLORATIONLICENSEHOLDERSMUSTNEGOTIATE
ANDENTERINTOA-INING!GREEMENTWITHTHE'OVERNMENTTOGETGRANTEDALARGE
SCALEMININGLICENSEAND
THE--!ESTABLISHESTERMSINARATHERGENERALMANNERWITHOUTELABORATINGMUCHONIMPORTANTlNANCIAL
ENVIRONMENTALANDCOMMUNITYASPECTSANDLEAVINGAFEWPROVISIONSOPENFORNEGOTIATION4HUSDRAFTINGOF
NEWREGULATIONSTOPROVIDEFURTHEREFFECTTOTHENEWMININGPROCLAMATIONANDREVISINGTHE--!TOMAKEIT
CONSISTENTWITHTHENEWMININGPROCLAMATIONWILLMAKETHELEGALFRAMEWORKMORECOMPLETE!COMPREHENSIVE
REVISIONOFTHE--!INTHELIGHTOFNEWLAWSANDREGULATIONSINCOMINGTRANSPARENCYREQUIREMENTSAND
SUSTAINABLEDEVELOPMENTCOMMITMENTSWOULDALSOMAKEITAUSEFULTOOLFORCOORDINATINGTHEWORKOFDIFFERENT
REGULATORYAGENCIESWITHAROLEINMINING
'OVERNMENTALINVOLVEMENTTHEMINERALSECTORISCENTREDTO-O-ANDTHE'EOLOGICAL3URVEYOF%THIOPIA'3%
with other institutions having rather weak knowledge about, and little involvement in mineral sector governance
and development.7HILECONSIDERABLECOMPETENCEEXISTSINPARTICULARAMONGMANY-O-AND'3%LONG
TERM
EMPLOYEESTHEOVERALLCAPACITYAT-O-AND'3%FORPROPERPROMOTIONSUPERVISIONANDREGULATIONOFTHE
SECTORISLIMITED4HEMAINREASONSFORTHISINCLUDETHEHISTORICALLYNON
EXISTENTLARGESCALEMININGSECTOR
WHICHHASNOTPROVIDEDTHEOPPORTUNITYFORCONSISTENTCAPACITYDEVELOPMENTTHEHIGHNUMBEROFSTAFFAT-O-
ANDTHE'3%TOTALLYACCORDINGTOTHESTRUCTURALPLANSWITHCURRENTNUMBEROFEMPLOYEESBEINGABOUT
OFWHICHTHEMAJORITYAREWORKINGINADMINISTRATIONORSUPPORTPROCESSESRATHERTHANCOREPROCESS
AHIGHTURNOVEROFSTAFFANDADECREASEINTHENUMBEROFLONG
TERMEXPERIENCEDSTAFFPREVENTSCONSISTENT
CAPACITYBUILDINGANDWHICHISRELATEDTOCIVILSECTORSALARIESBEINGSIGNIlCANTLYLOWERTHANTHOSEOFFEREDBY
THEPRIVATESECTORANDNON
mEXIBLEBUDGETINGANDPROCUREMENTPROCEDURESWHICHINPARTICULARHAMPER
WORKATTHEDRILLINGANDLABORATORYUNITSOFTHE'3%)MPORTANTAREASAFFECTEDINCLUDEMAINLYTHEPROVISION
OFGEOLOGICALINFORMATIONMINERALRIGHTSADMINISTRATIONANDREGULATIONENVIRONMENTALANDSOCIALREGULATION
WHICHWASRECENTLYTRANSFERREDFROMTHE%0!TO-O- ANDMININGCONTRACTNEGOTIATIONS)NSTITUTIONAL
RESTRUCTURINGTOFACILITATEINCREASEDSALARIESANDMOREEFlCIENTPROCESSESANDCAPACITYBUILDINGPLANSCOULD
BECONSIDERED
The regional states, following the general organizational set-up of the Ethiopian state, have a governmental
structure related to mining that parallels the federal level structure. 4HISSTRUCTUREEXTENDSDOWNTOTHEZONE
WOREDAANDKEBELESUB
REGIONALLEVELS3OMETYPESOFMINERALLICENSESANDASSOCIATEDREGULATIONAREUNDER
CONTROLOFTHEREGIONSANDWOREDASARESIGNIlCANTLYINVOLVEDIN!3-MANAGEMENT,ACKOFCAPACITYISALSO
ANISSUEATTHEREGIONALANDSUB
REGIONALLEVELSOFGOVERNANCEANDTHEDEGREEANDSUCCESSOFCOORDINATION
BETWEENFEDERALREGIONALANDSUB
REGIONALLEVELSSEEMTOVARY
The development of local skills is important for job creation as well as to attract investors and it is possible
that the industry may require between a few hundred and possibly up to a couple of thousand skilled staff over
THENEXT
YEARS(UMANRESOURCESWITHSKILLSOFDIRECTRELEVANCETOMINERALSECTORWORKARETOALARGE
DEGREELACKINGIN%THIOPIA&URTHERMORETHEQUALITYOFHIGHEREDUCATIONSPECIALIZEDTOWARDSEXPLORATION
MININGANDMINERALPROCESSINGISLOWASTHEREISASERIOUSLACKOFQUALIlEDTEACHERSANDTECHNICALRESOURCES
ATEDUCATIONALINSTITUTIONS7HILETHEDEVELOPMENTOFMININGRELATEDTRAININGAT46%4INSTITUTIONSISPARTOF
THEGOVERNMENTSSTRATEGYTHEREAREASYETNOCURRICULADEVELOPED!SARESULTMANYEXPLORATIONCOMPANIES
SOURCESKILLEDSTAFFFROMOUTSIDE%THIOPIA%VENTHOUGHMININGISNOTLABOURINTENSIVECOMPAREDTOFOR
EXAMPLETHEMANUFACTURINGINDUSTRYTHEPRESENCEOFALOCALSKILLEDWORKFORCEISIMPORTANTINATTRACTING
INVESTMENTANDTHEPRESENCEOFWELL
TRAINEDNATIONALSWILLENSURETHATTHELARGERSCALEMININGPROJECTSDO
NOTTURNINTOhENCLAVEECONOMIESvWHEREEXPATRIATEWORKERSmYINANDOUTTOCONDUCTTHESPECIALISEDWORK
REQUIRED
Ethiopia has a sizeable ASM sector for gold, although its exact size and characteristics remain poorly
understood. The priority here is therefore to provide a better understanding of the sector, and to tailor measures
that enable the sector to be better managed and controlled.!3-ACTIVITIESARESEENASAPOSSIBLEVEHICLEFOR
INDUSTRIALDEVELOPMENTANDMAYBEANIMPORTANTLIVELIHOODFORWHATAREUSUALLYRURALCOMMUNITIESWHO
HAVELIMITEDALTERNATIVEECONOMICOPPORTUNITIES)TALSOCONSTITUTESASIZEABLESOURCEOFEMPLOYMENTWITH
THE-O-ESTIMATINGTHATUPTOMILLIONPEOPLEMAYTOSOMEEXTENTBEINVOLVEDIN!3-ACTIVITIES!3-GOLD
MININGISASIGNIlCANTECONOMICSECTORIN%THIOPIABUTITISHOWEVERALSOASSOCIATEDWITHSOMETROUBLESOME
CHARACTERISTICSTHATINCLUDEINFORMALITYNOTBEINGLEGAL SOCIALANDENVIRONMENTALIMPACTSANDTHATTHESE
ACTIVITIESMAYHINDERTHEDEVELOPMENTOFLARGESCALEMININGOPERATIONS4HE-O-ISHEAVILYINVOLVEDIN
Gender inequalities are apparent in many areas of the Ethiopian mineral sector, and related education.4HUS
THENUMBEROFMENEMPLOYEDBYTHECURRENTLYACTIVEEXPLORATIONANDMININGCOMPANIESFAREXCEEDSTHE
NUMBEROFWOMEN#ONCERNING!3-THEMALEPOPULATIONINMOST!3-AREASCOMMONLYEXCEEDSTHATOF
FEMALEWIDELYTHEIRRESPECTIVEDUTIESOFTENDIFFERANDSURVEYSFURTHERSUGGESTTHATAMANEARNSNEARLYTWICE
OFWHATISBEINGEARNEDBYAWOMAN!TUNIVERSITIESALTHOUGHTHEEXACTlGUREISNOTKNOWNLESSTHAN
POSSIBLYMUCHLOWER OFTHESTUDENTSPURSUINGMININGRELATEDEDUCATIONAREFEMALEANDONLYOFTHE
ACADEMICSTAFFTEACHINGMINERALSECTORRELATEDSUBJECTSAREFEMALE&OR46%4SWHILETHEREISNODATAFOR
MINERALSECTORPROFESSIONALSTRAININGINOFALLTHESTUDENTSENROLLEDAT46%4INSTITUTIONS
WEREFEMALE!MONG46%4TRAINERSHOWEVERONLYSOME
WEREFEMALE!T-O-OFTHESTAFF
AREWOMENANDTHEGENDERDISTRIBUTIONVARIESWITHDIFFERENTUNITSDIRECTORATESHAVINGTOFEMALE
STAFF3EVERALSENIORANDEXECUTIVEPOSITIONSHAVEBEENORAREHELDBYWOMEN
Ethiopia is a diverse country, with a long and unique history and with numerous cultures and languages
existing side by side. It is also a very rich country in terms of biodiversity and natural heritage.&ORTUITOUSLY
THEGEOLOGICALLYMOSTPROSPECTIVEAREASDONOTINTERSECTWITHAREASTHATAREEITHERVERYDENSELYPOPULATED
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8 FINAL REPORT
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Č[FΎ^(ĊΎ~İlΎÃáΎ8o0ΎÕkĮ̛ΎΎÕÃáΎpΎ¼Ύ̚¥p.p̛Ύ8kßÜ0Ύs¼ŁŁΎ[Ç Ύ+ôáΎkL¹ΎÕºH0Ύ
>>ØΎ[á+ùŃΎÕÜ·ÊΎÃáôpΎvspΎΎCĊıΎÕ(.ΎÜpΎΎÕH Ύù^nΎHâxΎù pΎ¼8ČΎ8ô^pΎØ8Į÷ŁŁ
̱̳˷ΎpÛĜØΎ+Ò ΎΎÖΎÕ
Ύn-¤ΎØpŃΎÕkØÖΎ^ xΎLL½xΎúΎúΎÕ8kôÝ^pΎ`ÊpΎÕk[3xΎô0ΎpŁŁΎpÛĜØΎ
[^ÛßÚc05mΎ[kĮČ1Ύ`n ΎÕ
xΎkĮČ2¹ΎH09xΎÕnÜxΎpŁŁΎÜΎÃáΎ
ΎîΎk8ıΎ3đΎÕ^pΎÕÃáΎ
¢^]½xΎÊ`Ύ3Į+^s¼Ύ·Ú Ύ[kÕΎ ¤ØpΎkć[DΎ¢^]½xΎ÷0ΎÚô ŁŁΎ]
ΎßáΎùĔpΎÕC8C8ΎH Ύ
Øs¼Ύ¢^]½xΎßΎÚn·FŁŁΎ8Ç Ύn¼ΎôÅ`ΎIĊć0ΎØ8Į÷ŁŁΎÚ Ύ¢
ΎÕÃáΎpΎ(.ΎÕ¢^]¼Ύ
`+k3`Ύá÷ijΎØĊńΎÞ Ύô0ΎCijΎÁ ΎCijΎkLpΎ·C6ΎØ8pŁŁΎ¢^]ΎČ[FΎ[kkΎØpΎúxΎpΎ
`vΎ5
ŃΎÇ ΎÕpÛĜØΎ¢^]ΎČ[FΎ^8ĊΎºñΎΎ[ÃáΎºíΎÚΎÕkćC4pΎćHΎØΎá÷ø½xΎs¼ŁŁΎ8Ç Ύ
ØpΎúxΎ[Ċ ΎČHΎ5
ΎÕÃáΎ8kßÜ0 ΎÝ8p-¼ Ύ
ΎkIĊĊ-Ύ¢pΎÕÜùįΎkď-ΎÊ0Ê0Ύ-ؽxΎΎ
HĊĒ½xΎ[8CČΎćC ΎÚxΎŁŁΎ
̵̱˷Ύ[ùΎÕkć[DΎÕkΎÕÜΎÝ0Ύ.¹pΎÚËn½xΎØΎ]
Ύô-lΎHáØΎÕ p3ć¼Ύ
Ύ[Ç ΎÕkΎ¢^]½xΎÚΎ
Ĕ 0ΎÕÃáΎij÷Ύ¼ĊpΎ(.ΎÚ·ŁŁ
Ύ
Ύ[ Ύù^`Ύ[Ç Ύ¢^]½xΎÕÃáΎ(.ΎÜĮCáΎùĬΎÚÜ ŁŁΎ8Ç ΎćFÚΎĊ+8ΎÚnÚ[nŃΎßáΎ
12 FINAL REPORT
~İpΎÕs¼Ύ ^ؽxΎ[Ç Ύ¤Ύan½xΎÚΎ3.ns¼Ύ[xΎkC^ÚpΎÕÚ+¼Ύ[
ΎÕô-lΎÕÃáΎÅ0ijΎ
kÁpΎÚΎn¹ΎkĬÃΎ
Ø6á0ΎÚxŁŁΎ
̶̱˷Ύù(pΎÃáΎÅ0ijΎÕØô¼ΎCČkΎô]ΎÕď¼Ύ[ÃáΎ ^ؽxΎÚΎ+¼ΎÕc8ppΎá0>ŃΎÃáΎô]Ύ
ù`0Ύ1ØmΎ¤ijØΎ¼ŁŁΎ!àΎÕÃáΎ(.Ύ8 pΎù(pΎ Ύ·đΎ6Ø·ĊΎ[ ^ؽxΎÚΎá0>ΎÞ+¼ΎØÜ0÷ŁŁΎ
[̱̯̯̱Ύ[kÜ+ô¼ΎÕÃáΎºñΎ>>ØΎÚΎÕù(pΎĪΎá0>Ύ 8pΎ[qΎ[ijkΎ8kΎÕÃáΎ ^ؽxΎÚΎÞ+¼Ύ
Þ Ύ ^ؽtΎ÷0Ύ[Ü+ùΎá0á0ΎÚ Ύá0>¼Ύ[ôÅ`Ύ[Ü+ùΎºĕΎijΎ
ΎÜxΎkÜùýŁŁΎ[Ύ·HpΎ[ijkΎ
ÃáΎ .xΎ ^ؽxΎÚΎÕkĊ¼ΎÕô]Ύù`0Ύ̴̲Ύ[qΎ·ÜΎ̴̱Ύ[qΎÞC8Ύô]¼ Ύ¤Ύù(npΎÞkijΎ
ÕIJà.Ύù(pΎ[ºñΎÕ·3Ύ5
ŃΎ¤xΎ8kΎ ^ؽxΎÚΎÕ.6s¼ΎÕô]Ύù`0ΎÞ·8ΎÚĮHߣŁΎ[
Ύ8kΎ
½xΎÕkCćΎLΎÕô]Ύù`0Ύ ĊΎÕ ŁŁΎÕ1ØmΎ¤ijØΎÕ3¼Ύ[ƙȲɄȯȺȽɀȳȻΎ̚ô[ØΎ[#ć¼Ύº÷ΎỨΎ#+pΎ5
Ύ
[[,ΎÃápΎ3^pΎ[qŃΎ[`+pΎÃáxΎÚΎ 8pΎ[qΎ[Ý8p-ΎÃáxΎÚΎ.pΎ[qΎ¼ŁŁΎÕ1ØmΎ¤ijØΎ Ċ¼Ύ
ij-¢Ύô1xΎ ĊΎ÷0Ύk66ÚΎ¼ŁŁΎô0ΎùΎÕô]Ύù`0Ύ Ċ¼ΎÕù(pΎĪΎá0>ΎxΎÕij-¢Ύô1xΎÊHkΎ¼ŁŁΎ
Ύ pÛĜØΎÕ=ÙmdΎÃĐΎ^Ύ`n
Ύ[Å0įΎÚΎ
3pΎÕxΎ8Ύº÷pΎØ8xnŁŁΎ[kď- Ύ[Ç Ύ+ôáΎ¢ Ύ
nΎ,Ύ¼ĔΎ^`qxΎô0Ύ¼8ČΎ^á0>Ύ¢pΎÃ¤pΎØ8kıŁŁΎ[úΎá.úpΎá0ñqxΎ[.pΎºñΎ÷0Ύ
ÕkØØÆpΎõßÛxΎpÛĜØΎÕÃáΎùĤpΎ=ÙmhΎΎ^pΎßnôΎHıpΎ
pΎõßÛxΎÝΎ¼ŁŁΎΎ^lΎ
ùpΎÕvΎÕkćC3¼ΎºñΎ[á÷ΎÞnÚΎÕØ8Įù[pΎnΎ
0ΎÚxŁŁΎ
Ύ [
Ύ`.-ØΎ[Ç Ύ+ôáΎÕ,ΎxΎÃHâxΎ·HΎØ8Į÷ŁŁΎ[kď- ΎÕ^\0Ύp.8ļ0pΎ·ÜİpΎ ΎØ Ύ
ÜØ8ĮùΎk[ÚΎØ8Į÷ŁŁΎΎØ¼ΎÕÃáΎpΎćΎÕ^\0Ύp.8ļ0pΎÕćÚHΎ·Ú Ύ^\0Ύp.8ļ0pΎ
Õ·Ċ¼Ύc8ppΎÕ8ΎÚÜ ŁŁΎÕΎļn@Ύ[ÖΎnΎćÚC¼ΎÕ^\0Ύp.8ļ0pΎ[8kC0ŁŁΎÕî8m¤Ύ
H0apΎ[CČpΎ̰̯ΎΎ̴̰ΎÁnpΎ ΎØ Ύ
ΎÚx˾ΎÕ¼Ύ[ôpΎ8Įö¼ΎÕp.8ļ0pΎ·ĔΎù pΎ¼8ČΎù^pΎ
Ú0[nŁŁ
ćFØΎ ¤+Ύ6axΎ̚ƫɃȻȻȯɀɇΎȽȴΎƪȳȱȽȻȻȳȼȲȯɂȷȽȼ̛
̷̲˷Ύ-ļ0lΎÕØćF¼ΎÕpÛĜØΎÕÃáΎÅ0ijΎpΎÕÜùijΎÕØć¤,ΎÕkØÖΎ ¤+Ύ6axΎ[H+`Ύ¼Ύ̚CĤΎ̛̰̲ŁŁΎ
ijkΎÕ
Ύá÷ijΎpÛĜØΎÕÃáΎÅ0ijΎá+ùΎÕ¼8p.
ØΎù(pŃΎÕ¢ßΎ¼ĔΎõßÚΎùáΎpΎ8o0Ύ̚ƜƞƙƬƜ̛ΎŃΎ
ÕÁ Ύ^¤ΎΎvÚ¼ØΎ̂?mh8̃ΎÜCßs¼ΎćΎÕkØÖΎĻ1ì¤qxΎ[ČFGΎ
CíŃΎΎ ΎÚ#.ΎÕ¼Ύ[ùĤΎ
]CČΎáùù!@Ύ`¤pΎØ8C.ŁŁΎÕC+\Ύ ¤+Ύ6axΎ·ÜΎpù[.ΎÞ·ĈΎ[Ĕ0ΎöÉΎ̵̚Ύ8Ύ̰̱Ύ·.p̛ŃΎ[¢Ύ
öÉΎ̰̱̚Ύ8Ύ̵̲Ύ·.p̛ΎΎ[+Ò ΎöÉΎ̵̲̚Ύ·.qxΎ[ỨΎ.ĕxΎC0[ºŁŁΎÕĭnΎ pΎ0Ύ[ÃáΎÅ0ijΎÕk#.ıΎ
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3.ΎÚô^ŁŁΎ[Ç Ύ+ôáΎÃáΎÅ0ijΎ^ؽxΎp 0pŃΎČFHΎ8kΎ^ ¹ΎÃáΎ .yxΎÞ ΎÕÃáΎ
Å0ijΎpΎ[7qxΎÚΎØÜ03¼ΎkĬÃΎÖΎp +pΎ
3ČΎÚô^ŁŁ
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14 FINAL REPORT
© Yara Dallol BV
).42/$5#4)/.
1.1. Background and report structure
4HISREPORTPROVIDESAREVIEWOFTHE%THIOPIANMININGSECTORANDASSESSESITSPOTENTIALTOCONTRIBUTETO
SUSTAINABLEECONOMICGROWTHANDDEVELOPMENT)TFURTHERPROVIDESRECOMMENDATIONSFORTHEINITIATIVESAND
ACTIONSTHATWILLBEREQUIREDFORSUCHDEVELOPMENTTOTAKEPLACEANDITIDENTIlESTHERISKANDOPPORTUNITIES
THATTHISENTAILS4HENEEDFORTHISTYPEOFSTRATEGICANALYSISFOLLOWSFROMTHE'OVERNMENTOF%THIOPIAS'O%
AMBITIONTOASPARTOFTHE'ROWTHAND4RANSFORMATION0LAN'40 DEVELOPTHEMININGSECTORTOBEAMAIN
PILLAROFTHEECONOMY
4HEREPORTWASPRODUCEDINTHEPERIOD-AYTO&EBRUARY)TWASCOMMISSIONEDBYTHE7ORLD
"ANKANDITSPARTNERS)&#$&!4$THE!USTRALIAN'OVERNMENTAND$F)$ WITHTHEAIMTOASSISTTHE'O%
INITSEFFORTSTODEVELOPTHEMININGSECTOR4HUSTHEREPORTHASBEENPRODUCEDINCLOSECOOPERATIONWITH
STAFFATTHE%THIOPIAN-INISTRYOF-INES-O- )TSlNDINGSAREMOSTLYBASEDONDESKTOPREVIEWSOFEXISTING
DOCUMENTSONALARGENUMBEROFMEETINGSANDINTERVIEWSWITHAFFECTEDANDINTERESTEDSTAKEHOLDERSAND
ALSOONSOMElELDWORKPERFORMEDINTHESOUTHERNANDWESTERNPARTSOFTHECOUNTRY2EGULAROVERSIGHTAND
FEEDBACKHASBEENPROVIDEDBYREPRESENTATIVESFROMTHE7ORLD"ANKANDITSPARTNERS
4HISCHAPTERPROVIDESANINTRODUCTIONTOTHE%THIOPIANECONOMYANDTHECURRENTCONTRIBUTIONFROMMINING
ANDDESCRIBESGENERALASPECTSOFMINERALSECTORDEVELOPMENTANDHOWITMAYCONTRIBUTETOECONOMIC
DEVELOPMENT#HAPTERPRESENTSTHEGEOLOGICALPOTENTIALOFTHECOUNTRYMINERALOCCURRENCESANDMINING
ANDEXPLORATIONPROJECTS"UILDINGON#HAPTER#HAPTERPRESENTSPOSSIBLESCENARIOSFORFUTUREMINERAL
SECTORGROWTHWITHECONOMICIMPLICATIONSANDFURTHERDISCUSSESINDUSTRYLINKAGES#HAPTERS
INCLUDE
ASSESSMENTSOFDIFFERENTMINERALSECTORFRAMEWORKAREASANDRECOMMENDATIONSAREPROVIDEDINTHEEND
OFEACHCHAPTER#HAPTERPRESENTSCURRENTINFRASTRUCTUREANDDEVELOPMENTPLANSANDlNALLY#HAPTER
PRESENTSASUMMARYANDPRIORITIZATIONOFRECOMMENDATIONS
4HE'ROWTHAND4RANSFORMATION0LANISTHEMAINNATIONALDEVELOPMENTROADMAPFOR%THIOPIAFORTHE
PERIOD
FOCUSINGONSTRUCTURALTRANSFORMATIONANDSECTORTARGETINGTOACHIEVEBROADBASEDAND
EQUITABLEGROWTH4HEMAINFEATUREOFTHEPLANISTOENSURE'$0GROWTHRATESOF
PERYEARANDTO
CREATEINVESTMENTOPPORTUNITIESINAGRICULTURALANDINDUSTRIALSECTORS4HEECONOMICSECTORPERFORMANCE
CREATESSPECIlCTARGETSFORTHEAGRICULTURALINDUSTRIALANDMININGSECTORS&INANCINGFROMBOTHTHEPUBLIC
ANDPRIVATESECTORISENVISIONED4HEOTHERMAJORSUB
HEADINGSFORTHEPROGRAMINCLUDEIMPROVEMENTSIN
THECOUNTRYSINFRASTRUCTUREASWELLASSOCIALDEVELOPMENTINDICATORSEDUCATIONANDTRAININGANDHEALTH
4HElNALSEGMENTFOCUSESONCAPACITYBUILDINGINFORMATIONANDCOMMUNICATIONSTECHNOLOGYDEVELOPMENT
DEMOCRACYANDGOODGOVERNANCE4HEPLANTAKESINTOCONSIDERATIONCROSSCUTTINGISSUESSUCHASGENDER
ANDYOUTHDEVELOPMENT()6!)$SPREVENTIONANDCONTROLLABOURAFFAIRSENVIRONMENTANDCLIMATECHANGE
)NTHEFRAMEWORKOFTHE-INING6ALUE#HAIN&IGURE %THIOPIACANBEVIEWEDASBEINGATTHESTAGEOF
DEVELOPINGANDIMPROVINGGOVERNANCERELATEDTOTHElRSTTHREESTEPS!CCESSTORESOURCES-ONITORINGOF
OPERATIONSAND#OLLECTIONOFROYALTYANDTAXES%THIOPIARECENTLYSUBMITTEDITSAPPLICATIONTOBECOMEA
CANDIDATE%)4)COUNTRY
16 FINAL REPORT
Collection Revenue %FlCIENT Inclusive &
Non–renewable Access to Monitoring of
of taxes and management, sustainable Sustainable
resources resources operations
royalties allocation utilization Development
Revenue collection
$ISCLOSUREOFREVENUEmOWS
Macroeconomic framework
Savings (volatility/future generations)
Public investment decisions
%FlCIENTUSE0&-PROCUREMENT
Recommendations of environmental impacts
%CONOMICDIVERSIlCATIONANDGROWTH
Figure 1.1. The Mining Value Chain (source: World Bank). Community development linkages
)TALSOIMPORTANTTOKEEPINMINDTHATFEWEXPLORATIONPROJECTSACTUALLYLEADTOMINEDEVELOPMENT&OR
EXAMPLELOOKINGATMAJORMETALSOVERARECENT
YEARPERIODOUTOF GREENlELDDISCOVERIES
IN#ANADAREACHEDFEASIBILITYSTAGE&OR!USTRALIATHENUMBERSWEREOUTOFOR&ARFEWER
PROJECTSWOULDSURVIVEALLTHEWAYTOTHEMINECONSTRUCTIONSTAGE
Table 1.2. Common time periods (years) for the different phases of mineral development projects.
%XPLORATIONFEASIBILITYSTUDY
-INECONSTRUCTION
0RODUCTION
-INECLOSURERECLAMATION
-ONITORING
2AW-ATERIALS'ROUP
2AW-ATERIALS'ROUP
-ININGISACYCLICALBUSINESSWITHCOMMODITYPRICESVARYINGINWHATISSOMETIMESREFERREDTOAShSUPER
CYCLESvWHICHINTURNMAYSPANOVERONEORSEVERALDECADES4HUSTHEDECADEPRECEDINGANDTHE
RISEOFDEMANDOF#HINA WASCHARACTERISEDBYLOWCOMMODITYPRICES&IGURE ANDLIMITEDEXPLORATION
)NCONTRASTSINCETHEWORLDHASSEENABOOMINTHEMININGSECTORFUELLEDTOAGREATEXTENTBY#HINESE
DEMANDLEADINGTOWHATATTIMESHASBEENNEARFRANTICACTIVITYANDINTERESTINTHESECTOR4HELASTYEAR
SINCEHASSEENASLOWINGDOWNANDDECREASESINCOMMODITYPRICES4HEMANAGEMENTOFTHESECTOR
NEEDSTOTAKETHESEFUNDAMENTALCHARACTERISTICSINTOACCOUNT
7HENCONSIDERINGTHE@DEVELOPMENTOFTHEMININGSECTORPARTICULARLYITSCONTRIBUTIONTOECONOMICGROWTH
ANDEXPORTREVENUESTHEGENERATIONOFLARGEECONOMICRENTSISMORELIKELYTOCOMEFROMMEDIUMTOLARGE
SCALEMININGPROJECTSRELATIVETOTHOSEFROMARTISANALANDSMALLSCALEPROJECTS&URTHERMOREECONOMIES
OFSCALEAREMORELIKELYTORESULTWITHINCREASEDMINESIZEANDWHENTHEREAREAFEWLARGESCALEMINESIN
PRODUCTION
4HEMININGSECTORHOLDSSUBSTANTIALPROSPECTSFORFOSTERINGDEVELOPMENTANDECONOMICGROWTH4HESECTOR
ISHOWEVERALSOSEENTOBEASSOCIATEDWITHANUMBEROFLESSDESIRABLECHARACTERISTICSSUCHASENVIRONMENTAL
IMPACTSSOCIO
ECONOMICUNRESTLAND
USECONmICTlNANCIALINSTABILITYEG$UTCHDISEASE ANDDUETOTHE
LARGEAMOUNTSOFMONEYINVOLVEDTOBEPRONETOCORRUPTIONANDILLICITlNANCIALTRANSACTIONS-EASURESARE
NEEDEDTOADDRESSTHESEPROBLEMAREASSUCHASTHEDEVELOPMENTOFASUITABLEREGULATORYREGIMEASWELL
ASTHEBUILDINGOFINSTITUTIONALCAPACITYTOIMPLEMENTSUCHAREGIME
Figure 1.2. Variations in “metal price index” since 2000 (with 2000 given an index of 100). Source: Raw Materials Group,
Stockholm (2013).
.OTETHENUMBEROFMINESWILLDIFFERDEPENDENTONTHEMETALBEINGMINEDANDTHEVOLUMEOFOREINCLUDINGWASTEROCK THATISBEING
PRODUCED
18 FINAL REPORT
© PACT Ethiopia
4HE0ROTEROZOICBASEMENTINCLUDESAVARIETYOFVARIOUSLYDEFORMEDANDMETAMORPHOSEDSEDIMENTARY
VOLCANICANDINTRUSIVEROCKS)NGENERALGNEISSESAREMORECOMMONANDTHEMETAMORPHICGRADEHIGHERIN
THESOUTHERNANDWESTERNTERRAINSCOMPAREDTOTHENORTHERNTERRAIN4HENORTHERNTERRAINISPREDOMINANTLY
MADEUPOFVOLCANICANDSEDIMENTARYROCKSOFLOWERMETAMORPHICGRADE3OCALLEDGREENSTONEBELTSOCCUR
INALLTHREEAREAS
&IGURE3IMPLIlEDGEOLOGICALMAPOF%THIOPIASOURCE'3%
'REENSTONEBELTSMAYHOSTAVARIETYOFMINERALSDEPOSITSESPECIALLYGOLD4HEYARETHOUGHTTOHAVEFORMEDALONGTHEMARGINSOF
!RCHAEANCRATONSnMILLIONYEARS BUTTHETERMISSOMETIMESALSOUSEDFORSIMILARGEOLOGICALENVIRONMENTSOFYOUNGER
AGE4HEYCONSISTOFAMIXOFMETAMORPHOSEDMAlCTOULTRAMAlCVOLCANICSEQUENCESWITHASSOCIATEDSEDIMENTARYROCKS4HENAME
GREENSTONECOMESFROMTHEGREENHUEOFSOMEOFTHEMETAMORPHICMINERALSPRESENT
4HEDIFFERENTGEOLOGICALTERRAINSDESCRIBEDABOVEAREPROSPECTIVEFORDIFFERENTTYPESOFROCKSANDMINERALS
!PARTFROMEXTENSIVEARTISANALMININGTHEREAREANDHAVEBEENVERYFEWMINESIN%THIOPIAANDCOMPARATIVELY
LITTLEDETAILEDEXPLORATIONHASBEENUNDERTAKEN-INERALROCKOCCURRENCES4ABLE INTHEDIFFERENTTERRAINS
AREHOWEVERREASONABLYWELLKNOWNMAINLYFROMTHEWORKUNDERTAKENBYTHE'EOLOGICAL3URVEYOF%THIOPIA
'3% OVERTHEPASTYEARS
Table 2.1. Mineral and rock occurrences in main geological environments of Ethiopia.
Geological terrain Commodity Deposit types and key areas
'OLD 0RIMARILYLODEGOLDINGREENSTONEBELTS
!U
!G
#U
:N 6-3
TYPEINTHENORTHERNTERRAIN
Late Proterozoic 4ANTALUM 0EGMATITEINSOUTHERNTERRAIN
BASEMENTBLACK
grey, green in Figure )RON "ASICINTRUSIONSINWESTERNANDSOUTHERNTERRAINS1UARTZ
BANDEDSEDIMENTARYIRONINWESTERNTERRAIN
0'%GOLD 5LTRAMAlCINTRUSIONSANDRELATEDALLUVIAL
ELUVIALPLACERSINTHE
-OSTIMPORTANT WESTERNTERRAIN
TERRAINFORMETALLIC
MINERALS 0HOSPHATE "ASICINTRUSIONSTOGETHERWITH&E
$IMENSIONSTONE 3EVERALAREASINTHE0ROTEROZOICTERRAINS
!LSODIMENSION
STONEREFRACTORY 2EFRACTORYRAW 3OUTHERNTERRAIN
MINERALSAND MATERIALSKYANITE
CERAMICRAW GRAPHITETALC
MATERIALS +AOLIN 3OUTHERNTERRAINANDINTHE(ARARAREAALSOINSOMEAREASWITH
1UATERNARYVOLCANICS
&ELDSPARQUARTZ 0EGMATITEINSOUTHERNTERRAINANDINTHE(ARARAREA
Mesozoic sediments ,IMESTONE !NUMBEROFDEPOSITSINALLTHREE-ESOZOICSEDIMENTARYBASINS
BLUEIN&IGURE GYPSUM
3ILICASAND 3EVERALDEPOSITSINTHE-ESOZOICBASINS
)MPORTANTFORTHE
MAINCEMENTRAW
MATERIALS
0OTASH %VAPORITESINTHECENTRALPARTSOFTHE$ANAKHILDEPRESSION
Tertiary-Quaternary 0UMICE !NUMBEROFAREASINTHEFELSICVOLCANICSOFTHE2IFT6ALLEY
volcanics and Diatomite !NUMBEROFAREASINLACUSTRINESEDIMENTSOFTHE2IFT6ALLEY
SEDIMENTSOLIVE
"ENTONITE !NUMBEROFAREASINLACUSTRINESEDIMENTSOFTHE2IFT6ALLEY
GREENIN&IGURE
2OCKSALT /CCURSINSOMELAKESINTHECENTRAL
SOUTHERNPARTOFTHE2IFT6ALLEY
)MPORTANTFORA 3ODAASH /PALOCCURSINTHEAREASSURROUNDINGTHENORTHERNCENTRALAND
NUMBEROFINDUSTRIAL SOUTHERNPARTSOFTHERIFTVALLEYIN4ERTIARYVOLCANICS
MINERALSAND
GEMSTONES 'EMSTONES /THERGEMSTONESSUCHASBERYLEMERALDSAPPHIRETOURMALINE
ANDGARNETAREFOUNDMAINLYINTHESOUTHERNPARTSOFTHERIFT
!LSOCOALAND #OAL ,IGNITETOBITUMINOUSDEPOSITSINSEDIMENTSMOSTLYWITHIN4ERTIARY
EPITHERMALGOLD VOLCANICFORMATIONSINSOUTHWESTERNANDNORTHERN%THIOPIA
%PITHERMALGOLD ,OW
GRADEGOLDOCCURRENCESINTHERIFTVALLEYNORTHERNPARTS
3OURCES 4ADESSE VARIOUSPROMOTIONALDOCUMENTSAVAILABLEATTHE'3%WWWGSEGOVETACCESSED.OVEMBER
DISCUSSIONSWITH-O-STAFF
20 FINAL REPORT
2.2. Geological data and information
4HE'EOLOGICAL3URVEYOF%THIOPIAWASESTABLISHEDINWITHTHEPRIMARYAIMTOCONDUCTSYSTEMATIC
GEOLOGICALMAPPINGANDMINERALEXPLORATION0RIORTOTHESVERYLITTLEGEOLOGICALMAPPINGWORKHAD
BEENUNDERTAKEN!BROADDESCRIPTIONOFAVAILABLEGEOSCIENTIlCINFORMATIONISPROVIDEDBELOW
2.3. Mining and mine prospects in Ethiopia and the region
4HEPURPOSEOFTHISSECTIONISTOPROVIDEABROADVIEWOFTHEGEOLOGICALPOTENTIALBYDESCRIBINGON
GOINGMINING
ASWELLASMINEPROSPECTSIN%THIOPIAANDTHESURROUNDINGREGIONS
1. Gold
4HEREISCURRENTLYONEOPERATINGLARGESCALEGOLDMINEIN%THIOPIATHE,EGA$EMBIOPENPITMINEINTHESOUTHERN
0ROTEROZOICTERRAINOWNEDBY-IDROC'OLD-INE0LC,EGA$EMBIOPENEDINANDHASATANAVERAGE
PRODUCEDSOMETYRTONNESOROZIN )NSOMETWOYEARSTIMETHEOPERATIONWILLCONTINUE
UNDERGROUNDANDALSOINCLUDETHE3AKARODEPOSITLOCATEDRIGHTNEXTTO,EGA$EMBI.EARBYTHEREISALSOTHESTATE
OWNED!DOLAMINEWHEREALLUVIALGOLDATLEASTINPARTDERIVEDFROMTHE,EGA$EMBIDEPOSITS HASBEENMINED
FOROVERHALFACENTURY
/NEGOLDPROSPECTIN%THIOPIAHASREACHEDANADVANCEDEXPLORATIONSTAGE.YOTA-INERALS,TDS4ULU+APIPROJECT
4HEPROJECTHASESTABLISHEDPROBABLERESERVESOF-T GTTOTALLYOZ ANDINDICATEDANDINFERRED
RESOURCESOF-T GTTOTALLYOZ ASOFMID
4HEPROJECTWASONHOLDDURINGTHESECOND
PARTOFBUTRECENTOWNERSHIPCHANGESANDADDITIONALlNANCINGHASALLOWEDFOREXPLORATIONACTIVITIESTO
CONTINUE4HEPROJECTSHOWSTHEPOTENTIALFORGOLDDEPOSITSINTHEWESTERN0ROTEROZOICTERRAIN
2. Polymetallic deposits
4HE!RABIAN
.UBIANSHIELDIN%RITREA3UDAN%GYPTAND3AUDI!RABIAHOSTSANUMBEROF6-3
TYPEPOLYMETALLIC
DEPOSITS4HEREARETHREEADVANCEDGOLDPROJECTSIN%RITREAONEOFWHICHHASREACHEDTHEMININGSTAGE4HE
"ISHAMINECOMMENCEDPRODUCTIONINANDITISAHIGH
GRADEDEPOSITWITHGOLDANDSILVEROXIDESATSURFACE
UNDERLAINBYCOPPERANDZINCSULPHIDES4HERESOURCESTATEMENTOF-AYESTIMATESCONTAINEDMETALOF
TONNESOF#UTONNESOF:NOZ!UANDOZ!GINTHE)NDICATEDAND
)NFERRED2ESOURCECATEGORIES
3. Potash
4HEREISASYETNOPOTASHMININGIN%THIOPIABUTTHE$ANAKHILDEPRESSIONINTHEFARNORTHEASTOFTHECOUNTRYHOLDS
SIGNIlCANTPOTASHRESERVES!LLANA0OTASHHASBEENGRANTEDAFULLMININGLICENSEANDISPLANNINGTOCOMMENCE
CONSTRUCTIONDURINGTHElRSTHALFOFANDSTART
UPPRODUCTIONINTHELATTERHALFOF0ROVENANDPROBABLE
SYLVINITERESERVESAMOUNTTO-T
+#L-EASUREDINDICATEDANDINFERREDSYLVINITERESOURCESAMOUNT
TO-T
+#L4HECURRENTMINEPLANISFOR-TYROVERYEARS4HESYLVINITEOCCURSINTHEUPPERMOST
SEDIMENTHORIZON,ARGECARNALLITEANDKAINITITERESOURCESAREPRESENTINLOWERHORIZONSWHICHMAYBEEXTRACTED
INTHEFUTURE/THERCOMPANIESAREPURSUINGEXPLORATIONATNEARBYLOCALITIES
4. Tantalite
4HESTATE
OWNED;%THIOPIAN-INERALS$EVELOPMENT%NTERPRISE%-$% =+ENTICHATANTALUMMINELOCATEDIN
SOUTHERN%THIOPIAHASBEENPRODUCINGTANTALUMINTHERECENTPASTANDSHOWSTHEPOTENTIALFORPEGMATITE
HOSTED
TANTALUMINTHEAREA4HEPRODUCTIONISCURRENTLYONHOLDDUETOATTEMPTSTOPRIVATIZETHEOPERATION4HISSEEMS
TOHAVEFAILEDANDTHECURRENTPLANSAREFOR%-$%TOCONTINUEPRODUCTIONIN4HEURANIUMCONTENTOFTHE
OREISQUITEHIGH ANDLOCALPROCESSINGTOREMOVETHEURANIUMWOULDBEREQUIREDFORMANYEXPORTMARKETS
7. Dimension stone
4HEMOSTIMPORTANTPRODUCEROFdimension stoneIN%THIOPIAISTHE.ATIONAL-INING#OMPANY-IDROCGROUP
-ARBLEFROMTHE"ENISHANGUL
'UMUZAREAINTHEWESTANDGRANITEANDLIMESTONEFROMAROUND(ARARINTHEEAST
ARETURNEDINTOlNISHEDPRODUCTSATTHEMANUFACTURINGFACILITYIN!WASHCENTRAL%THIOPIA3ANDSTONEANDVOLCANIC
ROCKSSUCHASIGNIMBRITEANDBASALTHAVEALSOBEENQUARRIEDMOSTLYONASMALLSCALEFORLOCALDIMENSIONSTONEUSE
22 FINAL REPORT
8. Coal
#OALWASMINEDONASMALLSCALEIN
INTHE$ELBI
-OYEAREAMAINLYINATTEMPTSTOSUBSTITUTEFORIMPORT
TOPROVIDECEMENTINDUSTRYWITHENERGY4HEREHASRECENTLYBEENRENEWEDINTERESTINTHISDEPOSIT
9. Gemstones
'EMSTONESAREPRODUCEDTHROUGHARTISANALMININGANDTHEMAJORTYPESOFGEMSTONESFOUNDIN%THIOPIAINCLUDE
GARNETSEMERALDSRUBIESANDOPALS/PALSACCOUNTFORNEARLYOFPRECIOUSSTONEEXPORTSOFTHECOUNTRY
Figure 2.2. Licenses (mainly exploration) issued in 2005-2007 (left) and in 2010-2011 (right).
4WOEXPLORATIONPROJECTSHAVEREACHEDANADVANCEDSTAGEWHEREMINERALRESERVESHAVEBEENESTABLISHED
INACCORDANCEWITHINTERNATIONALSTANDARDSSUCHASTHE*/2#CODEORTHE.)
4HESEINCLUDE!LLANA
0OTASHS$ALLOLPOTASHPROJECTAND.YOTA-INERALSS4ULU+APIGOLDPROJECT)TSHOULDBENOTEDTHATEVENAT
THISADVANCEDEXPLORATIONSTAGEVARIOUSFACTORSSUCHASTECHNICALISSUESCOMMODITYPRICElNANCINGETC
MAYMAKEANYPROJECTUNECONOMICORDELAYPROGRESS!SMENTIONEDABOVE!LLANA0OTASHPLANSTOSTART
PRODUCTIONBYMIDTOLATEWHILETHE4ULU+APIPROJECTHASBEENONHOLDDURINGTHESECONDPARTOF
BUTNEWlNANCINGHASRECENTLYPROVIDEDFORACONTINUATIONOFEXPLORATIONACTIVITIES
.INETEENCOMPANIESAREUNDERTAKINGMOREORLESSADVANCEDEXPLORATIONACROSSATOTALOFTWENTY
EIGHT
LICENSES4ABLE BUTNONEOFTHESEPROJECTSHAVEPROGRESSEDFARENOUGHFORMINERALRESOURCESORRESERVES
ESTIMATESTOBEESTABLISHEDAPARTFROM4ULU+API4HEMAJORITYAREEXPLORINGFORGOLDANDBASEMETALSINTHE
NORTHERNWESTERNANDSOUTHERN0ROTEROZOICTERRAINSONEFORIRONOREINTHE!MHARAREGIONANDTWOAPART
FROM!LLANA FORPOTASHINTHE$ANAKHILDEPRESSION
24 FINAL REPORT
4IGRAY%NTICHO,OCALITY
+OLA4EMBEN7ERIE
3TREAM3OIL2OCK#HIP
-/-< ,EHE'ANTA!FESHUM 0RECIOUSAND
3AMPLING)NTENSIVE4RENCHING
%,<< AND(AWZEN7EREDAS "ASE-ETALS
!IRBORNE'EOPHYSICS
#ENTRALAND%ASTERN
4IGRAY:ONES
/ROMIA9UBDO,OCALITY 'OLD3ILVER
/RECORP-INERALS 3TREAM3OIL2OCK#HIP
-/-< 9UBDO$ILE,ALOAND #OPPER,EAD
0LC 3AMPLING4RENCHING!IRBORNE
%,<< .OLE+ABA7EREDAS :INCAND
'EOPHYSICS$RILLING
7ESTERN7ELLEGA:ONES .ICKEL
/ROMIA'ENJI,OCALITY
'OLD3ILVER
"OJI'IMBI(ARU,ALO 3TREAM3OIL2OCK#HIP
-/-< #OPPER,EAD
!SABI.OLE+ABAAND 3AMPLING)NTENSIVE4RENCHING
%,<< :INCAND
9UBDO7EREDAS7EST !IRBORNE'EOPHYSICS
NICKEL
7ELLEGA:ONE
'OLD 3TREAM3OIL2OCK#HIP
-/-<
4IGRAY#HINI7ORK
!SSOCIATED 3AMPLING4RENCHING0ITTING
< Amba
.ATIONAL-INING -INERALS 'ROUND'EOPHYSICS$RILLING
#ORPORATION0LC -/-< 3TREAM3OIL2OCK#HIP
/ROMIA/KOTE"ORENA 'OLD"ASE
%,<
3AMPLING4RENCHING0ITTING
'UJI:ONE -ETALS
< 'ROUND'EOPHYSICS$RILLING
3TREAM3OIL2OCK#HIP
'OLD
.YOTA-INERALS /ROMIA4ULU+API 3AMPLING4RENCHING'ROUND
0LATINUM
%TH ,TD !NCHORE77ELLEGA !IRBORNE'EOPHYSICS
'ROUP-ETALS
'EOPHYSICS)NTENSIVE$RILLING
3TREAM3OIL2OCK#HIP
-/- /ROMIA'UJI!NKORE 'OLD"ASE 3AMPLING4RENCHING'ROUND
%, 9UBDO77ELLEGA -ETALS !IRBORNE'EOPHYSICS
'EOPHYSICS)NTENSIVE$RILLING
/ROMIA3IYO(AWI7ELE
'OLD 3TREAM3OIL2OCK#HIP
-ETU$ARIMUAND
%L-INING0LC !SSOCIATED 3AMPLING)NTENSIVE4RENCHING
'AWA,OCALITY7ESTERN
-INERALS 'ROUND'EOPHYSICS
7ELLEGA:ONE
3TREAM3OIL2OCK#HIP
3OMALI(ARAMSAMAND 3AMPLING4RENCHING,ANDSAT
-'-'OLD-INES -/-<
(ASAMITE,OCALITY,IBEN 'OLD )MAGE)NTERPRETATION!IRBORNE
0,# <
:ONE 'EOPHYSICSPREVIOUSLYSOME
$RILLING
'OLD3ILIVER
3TREAM3OIL2OCK#HIP
!FAR4ENDAHO AND"ASE
3TRATEX -/- 3AMPLING$RILLING
-ETALS
)NTERNATIONAL0LC %,
-/- !FAR'ABALAAND'IRA 0RECIOUSAND 3TREAM3OIL2OCK#HIP
%, ,OCALITY "ASE-ETALS 3AMPLING$RILLING
3..02$IZI3HEKA 'OLD 3TREAM3OIL2OCK#HIP
%4./-INING -/-<
AND3URMA7EREDAS !SSOCIATED 3AMPLING)NTENSIVE4RENCHING
0LC %,\<
"ENCH-AJI:ONE -INERALS 0ITTING'ROUND'EOPHYSICS
!MHARA3EKOTA 0ITTING4RENCHING'ROUND
!CCESS#APITAL !-(<
,OCALITY3EKOTA7EREDA )RON/RE 'EOPHYSICSAND)NFERRED
3ERVICES3# %,<<
:ONEONE RESOUCEESTIMATION
!FAR-USLEYAND $RILLING$OWN(OLE,OGGING
9ARA$ALLOL"6 0OTASH
#RESCENT,OCALITIES 3URVEY
-/-<
'"#ENTRAL $RILLING$OWN(OLE,OGGING
%,<
!FAR"ADA 0OTASH
!FRICAN 3URVEY
<
2ESOURCES,TD
%THIOPIA
$RILLING$OWN(OLE,OGGING
!FAR$ALLOL 0OTASH
3URVEY
3OURCE -O--INERAL,ICENSINGAND!DMINISTRATION$IRECTORATE&EBRUARY
!IRBORNEGEOPHYSICALDATAISOFFUNDAMENTALIMPORTANCETOMINERALEXPLORATIONANDTHEAVAILABILITYOFTHIS
TYPEOFDATAISOFVERYHIGHINTERESTTOINVESTORS!IRBORNEGEOPHYSICALSURVEYSSHOULDPRIMARILYBEUNDERTAKEN
ACROSSTHELATE0ROTEROZOICTERRAINSORPARTSOFTHESE
'EOLOGICALMAPPINGRELIESHEAVILYONAIRBORNEGEOPHYSICALDATAANDAIRBORNEDATAISAPREREQUISITETO
QUALITYGEOLOGICALMAPPING-OREDETAILEDGEOLOGICALMAPSATAlNERSCALEEG WOULDFACILITATE
EXPLORATION4HISCOULDBECOUPLEDWITHGEOCHEMICALSURVEYSINSELECTEDREGIONS
4HEIMPLEMENTATIONOFANINTEGRATEDGEOLOGICALANDDATAANDINFORMATIONMANAGEMENTSYSTEMALSOINCLUDING
GEOCHEMICALDATAISPROPOSED3UCHASYSTEMBASEDONSPATIALDATAWOULDFACILITATETHEHANDLINGOFDATA
ANDINFORMATIONANDBEAVERYUSEFULEXPLORATIONTOOL)NITIALLYTHEESTABLISHMENTOFAPOLICYDElNINGDATA
OWNERSHIPANDRULESANDWAYSFORDISSEMINATINGDATACOULDBECONSIDERED
-O-AND'3%COULDCONSIDERESTABLISHINGAPROMOTIONSTRATEGYFORTHE%THIOPIANMINERALSECTORINCOOPERATION
WITHTHE)NVESTMENT0ROMOTION!GENCY4HISMAYINCLUDEPUBLISHINGININTERNATIONALTRADEJOURNALSAND
GENERATINGPROMOTIONALMATERIALFORWIDERCIRCULATIONPLANNEDPRESENCEATINTERNATIONALMINERALSECTOR
CONFERENCESANDEVENTSDIRECTCONTACTWITHTARGETEDINVESTORSANDPRODUCTIONOFMONTHLYNEWSLETTERS
ETC&ORAHOLISTICSTRATEGYTOTAKEINTOACCOUNTINVESTORSPOSITIVEPERCEPTIONSANDREQUIREMENTREQUESTFOR
INFORMATIONCONCERNSETCTHEFORMULATIONOFTHESTRATEGYWOULDBENElTFROMANINITIALSURVEYOFINVESTORS
PERCEPTIONOF%THIOPIAASAMININGDESTINATION)TWOULDBEIMPORTANTTOINCLUDECURRENTINVESTORSPAST
INVESTORSTHATHAVEWITHDRAWNANDPOTENTIALINVESTORS4HESURVEYSHOULDALSOINCLUDEDIFFERENTSIZED
COMPANIESIEJUNIORSANDMAJORS
26 FINAL REPORT
© Yara Dallol BV
3#%.!2)/3&/2-).).'$%6%,/0-%.4!.$%#/./-)#
IMPLICATIONS
4HISCHAPTERFOLLOWSONFROMTHEPREVIOUSCHAPTERSEXAMINATIONOFTHECURRENTSTATUSOFTHE%THIOPIANMINING
SECTORANDBASEDONTHISINFORMATIONITGENERATESTHREEFUTURESCENARIOSFORMEDIUMTOLARGESCALEMINE
PRODUCTIONINTHECOUNTRY4HESCENARIOSAREBASEDONEXISTINGMINESANDPROJECTSANDCURRENTEXPLORATION
ACTIVITIES'IVENTHEDERIVEDSCENARIOSPROJECTIONSFORCASHmOWSTOTHESTATEASWELLASDIRECTEMPLOYMENT
NUMBERSAREGENERATED
4HEDEVELOPMENTOFECONOMICLINKAGESFROMTHEMININGSECTORISESSENTIALTOPREVENTTHEDEVELOPMENTOF
AN@ENCLAVEMININGSECTOR&ORWARDANDlSCALLINKAGESARETHEMAINFOCUSFORTHESTATEWHILEATTENTION
MUSTALSOBEPAIDTOBACKWARDLINKAGESWHICHINCLUDESARANGEOFSERVICEPROVISIONSASWELLASDEVELOPING
LOCALMANUFACTURINGCAPABILITY4HUSTHECHAPTERPROVIDESFURTHERCONSIDERATIONSOFTHEEXISTINGLINKAGES
BETWEENMININGANDOTHERSECTORSOFTHEECONOMYANDRECOMMENDATIONSAREMADEFORHOWSUCHLINKAGES
MAYBEIMPROVED
Table 3.1 Comparison of prospective surface areas and gold production in 2012.
Prospective surface area
Country Gold production
APPROXIMATEKM
'HANA OZ
"URKINA&ASO OZ
'UINEA OZ
!PPROXIMATELYOZOFWHICHABOUTIS
Ethiopia
REPORTEDTOCOMEFROMARTISANALMINING
3OURCE2AW-ATERIALS'ROUP
-O-%THIOPIA
)TISALSOIMPORTANTTOKEEPINMINDTHATFEWEXPLORATIONPROJECTSACTUALLYLEADTOMINEDEVELOPMENT&OR
EXAMPLELOOKINGATMAJORMETALSOVERARECENT
YEARPERIODOUTOF GREENlELDDISCOVERIES
IN#ANADAREACHEDFEASIBILITYSTAGE&OR!USTRALIATHENUMBERSWEREOUTOFOR &ARFEWER
PROJECTSWOULDSURVIVEALLTHEWAYTOTHEMINECONSTRUCTIONSTAGE
'IVENFACTSABOVEANDTAKINGINTOACCOUNTTHEVERYFEWADVANCEDPROJECTSANDRELATIVELYFEWSERIOUS
GREENlELDPROJECTSIN%THIOPIATODAYEVENINTHEBESTCASEONLYAMODERATEINCREASEINNUMBEROFMINES
ANDPRODUCTIONISEXPECTEDOVERTHENEXTYEARS)NTHELONGERTERMHOWEVERTHECOMPARATIVELYLARGE
AREASWITHPROMISINGGEOLOGYCANLEADTOANUMBEROFNEWMINESANDEXTENSIONOFEXISTINGPROJECTSPROVIDED
THATEXPLORATIONACTIVITIESWILLCONTINUETOINTENSIFYINTHEFUTURE
4HREEDIFFERENTSCENARIOSTERMEDCONSERVATIVEPROBABLEANDPOSSIBLEAREGIVENIN4ABLE)TISEMPHASIZED
THATTHESCENARIOSREMAINSPECULATIVEASTHEREAREFEWADVANCEDPROJECTSPARAGRAPH ANDARANGEOFFACTORS
THATAREDIFlCULTTOPREDICTMAYDRIVEDEVELOPMENTTOWARDSEITHEROFTHETHREESCENARIOSEGGOVERNMENT
POLICYANDINPARTICULARCLARITYANDATTRACTIVENESSOFTHELICENSINGPROCEDURECOMMODITYPRICESGLOBAL
ECONOMICCLIMATETECHNICALISSUESPOLITICALRISKSSOCIALCONmICTSETC
Table 3.2. Proposed scenarios for mineral production over the next 20 years.
-IDROCOPERATIONS,EGA$EMBI CONTINUETOPRODUCEGOLDATABOUTOZYR
FORYEARS!FTERGOINGUNDERGROUND,EGA$EMBI
3AKAROPRODUCESOZYRFOR
Conservative ANOTHERYEARS
$UETOTHEMANY !RTISANALGOLDPRODUCTIONCONTINUESATCURRENTLEVELSTYR
POSSIBLERISKS 4HEONLYADVANCEDMETALSPROJECT.YOTAS4ULU+APIPREVIOUSLYBELIEVEDTOGOINTO
EXPLORATIONIN MININGINISNOTREALIZED
%THIOPIAISNOT 4ANTALITEPRODUCTIONREMAINSHALTED
INTENSIlED
!LLANA0OTASHWILLSTARTPRODUCINGBYMIDTOLATEBUTATHALFTHEPLANNEDRATE
-TYR DUETOUNFORESEENPRODUCTIONORLOGISTICALISSUES
-IDROCOPERATIONS,EGA$EMBI CONTINUETOPRODUCEGOLDATABOUTOZYRFOR
YEARS!FTERGOINGUNDERGROUND,EGA$EMBI
3AKAROWITHSOMERESOURCEEXTENSIONS
CONSIDEREDLIKELYPRODUCEOZYRFORANOTHERYEARS
Probable
!RTISANALGOLDPRODUCTIONCONTINUESATCURRENTLEVELSABOUTTYR
/NLYSMALL 4ULU+APIORANOTHERSMALLGOLDDEPOSITISIDENTIlEDSTARTSPRODUCINGOZA
INCREASEIN IN
MININGPRIMARILY /NEOTHERSMALLGOLDDEPOSITIDENTIlEDSTARTSPRODUCINGOZAIN
due to the
COMPARATIVELYFEW 4WOSMALLGOLDDEPOSITSAREIDENTIlEDSTARTPRODUCINGOZAEACHFROM
ADVANCEDPROJECTS 4ANTALITEOREPRODUCTIONRE
STARTSINABOUTTYRINACCORDANCEWITH
ANDLOWINTENSITY GOVERNMENTALPLANS ANDREMAINSATTHISLEVELASTHEDEPOSITISDEPLETEDANDNEW
OFEXPLORATION DEPOSITSAREIDENTIlED
!LLANASTARTSPRODUCINGANDEXPORTINGPOTASHASPLANNEDAT-TYRBYMIDTOLATE
!NOTHERSMALLERPOTASHOPERATIONSTARTSPRODUCINGINAT-TYR
2AW-ATERIALS'ROUP
28 FINAL REPORT
-IDROCOPERATIONS,EGA$EMBI CONTINUETOPRODUCEGOLDATABOUTOZYRFOR
YEARS!FTERGOINGUNDERGROUND,EGA$EMBI
3AKAROWITHSOMERESOURCEEXTENSIONS
CONSIDEREDLIKELYPRODUCEOZYRFORANOTHERYEARS
!RTISANALGOLDPRODUCTIONCONTINUESATCURRENTLEVELSABOUTTYR
4ULU+APIORANOTHERSMALLGOLDDEPOSITIDENTIlEDSTARTSPRODUCINGOZAIN
/NEOTHERSMALLGOLDDEPOSITISIDENTIlEDSTARTSPRODUCINGOZAEACHFROM
Possible
7ILLREQUIRE !LARGERGOLDDEPOSITISIDENTIlEDSTARTSPRODUCINGOZABY
VERYSTRONG 4WOSMALLGOLDDEPOSITSAREIDENTIlEDSTARTPRODUCINGOZAEACHFROM
INTENSIlCATION
OFEXPLORATION 4ANTALITEOREPRODUCTIONRE
STARTSINABOUTTYRINACCORDANCEWITH
ACTIVITIES GOVERNMENTALPLANS ANDREMAINSATTHISLEVELASTHEDEPOSITISDEPLETEDANDNEW
DEPOSITSAREIDENTIlED
!LLANASTARTSPRODUCINGANDEXPORTINGPOTASHASPLANNEDAT-TYRBYMIDTOLATE
!NOTHERSMALLERPOTASHOPERATIONSTARTSPRODUCINGINAT-TYRANDINCREASES
PRODUCTIONTO-TYRIN
!6-3DEPOSITISIDENTIlEDSTARTSPRODUCINGGOLDOZYR FROMAND
COPPERKTYR FROM
0RICESFORtantalumARESUBJECTTOSHARPCHANGESGIVENTHELIMITEDNUMBEROFSUPPLIERSINTHESECTOR4HEREFORE
CHANGESINONEMAJORPRODUCERCANCAUSESUBSTANTIALmUCTUATIONS7HILETHEAVERAGEFORTHEMETALOVER
THE
DECADEHASBEENAROUND53$KGSPIKESININCREASEDPRICESTONEARLY53$
KGFORASHORTPERIOD4HESESHORTPRICESPIKESAREUSUALLYASARESULTOFPANICBUYINGBYCONSUMERSWHEN
MINEPRODUCTIONISHALTEDORINVENTORYLEVELSAREPERCEIVEDTOBELOW(OWEVERASSOONASSUPPLYISRESTORED
THEPRICESRETURNTOTHEIRAVERAGELEVELS#HANGESINTHEDEMANDFORELECTRONICEQUIPMENTTHEMAINUSEFOR
TANTALUMWILLAFFECTPRICELEVELS0RICESFORTHENEXTTHREEYEARSAREFORECASTAT53$TO53$KG
CopperPRICESGENERALLYREmECTTHESTATEOFTHEGLOBALECONOMYWITHCOPPERPRICESRISINGINPERIODSOF
ECONOMICGROWTH)NRECENTYEARSGLOBALCOPPERDEMANDHASMAINLYBEENDRIVENBY#HINESEDEMANDAND
PRICEmUCTUATIONSOFTENOCCURINRESPECTTOCHANGESINTHEPERFORMANCEOFTHE#HINESEECONOMY)N
COPPERPRICESRECEDEDSOMEWHATFROMTHEIRPREVIOUSHIGHSINTHE53$TONANDTHEYCURRENTLYRESIDE
4HESCENARIOSPRESENTEDIN4ABLEREmECTTHEPRESENTLIMITEDDEVELOPMENTOFLARGEANDMEDIUMSCALE
MININGIN%THIOPIAWITH,EGA$EMBIBEINGTHEONLYCURRENTMINEINPRODUCTIONANDWITH!LLANA0OTASHAND
+ENTICHATANTALUM EXPECTEDTOSTARTPRODUCTIONINTHENEXTTWOYEARS4HEMAJORITYOFTHEOTHERPROJECTS
INCLUDEDINTHEPOSSIBLEANDPROBABLESCENARIOSARENOTEXPECTEDTOCOMEONLINEBEFOREMAKING
PRICEFORECASTSFORTHEIRMINERALPRODUCTIONOPENTOCONSIDERABLEUNCERTAINTYANDMARGINSOFERROR
Table 3.3. Estimation of economic impact (corporate tax and royalties) and employment based on development
scenarios.
%CONOMIC)MPACTMILLION53$ 2024
#ONSERVATIVE
0ROBABLE
0OSSIBLE
$IRECT%MPLOYMENT0OTENTIAL.UMBER
#ONSERVATIVE
0ROBABLE
0OSSIBLE
&IGURESHOWSTHEREVENUEFROMTHESALESOFTHEPROJECTSLISTEDIN4ABLE4HESHARPRISEINREVENUE
ISMAINLYLINKEDTOSTARTPRODUCTIONOFNEWGOLDPROJECTSWHILETHEFALLINREVENUEINISLINKED
TODEPLETIONOFRESOURCESAT-IDROCS,EGA$EMBIMINE!SNEWPRODUCTIONCOMESONLINEFORGOLDIN
REVENUESPICKUPAGAIN
)NAPROBABLESCENARIOITISPROPOSEDTHATTHEMINERALSECTORCOULDGENERATEREVENUEUPTO53$BILLION
BYANDINANOPTIMISTICSCENARIOSOME53$MILLIONSEEGRAPHABOVE )NTHEPROBABLESCENARIO
THEREVENUECORRESPONDSTOABOUTOFTHECURRENTEXPORTVALUEOFGOLDIN4ANZANIA53$IN
ANEMERGINGMININGECONOMYDOMINATEDBYGOLDPRODUCTION)N'HANAWHICHHASALONGMININGHISTORY
WHEREGOLDACCOUNTSFORMORETHANOFTHETOTALMINEDVALUEGOLDEXPORTSWEREWORTHALMOST53$
BILLIONIN
3000
2500
2000
USD Millions
1500
1000
500
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
)NTOTALSALESFROMTHEMININGSECTORIN!FRICAWHEREVALUEDAT53$BILLIONTHISDOESNOTINCLUDE
MININGFORINDUSTRIALMINERALS REPRESENTINGNEARLYOFTHECONTINENTS'ROSS0RODUCT)N!FRICAMETAL
MININGANDCOALMININGAREABOUTTHESAMEMAGNITUDEINTERMSOFVALUE!MONGTHEMETALSGOLDCOPPERAND
IRONOREMAKEUPMORETHANHALFOFTHEVALUE)FONEASSUMESTHATTHEGEOLOGYOF%THIOPIAISASPROSPECTIVE
ASTHE!FRICANhAVERAGEvTHENTHESENUMBERSWOULDIMPLYTHATTHEPRESENTDAYECONOMICPOTENTIALFORTHE
DEVELOPMENTOFTHE%THIOPIANMININGSECTORWOULDBETOACHIEVEANANNUALTURNOVEROFNEARLY53$BILLION
WITH%THIOPIACOVERINGKMÜOF!FRICASSURFACE
30 FINAL REPORT
3.4. Current and projected economic linkages
%XPLORATIONACTIVITIESMAYGENERATEBACKWARDLINKAGESTHROUGHTHENEEDFORLOGISTICALSERVICESLABORATORYAND
TESTINGSERVICESANDOTHERSUPPLEMENTARYSERVICES4ELECOMMUNICATIONSANDLOGISTICSARETHELARGERSECTORS
THATCANBENElTFROMDEVELOPMENTOFBACKWARDLINKAGES(OWEVERRESTRICTIONSONFOREIGNPARTICIPATIONIN
TELECOMMUNICATIONANDLOGISTICSWITHOUTTHEEXISTENCEOFCOMPETITIVENATIONALALTERNATIVESEFFECTIVELYMEANS
THATTHEFULLPOTENTIALOFCREATINGBACKWARDLINKAGESINTHISREGARDISNOTBEINGACHIEVED/THERSERVICES
SUCHASTHEEXISTENCEOFNATIONALLYBASEDLABORATORYANDTESTINGPROVISIONOFSECURITYCATERINGACCOUNTING
AND)4SERVICESCANALSOBEEXPANDED%FFECTIVEPARTICIPATIONBYTHEPRIVATESECTORCANCONTRIBUTETOCOST
REDUCTIONSINPROVIDINGTHESESERVICESWHICHINTURNCONTRIBUTESTOAMOREATTRACTIVEINVESTMENTENVIRONMENT
FORMININGANDEXPLORATIONlRMS(IGHERPARTICIPATIONRATESCANLEADTOINCREASEDEMPLOYMENTANDINCOME
OPPORTUNITIES
#URRENTLYTHECONTRIBUTIONOFTHEMININGSECTORTOEXPORTINCOMESISLIMITEDTOREVENUESBEINGGENERATEDFROM
GOLDANDGEMSTONEEXPORTSWITHPOTASHEXPORTSEXPECTEDTOCOMEONLINEINTHENEXTTWOYEARS0RODUCTION
OFINDUSTRIALMINERALSISLIMITEDTODOMESTICCONSUMPTION
4HE,EGA$EMBIMINEOFFERSLOCALEMPLOYMENTANDALSOGENERATESSIGNIlCANTSECONDARYANDASSOCIATED
EMPLOYMENT/VERALLFORWARDLINKAGESFROMGOLDARELIMITEDASNEARLYOFTHEVALUEISCREATEDATTHE
MINESTAGEANDNOTFROMBENElCIATION"ACKWARDLINKAGESINTERMSOFINPUTSINTOMININGOPERATIONSSUCH
ASSERVICEPROVISIONCHEMICALINPUTSMACHINERYETC HAVEGREATERPOTENTIAL&OREXAMPLEIN'HANATHE
GOLDMININGSECTORCONTRIBUTESAROUNDTO'$0EMPLOYINGNEARLYPEOPLE4HECOUNTRYSCAPITAL
EXPENDITUREBYTHEGOLDSECTORlRMSWAS53$MILLIONWITHLOCALPURCHASESEXCLUDINGFUELPOWER WERE
53$MILLIONIN)NADDITIONVOLUNTARYCONTRIBUTIONSTOWARDSCOMMUNITYDEVELOPMENTPROJECTSBY
JUSTONEOFTHEGOLDMININGlRMSAMOUNTEDTO53$MILLIONINALONE-ORRISETAL
4ANTALUMEXPORTSFROM%THIOPIAHAVEBEENSPORADICWITHFEWLINKAGESCURRENTLYBEINGEVIDENT4ANTALUM
ISUSEDINCHEMICALPROCESSEQUIPMENTCAPACITORSNUCLEARREACTORSANDAIRCRAFTPARTSANDTHEREFOREIS
UNLIKELYTOSERVEASARAWMATERIALFORTHEDOMESTICMANUFACTURING&URTHERTHEPRODUCTIONAT+ENTICHAIS
ASSOCIATEDWITHCHALLENGESWITHREGARDSTOPROCESSINGASTHEPRODUCTHASELEVATEDLEVELSOFRADIOACTIVITY
(ENCEINTHISCASEINITIATIVESRELATEDTOIMPROVETHEPROCESSINGANDTHEREBYADDINGVALUETOTHEPRODUCT
WOULDBEMOSTBENElCIALANDITWOULDRESULTINHIGHEREXPORTREVENUES!SSESSMENTSNEEDTOBECONDUCTED
WEIGHINGTHECOSTSANDBENElTSFROMCONTINUINGTOEXPORTTANTALITEORETOINITIATINGABENElCIATIONEXERCISE
THATCANBECOSTLY
0OTASHMININGWITHPOTASHBEINGANINTERNATIONALLYTRADEDCOMMODITYOFFERSSUBSTANTIALOPPORTUNITIES
FORECONOMICLINKAGES)THASAPOTENTIALTOCONTRIBUTESUBSTANTIALLYTOTHEDOMESTICAGRICULTURALSECTOR)N
TERMSOFFORWARDLINKAGESTHE!LLANA0OTASHPROJECTWILLCONTRIBUTETOTHElSCALLINKAGESTOTHEECONOMY
THROUGHEXPORTANDTAXREVENUES%MPLOYMENTCREATIONISEXPECTEDTOBEAROUNDJOBSONCETHEFACILITY
ISINPRODUCTIONWITHEMPHASISBEINGPLACEONRECRUITINGLOCALLY(OWEVERFORSOMESKILLEDJOBSEXPATRIATE
LABOURISREQUIREDGIVENTHELACKOFCERTIlCATIONOFDOMESTICLABOUR4HISFOLLOWSASINTERNATIONALOPERATORS
PARTICULARLYTHOSEHEADQUARTEREDIN.ORTH!MERICAAND%UROPEAREREQUIREDTOENSURETHATMINESITE
PERSONALHAVEINTERNATIONALLYACCEPTABLEQUALIlCATIONSWHICHARENOTAVAILABLEFORDOMESTICLABOUR
-ANYOFTHEINDUSTRIALMINERALSANDCOAL AVAILABLEIN%THIOPIAAREIMPORTEDANDTHEREISCERTAINLYSCOPEFOR
THESECTORTOGROWPRIMARILYTOSERVETHEDOMESTICMARKET/FTHEINDUSTRIALMINERALSTHATAREIMPORTEDTHEY
ARELARGELYSOURCEDFROM#HINAANDTHE%UROPEAN5NIONWHILECOALISIMPORTEDFROMTHE%UROPEAN5NION
ASWELL5KRAINE)NTHEPASTATTEMPTSTOSUPPLYTHEDOMESTICMARKETWITHINDUSTRIALMINERALSHAVEFAILED
MAINLYDUETOINCONSISTENTSUPPLYANDTHELACKOFPROPERSPECIlCATIONSFORTHEDIFFERENTPRODUCT-ORGAN
32 FINAL REPORT
-ARBLEEXPORTSGENERATESOMESMALLREVENUESONLYANDTHEACTIVITIESMAYBENElTFROMEFFORTSTOINCREASE
THESCALEOFPRODUCTIONANDTOGENERATEBETTERLINKAGESWITHOTHERACTIVITIES-OSTOFTHEMARBLEISPRODUCED
BYONEDOMINANTlRM.ATIONAL-INING#ORPORATIONWHICHOWNTHE!WASH-ARBLEPROCESSINGPLANT$ALLETI
-ARBLE1UARRYAND(ARAR1UARRY ANDTHETOTALVALUEOFPRODUCTIONWASSOME53$IN-ARBLE
ISALSOUSEDINTHECONSTRUCTIONSECTORWHEREDOMESTICCONSUMPTIONARELIKELYTOINCREASEWITHTHECONTINUED
INVESTMENTSINTHATSECTOR7HILEMARBLEPRODUCTIONBOTHFORDOMESTICCONSUMPTIONANDEXPORTS CANBE
INCREASEDTHECURRENTSTRUCTUREONEDOMINANTPRODUCERNUMEROUSSMALLSCALEPRODUCERS OFPRODUCTION
MAYNEEDTOSHIFTTOWARDSAGREATERNUMBEROFLARGEANDMEDIUMSCALEPRODUCERSFORGREATEREMPLOYMENT
ANDINDUSTRIALLINKAGESTOBEREALIZED
4HE#EMENT)NDUSTRYIN%THIOPIAHASEXPANDEDRAPIDLYINTHEPASTlVEYEARSBUILDINGMAINLYONRAWMATERIALS
SOURCEDFROMWITHINTHECOUNTRY4HE'40SAIMISTORAISETHECOUNTRYSTOTALCURRENTPRODUCTIONCAPACITYTO
MILLIONTONSPERANNUMBY4HEREVIEWSOFTHE'40REPORTSTHETOTALCURRENTCAPACITY
OFTHESECTORTOBEATMILLIONTONS4OSUPPORTTHEDOMESTICINDUSTRY%THIOPIABANNEDCEMENTIMPORTS
IN-ARCH
4HECURRENTPERCAPITACEMENTCONSUMPTIONISESTIMATEDATKGYEARANDTHEGOVERNMENTWISHESTO
INCREASETHISTOKGYRBY4HISISINLINEWITHTHEHEAVYINFRASTRUCTUREINVESTMENTSBEINGMADEBY
THEGOVERNMENTINCLUDINGTHECONSTRUCTIONOFTHE-ILLENNIUM2ENAISSANCE$AM ASWELLASTHEINCREASE
INCONSTRUCTIONACTIVITIESWILLINCREASETHEDEMANDFORCEMENTINTHENEXTlVEYEARS(OWEVERWHILETHIS
lGUREISSTILLBELOWTHEGLOBALAVERAGEOFKGYRITISDOUBTFULWHETHERTHE%THIOPIANECONOMYREALLYCAN
ABSORBAPRODUCTIONOFKGYR4OILLUSTRATETHISITMAYBEOBSERVEDTHATWHILSTTHE#HINESEECONOMY
SUPPORTSAPERCAPITACEMENTCONSUMPTIONOFKGYRIN)NDIATHISNUMBERISKGYR&URTHERTHE
CEMENTPRODUCTIONIN*ULYWASREPORTEDATMILLIONTONSWHILEDEMANDWASREPORTEDATMILLION
TONS%VENWITHEXPECTATIONSOFDEMANDPICKINGUPINTHENEXTFEWYEARSTHEINDUSTRYFACESASERIOUSRISK
OFOVER
SUPPLYWHICHWILLFORCESOMEACTORSOUTOFTHESECTOR
4HE'40TARGETSTHESETTINGUPOFCAUSTICSODAANDSODAASHINDUSTRIESUSINGLOCALLYAVAILABLERAWMATERIAL
4HETARGETSINCLUDEDINCLUDEESTABLISHINGACAUSTICSODAMANUFACTURINGPLANTWITHTHECAPACITYOF
TONSPERYEARASWELLASASODAASHPLANTWITHTHECAPACITYTOPRODUCETONSPERYEAR
%THIOPIASIMPORTANTPRODUCERSANDSTAKEHOLDERSINVOLVEDINTHECAUSTICSODAANDSODAASHPRODUCTIONINCLUDE
!BIJATA3ODA!SHCOANDTHE.ATIONAL-INING#ORPORATIONANAFlLIATEOFTHE-IDROC'ROUP #URRENTLYTHERE
ISALSOONESTATEOWNEDCAUSTICSODAFACTORYOPERATINGIN:EWAY/ROMIAEMPLOYINGPEOPLE
4HE'40TARGETSFORTHE-ETALAND%NGINEERING)NDUSTRYINCLUDETHEENHANCEMENTOFTHEINDUSTRYSPRODUCTION
IMPROVEDQUALITYANDPRODUCTIVITYFOCUSONIMPORTSUBSTITUTIONANDTHEBUILDINGOFCAPACITYTOSUPPORT
OTHERMANUFACTURINGUNITS)NTERMSOFTARGETSTHISTRANSLATESINTOINCREASINGTHEGROSSVALUEOFDOMESTIC
PRODUCTSOFTHEINDUSTRYTOOVER%4"BILLIONRAISINGTHECAPACITYUTILIZINGOFTHEINDUSTRYTOAND
IMPROVEANNUALPERCAPITAMETALCONSUMPTIONTOSOMEKGBYTHEENDOFTHEPROGRAM4ARGETSALSOINCLUDE
IMPROVINGTHEPRODUCTIONANDTECHNOLOGICALCAPACITYTOBEABLETOPRODUCESPAREPARTSANDCOMPONENTS
7HILETHEGOALOFTHE'40ISTOINCREASEIMPORTSUBSTITUTIONFORINPUTSINTOTHEMETALANDENGINEERINGINDUSTRY
ANDEFFORTSAREBEINGMADETOWARDSMANUFACTURINGSPAREPARTSDOMESTICALLYTHEREISSTILLONLYLIMITEDLOCAL
CAPABILITYFORMETALSMELTINGANDRElNINGCAPACITY(OWEVERIN/CTOBERTHECOUNTRYEXPORTEDTONS
OFSTEELMANUFACTUREDFROMIMPORTEDSCRAPTHElRSTINTHECOUNTRYSHISTORY
Box 1: Macroeconomic contributions of mining to low and middle Income economies
In terms of Foreign Direct Investment (FDI) mining investments can in some cases account for as
MUCHAS
OFTOTAL&$)mOWSINLOWANDMIDDLEINCOMEECONOMIESESPECIALLYINCASESWHERETHE
COUNTRYINQUESTIONISNOTSEENASBEINGANOTHERWISEATTRACTIVEDESTINATIONSFORINTERNATIONALCAPITAL
-INERALPRODUCTIONMINING ANDMINERALPROCESSINGSMELTINGANDRElNING MAYBELOCATEDINDIFFERENT
COUNTRIESTHISASPROCESSINGTOAGREATEREXTENTMAYBENElTFROMECONOMIESOFSCALEnTHUSTHEREARE
MANYFEWERPROCESSINGPLANTSSMELTERSTHANTHEREAREMINESINTHEWORLD
BUTALSOASSOMETYPEOF
PROCESSINGREQUIRESHIGHLEVELSOFTECHNOLOGYANDCAPITALANDAVAILABILITYOFENERGYWHICHMAYNOTBE
READILYAVAILABLEINTHECOUNTRYWHERETHEMININGISDONE&URTHERPROCESSINGFACILITIESAREOFTENLOCALIZED
INMORECENTRALIZEDLOCATIONSAGAINDUETOTHEAVAILABILITYOFTRANSPORTMARKETSCAPITALANDOVERALL
BUSINESSENVIRONMENTS4HUSTHECONTRIBUTIONOFMININGTOTHENATIONALINCOMEINLOWANDMIDDLEINCOME
COUNTRIESMAYBECOMELIMITEDTOEXTRACTIVEACTIVITIESANDINSUCHCASESTHECONTRIBUTIONMAYBELESS
SAYINTHETOOF'$0RANGE/VERALLLARGESCALEMININGTENDSTOGENERATECOMPARATIVELYLOWLEVELS
OFDIRECTEMPLOYMENTANDMAYOFTENACCOUNTFORNOMORETHANFROMTOOFTOTALNATIONALEMPLOYMENT
INLOWINCOMECOUNTRIES-INERALEXPORTSFORSUCHCOUNTRIESCANBESUBSTANTIALACCOUNTINGFROMTO
OFALLEXPORTSPARTICULARLYINLOWINCOMEAGRARIANECONOMIES3TATEREVENUESRECEIVEDFROMTHE
MININGSECTORTHROUGHDIRECTANDINDIRECTTAXATIONCANACCOUNTFROMTOOFTOTALREVENUES4HISIS
APARTICULARLYIMPORTANTCONTRIBUTIONINLOWANDMIDDLEINCOMECOUNTRIESTHATOTHERWISEHAVELIMITEDTAX
RAISINGCAPACITY
3OURCE "ASEDON)#-- @4HEROLEOFMININGINNATIONALECONOMIES
3.5. Recommendations
%THIOPIANPOLICYAIMSTOWARDSDEVELOPINGANESSENTIALLYNEWECONOMICSECTORTHATISTHELARGE
SCALEMINERAL
SECTOR4HELEADTIMESFROMEXPLORATIONTOALARGE
SCALEMINEBEINGCOMMISSIONEDARELONGOFTEN
YEARS ANDTHUSASIMILARLYLONG
TERMPERSPECTIVEISNECESSARYWHENSUPPORTINGANDMANAGINGTHESECTOR
/URPROJECTIONSSUGGESTTHATTHERAPIDDEVELOPMENTENVISIONEDMAYNOTBEREALIZEDANDTHEREFORETHE
DEVELOPMENTOFTHEMINERALSECTORCOULDBENElTFROMADOPTINGALONGERTERMVIEWBASEDONASLOWERGROWTH
RATE!LONGTERMVIEWNEEDSINGENERALTOBEBASEDONTHESECTORSPARTICULARCHARACTERISTICSSUCHASTHE
INHERENTGEOLOGICALANDlNANCIALUNCERTAINTIESTHEINDUSTRYSCYCLICALNATUREANDTECHNICALREQUIREMENTS
NEEDEDFORADVANCEDEXPLORATIONPROJECTSTOBECOMEACTUALPRODUCINGMINES
7HENDEVELOPINGTHISNEWSECTORITNEEDSTOBECONSIDEREDHOWTOBESTESTABLISHECONOMICLINKAGESWITH
OTHERNEWANDEXISTINGSECTORS4HElNDINGSOFTHISREPORTSUGGESTTHATARANGEOFAPPROACHESANDACTIVITIES
WILLBENEEDEDANDTHESEARELISTEDBELOW
)TISNECESSARYTOASSESSTHENEEDSOFTHEDOMESTICECONOMYFORINDUSTRIALMINERALSTHATCANBEGENERATED
WITHINCOUNTRY&OREXAMPLERECENTINCREASESINCEMENTPRODUCTIONCAPACITYISTENDINGTOWARDSOVERSUPPLY
FORTHEDOMESTICMARKET/VERALL%THIOPIASABSORPTIONCAPACITYNEEDSTOBEASSESSEDBEFOREMOREPROTECTION
SUCHASTHEBANONCEMENTIMPORTS ISPROVIDEDTOTHESECTOR
4HEDEVELOPMENTOFINDUSTRIALMINERALMININGWOULDBENElTFROMADETAILEDMARKETANALYSIS)NTHElRST
INSTANCEPRODUCTIONWOULDBEAIMEDFORTHEDOMESTICMARKETTOSUBSTITUTEFORIMPORTSANDSUCHANANALYSIS
SHOULDESTABLISHQUANTITIESANDQUALITIESDETAILEDSPECIlCATIONS OFDIFFERENTINDUSTRIALMINERALSREQUIRED
&OLLOWINGONPREVIOUSSTUDIESOFINDUSTRIALMINERALSDEPOSITSUNDERTAKENBYTHE'3%ADDITIONALSTUDIES
WOULDTHENBEREQUIREDTOESTABLISHWHETHERTHEDEPOSITSTHATHAVEBEENIDENTIlEDCANMEETTHEQUALITY
REQUIREMENTSOFTHEMARKET
34 FINAL REPORT
/NEOFTHENATURALLINKAGESFROMAMININGSECTORISTOWARDSTHEBENElCIATIONOFTHEMINERALRAWMATERIAL
PRODUCEDINTHECOUNTRY!LTHOUGHTHEREISINDICATEDGEOLOGICALPOTENTIALFORBASEMETALSIN%THIOPIASUCH
MINESWILLONLYBEESTABLISHEDINTHELONGERTERMPERSPECTIVE!TTHISTIMETHUS%THIOPIASMETALAND
ENGINEERINGINDUSTRYREMAINSSMALLANDRELIANTONDOMESTICSCRAPANDIMPORTEDRAWMATERIALS%FFORTSNEED
TOBEMADETOALIGNTHEAIMSOFTHEENGINEERINGSECTORWITHTHATOFTHEIDENTIlEDPOTENTIALMINERALS
0OLICIESTOINCREASELINKAGESCANBEAIMEDATANUMBEROFDIFFERENTLEVELS4HESEARESUMMARISEDINTABLE
-ACROPOLICIESTHATPROMOTEPROPERTYRIGHTSANDPROVIDEABUSINESSFRIENDLYENVIRONMENTAREWELCOME
4ARGETEDPOLICIESFORTHEMINERALSECTORCANDIFFERONTHEBASISOFTHEMINERALPRODUCEDFOREXAMPLE
TARGETEDPOLICIESFORGOLDWILLDIFFERFROMTHOSEFORIRONORE!VALUECHAINANALYSISFOREACHMINERALCOULDBE
AUSEFULTOOLINDETERMININGWHERETHEINVESTMENTREDUCINGCOSTSAREINCURREDANDWHERETHELARGESTPROlT
MARGINISGENERATED!VALUECHAINANALYSISWILLALSOALLOWFORSTRATEGIESFORBETTERTARGETEDBACKWARDAND
FORWARDLINKAGESTOBEDEVELOPED/NAlRMLEVELTHENATUREOFTHELEADlRMCANAFFECTTHELINKAGESTHAT
AREGENERATEDANDlRMSWHICHASSISTINLOCALCAPACITYDEVELOPMENTSHOULDBEENCOURAGED
Table 3.5. Macro, meso and micro policies to promote production linkages to the resource sector.
0ROPERTYRIGHTSSTABILITYEXCHANGERATESKILLSAND.ATIONAL3YSTEMOF
-ACRO0OLICIES
)NNOVATIONINFRASTRUCTUREINNOVATION
"ASEDONANINFORMEDANALYSISOFDIFFERENTCOMMODITIESSECTORSANDTHEIR
LINKAGESTOIDENTIFYINGFEASIBLEBACKWARDANDFORWARDLINKAGESTHROUGHTHE
INVOLVEMENTOFVALUECHAINRESTRUCTURINGCONSORTIUMINVOLVINGKEYPLAYERSIN
THESECTOR
-ESOTARGETING
!NALYSISOFGLOBALVALUECHAINSINEACHCOMMODITIESSECTORTODEVELOPSTRATEGY
POLICIES
TOSELECTIVELYSOURCEKEYTECHNOLOGIESANDTOENGAGEWITHTHEMOSTCOOPERATIVE
GLOBALlRMSWHOSESTRATEGIESLENDTHEMSELVESTOLINKAGEDEVELOPMENT
3ECTORSPECIlCSUPPORTFORKEYMARKETFAILURESNOTABLYWITHREGARDTO
CAPABILITIESANDSKILLSTHE.ATIONAL3YSTEMOF)NNOVATIONANDINFRASTRUCTURE
-ICRO
lRMLEVEL ,EADlRMSTRATEGIESSUPPLYCHAINANDCUSTOMERDEVELOPMENTSTRATEGIESlRM
POLICIES LEVELUPGRADING
3OURCE -ORRISETAL
4HEMININGSECTORCANCONTRIBUTETOWARDSADIVERSIlEDECONOMYIFPOLICIESAREPUTINTOPLACENOWTOENSURE
ITDOESNOTBECOMEANENCLAVESECTOR3UCHPOLICIESNEEDTOFOCUSONDEVELOPINGSKILLSBOTHENTREPRENEURIAL
ANDLABOURCAPACITY THATSERVEASSUPPORTINDUSTRIESTOTHEMININGSECTOR4HESECANINCLUDEDEVELOPING
LOGISTICALSUPPORT)4SKILLSPROVISIONOFSERVICESSUCHASSECURITYANDCATERING%NGINEERINGSKILLSCANBE
DEVELOPEDTOSERVICETHEMACHINERYATOPERATINGMINES%FFORTSCANBEMADETOMANUFACTUREINPUTSFOR
THEMININGOPERATIONSTHEMSELVESSTARTINGWITHLOWTECHNOLOGYPRODUCTSSUCHASPIPESMOVINGTOHIGHER
TECHNOLOGYPRODUCTSASEXPERTISEDEVELOP 3KILLSDEVELOPEDINSUPPORTINGTHEMININGSECTORCANALSOBE
TRANSFERREDTOOTHERSECTORS&OREXAMPLETHECAPACITYTOSERVICEHEAVYMACHINERYFORTHEMININGSECTOR
CANBEUTILISEDFORTHECONSTRUCTIONSECTORANDLARGESCALEAGRICULTURALMACHINERY#APACITYDEVELOPEDBY
THEPROVISIONOF)4SERVICESCANBEPROVIDEDTOOTHERSECTORSASWELL
36 FINAL REPORT
GEOLOGISTSANDSURVEYORS/THERQUALIlEDLABOURWOULDINCLUDEFOREXAMPLEVARIOUSTYPESOFTECHNICIANS
DRILLERSBLASTERSHEAVYEQUIPMENTOPERATORSHEAVYVEHICLEOPERATORSETC3EVERALJOBQUALIlCATIONSNOT
SPECIlCTOMININGWILLALSOBEREQUIREDSUCHASACCOUNTANTS)4STAFFCIVILENGINEERSHUMANRESOURCES
PERSONNELENVIRONMENTALEXPERTSELECTRICIANSWELDERSETC
(IGHEREDUCATIONOFDIRECTRELEVANCETOTHEMINERALSECTORISHOWEVERLIMITEDTOPROGRAMSIN%ARTH3CIENCE
OR'EOLOGYGIVENATUNIVERSITIESAND-INING%NGINEERINGAND-ETALLURGYATUNIVERSITYEACH4HEREARE
ALSOPROGRAMSIN'EOMATIC%NGINEERINGUNIVERSITY AND3URVEYING4ECHNOLOGYUNIVERSITIES
Table 4.1. Number of students enrolled in university programs of relevance to the mineral sector year
1-year 4 in the academic year 2011-2012.
Program Male Female Total
%ARTH3CIENCE'EOLOGY
'EOMATICENGINEERING
3URVEYINGTECHNOLOGY
-INING%NGINEERING
-ETALLURGY
Total
$ATASOURCE-O%%DUCATIONSTATISTICALABSTRACT
ASREFERREDTOBY#ATALYSTTO$EVELOPMENT
4HEREISSOMEGENDERDISPARITYWITHOFTHESTUDENTSBEINGFEMALE4HEREISANAPPARENTPOSITIVETREND
OFINCREASINGFEMALEENROLMENTINPROGRAMSOFRELEVANCETOTHEMINERALSECTORFROMINYEARTO
INYEAR4ABLE (OWEVERITISNOTKNOWNWHETHERTHISISDUETOANACTUALINCREASEDFEMALEENROLMENT
ORIFFEMALESTUDENTSHAVEAHIGHERTENDENCYTODROPOUTOFUNIVERSITY4HETOTALSHAREOFFEMALESTUDENTS
ISSOMEWHATLOWERTHANNATIONALUNIVERSITYTOTALOF!SCANBESEENIN4ABLETHEGENDER
DISPARITYISTHELOWESTIN%ARTH3CIENCE'EOLOGY
4HEMAJORITYOFTHESTUDENTSAREENROLLEDIN%ARTH3CIENCE'EOLOGYWITHATOTALOFALMOSTSTUDENTS
4ABLE WHICHGIVESANAVERAGEOFSTUDENTSYEAR!DOPTINGOVER
ALLUNIVERSITYGRADUATIONRATEOF
ABOUTBASEDONDATAIN#ATALYSTTO$EVELOPMENT4ABLE WOULDGIVEGEOLOGYGRADUATES
YEARANDMANYOFTHESEMAYCHOOSETOWORKINOTHERSECTORSTHANEXPLORATIONANDMINING4HUSTHENUMBER
OFUNIVERSITYGEOLOGYGRADUATESWOULDLIKELYNEEDTOINCREASETOMEETTHEMINERALSECTORDEMANDS
4HEUNIVERSITIESAREFACINGSEVERALPROBLEMSRESULTINGINTHATTHEQUALITYOFTHEEDUCATIONISVERYLOW!CCORDING
TOTHE-O%!NNUALSTATISTICALABSTRACT
THEREISATOTALOFACADEMICSTAFFATDEPARTMENTS
OFRELEVANCETOTHEMINERALSECTOR4HISISDEEMEDTOBESOMEWHATLOWBUTMOREORLESSADEQUATELOOKING
ATTHEOVER
ALLNUMBEROFSTUDENTS(OWEVERTHEREARELARGEDIFFERENCESBETWEENTHEUNIVERSITIESWITH
STUDENTTEACHERRATIOSRANGINGFROMABOUTTOWITHMANYGEOLOGYDEPARTMENTSBEINGUNDERSTAFFED
&URTHERMORETHELEVELOFQUALIlCATIONOFTHESTAFFISOVER
ALLLOWWITHONLYBEING0H$HOLDING-3C
DEGREESWHILETHEMAJORITYOFHOLDABACHELORSDEGREE/NLYOFTHEACADEMICSTAFFAREFEMALE
)NTERVIEWSWITHTHEINDUSTRYUNDERTAKENWITHINTHISPROJECTANDINFORMATIONRECEIVEDBYTHE!!5#ATALYSTTO
$EVELOPMENT INDICATETHATSTUDENTSAREINGENERALLYPOORLYTRAINEDTOTHEDEGREETHATMANYCANNOT
IDENTIFYDIFFERENTROCKTYPES
TVET
!NEW46%4STRATEGYWASADOPTEDBY'O%INDESIGNEDTOBEOUTCOMEBASEDANDDEMAND
DRIVEN
!FTERSECONDARYEDUCATION'RADES
OFTHESTUDENTSTHATCONTINUESTUDYINGAREEXPECTEDTOJOIN
46%4INSTITUTIONSANDAREEXPECTEDTOJOINHIGHEREDUCATIONINSTITUTIONS)NSOME
STUDENTSENROLLEDAT46%4INSTITUTIONSANDOFTHESEWEREFEMALE!MONG46%4TRAINERSHOWEVERONLY
SOME
AREFEMALE
46%4INSTITUTIONSOFFERTRAININGATlVELEVELSWHERE,EVEL6WOULDPRODUCEMINERALSECTORPROFESSIONALSSUCH
ASTECHNICIANSINMININGMINERALPROCESSINGANDGEOLOGYAND,EVEL)))
)6WOULDOFFERMINERALSECTORSPECIlC
TRAININGINFOREXAMPLEDRILLINGSURVEYINGMINERALPROCESSINGEQUIPMENTOPERATIONETC(OWEVERASYET
NEEDSOCCUPATIONALSTANDARDSAND46%4CURRICULASPECIlCTOTHEMINERALSECTORHAVENOTBEENDElNED
WHILE'O%PLANSTOEXPAND46%4TOINCLUDEMINERALSECTORSPECIlCPROFESSIONS
38 FINAL REPORT
4.3. Recommendations
!NIMPROVEMENTOFTHEQUALITYOFEDUCATIONATHIGHERINSTITUTIONSANDDEVELOPMENTOF46%4TRAININGWOULD
ASSISTINATTRACTINGINVESTMENTINEXPLORATIONANDITWOULDALSOLEADTO%THIOPIABENElTINGBETTERFROMA
POTENTIALLYGROWINGMINERALINDUSTRYTHROUGHINCREASEDLOCALEMPLOYMENT)NCREASEDEFFORTSINTHESEAREAS
INITIATEDTODAYWOULDBEWELLTIMEDASTHEMININGSECTORISSTILLINITSINFANCY.EVERTHELESSEXPLORATIONSKILLS
AREIMMEDIATELYREQUIREDANDNEEDSINTHISAREAAREEXPECTEDTOGROWINTHEFUTUREWHILEANINCREASED
REQUIREMENTFORPROFESSIONALSPECIALIZEDINMININGMININGENGINEERSETC ISMORELIKELYEXPECTEDWITHIN
SOME
YEARS
46%4CURRICULAAREDEVELOPEDONTHEBASISOFOCCUPATIONALSTANDARDSANDACCORDINGTOTHE46%4STRATEGY
THEVARIOUSMINISTRIESARERESPONSIBLEFORSETTINGTHESESTANDARDS!PARTFROMDEVELOPINGOCCUPATIONAL
STANDARDSITISPROPOSEDTHAT-O-WOULDBEINVOLVEDINTRAININGDEVELOPMENTTHROUGHTHEMONITORINGAND
ASSESSMENTOFTHEREQUIREMENTSOFTHEINDUSTRYSOTHATREQUIREDQUALIlCATIONSANDNUMBERSOFSTUDENTSARE
ALIGNEDWITHFUTUREINDUSTRYDEMAND
4HE'3%ANDTHEMINERALSECTORINDUSTRYHOLDAMPLEKNOWLEDGEINTHEAREASOFEXPLORATIONANDMINING
%DUCATIONTRAININGOFMINERALSECTORPROFESSIONALCOULDBENElTGREATLYFROMCOLLABORATIONBETWEENUNIVERSITIES
AND46%4SANDTHE'3%ANDTHENEWLYESTABLISHEDMINERALINDUSTRYBUSINESSORGANIZATIONSEE#HAPTER
%THIOPIAHASAVERYINTERESTINGGEOLOGYWITHROCKSRANGINGINAGEFROM0RECAMBRIANTOVERYYOUNGVOLCANIC
ROCKSANDON
GOINGGEOLOGICALPROCESSESINTHERIFTVALLEY4HISGEOLOGICALENDOWMENTISOFINTERESTTORESEARCH
GROUPSGLOBALLYANDCOULDPROVIDEAPOSSIBILITYFORJOINTRESEARCHPROGRAMMESWHEREEDUCATIONALSUPPORT
FROMINTERNATIONALUNIVERSITIESCOULDBEINCLUDED
34!+%(/,$%2/6%26)%7
5.1. Stakeholders and key sector involvement
&EDERALGOVERNMENTALINVOLVEMENTINTHEMINERALSECTORISCENTREDTOTHE-O-ANDTHE'3%SEENEXT
CHAPTER -INISTRYOF&INANCEAND%CONOMIC$EVELOPMENT-O&%$ HASINTERESTINTHESECTORRELATEDTO
ITSCONTROLOFTHEBUDGETPROCESSANDPLANNINGPROCESSITSINTERESTINANDADMINISTRATIONOFREVENUES
TAXESROYALTIESANDFOREIGNEXCHANGEEARNINGSFROMTHESECTORANDITSCONTROLOFTHElNANCIALASPECTSOF
DEVELOPMENTPROGRAMSSUPPORTBYDEVELOPMENTPARTNERS4HE.ATIONAL"ANKOF%THIOPIAISINVOLVEDTHROUGH
THEGOLD
BUYINGPOLICYWHEREGOLDPRODUCEDBYARTISANALANDSMALL
SCALEMINERSISBOUGHTBYTHEBANK
4HE%NVIRONMENTAL0ROTECTION!UTHORITY%0! USEDTOBERESPONSIBLEFORTHE%)!PROCESSBUTHASSECONDED
ENVIRONMENTALSUPERVISIONANDCONTROLOFTHEMINERALSECTORTOTHE-O-/THERMINISTRIESORGOVERNMENTAL
OFlCESARELITTLEINVOLVEDANDSEEMTOHAVEWEAKKNOWLEDGEOFTHESECTOR
40 FINAL REPORT
7ITHINTHEINDUSTRIALMINERALSSECTORTHEREAREANUMBEROFOPERATORSMOSTOFTHEMDOMESTICANDWITHTHE
MOSTIMPORTANTONESBEINGSOME
KEYCEMENTPRODUCERSINCLUDINGTHESTATE
OWNED-UGHER#EMENT
%NTERPRISE
4HEREISANEXTENSIVEARTISANALMININGSECTORIN%THIOPIAMANYOFTHEMINERSAREPARTOFARTISANALMINING
COOPERATIVESBUTMANYREMAININFORMAL'OLDGEMSTONEANDSALTARETHEMAJORCOMMODITIESBEINGMINED
BYTHESEMINERS
!NUMBEROFDONORORGANIZATIONSAREACTIVEASSTAKEHOLDERS3PECIlCALLYINTHEMININGSECTORTHEREISSEMI
FORMALCOORDINATIONBETWEENINITIATIVESANDPROJECTSCONDUCTEDBYTHE7ORLD"ANK)&#$F)$$&!4$THE
!USTRALIAN'OVERNMENTANDALSO$ANIDA
4HE7ORLD"ANKHASALSOlNANCEDANDEXECUTEDTHE%THIOPIA2EVENUE4RANSPARENCY)NITIATIVEAIMEDTOLAY
THEFOUNDATIONSTOENABLETHE'OVERNMENTTOAPPLYASANOFlCIALCANDIDATEWITHTHE%)4)MAINLYTHROUGH
ORGANIZINGTRAININGWORKSHOPSEXCHANGESANDOTHERFORMSOFCAPACITYBUILDING
$&!4$ISACTIVELYENGAGEDWITHTHE-INISTRYOF-INESINSCOPINGACTIVITIESANDTECHNICALCAPACITYBUILDING
EFFORTSTHROUGHANUMBEROFPROGRAMMESINCLUDINGI AlVEYEARINITIATIVECALLEDh%DUCATIONFOR-ININGv
WITHABUDGETOFABOUT53$MILLIONAIMINGATINCREASINGPOSSIBILITIESFOR%THIOPIANSTOBEEMPLOYEDIN
MININGANDII AlVEYEARPROGRAMMETOSTRENGTHENTHE-INISTRYOF-INESCOMPRISINGABUDGETOFSOME53$
MILLION0ARTOFTHELATTERPROJECTHASINVOLVEDTRAININGINTOPICSRELATEDTOMINERALTITLESMANAGEMENT
)N$&!4$UNDERTOOKTHREESCOPINGSTUDIESINTHEAREASOF-INERAL3UPPLY#HAINS%DUCATIONFOR
-ININGAND#32
$&!4$ANDTHE!USTRALIAN'OVERNMENTAREJOINTLYASSISTINGINSUPPORTINGTHE!FRICA-INERAL2ESOURCE#ENTRE
!-$# INTURNANINSTITUTIONCREATEDTOASSIST!FRICANNATIONSINACHIEVINGTHE!FRICAN-INING6ISION!-6
SEEBOXIN3ECTION
%THIOPIAISABENElCIARYOF!USTRALIAS-ININGFOR$EVELOPMENT)NITIATIVE!SPARTOFTHISTHE-O-HAS
BENElTEDFROMPARTICIPATIONINSTUDYTOURSTRAININGANDINRECEIVINGSCHOLARSHIPSFORTRAINING
$F)$ISPRESENTLYPREPARINGINITIATIVESAIMEDATTHEMININGSECTORWITHTHEAIMTOSTARTWORKFROM
ONWARDS)NTHEPLANNING$F)$ISLEANINGTOWARDSINITIATIVESTHATRELATETOENVIRONMENTALASPECTSANDOR
!3-ANDISDRAWINGONASSISTANCEFROMTHE.ATURAL2ESOURCE#HARTERCFBOXIN3ECTION
)&#ISINVOLVEDTHROUGHEQUITYPARTICIPATIONINTHE!LLANA0OTASHAND4ULU+APIPROJECTS4HISINTURN
MEANSTHATTHOSEPROJECTSAREHAVEBEENDEVELOPEDINACCORDANCEWITHTHE)�ERFORMANCE3TANDARDS
ON%NVIRONMENTALAND3OCIAL3USTAINABILITYWHICHARECOMPREHENSIVEINTHEIRSCOPE#OMPANIESWITH)&#
lNANCINGMUSTFULlLTHEREQUIREMENTSOFTHESTANDARDSANDCONTROLSAREPERFORMEDTHROUGHEXTERNALAUDITS
4HE#HINESEGOVERNMENTISINVOLVEDASANECONOMICPARTNERANDCURRENTLYSUPPORTSAPROJECTTOGENERATE
EXPLORATIONTARGETSINSOUTHERN%THIOPIA4HISPROJECTINCLUDESCAPACITYBUILDINGATTHE'3%INTHEAREASOF
MINERALEXPLORATIONANDLABORATORYDEVELOPMENT
3OCIALMOBILIZATIONANDDISPUTERESOLUTIONISANIMPORTANTTOENSURETHATLOCALCOMMUNITIESDONOTUNNECESSARILY
BEARTHEBRUNTOFEXTRACTIVEINDUSTRYOPERATIONS#URRENTLYUNDERTHEWORKPLANFORPREPARATIONFORTHE
CANDIDACYTOTHE%XTRACTIVE)NDUSTRIES4RANSPARENCY)NITIATIVE%)4) THE-INISTRYOF-INESISWORKINGWITH
CIVILSOCIETYORGANIZATIONSTOPROMOTESOCIALMOBILIZATIONANDAWARENESSAMONGCIVILSOCIETYMEMBERSFOR
THEMININGSECTOR3OCIALMOBILIZATIONALSOINCLUDESMANAGINGEXPECTATIONSOFTHELOCALCOMMUNITIESWHEN
ITCOMESTOMININGOPERATIONSINTHEIRAREAS%DUCATIONHASTOBEANIMPORTANTPARTOFTHISEFFORT
4HEMEDIASROLEININFORMINGTHEPUBLICABOUTMININGANDININmUENCINGPUBLICOPINIONISIMPORTANTIN
ALLCOUNTRIES)NITIATIVESAIMEDATIMPROVINGJOURNALISTSANDOTHERSINTHEMEDIASECTORKNOWLEDGEAND
UNDERSTANDINGOFHOWMODERNEXPLORATIONANDMININGISCONDUCTEDWOULDTHEREFOREBEBENElCIAL
42 FINAL REPORT
© Yara Dallol BV
Before the millennium, in depth discussion on how to best develop, manage and control the mining
sector in developing countries was almost solely discussed at the World Bank. The advice provided was
BASEDONFREEMARKETREFORMANDTOENSURETHATFOREIGNINVESTMENTSWEREALLOWEDTOmOWINTOEXPLORATION
ANDMININGDEVELOPMENT7ITHREGARDSTOEXPLORATIONITWASRECOMMENDEDTHATRIGHTSSHOULDBEISSUES
ONAhlRSTCOMElRSTSERVEDvBASIS
In the 1990s, the World Bank Group had become increasingly concerned with the need to consider
environmental and social issues in mining sector development. In fact, severe criticism of some World
"ANKPROJECTSANDADEBATEOVERTHEhRESOURCECURSEvLEDTOAREVIEWOFTHEBANKINVOLVEMENTIN
PROJECTSINTHEhEXTRACTIVESECTORv4HEh%XTRACTIVE)NDUSTRIESREVIEWvWASCOMPLETEDINANDIT
CONCLUDEDTHATTHEPROPERDEVELOPMENTOFEXTRACTIVEINDUSTRIESCANCONTRIBUTETOPOVERTYREDUCTIONAND
THAT7ORLD"ANKINVOLVEMENTCANPOSITIVELYINmUENCEINDUSTRYSTANDARDS3INCETHE7ORLD"ANK
has developed a comprehensive set of tools aimed at assisting in the proper development and control of
ALLTHELINKSINTHEhMINERALRESOURCECHAINv4HESETOOLSHAVEBECOMETIGHTLYCOUPLEDWITHTHE%)4)
Following the latest commodity price boom, a number of new policy initiatives have been developed. In
GENERALTHESEEITHERAIMTOENSURETHEFUTURESUPPLYOFMETALSEGTHE%5SRAWMATERIALSINITIATIVE
ORATTEMPTINGTOPROVIDEADVICETORESOURCERICHCOUNTRIESOFHOWTOBETTERENSURETHATBENElTSOFTHE
SECTORCANBEBETTERHARNESSED3OMEOFTHELATTERTYPEOFADVICEEGTHE.ATURAL2ESOURCE#HARTER IS
suggesting that the mineral sector should be managed more like the oil sector, including public bidding
FORTENEMENTSINCONTRASTTOhlRSTCOMElRSTSERVEDvAPPROACH/THERDEVELOPMENTRELATESTOATTEMPTSTO
FORMALISEBETTERSTRUCTUREANDEVENSTIPULATELEGALREQUIREMENTSFORTHE#32RELATEDACTIVITIESTHATOFTEN
are performed by international mining companies that operate in developing countries.
4HE!FRICA-INING6ISION!-6 WASADOPTEDATTHE!FRICAN5NIONSUMMIT4HISVISIONISATTEMPTING
to provide a path to better integrating mining with development policies and goals and to assist states to
MOVEFROMBEINGSOLELYEXPORTEROFRAWMATERIALSTOALSOBEINGMANUFACTURERANDSUPPLIEROFKNOWLEDGE
BASEDSERVICES4HENEEDTOENSURELOCALDEVELOPMENTANDCOMMUNITYBENElTSAREHIGHLIGHTEDASARE
efforts to improve the capacity of nations to negotiate contracts with mining companies.
%THIOPIAISASIGNATORYTOTHE!-6BUTTHE%THIOPIANPOLICYFRAMEWORKDOESNOTREFERTOTHE!-6ANYWHERE
4HEYDOHOWEVERSHAREMANYOVER
ALLPOLICYDIRECTIONSINCLUDINGTHEOUTLOOKTOREGIONALPLANNINGAND
COOPERATIONACENTRALVISIONOFTHE!-6
44 FINAL REPORT
)TISANOBJECTIVEOFTHEDRAFT-INERAL0OLICYTOESTABLISHALEGISLATIVEANDREGULATORYFRAMEWORKTHATWILL
PROVIDEFORTHEEFFECTIVEADMINISTRATIONOFTHEMINERALSECTORANDANACCOMPANYINGMEASUREISTOPREPARE
ANDIMPLEMENTAMININGPROCLAMATIONANDREGULATIONS!FTERTHEISSUINGOFTHE-INING/PERATIONS
0ROCLAMATIONANAMENDMENTTOTHEPROCLAMATIONANDTWODIRECTIVESHAVEBEENENACTEDSEEABOVE
4HUSTHEREISAPPARENTLYANON
GOINGPROCESSOFREVIEWINGANDUPDATINGTHELEGISLATIVEREGIMEWHILENEW
REGULATIONSTOGIVEFURTHEREFFECTTOTHE-INING/PERATIONS0ROCLAMATIONAREYETTOBEDRAFTED
4HEKEYLEGISLATIONGOVERNINGTHEMINERALSECTORISTHE-INING/PERATIONS0ROCLAMATIONh-INING
0ROCLAMATIONv )NLINEWITHTHE#ONSTITUTIONTHE-INING0ROCLAMATIONPROVIDESTHATMINERALRESOURCES
WITHINTHETERRITORYOF%THIOPIAARETHEPROPERTYOFTHE'OVERNMENTANDOFALLTHEPEOPLESOF%THIOPIAAND
THATTHE'OVERNMENTISTHECUSTODIANOFMINERALRESOURCESWITHDUTYTODEPLOYTHEMFORTHEBENElTAND
DEVELOPMENTOFALL%THIOPIANS4HE-INING0ROCLAMATIONFOCUSESONESTABLISHINGTHERULESANDPROCEDURES
FORALICENSINGSYSTEMANDINCLUDESKEYASPECTSOFTYPESOFLICENSESDIVISIONBETWEENTHEFEDERALGOVERNMENT
ANDREGIONALSTATESINTHEISSUINGOFDIFFERENTTYPESOFLICENSESRULESANDPROCEDURESFORACCESSTOMINERAL
RIGHTSTHEIRTERMINATIONANDRIGHTSANDOBLIGATIONSOFLICENSEHOLDERS4HEPROCLAMATIONISRATHERGENERAL
ANDTHEREAREASYETNOREGULATIONSDRAFTEDINRESPONSETOTHEPROCLAMATION4HEREGULATIONTHATISCURRENTLY
INUSETOIMPLEMENTTHE-INING/PERATIONS0ROCLAMATION.OISTHE-INING/PERATION2EGULATION
.OWHICHMAINLYDEALSWITHISSUANCEOFALICENSERENEWALTRANSFERANDREVOCATIONOFALICENSE
RIGHTSANDDUTIESOFLICENSEESANDROYALTYFEEANDTAXATIONISSUES
!NUMBEROFPROVISIONSINTHE-INING0ROCLAMATIONRESULTINUNCLEARANDWHATCANBEPERCEIVEDASCONTRADICTIVE
RULESWHICHNEGATETHEOBJECTIVEOFTHEDRAFTMINERALPOLICYTOESTABLISHALEGALREGIMEATTRACTIVETOINVESTORS
4HUS!RTICLE
B PROVIDESFORASOCALLEDlRST
COME
lRST
SERVEDSYSTEMINTHATAPPLICATIONSOFTHE
SAMESTATUSCOVERINGTHESAMEMINERALANDAREASHOULDBEDEALTWITHhINTHEORDEROFRECEIPTvIMPLICITLY
UPONASSESSMENTOFlNANCIALANDTECHNICALRESOURCES (OWEVERTHEFOLLOWINGSUB
ARTICLESTATESTHATFOR
APPLICATIONSSUBMITTEDhATTHESAMETIMEvPRIORITYWILLBEDETERMINEDBYATECHNICALTEAMONTHEBASIS
OFTHETECHNICALWORKPROGRAMMETECHNICALABILITYANDlNANCIALPROPOSAL4HISISCONSISTENTWITH!RTICLE
THATSTATESTHATTHELICENSINGAUTHORITYWILLREGISTERTHEAPPLICATIONANDGIVEARECEIPTTOTHEAPPLICANT
ONCEITISSATISlEDWITHTHEAPPLICATIONRATHERTHANARECEIPTGIVENUPONSUBMISSIONOFANAPPLICATION
4HEAMENDMENTTOTHEPROCLAMATIONSEEMSTODEPARTFROMTHElRST
COMElRST
SERVEDCRITERIONCREATINGA
MIXTUREBETWEENlRST
COMElRST
SERVEANDACOMPETITIVESYSTEM
4HE-INING0ROCLAMATIONALSOENVISAGESANENTREPRENEURIALROLEFORTHE'OVERNMENTINMININGOPERATIONS
hTHATAREVITALFORTHEOVERALLECONOMICGROWTHEITHERBYITSELFORINPARTNERSHIPWITHPRIVATEINVESTORSv
!PPARENTLYSTATECOMPANIESMUSTACCESSLICENSESUNDERTHESAMECONDITIONSASOTHERAPPLICANTS)NORDER
TOMAKETHISCLEARTOTHEINVESTORCOMMUNITYTHISSHOULDBEPROVIDEDFORINTHEMININGLAWASINTHE
#HILEAN-INING#ODEFOREXAMPLE
4HE-INING0ROCLAMATIONSTATESTHATTHELICENSINGAUTHORITYCANPREPAREhMODELMININGAGREEMENTSv
TOSERVEASBASISFORNEGOTIATION)NPRACTICEEXPLORATIONLICENSEHOLDERSMUSTNEGOTIATEANDENTERINTOA
-INING!GREEMENTWITHTHE'OVERNMENTTOGETGRANTEDALARGE
SCALEMININGLICENSEASEVIDENCEDBYTHE
RECENTNEGOTIATIONOFA-INING!GREEMENTWITH!LLANA0OTASH
4HE-ODEL-INING!GREEMENT--! WASDRAFTEDPURSUANTTOTHEPREVIOUS-INING0ROCLAMATION.O
ANDHASNOTBEENUPDATEDANDMADECONSISTENTWITHTHE-INING0ROCLAMATION)TESTABLISHESTERMSIN
ARATHERGENERALMANNERWITHOUTELABORATINGMUCHONIMPORTANTlNANCIALENVIRONMENTALANDCOMMUNITY
4HE--!PROVIDESFORTHEACQUISITIONOFAPARTICIPATIONINTERESTBYTHE'OVERNMENTWITHOUTACOSTWHICH
ISALSOPARTOFTHERECENT AMENDMENTTOTHE-INING0ROCLAMATION)NLINEWITHTHISTHENEW
MININGPROCLAMATIONSTATESTHATTHEFEDERALSTATEHASTHERIGHTTOFREECARRYINMININGPROJECTS!DDITIONAL
EQUITYPARTICIPATIONBYTHESTATEWITHAGREEMENTFROMTHEINVESTORSCANBEDECIDEDWHENTHEMININGLICENSE
AGREEMENTISSIGNED
/THER!FRICANCOUNTRIESHAVECONCENTRATEDONINCREASEDSTATEPARTICIPATIONINTHEMININGSECTORWITH!NGOLA
INITSNEWMININGCODE3EPTEMBER ALLOWINGTHESTATETOBEENTITLEDTOATLEASTOFOWNERSHIPIN
THECOMPANYORTHEMINERALSBEINGEXTRACTED3IMILARLY:AMBIAINANNOUNCEDPLANSTOINCREASEITS
INTERESTINMININGPROJECTSFROMTO:AMBIAHASINDICATEDTHATTHEREAREPLANSTOINCREASEMINING
SECTORTAXESAND:IMBABWEHASINTRODUCEDLEGISLATIONTHATWOULDREQUIREMININGCOMPANIESTOHAVE
OWNERSHIPBYINDIGENOUS:IMBABWEANS.AMIBIANPLANSINCLUDEALLFUTUREMININGPROJECTSTOBEAWARDEDTO
STATE
OWNEDCOMPANIES4HE$2#INITSREVISIONOFTHEMININGCODEHASPROPOSEDANINCREASEDSHAREHOLDING
OFTHESTATEINAMININGCOMPANYTOCOMPAREDTOTHEPRESENT
!CCORDINGTOOURINTERVIEWWITHINTHISASSIGNMENTNEGOTIATIONSFOCUSALMOSTEXCLUSIVELYONTHECLAUSEON
STATEPARTICIPATIONASWELLASONTHEAPPROVALOFTHETECHNICALWORKPROGRAMMEANDTHEEXTENSIONOFTHE
LICENSE!SPERTHEINTERVIEWSWITHGOVERNMENTOFlCERSANDINDUSTRYREPRESENTATIVESAMAINCONSTRAINTFOR
NEGOTIATINGASTRONGAGREEMENTISTHELACKOFEXPERTISEFROMTHEGOVERNMENTAUTHORITYINTECHNICALASPECTS
SUCHASTHEASSESSMENTOFTHEFEASIBILITYSTUDY
6.4. Recommendations
&ORTHEORDERLYANDSUCCESSFULDEVELOPMENTOFTHEMINERALSECTORTHEROLEOFTHE3TATE
WHENOTHERTHAN
REGULATORYnCOULDBEMADEMORECLEARINTHEPOLICYANDLEGALFRAMEWORK&URTHERMOREINGENERALITIS
BENElCIALTOBOTHINVESTMENTANDGOVERNANCETHATTHISROLEISCLEARLYCOMMUNICATEDTOSTAKEHOLDERSAND
INVESTORSANDTHATITISREmECTEDINALLACTIONSTHATRELATETOSTATEINVOLVEMENTINTHESECTOR4HE%THIOPIAN
POLICYENVIRONMENTEXPLICITLYENVISIONSMINERALSECTORDEVELOPMENTTOBEDRIVENBYPRIVATESECTORINVESTMENT
'IVENTHESCARCITYOFEXPERIENCEDMININGOREXPLORATIONCOMPANIESWITHINTHECOUNTRYSUCHINVESTMENTSARE
THEREFORELIKELYTOCOMEFROMFOREIGNOPERATORS!TTHESAMETIMETHEPOLICYANDLEGALFRAMEWORKDOESPROVIDE
FORSTATEINVOLVEMENTINMINING4HEREAREGOODEXAMPLESOFPARTLYORFULLYSTATE
OWNEDMININGCOMPANIES
SUCCESSFULLYCOEXISTINGWITHTHEPRIVATESECTORFOREXAMPLE#/$%,#/IN#HILEAND,+!"IN3WEDEN 3UCH
SUCCESSESAREGENERALLYBASEDONLONGHISTORIESANDSIGNIlCANTCONTRIBUTIONSFROMTHERESPECTIVECOMPANIES
TONATIONALDEVELOPMENTBUTALSOONCLEARPOLICIESANDRULESFORHOWSUCHCOMPANIESSHOULDBEMANAGED
ANDRUNASWELLASTHETRANSPARENTIMPLEMENTATIONOFTHESERULES)TISRECOMMENDEDTHATTHE%THIOPIAN
GOVERNMENTCAREFULLYCONSIDERTHELESSONSLEARNEDFROMELSEWHERESEEBOX ANDDEVELOPSANDIMPLEMENTS
POLICIESTHATAREINLINEWITHTHEWEALTHOFEXPERIENCESTHANNOWEXISTWITHREGARDSTOSTATEINVOLVEMENTIN
MINING
!FORUMFORCOLLABORATIONEGPOLICYCOMMITTEE INVOLVINGOTHERAUTHORITIESTHANTHE-O-EGTRANSPORT
INDUSTRYWATERANDENERGYENVIRONMENTEDUCATIONINVESTMENT WOULDBEBENElCIALTOMINERALPOLICYDElNITION
ANDIMPLEMENTATION4HECURRENTDRAFTMINERALPOLICYINCLUDESMANYAREASTHATREQUIREKEYINVOLVEMENT
FROMOTHERAUTHORITIESANDPOLICYMEASURESACTIONSNEEDTOBEBETTERDElNEDTOFACILITATEIMPLEMENTATION
-OREFORMALIZEDMEANSOFCOMMUNICATIONWOULDBEBENElCIALTOTHELONGTERMSUSTAINABLEDEVELOPMENT
OFTHESECTOR
46 FINAL REPORT
Box 3: State involvement in the mineral sector
The last decade has seen an increasing interest, especially among developing countries, in increasing
state involvement in, and control of, mining projects. This relates to a period when commodity prices
have been high, and when China’s role in world mining has risen (in China, all mining is state controlled).
This period - in turn - follows a prolonged period (1980-2000) which saw wide spread privatisation of
state owned mines, in turn, following the collapse of the Soviet Union and the subsequent turn to market
based, liberal policies which saw a very limited role for state enterprises. The period of privatisations
was also concurrent with a period when metal prices were low, and when minerals were deemed to
be of comparatively lesser strategic importance (in contrast to oil and the energy minerals where state
involvement always has been higher than in the minerals sector). In line with this, state control has in
general been greater in minerals that are deemed to have strategic importance (e.g. iron, aluminium,
copper), compared to those that are regarded as not being strategic in this way (e.g. gold).
Throughout these historical trends and changes, state control and/or ownership in mining operations
HAVECONTINUEDTOEXISTBUTITSRELATIVEIMPORTANCEHASVARIEDREmECTINGTHECYCLICALITYOFTHESECTORAS
well as changes in policy direction. Raw Materials Group (2011) reports that for a subset of the most
important minerals and metals (bauxite, Cu, Au, Fe, Pb, Mn, Ni, Sn and Zn), state control by value was
at a high of 46% in 1984, and at a historical low of 22% in the early parts of 2000. Raw Materials Group
(2011) further suggests that today, there is realisation that there are no simple answers as to whether
state control in mining is good or bad. In all cases, however, were there is state control, the level of
success is determined by a number of factors, and among those of special importance are: the existence
of adequate management capacity; continual reinvestments must be made; the need of understanding
on part of the owner (the state) of the cyclicality, long-term and risky nature of the sector; the need to
RETAINCONSIDERABLElNANCIALSTRENGTHWITHINTHECOMPANYACLEARDISTINCTIONBETWEENTHESTATESROLEAS
ANOWNERANDAREGULATORFULLTRANSPARENCYANDWITHIN
COMPANYCONTROLOFCOMPANYCASH
mOW
In addition to the possibility of full state control or ownership, there is partial ownership. This is
especially prevalent in developing countries, and commonly the state in question assumes ownership
of some percentage (either through free carry or through investing in the project at an early stage) of a
certain project. The percentage is commonly less than 10 %. Advantages with this approach include
that the state has a good understanding of what is happening within the company, that capacity and
understanding of mining can be built up within the administration, and that dividends can be received
from successful projects. Disadvantages include that such a set up may be a substantial deterrent to
private investors (especially in the case of “free carry”), and that the state becomes to a greater extent
EXPOSEDTOAVARIETYOFRISKSRELATEDTOPROJECTSNOTFULlLLINGEXPECTATIONS
The issue of state control of mining in Ethiopia has, in part, followed international trends but has more
IMPORTANTLYBEENCONTROLLEDBYDOMESTICPOLITICALCHANGES#URRENTLYTHE%THIOPIANMINERALPOLICYDElNES
the role of the government as the facilitator, promoter and regulator of a mineral sector envision to be
driven by private sector investment, the 2010 Mining Proclamation envisages an entrepreneurial role for
the Government in mining operations “that are vital for the overall economic growth either by itself or in
partnership with private investors”. The Ethiopian Mineral Development Share Company (EMDSC) is the
state-owned enterprise engaged in minerals exploration and exploitation, primarily involving the Kenticha
tantalum mine. During 2013, the Privatization and Public Enterprises Supervising Agency (PPESA)
invited prospective business partners to enter into a Joint Ventures to develop the EMDSC1. Previously, in
the late 1990’s, the Lega Dembi gold mine was privatized and the government also have had plans to sell
the state-owned Adola Gold Development Enterprise2, which runs a small alluvial gold project in southern
Ethiopia, but this plan has not been realized. The state also owns the Mugher Cement Enterprise, one of
the major cement producers in Ethiopia. Recently a joint Ethio-Chinese project has been initiated with
the objective to undertake exploration within a very large concession in southwestern Ethiopia3.
1 The Reporter observed on 18 August 2013 that the EMDSC is about to go to the privatization auction block in full in 2013/14
after the PPESA cancelled plans to operate the company under a joint venture deal.
2 Capital, 19 March, 2012.
3 The Reporter, 28 December, 2013
4HEDEVELOPMENTOFNEWREGULATIONSANDREVISIONOFTHE--!ONTHEBASISOFTHENEWMININGPROCLAMATION
WILLLEADTOAMORECOMPLETELEGALFRAMEWORK!COMPREHENSIVEREVISIONOFTHE--!INTHELIGHTOFNEWLAWS
ANDREGULATIONSINCOMINGTRANSPARENCYREQUIREMENTSANDSUSTAINABLEDEVELOPMENTCOMMITMENTSWOULD
ALSOMAKEITAUSEFULTOOLFORCOORDINATINGTHEWORKOFDIFFERENTREGULATORYAGENCIESWITHAROLEINMINING
EGTHEENVIRONMENTALANDWATERAGENCYTHERELEVANTAGENCYFORPLANNINGINFRASTRUCTUREANDCOMMUNITY
DEVELOPMENTASWELLDIFFERENTLEVELSOFJURISDICTIONALAUTHORITY nASINLONG
TERMMININGAGREEMENTSIN
7ESTERN!USTRALIA!THOROUGHREVIEWOFTERMINOLOGYANDCONSISTENCYWITHTHEOVERALL%THIOPIANLEGALSYSTEM
ISALSORECOMMENDED
4HEADVANTAGESANDDISADVANTAGESOFAMININGLICENSINGREGIMEWHICHISNOTSTRICTLYBASEDONTHElRST
COME
lRST
SERVEDMAYBERECONSIDERED7HILETHEGROUPINGANDASSESSMENTOFEXPLORATIONLICENSEON
AMONTHLYBASISMAYHAVESOMEMERITINTHAT@SPECULATIONANDAPPLICANTSTHATDONOTHAVEINMINDTO
UNDERTAKESERIOUSEXPLORATIONCANBEAVOIDEDACOMMONVIEWAMONGSTINTERNATIONALEXPLORATIONCOMPANIES
ISTHATSUCHAREGIMEANDINPARTICULARTHEPROVISIONTHATALLAPPLICATIONSCANBEDISREGARDEDANDTHEAREA
INQUESTIONCANBETAKENTOBIDDINGISAMAJORDISINCENTIVETOINVESTMENT4HUSCURRENTLYTHELEGALAND
REGULATORYFRAMEWORKHASARATHERLIMITEDROLEINESTABLISHINGTHEENABLINGCONDITIONSFORMININGTOUNLEASH
@SUSTAINABLEECONOMICGROWTHWHICHISAKEYVISIONOFTHEMINERALPOLICYFRAMEWORK
3OMECOUNTRIESPROVIDEFORCOMPETITIVEBIDDINGINHIGHLYPROSPECTIVEAREASORWITHREGARDTOCERTAINhSTRATEGICv
MINERALS)TWOULDBEBENElCIALTOINVESTMENTANDREGULATIONIFTHEBASISFORCALLINGFORCOMPETITIVEBIDDING
ASWELLASTHECRITERIAFORCOMPETITIVEANDTRANSPARENTPROCEDURES WOULDBEESTABLISHEDUNDERTHELAWIN
RELEVANTREGULATIONSORDIRECTIVES
)TCOULDBEHELPFULTOEXPLORETHEPOSSIBILITYOFESTABLISHINGCATEGORIESOFMINERALSANDRELEVANTACCESSREGIMES
ASWELLASTHEIRRESPECTIVEPRIORITIESANDRELATIONSHIPWHICHARESOMEHOWUNCLEARANDHARDTOIMPLEMENT
UNDERTHECURRENTSYSTEM
48 FINAL REPORT
© Allana Potash Afar Plc.
7. INSTITUTIONAL FRAMEWORK
7.1. Ministry of Mines
4HE-INISTRYOF-INES-O- ISRESPONSIBLEFORESSENTIALLYALLASPECTSOFMINERALSECTORDEVELOPMENTAND
GOVERNANCE4HEREGULATORYBASISFORTHE-O-ISTHE@0ROCLAMATIONTOPROVIDEFORTHEDElNITIONOFPOWERS
ANDDUTIESOFTHEEXECUTIVEORGANSOFTHE&EDERAL$EMOCRATIC2EPUBLICOF%THIOPIA.O4HE
POWERSANDDUTIESDElNEDINTHEPROCLAMATIONBROADLYTRANSLATETOTHEFOLLOWINGI PROMOTIONFORSECTOR
DEVELOPMENTII COLLECTIONANDMANAGEMENTOFGEOSCIENTIlCDATAIII ENCOURAGEINVESTMENTTHROUGH
FACILITATINGEXPLORATIONANDMININGOPERATIONSIV REGULATIONOFTHESECTORINCLUDINGTHEARTISANALANDSMALL
SCALEGEMSTONESECTORV ORGANIZATIONOFRESEARCHANDTRAININGCENTRESFORSECTORDEVELOPMENTANDVI
GRANTINGANDMANAGEMENTOFMINERALRIGHTS)TEMIIANDTOSOMEEXTENTITEMIFALLSUNDERTHE'EOLOGICAL
3URVEYOF%THIOPIA3ECTION
4HEORGANIZATIONALSTRUCTUREOFTHE-O-ISSHOWNIN&IGURE-ANYOFTHEOFlCESAREGENERICTOGOVERNMENTAL
MINISTRIESWHILEOFlCESWITHDUTIESOFDIRECTRELEVANCETOSECTORDEVELOPMENTINCLUDE
-INERAL,ICENSINGAND!DMINISTRATION$IRECTORATE)SSUINGANDADMINISTRATIONOFMINERALLICENSESAND
COMPLIANCEMONITORINGOFTECHNICALANDlNANCIALOBLIGATIONS4HEREARECURRENTLYSOMESTAFFATTHE
DIRECTORATEBUTTHEREISINSUFlCIENTCAPACITYTOHANDLEANDEVALUATELICENSEAPPLICATIONSANDPERFORM
COMPLIANCEMONITORINGSEEFURTHER#HAPTER
%NVIRONMENTALAND#OMMUNITY$EVELOPMENT$IRECTORATE4HEDIRECTORATEWASESTABLISHEDINAND
AFTERATRANSITIONPERIODTHEYARENOWFULLYRESPONSIBLEFORTHE%)!PROCESSINCLUDINGSUPERVISION%)!
EVALUATIONANDCOMPLIANCEMONITORING/CCUPATIONAL(EALTHAND3AFETYISALSOPARTOFTHESCOPEOFWORK
4HEREARECURRENTLYSTAFFATTHEDIRECTORATEBUTTHEREISNOSTAFFWITHEXTENSIVEEXPERIENCEANDSUFlCIENT
QUALIlCATIONSINTHElELDSREQUIREDMININGENVIRONMENTSOCIOECONOMICSCOMMUNITYDEVELOPMENTAND
/(3 FOREXAMPLEFORIN
DEPTHASSESSMENTOF%)!S4HEREISALSOALACKOFINSTRUMENTSFORENVIRONMENTAL
MONITORINGATTHEDIRECTORATE&ROMINTERVIEWSCARRIEDOUTWITHINTHISPROJECTITAPPEARSASIFTHEDIRECTORATE
LACKSPOWERANDRESOURCESFORADEQUATEMONITORINGANDENFORCEMENTEGSOMECOMPANIESHAVENOT
LODGEDENVIRONMENTALBONDS
,EGAL!FFAIRS$RAFTINGOFPOLICIESPROCLAMATIONSANDREGULATIONSASWELLASVARIOUSOTHERLEGALAGREEMENTS
IMPORTANTLYTHE-ODEL-INING!GREEMENTSEE#HAPTER 4HEREARESTAFFAT,EGAL!FFAIRSBUTNONEIS
QUALIlEDINMINERALLAW
!RTISANAL-ININGAND4RANSACTIONS#OORDINATION2ESPONSIBLEFORTHEDEVELOPMENTOFTHEARTISANALMINING
SECTORTHROUGHTECHNICALANDTRAININGSUPPORTANDENCOURAGEMENTTOFORMCOOPERATIVES)NTHISTHEYWORK
CLOSELYWITHREGIONSANDWOREDASANDTHEREISCURRENTLYSTAFFATTHEUNIT4HEUNITHASMADEPROGRESS
INCERTAINGEOGRAPHICALAREASINTERMSOFPROMOTINGTHEESTABLISHMENTOFMININGCOOPERATIVES(OWEVER
CONSIDERINGTHEVERYLARGESIZEOFTHEARTISANALSECTORTHEUNITISUNDERSTAFFEDANDALSOLACKCAPACITYFOR
ADEQUATESUPERVISIONINTHEAREASOFENVIRONMENTALANDSOCIOECONOMICMANAGEMENT
%)4))MPLEMENTATION3ECRETARIAT4HESECRETARIATISRESPONSIBLEFORTHEPROCESSANDAPPLICATIONFOR%THIOPIA
TOBECOMEAN%)4)CANDIDATECOUNTRY4HEREARESTAFFATTHESECRETARIAT
Support processes
Management units
Planning,
Gender Public Environmental
Monitoring
Audit Support Mainstreaming Relations & & Community
& Evaluation Legal Affairs
Process Management Communication Development
Management (7)
(8) Process /FlCE -ONITORING/FlCE
Process
(6) (8) (14)
(7)
Information EITI
Change HIV/AIDS Prevention
Communication Implementation %THICS/FlCE
-ANAGEMENT/FlCE #ONTROL/FlCE
Technology Centre Secretariat (3)
(5) (4)
(10) (5)
3TATE-INISTERSOFlCE
(5)
Core processes
Artisan Mining
Mineral Licensing & Petroleum Licensing Research &
& Transactions
Administration & Administration Development
Coordination
(24 / 59) (27 / 44) (7 / 23)
(14)
Figure 7.1 `Ministry of Mines organizational structure. There is a total of 287 staff (of which 40% are women) compared to the
REQUIREDBYTHEOFlCIALSTAFFSTRUCTURE4HENUMBEROFCURRENTSTAFFISSHOWNWITHINBRACKETS&IGURESINREDALSO
SHOWTHENUMBERREQUIREDBYTHEOFlCIALSTAFFSTRUCTUREFORTHElVEOFlCESWITHTHEHIGHESTSTAFFSHORTAGECOMPARED
to the staff structure.
4HEREISATOTALOFALMOSTSTAFFATTHE-O-ANDTHEREISAHIGHNUMBEROFSTAFFINMANAGEMENTANDSUPPORT
PROCESSES ASCOMPAREDTOSTAFFINTHECOREPROCESSES nSEE&IGUREINTHISESTIMATIONTHE
%NVIRONMENTAL#OMMUNITY$EVELOPMENT-ONITORING/FlCEISHEREGROUPEDWITHTHECOREPROCESSESASIT
INESSENCEHASAREGULATORYFUNCTIONSIMILARTOTHATOFTHEMINERALLICENSINGDIRECTORATE /VERALLOFTHE
STAFFAREWOMENBUTTHEGENDERDISTRIBUTIONVARIESBETWEENDIFFERENTUNITSFROMWOMENATTHE,EGAL
!FFAIRSOUTOF TOATTHE%THICSOFlCEWHEREALLTHREESTAFFAREFEMALE!CCORDINGTOTHEESTABLISHED
50 FINAL REPORT
STAFFSTRUCTURETHERESHOULDBESTAFFATTHE-O-ANDTHEDISCREPANCYBETWEENCURRENTANDPLANNED
STAFFNUMBERSISRELATEDMAINLYTOlVEOFlCES&IGURE
Table 7.1. The MoM (not including the GSE) 2012/2013 budget for recurrent costs.
Birr Part of total budget
-ANAGEMENTADMINSUPPORT
-INERALLICENSINGADMIN
0ETROLEUMLICENSINGADMIN
!RTISANALMININGTRANSACTIONS
2ESEARCHDEVELOPMENT
3OURCE -O-(UMAN2ESOURCES$EVELOPMENT-ANAGEMENT
4HEORGANIZATIONALSTRUCTUREISSHOWNIN&IGUREANDASWITHTHE-O-SEVERALOFlCESAREGENERICTO
GOVERNMENTALINSTITUTIONSANDMOSTLYCONCERNEDWITHINTERNALPROCESSESWHILElVEUNITSCENTRESAREOFDIRECT
IMPORTANCETOMINERALSECTORDEVELOPMENTAREDESCRIBEDBELOW)TISNOTEDTHATAPARTFROMSUPPORTINGMINERAL
SECTORDEVELOPMENTTHE'3%ISALSOINVOLVEDINRESEARCHANDDEVELOPMENTINTHEAREASOFGROUNDWATER
GEOHAZARDSANDGEOTHERMALENERGYBUTTHESEAREASARENOTCONSIDEREDINTHISREPORT
"ASIC'EOLOGICAL-APPINGSHALLUNDERTAKEGEOLOGICALMAPPINGGEOCHEMICALSURVEYSANDGEOPHYSICAL
INVESTIGATIONS4HEREARESOMESTAFFASCOMPAREDINTHEOFlCIALSTAFFSTRUCTURE4HE'3%UNDERTOOK
EXCELLENTMAPPINGANDEXPLORATIONWORKOVERMANYYEARSAFTERITSESTABLISHMENTINTHELATESANDSTILL
HOUSESCONSIDERABLECOMPETENCE(OWEVERDUETOALACKOFHUMANANDlNANCIALCAPACITYTHEPREVIOUS
LEVELOFWORKHASNOTBEENUPHELDANDITHASNOTBEENPOSSIBLETOBUILDONTHEWORKEXECUTEDANDTHE
COMPETENCEACQUIREDDURINGLARGETRAININGPROGRAMSINTHE
S!SARESULTTHEEXISTINGWORK
ISLARGELYRESTRICTEDTOCOMPLETINGGEOLOGICALMAPPINGATTHESCALEBYALMOSTOFTHE
COUNTRYISNOWCOVERED )NADDITIONTOTHEISSUEOFSTAFFCAPACITYTHE'3%VEHICLEmEETANDEQUIPMENT
INSTRUMENTSAREINPARTOLDANDSOMETIMESDONOTFUNCTIONWELL4HEQUALITYOFTHEMAPPINGISALSOLIMITED
BYTHELACKOFAIRBORNEGEOPHYSICALDATATOSUPPORTTHEMAPPING
-INERAL%XPLORATIONAND%VALUATIONISRESPONSIBLEFOREXPLORATIONFORMETALLICANDINDUSTRIALMINERALSAS
WELLASHYDROCARBONS 4HEREISSOME
STAFFASCOMPAREDTOINTHESTAFFSTRUCTUREANDTHEWORK
ISFOCUSEDONTHEDELINEATIONOFTARGETAREASFORPLACERGOLDTOSUPPORTARTISANALMININGANDFORINDUSTRIAL
MINERALSCLOSETOEXISTINGINFRASTRUCTURETOSUPPORTARTISANALANDSMALL
SCALEMINING%XPLORATIONFOR
METALLICMINERALSWASAKEYFOCUSINTHEPASTBUTWITHPRIVATECOMPANIESENTERINGTHEMARKETTHISWORK
HASCOMETOAHALTDUETOSTAFFLOSS
4HE'EOSCIENCE$ATA#ENTREISRESPONSIBLEFORTHEADMINISTRATIONANDDISTRIBUTIONOFDATAANDINFORMATION
)THOSTSALIBRARYABIBLIOGRAPHICDATABASEWITHMAPSANDSOMETECHNICALREPORTSANDAMINERAL
OCCURRENCEDATABASEWITHMETADATAFORSOMEOCCURRENCES4HECENTREISALSOINVOLVEDINPRODUCING
PROMOTIONALMATERIAL7HEREASTHECENTREISWELLORGANIZEDTHEREARELARGEAMOUNTSOFINFORMATIONAND
DATANOTENTEREDINDATABASES&URTHERMORECOMPANIESAREOBLIGATEDTOPROVIDEEXPLORATIONDATAAND
INFORMATIONTOTHE'3%BUTDATAFROMTHECOMPANIESARENOTCURRENTLYCOLLECTED4HEREARECURRENTLY
STAFFATTHECENTRE
4HE$RILLING3ERVICESCENTREHAS
COREDRILLINGRIGSANDALSORIGSEACHFORWATERHOLEANDGEOTHERMAL
DRILLING 4HECOREDRILLINGWORKUNDERTAKENISALMOSTEXCLUSIVELYFORPRIVATECLIENTSWHEREASINTHEPAST
COREDRILLINGWASANINTEGRALPARTOFTHE'3%EXPLORATIONWORK!TTHEENDOF.OVEMBERlVEOF
THECOREDRILLINGRIGSWEREDEPLOYEDINTHElELDANDTHERESTWEREINWORKSHOPFORMAINTENANCE$ELAY
INTHEPROCUREMENTOFSPAREPARTSANDCONSUMABLESDUETOTHECUMBERSOMEBUDGETINGANDTENDERING
PROCEDURESISAKEYISSUE4HEREARESOMEDRILLERSANDSUPPORTSTAFFOFWHICHDRILLERSARE
CURRENTLYASSIGNEDTOGEOTHERMALDRILLINGFOR%"#/ASTATEENTERPRISE %XPLORATIONCOMPANIESBELIEVE
THATTHE'3%DRILLINGCENTREHASGOODEQUIPMENTANDSKILLEDDRILLERSBUTCLAIMTHATTHEDRILLINGSERVICE
ISVERYINEFlCIENT!SFASTHIGH
QUALITYDRILLINGISOFPRIMARYIMPORTANCEINEXPLORATIONMANYCOMPANIES
PREFERTOUSEPRIVATEDRILLINGCOMPANIES
Director General
Chief Geologist
3CIENTIlC%QUIPMENT
Geoscience Drilling Services
Engineering, Repair &
Laboratory Centre Centre
Maintenance Centre
Figure 7.2 Organizational structure of the Geological Survey of Ethiopia.
52 FINAL REPORT
4HESURVEYINTOTALHASSOMESTAFFASCOMPAREDTOTHESTAFFSTRUCTURETHATHASABOUTPOSITIONS
3IMILARTOTHE-O-THEMAJORITYOFTHEEMPLOYEESWORKINMANAGEMENTADMINISTRATIONANDSUPPORTABOUT
STAFFTHATFALLUNDERh0ROC&IN0ROPERTY!DMIN'EN3ERVICESETCvIN&IGURE !CCORDINGTO
THE'3%STRUCTURETHERESHOULDBEATOTALOFTECHNICALSTAFFVARIOUSTYPESOFGEOSCIENTISTSCHEMISTS
ETC WHILETHENUMBEROFTECHNICALSTAFFTODAYISABOUT
!PARTFROMTHEYEARLYGOVERNMENTALBUDGETALLOCATIONTOTHE'3%BASEDONSTAFFSTRUCTUREANDPLANNED
ACTIVITIESTHE'3%ISTOALARGEEXTENTRELIANTONDONOR
SUPPORTEDPROJECTSFORTHECORETECHNICALWORKTOBE
UNDERTAKENANDMUCHOFTHEHISTORICALWORKINCOLLECTINGGEO
SCIENTIlCDATAINSTITUTIONALSTRENGTHENING
ANDTRAININGHASBEENINPROJECT
FORMBASEDONDONORFUNDS4HEREISCURRENTLYA
YEARPROGRAMWITHTHE
#HINESEGOVERNMENTFOCUSEDONTHEDElNITIONOFTARGETAREASINSOUTHERN%THIOPIALABORATORYSUPPORTAND
TRAININGOFSTAFF
!SFORTHE-O-ANDTHE'3%WORKISALSOHAMPEREDBYINSUFlCIENTSTAFFCAPACITYBOTHINLIGHTOFVISIONS
ANDGOALSANDTOPERFORMCOREFUNCTIONSWHICHISINPARTDUETOTHEVERYHIGHTURNOVEROFSTAFFMAKINGIT
DIFlCULTTOBUILDCAPACITYOVERTHELONGERTERM&OREXAMPLEINABOUTTECHNICALSTAFFLEFTTHE'3%
ANDABOUTNEWSTAFFWERERECRUITED4HE'3%ISPERCEIVEDASHAVINGCONSIDERABLECOMPETENCEAMONG
MANYLONG
TERMEMPLOYEESBUTMANYEXPERIENCEDSTAFFLEAVEANDNEWRECRUITSARENOTSUFlCIENTLYQUALIlED
ANDTHEYOFTENSTAYONLYFORASHORTTIME
4HE'3%REPORTSTHATTHEYRECEIVESUFlCIENTBUDGETALLOCATIONSBASEDONTHEIRANNUALREQUESTS$ESPITE
THISITISARGUABLETHATBUDGETSFORTHESEINSTITUTIONSARENOTSUFlCIENTFORFUNCTIONSFORWHICHTHEYTAKE
RESPONSIBILITY%VENIFTHEISSUEOFTHELEVELOFSTAFFSALARIESISTREATEDSEPARATELYBUDGETSUPPORTFORlELD
ACTIVITIESMAPPINGPROGRAMSETCAREPROBABLYTOOLOW
/THERMINISTRIESANDGOVERNMENTALOFlCESSEEMTOHAVENOKNOWLEDGEANDVERYLITTLEINVOLVEMENTINMINERAL
SECTORPLANNINGDEVELOPMENT4HEREISNOOFlCIALFORUMFORCOLLABORATIONANDJOINTPLANNINGBETWEENTHE
VARIOUSMINISTRIESAUTHORITIESTHATAREORSHOULDBECONCERNEDWITHTHEDEVELOPMENTOFTHEMINERALSECTOR
)SSUESCANBEADDRESSEDAT#OUNCILOF-INISTERMEETINGSBUTCOMMUNICATIONSEEMSTOBEMAINLYTHROUGH
THE-O-NOTIFYINGOTHEROFlCESOFEXPLORATIONANDMININGPROJECTSUNDERWAYASANDWHENNEEDED(OWEVER
THISNORMALFORACOUNTRYWITHLITTLEHISTORICALMININGANDANUNDEVELOPEDMININGSECTOR#OUNTRIESSUCH
AS3OUTH!FRICA'HANAANDTHE53!HAVESEENMORETHANYEARSOFMOREORLESSFORMALIZEDMINING
OREVENSEVERALHUNDREDYEARSINTHECASEOF3WEDEN4HISHASALLOWEDFORLONGTERMDEVELOPMENTOFLEGAL
ANDGOVERNANCESTRUCTURESWHILEITISEMPHASIZEDTHATEVENINTHESEREGIMESGOVERNANCESTRUCTURESAND
PROCEDURESARECONTINUOUSLYBEINGDEVELOPEDANDIMPROVED
!CCORDINGTOACIVILSERVICEEXPERTCONSULTEDWITHINTHISPROJECTTHE'3%ALREADYHASTHEREQUIREDINSTITUTIONAL
STATUSTOALLOWFORINCREASEDSALARIESAS0ROCLAMATION.OESTABLISHESTHE'3%ASANAUTONOMOUS
FEDERALGOVERNMENTALORGANHAVINGITSOWNJURIDICALPERSONALITY4HE0ROCLAMATIONPROVIDESTHATSTAFFSALARIES
ANDPERDIEMRATESSHALLBEDETERMINEDBYDIRECTIVESISSUEDBYTHEGOVERNMENT7HILEINCREASINGSALARIESFOR
SEVERALHUNDREDSTAFFMAYNOTBElNANCIALLYVIABLEADETAILEDREVIEWOFTHEINSTITUTIONALSTRUCTUREANDSTAFF
REQUIREMENTSTOPERFORMCOREMANDATESSHOULDlRSTBEUNDERTAKEN#ONSIDERINGTHATAGOVERNMENTALCAREER
OFFERSGREATERJOBSECURITYANDPOSSIBLYOTHERNON
MATERIALBENElTSSUCHASJOBSATISFACTIONOPPORTUNITIES
FORTRAININGETCINTERVIEWSWITH-O-STAFFINDICATETHATASALARYINCREASEMAYNOTNEEDTOBEATTHELEVELOF
PRIVATESECTORSALARIESFORSTAFFTOBERETAINED
)TMAYBECONSIDEREDTHATOFlCESWITHREGULATORYFUNCTIONSBELIFTEDOUTOF-O-ANDTURNEDINTOAUTONOMOUS
ORGANIZATIONSSIMILARTOTHE'3%ANDTHAT-O-REMAINSWITHPOLICYDElNITIONASTHEKEYMANDATE4HE
LICENSINGANDADMINISTRATIONDIRECTORATEANDTHEENVIRONMENTALSOCIALANDCOMMUNITYDEVELOPMENTUNIT
ARECRITICALTOTHESUSTAINABLEDEVELOPMENTOFTHEMINERALSECTORYETTHEYAREINSERIOUSLACKOFHUMANAND
TECHNICALCAPACITY3EPARATINGTHESEFROMTHE-O-WOULDPROVIDEFORINCREASEDSALARIESANDTHEPOSSIBILITY
TOFUNCTIONMOREEFFECTIVELYINSMALLERORGANIZATIONS4HEWORKOFTHESETWOUNITSOVERLAPINMANYAREAS
ANDTHEIRAMALGAMATIONINTOONEAGENCYMAYBECONSIDERED4URNINGGOVERNMENTALUNITSINTOAUTONOMOUS
INSTITUTIONSHASBEENSUCCESSFULLYAPPLIEDATANUMBEROFOTHER%THIOPIANMINISTRIES
&ORTHELABORATORIESANDTHEDRILLINGUNITSTHEIRCONTINUEDEXISTENCEASPARTOFTHE'3%SHOULDBERECONSIDERED
4HEIROUTPUTISCONSIDEREDTOBERATHERLOWCOMPAREDTOTHEIRINSTRUMENTANDEQUIPMENTCAPACITYAND
STAFFNUMBERSTHISISINPARTDUETOLACKOFCLIENTSANDINPARTDUETOLACKOFSPAREPARTSANDCONSUMABLES
&URTHERMOREINTHELONGERTERMTHEIRABILITYTOCOMPETEWITHPRIVATESERVICEPROVIDERSISREGARDEDTOBE
SEVERELYLIMITED4HEYARENOTINCHARGEOFTHEIROWNBUDGETSBUTHAVETORELYONYEARLYBUDGETREQUESTS
ANDALLOCATIONSFROM-O&%$%VENIFTHEYWERETURNEDINTOSTATEENTERPRISESACCORDINGTOOURINFORMATION
THEYWOULDHAVETOSURRENDEROFTHEIRREVENUESTOTHESTATE)TISPROPOSEDTHATEITHERSCALINGDOWNTO
MEETTHENEEDSONLYOFTHE'3%ORPRIVATIZATIONOFTHESEUNITSISCONSIDERED
#APACITYBUILDINGISREQUIREDTHROUGHOUTTHE-O-ANDTHE'3%,ONG
TERMPLANSFORTHISSHOULDBECONSIDERED
INCONJUNCTIONWITHTHEPOSSIBLERE
ORGANIZATIONOFTHEINSTITUTIONS
)NTHESHORTERTERMVARIOUSCAPACITYBUILDINGEFFORTSSHOULDBECONSIDERED4HISSHOULDBEPRIMARILYFOCUSED
ONTHE-INERAL,ICENSING!DMINISTRATION$IRECTORATEANDTHE%NVIRONMENTAL#OMMUNITY$EVELOPMENT
-ONITORING/FlCE)TISPROPOSEDTHATTHISCAPACITYBUILDINGISNOTINTHEFORMOF@STAND
ALONETRAININGCOURSES
OREDUCATIONALPACKAGES2ATHERITISPROPOSEDTHATEXTERNALEXPERTISEISBROUGHTINTOASSISTWITHON
GOING
WORKONACONTINUOUSORCONTINUALBASISANDTHATTRAININGISPROVIDEDON
THE
JOBANDALSOTHATSTRUCTURED
TRAININGORCOURSEWORKAREINCLUDEDASANINTEGRALPARTOFTHECONSULTANCY
3IMILARLYITISPROPOSEDTHATEXTERNALEXPERTISEISBROUGHTINFORTHENEGOTIATIONOFMININGAGREEMENTS!S
DISCUSSEDABOVEACOMPARATIVELYLOWLEVELOFREGULATION#HAPTERANDSEEALSO#HAPTERFORENVIRONMENTAL
ANDSOCIALREGULATION REQUIRESEVENSTRONGERNEGOTIATIONCAPACITY3UCHCONSULTANCYSERVICESSHOULDALSO
BECOMBINEDWITHTRAININGOFSTAFF
3UPPORTISALSOREQUIREDTO2EGIONAL/FlCESINPARTICULARINTHEAREAOFARTISANALMININGMANAGEMENT
!SITISASOLIDPOLICYOFTHEGOVERNMENTTHATARTISANALMININGREMAINSAKEYSECTORCONTRIBUTINGTOFOREIGN
CURRENCYEARNINGJOBCREATIONANDLOCALECONOMICDEVELOPMENTREGIONALOFlCESWOULDREQUIRECAPACITY
BUILDINGPRIMARILYINTHEAREAOFENVIRONMENTALANDSOCIALMANAGEMENT
54 FINAL REPORT
© Allana Potash Afar Plc.
&)3#!,2%')-%
8.1. Fiscal regulations
4HELEGALBASISTOCOLLECTTAXANDROYALTYPAYMENTEMANATESFROMASETOFPROCLAMATIONSREGULATIONSAND
DIRECTIVESINCLUDINGTHE-INING/PERATIONS0ROCLAMATION-INING4AX0ROCLAMATION.O-INING
)NCOME4AX0ROCLAMATION!MENDMENT .OAND.O)NCOME4AX0ROCLAMATION.O
AND#OUNCILOF-INISTERS2EGULATIONON-INING/PERATIONS.O!DRAFTMININGINCOME
TAXPROCLAMATIONOFISUNDERREVIEW
2OYALTIESARECALCULATEDONANADVALOREMBASIS!DVALOREMBASISISCOMPUTEDINPROPORTIONTOTHEESTIMATED
VALUEOFTHEGOODSORTRANSACTIONCONCERNEDANDISOFTENCONNECTEDWITHTHELEVYINGOFTAXORCUSTOMDUTIES
2OYALTIESUNDER%THIOPIANMININGLAWAREPAIDBASEDONTHEhSALESPRICEvSETINTHECOMMERCIALTRANSACTION
OFMINERALSPRODUCED4HEROYALTYRATESFORMINEDPRODUCTSAREASFOLLOWS
0RECIOUS-INERALS )NDUSTRIALMINERALSSALT
3EMI
PRECIOUSMINERALS #ONSTRUCTIONMINERAL
-ETALLICMINERALS 'EOTHERMAL
4HE-INING/PERATIONS0ROCLAMATIONPROVIDESFOREXEMPTIONSFROMCUSTOMSANDDUTIESREGARDINGANY
CONSUMABLESEQUIPMENTMACHINERYANDVEHICLESTHATANYHOLDEROFANEXPLORATIONLICENSEORHISCONTRACTOR
MAYIMPORTTO%THIOPIAUSEFULFORTHEPURPOSEOFMININGOPERATIONSANDINACCORDANCEWITHTHEAPPROVED
WORKPROGRAM!RT !LSOTHEHOLDEROFSMALLORLARGESCALEMININGLICENSEMAYIMPORTFREEOFCUSTOM
DUTIESCONSUMABLESREQUIREDTOSTARTANDSUSTAINCOMMERCIALPRODUCTIONFORTHElRSTTHREEMONTHS!RT
4HE$RAFT-INING)NCOME4AX0ROCLAMATIONOFINTRODUCESREGULATIONSTHATWOULDALLOWFORRINGFENCING
EACHLICENSEASASEPARATETAXUNITAPROVISIONTHATDIDNOTEXISTINTHE-INING)NCOME4AX0ROCLAMATION
NOAMENDED 4HEDRAFTALSOINTRODUCESDEDUCTIONSFORAMOUNTSDEPOSITEDINTOAFUNDFORMINE
REHABILITATIONWHERENOSUCHPROVISIONSEXISTEDINTHECURRENTTAXPROCLAMATION!LSODRAFTPROCLAMATION
ALLOWSFORMINISTERIALDISCRETIONFORGRANTINGTEMPORARYTAXRELIEFAGAINAPROVISIONABSENTINTHECURRENT
PROCLAMATION
!CCORDINGTODATAFROM-O&%$ROYALTIESCOLLECTEDBYTHEFEDERALGOVERNMENTHAVEINCREASEDFROMABOUT53$
MILLIONINTOALMOST53$MILLIONIN2OYALTIESCOLLECTEDBYTHEREGIONALGOVERNMENTSHAVE
INCREASEDFROMABOUT53$INTO53$MILLIONIN4HE7ORLD"ANK ESTIMATES
ROYALTYPAYMENTSTOACCOUNTFOROFTHEREVENUESTHATmOWTOTHESTATEWITHANOTHERCOMINGFROM
EQUITYPARTICIPATION#ORPORATETAXESESTIMATEDTOACCOUNTFORNEARLYOFTHEmOWS4HEREMAININGPARTS
DERIVEFROMTARIFFSANDPERSONALINCOMETAXES
#URRENTROYALTYRATESIN%THIOPIAAREINLINEWITHOTHER!FRICANCOUNTRIES!NUMBEROFCOUNTRIESHAVEALREADYOR
ARELOOKINGTOINCREASETAXATIONINTHEMININGSECTOR)N3OUTH!FRICAINTRODUCEDAPROlTBASEDMINING
ROYALTYOFTOWITHDIFFERENTRATESFORGOLDPRODUCERSRELATIVETOTHEINDUSTRIALSECTOR4ANZANIAAND
.AMIBIAARESPECIlCALLYLOOKINGATINTRODUCINGEXCESSPROlTTAXESFORMININGCOMPANIESAND-OZAMBIQUE
ISSEEKINGTOREVISEITSMININGCODETOENSUREHIGHERREVENUESFORTHEGOVERNMENT)N'HANAINCREASED
ITSMINERALROYALTYTAXFROMTO(OWEVERINOTHERCASESSUCHASTHATOF'UINEAATTEMPTSHAVEBEEN
MADETOREVISEMININGROYALTIESANDTAXATIONDOWNWARDSTOATTRACTINVESTMENT
7HILETHEROYALTYRATESTHECORPORATETAXRATEANDTHEPERCENTAGEOFEQUITYPARTICIPATIONBYTHESTATEIN
%THIOPIAISCOMPETITIVECOMPAREDTOMANYOTHER!FRICANCOUNTRIESTHISALONEWILLNOTSERVETOATTRACTINVESTORS
)NTERNATIONALCOMPANIESLOOKATTHE@EFFECTIVERATEOFTAXATIONIEWHENALLTHETAXESPAIDTOTHEGOVERNMENT
SUCHASEXCISEDUTIESPROPERTYTAXVEHICLETAXETC ASADETERMINANTOFPLANNEDINVESTMENTS
'IVENTHEPAUCITYOFLARGESCALEMININGTHEABILITYOFTHEFEDERALGOVERNMENTTOCOLLECTROYALTIESANDTAXES
FROMLARGESCALEOPERATORSHASNOTBEENWELLTESTED4HEREAREINDICATIONSTHATTHE-O-MAYNOTHAVEALL
THENECESSARYTECHNICALCAPACITIESTODOSOANDLIMITATIONSINTHISREGARDINCLUDETHEABILITYTOMONITORAND
AUDITlNANCIALSTATEMENTSANDPRODUCTIONlGURESANDASWELLASLIMITEDAVAILABILITYOFTHELEGALANDlNANCIAL
SPECIALISTSNECESSARYTOSUPERVISETHECOLLECTIONOFROYALTYPAYMENTS!SACONSEQUENCEINPRACTICETHE
CONTRIBUTIONOFTHEMININGSECTORTODOMESTICTAXREVENUEMAYBEMORELIMITEDTHANOURESTIMATESINDICATE
CF3ECTION
4HEGOVERNMENTLAUNCHEDITSCOMMITMENTTOTHE%)4)PROCESSWITHTHE-INISTRYOF-INESDELEGATEDTOLEAD
THECANDIDACYANDCOMPLIANCEPROCESS!N%THIOPIAN%)4).ATIONALSTEERINGCOMMITTEEWASCONSTITUTED
COMPRISINGOFGOVERNMENTOFlCIALSCIVILSOCIETYREPRESENTATIVESANDPRIVATECOMPANIES4HECOMMITTEE
FOCUSEDONDESIGNINGFRAMEWORKSFORENGAGEMENTANDOTHERIMPLEMENTATIONISSUES3TAKEHOLDERENGAGEMENT
INCLUDINGFOUREXTENSIVEWORKSHOPSANDTRAININGSESSIONSBOTHWITHMININGCOMPANIESANDCIVILSOCIETY
ORGANIZATIONSHAVEBEENCARRIEDOUTBETWEENANDASPARTOFTHE-O-SINITIATIVETOPROMOTE
TRANSPARENCY
56 FINAL REPORT
"YTHEENDOFEXTRACTIVECOMPANIESHAVEJOINEDTHEINITIATIVEINCLUDINGGOLDANDPOTASHPRODUCERS
ASWELLASTHOSEFORINDUSTRIALMINERALSSALTANDMARBLE/FTHESECOMPANIESWEREINCLUDEDINTHElRST
INCOMEPAYMENTRECONCILIATIONREPORTBASEDONlGURESWITHREPORTEDREVENUESOF53$
MILLIONEXPECTEDTOBEPUBLISHEDINEARLY!CANDIDATUREASSESSMENTFOR%THIOPIAWASRELEASEDBY
THE%)4)ONTH&EBRUARYANDCANDIDACYSTATUSWASAWARDEDIN-ARCHOFTHESAMEYEAR
4HEMAJORHURDLEFORTHEGRANTINGOFCANDIDACYSTATUSHADBEENTHECIVILSOCIETYLEGISLATIONPARTICULARLYTHE
CLAUSELIMITINGFOREIGNFUNDINGTOFORORGANIZATIONSINVOLVEDINADVOCACY#ONCERNSHADBEENRAISED
THATTHELEGISLATIONDOESNOTALLOWFORTHECIVILSOCIETYGROUPSTOBESUFlCIENTLYINDEPENDENTANDTHEREFORE
MEANINGFULLYPARTICIPATEINTHEPROCESS4HEGOVERNMENTHASSUCCESSFULLYARGUEDTHATTHELEGISLATIONISNOT
MEANTTORESTRICTTHEOPERATIONSOFCHARITIESANDCIVILSOCIETYORGANIZATIONSBUTTOOFFERAFRAMEWORKFORTHEIR
OPERATIONSTHATDIDNOTEXISTINTHELEGISLATIONBEFORE4HEYFURTHERARGUEDTHATTHELEGISLATIONISSETUPTOALLOW
CHARITIESANDSOCIETIESTOENGAGEININCOMEGENERATINGACTIVITIESCREATETRANSPARENCYANDACCOUNTABILITY
OFTHEIRACTIVITIESANDALLOWACLEARLYDElNEDRELATIONSHIPTOEXISTBETWEENTHE3TATEANDTHEORGANIZATIONS
4HEGOALNOWSHOULDBETOCONTINUEPURSUINGMULTI
STAKEHOLDERENGAGEMENTANDENSURETHEINVOLVEMENT
OFCIVILSOCIETYORGANISATIONSINTHEEXTRACTIVESECTORASTHISISLIKELYTOREMAINTHEKEYISSUEFORACHIEVING
COMPLIANCESTATUS
4HECONTENTOFMININGINVESTMENTRELATEDCONTRACTSARENOTMADEPUBLICIN%THIOPIA4HEREAREFURTHERMORE
NOSIGNSTHATSUCHINFORMATIONWILLBEMADEPUBLICINTHEFUTUREINTHEWAYTHATISCURRENTLYCONSIDERED
INCOUNTRIESSUCHAS,IBERIA3IERRA,EONEAND'UINEA 4HEREASONSMAYBERELATEDTOAWISHTOMAINTAIN
INVESTORCONlDENTIALITY(OWEVERSTATEMENTSMADEBYGOVERNMENTOFlCIALSALSOIMPLYTHATTHISAPPROACH
MAYALSOBEASSOCIATEDWITHAPREFERENCETOREGULATECONDITIONSINLAWSANDREGULATIONSRATHERTHANTODO
SOINSEPARATECONTRACTAGREEMENTWITHINVESTORS
%THIOPIAISALSOASIGNATORYTOTHE7ORLD"ANKS)NTERNATIONAL#ONVENTIONON3ETTLEMENTOF)NVESTMENT$ISPUTES
BETWEENTHE3TATESAND.ATIONALSOF/THER3TATESASWELLASBEINGAMEMBEROFTHE-ULTILATERAL)NVESTMENT
'UARANTEE!GENCY3UCHAGREEMENTSAREINDICATIVEOFTHEWILLINGNESSOFTHEGOVERNMENTTOBESUBJECTTO
INTERNATIONALARBITRATIONANDSTANDARDS4HEREHASBEENNOSPECIlCMININGSECTORDISPUTETHATHASREQUIRED
INTERNATIONALARBITRATIONATTHISTIME
8.4. Recommendations
)NDESIGNINGlSCALPOLICYINTHEMININGSECTORANYGOVERNMENTNEEDSlRSTTOSTRIVETOMAINTAINCONSISTENCY
INITSAPPROACHASTOOFREQUENTCHANGESINTAXATIONRATESANDREGULATIONSGOVERNINGPRIVATEINVESTMENTS
WILLDISCOURAGEINVESTORS4HEOBJECTIVESHOULDBETOARRIVEATAPOLICYWHICHISSEENASFAIRBYALLPARTIES
ANDWHICHFURTHERISSTABLEANDMAYCONTINUETOFUNCTIONALSOINTHECASEOFA@WORLDCLASSMINEBEING
DISCOVEREDANDCOMMISSIONED&URTHERWITHREGARDSTOEXPORTABLECOMMODITIESSUCHASGOLDTHESEMAY
HAVEAVOLATILEPRICECYCLEREQUIRINGREGULATORYEFFORTSTOPROTECTTHEDOMESTICECONOMYFROMSUCHVARIATIONS
3ECONDLYGOVERNMENTSSHOULDLOOKATTHEOVERALLREVENUESTHATITRECEIVESFROMTHEMININGSECTORANDNOT
SOLELYATROYALTYRATESANDCORPORATEINCOMETAX)TISTHEEFFECTIVERATEOFTAXATIONIETHERATEPAIDBYTHE
MININGCOMPANYCOMBININGALLTAXATIONANDDEDUCTIONSTHATDETERMINESWHETHERTHESTATEISGETTINGA@FAIR
SHAREFROMTHEEXTRACTIONOFITSNATURALRESOURCES!BENCHMARKINGSTUDYSHOULDBEUNDERTAKENWHERETHE
CURRENT%THIOPIANlSCALPOLICIESARECOMPAREDTOTHESITUATIONINNEIGHBOURINGCOUNTRIESANDWITHRELEVANT
COUNTRIESELSEWHERE
4HEREARENO@CORRECTSYSTEMSFORRESOURCEREVENUEALLOCATIONANDDIFFERENTSYSTEMSWILLBENElTDIFFERENT
COUNTRIESCFBOXBELOW !RESOURCEREALLOCATIONPLANMAYTAKEINTOCONSIDERATIONTHELEVELOFREGIONAL
DISPARITYWITHINACOUNTRYASWELLASTHECAPACITYOFREGIONALANDSUB
REGIONALGOVERNMENTSTOCOLLECTTAXES
ANDROYALTIESASWELLASABSORBTHEMANDSPACEFORLOCALCOMMUNITIESMOSTIMPACTEDBYMININGOPERATIONS
TOSHAREINTHEBENElTSOFMINING$IFFERENTOPTIONSAREAVAILABLETHATMAYNOTONLYINCLUDESHARINGREVENUES
BETWEENTHEFEDERALGOVERNMENTANDTHEREGIONALSTATESWHERETHENATURALRESOURCESAREBEINGEXTRACTEDBUT
THATALSOCOVEROTHERNON
RESOURCEPRODUCINGREGIONALSTATES4HELATTERMAYWELLlNDTHEIRREVENUESDECLINE
INRELATIONTOTHERESOURCEPRODUCINGPROVINCEWHICHISGENERATINGRESOURCEREVENUESFORTHEMSELVES 4HE
GOALOFACHIEVING(ORIZONTAL&ISCAL%QUALIZATIONISFORREVENUESHARINGTOFACILITATEFOREACHREGIONALSTATES
GIVENITSOWNREVENUERAISINGCAPACITYANDEFlCIENCY TOPROVIDEASIMILARLEVELOFSERVICES
Minerals may be either the property of the landowner (as in the case of the United States) or, more
commonly, the state on behalf of the people. A general principle is that when mining takes place,
the owner should be compensated for the loss of the mineral asset. Therefore royalties are seen as
compensation to the owner of the minerals. There are few countries, such as Sweden and Mexico, which
levy no royalties.
The revenue generated from taxation and royalties from mining activity may be allocated in different
ways, for example between land owners, federal, provincial and regional state levels. For example,
in many countries (e.g. Chile, Sweden, Tanzania) mining related revenues enter the federal budget
and there is thereafter no special treatment of these revenues. In contrast, in Indonesia, the 1999 law
stipulated that 20% of the royalties would go to the central government, and 80% to the region. Within
the region, this would be further subdivided between the regencies (64%) and the provincial government
(16%). In Peru, while the federal government collects the corporate income tax from the mining sector,
through the state mechanism, 50% of such tax collected is returned to the sub-national government.
Also in Peru, the royalty payments collected are distributed between the district municipalities (20%), the
regional government (15%) and the regional national universities (5%). In Ghana, 20% of the royalties
collected from the mining sector are spent on the regions where mining takes place. The remaining
money is put into a ‘Consolidated Fund’ for general public expenditures.
In Australia and Canada, the federal state does not impose any mining royalties (apart from the MMRT
IN!USTRALIAAPPLICABLEONTHESUPERPROlTSOFIRONOREANDCOAL )NSTEADROYALTYRATESARELEFTTOTHE
discretion of the individual province, which can design and collect its own royalty scheme. In Canada,
provincial mining royalties are tax deductible against the federal corporate income tax.
Another approach towards resource rents is to allow control over the spending of such revenue to the
local communities that are directly affected by mining. For example, in Papua New Guinea, the scheme
developed between the mining company, central and provincial governments allows for the indigenous
LAND
OWNERCOMMUNITIESTODECIDEONPROJECTSTHATSHOULDBElNANCEDBYMININGRELATEDINCOMESSUCH
as roads, education and health facilities. In this country, a certain proportion of the gross taxable income
of the mining project is earmarked for such project.
7HENTHEMINERALSECTORHASGROWNCONSIDERABLYTHEGOVERNMENTMAYCONSIDERESTABLISHINGASOVEREIGN
WEALTHFUNDORAGENERATIONFUND WHEREPARTOFTHECOMMODITYREVENUESGENERATEDCANBESAVEDSERVING
BOTHASACAPITALRESOURCEFORFUTUREGENERATIONSASWELLASLIMITINGTHEDETRIMENTALIMPACTh$UTCHDISEASEv
7HILEITMAYBEARGUEDTHATACOMPARATIVELY@POORCOUNTRYCANNOTAFFORDTOBANKREVENUESFORTHEFUTURE
ITMAYLIKEWISEBEARGUEDTHATTHISISAGOODMEASUREOFPROTECTIONOFFUNDSINAlNANCIALSYSTEMWHERE
OPTIMALlSCALMANAGEMENTISNOTINPLACE!NINmOWOFRESOURCEREVENUESCANRESULTINALARGERCAPITAL
POOLFORTHEBANKSTOLENDFROM)FTHECAPITALISMADEAVAILABLEFORMANUFACTURINGORBUSINESSESITCAN
ADDTOTHEDOMESTICGROWTHOFTHEECONOMY(OWEVERIFSUCHOPPORTUNITIESARENOTADEQUATETHECAPITAL
MAYINSTEADmOWINTOOTHERPARTSOFTHEECONOMYFOREXAMPLETHEPROPERTYMARKETANDTHUSCREATINGA
HOUSINGBUBBLEWITHINmATINGPRICES!SOVEREIGNWEALTHFUNDALLOWSFORPARTOFTHERESOURCEREVENUESTHAT
THEECONOMYCANNOTABSORBTOBELOCATEDININTERNATIONALASSETMARKETSFROMWHICHTHESTATEEARNSA
RETURN4HESERETURNSCANBEUTILISEDINNATIONALBUDGETSOREARMARKEDFORDEVELOPMENTPROJECTSSUCHAS
HEALTHEDUCATIONANDINFRASTRUCTURE!STHEABSORPTIVECAPACITYOFTHEECONOMYINCREASESMOREANDMORE
OFTHEFUNDSCANTHENBEBROUGHTINTOTHEECONOMY'ENERATIONFUNDSAREINCREASINGLYBEINGDISCUSSEDIN
RELATIONTOMINERALRESOURCEREVENUESWHILETHEYHAVEBEENMORECOMMONLYAPPLIEDWITHINTHEOILSECTOR
4HE.ORWEGIAN'OVERNMENT0ENSION&UNDFOREXAMPLETAKESTHEPROCEEDSFROMTHEOILSECTORANDINVESTS
THEMINASSETSACROSSTHEWORLD4HERETURNSFROMTHESEINVESTMENTSAREUSEDTOlLLTHENATIONALBUDGET
DElCIT'HANAS2EVENUE-ANAGEMENT!CT WASENACTEDAYEARAFTEROILREVENUESBEGANTOmOWFROM
ITS*UBILEE&IELDSIN4HE!CTCLEARLYOUTLINESTHEMECHANISMSFORTHECOLLECTIONANDDISTRIBUTIONOF
THEPETROLEUMREVENUESTHATACCRUETOTHESTATE4HEBILLDIVIDESTHEREVENUESINTOA(ERITAGE&UNDANDA
3TABILISATION&UND4HELATTERISTOBEUSEDTOENSUREASTABLELEVELOFBUDGETARYSUPPORTINCLUDINGSPENDING
ONINFRASTRUCTURE4HE-INISTRYOF&INANCEAND%CONOMIC0LANNINGISRESPONSIBLEFORINVESTINGTHEPROCEEDS
REmECTINGTHEIRROLEASTHE4REASURY4HE#ENTRAL"ANKOF'HANAISRESPONSIBLEFORMANAGINGTHEFUNDS
58 FINAL REPORT
2ISKMANAGEMENTPARTICULARLYWHENMINERALEXPORTSARESUBJECTTOVOLATILEINTERNATIONALPRICESISIMPORTANT
/NEOFTHEMAJORVECTORSOFTHE@RESOURCECURSEISTHEIMPACTONSTATEBUDGETSFORDEVELOPINGCOUNTRIESINTHE
FACEOFCOMMODITYPRICESLUMPS3OME,ATIN!MERICANCOUNTRIESDEVISEDCOUNTERCYCLICMONETARYPOLICIES
WHICHWEREPUTTOGOODEFFECTINFACEOFTHElNANCIALCRISISTOCOUNTERTHEEFFECTSOFTHECOMMODITY
PRICEmUCTUATIONS/THERCOUNTRIESSUCHAS-EXICOWITHITSOILPRODUCTIONHAVEUSEDFORWARDCONTRACTSTO
ENSUREADEQUATEFUTUREINCOMESFORTHEIREXPORTS
7ITHTHEGRANTINGOF%)4)CANDIDACYSTATUSTHEEXTRACTIVESECTORISGOINGTOCOMEUNDERINCREASEDSCRUTINY
ANDCOMMENTARYFROMAVARIETYOFINTERNATIONALACTORSANDORGANISATIONS1UESTIONSOFTRANSPARENCYIN
LICENSINGOPERATIONSOFTHE-O-ITSELFANDOFTAXESANDREVENUESARELIKELYTOINCREASE4HE-O-NEEDS
TOPREPAREFORADDRESSINGNEWDEMANDFORSUCHINFORMATIONASWELLASFURTHERDEVELOPITSPUBLICRELATIONS
CAPACITY'REATERTRANSPARENCYINTHEEXTRACTIVEINDUSTRYHASGAINEDPOLITICALMOMENTUMINRECENTYEARS
ANDEFFORTSTHATSHOWCASE%THIOPIASCOMMITMENTSTOSUCHANINITIATIVEWILLBEWELCOMEDBYINVESTORSAND
CIVILSOCIETYORGANISATIONS'IVENTHE@RENTSEEKINGANDCORRUPTIONTHATISSOMETIMESASSOCIATEDWITHTHE
EXTRACTIVESECTORDISCLOSUREOFRESOURCEREVENUESALLOWSFORTHEDEVELOPMENTOFATRANSPARENTMININGSECTOR
3UCHINFORMATIONWILLALSOBEOFUSETOLOCALCOMMUNITIESWHOCANDETERMINETHEEXTENTOFBENElTSTHEY
RECEIVEINRELATIONTOTHEMININGOPERATIONSINTHEIRREGIONS
!NOTHERISSUERELATEDTORESOURCEREVENUESISTHEPOSSIBILITYOF$UTCHDISEASEWHICHREFERSTOTHEMARGINALISATION
OFTHEDOMESTICMANUFACTURINGSECTORWHENNATURALRESOURCESBECOMEADOMINANTEXPORT&OREXAMPLEIF
%THIOPIAWASTODISCOVERALARGEGOLDDEPOSITANDGOLDDOMINATEDITSEXPORTREVENUESTHE%THIOPIA"IRRIS
LIKELYTOAPPRECIATEINVALUE7HILETHATWOULDINCREASETHEFOREIGNEXCHANGEEARNEDBYTHECOUNTRYITCOULD
HAVEADETRIMENTALEFFECTONITSAGRICULTURALEXPORTSASTHESEWOULDNOWBECOMEMOREEXPENSIVEINTHE
INTERNATIONALMARKETS ASWELLASONTHEDOMESTICMANUFACTURINGSECTORWHICHCOULDBECOMEUNCOMPETITIVE
INTERNALLYANDINTERNATIONALLYASWAGESANDCOSTOFCAPITALWOULDRISE 4HEREFOREINTHEMEDIUMTERMAS
MINERALEXPORTSPICKUPTHE-INISTRYOF&INANCEAND%CONOMIC$EVELOPMENTINCOORDINATIONWITHTHE
.ATIONAL"ANKOF%THIOPIANEEDSTOPLANAHEADTODEVISETHEAPPROPRIATEMEASURESINITSMONETARYPOLICY
7HILEGENERATIONFUNDSANDlSCALEQUALISATIONMECHANISMSDISCUSSTHESAVINGANDDISTRIBUTIONMECHANISMS
FORRESOURCEREVENUESTHESPENDINGMECHANISMSFORSUCHREVENUESSHOULDALSOBETAKENINTOCONSIDERATION
BYTHESTATE4HE7ORLD"ANK RECOMMENDSTHATMININGREVENUESTHATAREPLACEDINFOUNDATIONS
TRUSTSORFUNDS&4& BEmEXIBLEWITHINEACHCOUNTRYCONTEXT(OWEVERTHEREARETHREECRITERIATHATCAN
CONTRIBUTETOMAKINGDECISIONSONTHESPENDINGOFSUCHFUNDS
A #OMPLEXITYSHOULDBEPROPORTIONATETOTHEFUNDINGANDCAPACITYOFTHEOPERATINGENVIRONMENT
C )NTEGRATIONWITHOTHERLOCALANDREGIONALDEVELOPMENTPLANS
(UMANRESOURCESATTHE-INISTRYOF-INESNEEDTOBEDEVELOPEDFURTHERTOINCREASETHEIRCAPACITYTOAUDIT
MONITORANDCALCULATETHEREVENUESDUETOTHESTATEASWELLASENSURINGTHATCOMPANIESMEETTHEIROTHER
EXPENDITUREANDSPENDINGREQUIREMENTS7HILETHEMININGTAXCODESANDOTHERlSCALHEADSMAYBECLEARLY
OUTLINEDINREGULATIONSTHEIROPERATIONALIZATIONISHIGHLYIMPACTEDBYTHEABILITYOFGOVERNMENTPERSONNELTO
INTERPRETUNDERSTANDANDENFORCE
Table 9.1. Types of mineral licenses issued in Ethiopia, with reference to articles of the 2010 Mining Proclamation.
Type of License Scope Duration Conditions 3TATUS#HARACTERISTICS
4OCARRYOUT
RECONNAISSANCE
WHENEVERTHE For the period
WORKPROGRAM SPECIlEDINTHE
2ECONNAISSANCE .ON
EXCLUSIVENON
DOESNOTINVOLVE LICENSEWHICH
,ICENSE RENEWABLE
GEOLOGICALWORK SHALLNOTEXCEED
that could MONTHS
DISTURBTHEEARTH
SURFACE
60 FINAL REPORT
For the period
SPECIlEDINTHE %XCLUSIVERENEWABLE
LICENSEWHICH %VIDENCEOFlNANCIAL TWICEIFAPPLICANTFULlLS
SHALLNOTEXCEED ANDTECHNICALRESOURCES ALLCONDITIONSINCLUDING
4OCARRYOUT
THREEYEARS)T TOCONDUCTEXPLORATION NOTINBREACHWITHANY
EXPLORATION
CANBERENEWED ACCORDINGTOTHEWORK APPLICABLEPROVISION
ACCORDINGTOTHE
TWICEFORAPERIOD PROGRAMMEEXPLORATION UPONRELINQUISMENT
RELEVANTWORK
%XPLORATION NOTEXCEEDING EXPENDITURECONSISTENT OFNOLESSTHANONE
PROGRAMME
,ICENSE ONEYEAREACH WITHMINIMUMANDWORK FOURTHOFTHELICENSE
ANDTOAPPLY
%XTENSIONOF PLANENVIRONMENTAL AREA6ARIATIONSTO
FORMINING
RENEWALMIGHT IMPACTPLANAPPROVED THEEXPLORATIONWORK
ANDRETENTION
BEALLOWED APPLICANNOTINBREACH PROGRAMMEHAVETOBE
LICENSES
BYLICENSING WITHOBLIGATIONSUNDER APPROVED.OPAYMENT
AUTHORITYNOT RECONNAISSANCELICENSE FEEUPONAPPLICATIONIS
BEYONDlVE PROVIDED
YEARS
7HERETHEAPPLICANTHAS
DEMONSTRATEDDISCOVERY
WITHINEXPLORATIONAREA
For the period OFPOTENTIALCOMMERCIAL
SPECIlEDINTHE SIGNIlCANCEBUT
)TGRANTSTHE
LICENSEWHICH CANNOTBEDEVELOPED
RIGHTTOHOLD
SHALLNOTEXCEED IMMEDIATELYBECAUSE
THEEXPLORATION
THREEYEARS)T ADVERSEMARKET
2ETENTION LICENSEANDTO
CANBERENEWED CONDITIONSOTHER
,ICENSE BEGRANTEDA
ONCEFORTHE ECONOMICFACTORSOR
MININGLICENSE
SAMEPERIODIF UNAVAILABLE
IMPLICITFROM
CONDITIONSFOR
!RT
GRANTINGLICENSE PROCESSINGTECHNOLOGIES
REMAIN OFATEMPORARYCHARACTER
!RT /BLIGATIONTO
SUBMITANNUALPROGRESS
REPORT!RT
2IGHTSTOMARKETANDSELL
!PPROVALOFWORK MINERALSPRODUCED!RT
For the period PROGRAMMEAND%)!
SPECIlEDINTHE ACCESSTOlNANCIAL
)MPLICITLYTO
LICENSEWHICH RESOURCESANDTECHNICAL !CCORDINGTO!RTICLE
CARRYOUTMINING
SHALLNOTEXCEED ABILITYNOTCONTRAVENTION CTHELICENSING
ASDElNED
TWENTYYEARS)T WITHANYOBLIGATIONSOF AUTHORITYCANNEGOTIATE
,ARGE
3CALE UNDERTHE
CANBERENEWED THEEXPLORATIONLICENSE A-INING!GREEMENT
-INING,ICENSE 0ROCLAMATION
FORYEARS IFANY!RT WHATINPRACTICEOCCURS
WITHTHERIGHTS
IFCONTINUED /BLIGATIONTOCOMMENCE TOGETGRANTEDTHESE
RECOGNISED
ECONOMIC OPERATIONSWITHINONE LICENSES4HE--!
UNDER!RT
VIABILITYISPROVED YEARASFROMLICENSE INCLUDESPROVISIONSON
!RT BECOMESEFFECTIVE!RT TRANSFERSURRENDERAND
TERMINATIONOFMINING
RIGHTS
!PPROVALOFWORK
For the period
PROGRAMMEAND%)!
SPECIlEDINTHE
)MPLICITLYTO ACCESSTOlNANCIAL
LICENSEWHICH
CARRYOUTMINING RESOURCESANDTECHNICAL
SHALLNOTEXCEED
ASDElNED ABILITYNOTCONTRAVENTION
TENYEARS)TCAN 2IGHTSTOMARKETANDSELL
3MALL
SCALE UNDERTHE WITHANYOBLIGATIONSOF
BERENEWED MINERALSPRODUCED!RT
-INING,ICENSE 0ROCLAMATION THEEXPLORATIONLICENSEIF
FORYEARS
WITHTHERIGHTS ANY!RT /BLIGATION
IFCONTINUED
RECOGNISED TOCOMMENCEOPERATIONS
ECONOMIC
UNDER!RT WITHINONEYEARASFROM
VIABILITYPROVED
LICENSEBECOMESEFFECTIVE
!RT
!RT
4HEISSUINGOFLICENSESISDONEBYEITHERTHEREGIONALSTATESORTHEFEDERALGOVERNMENT-INERAL,ICENSING
!DMINISTRATION$IRECTORATE-O- 4HEFORMERAREMANDATEDTOISSUEA ARTISANALMININGLICENSESB TO
DOMESTICINVESTORS RECONNAISSANCEEXPLORATIONANDRETENTIONLICENSESWITHRESPECTTOCONSTRUCTIONAND
INDUSTRIALMINERALSC TODOMESTICINVESTORS SMALLSCALEMININGLICENSESFORINDUSTRIALMINERALSANDSMALL
ANDLARGESCALEMININGLICENSESFORCONSTRUCTIONMINERALS4HEFEDERALGOVERNMENTISSUESRECONNAISSANCE
EXPLORATIONRETENTIONANDMININGLICENSESOTHERTHANTHOSETOBEISSUEDBYREGIONALSTATES
!RTICLEOFTHE-INING/PERATIONS0ROCLAMATIONPROVIDESTHATLICENSEHOLDERSPAYANNUALLYINADVANCE
SURFACERENTALSFORTHELICENSEAREAANDFORTHEAREACOVEREDBYALEASETHISPRESUMABLEREFERSTOLEASES
OFAREASOUTSIDETHELICENSEAREABUTREQUIREDFORTHEMININGOPERATIONS 4HEPAYMENTOFLICENSESISMADE
TOTHERESPECTIVEAUTHORITIESRESPONSIBLEFORTHEGRANTINGOFTHELICENSESATTHEFEDERALANDREGIONALLEVELSOF
ADMINISTRATION
4HECURRENTLYAPPLIEDPROCESSFORTHEASSESSMENTOFEXPLORATIONLICENSEAPPLICATIONSISTOGROUPANDEVALUATE
THESEONAMONTHLYBASISINACCORDANCEWITHTHEPROVISIONSOFTHE-INERAL,ICENSE!PPLICATION0ROCESSING
$IRECTIVE3ECTIONPARAGRAPH )NPRACTICETHUSATECHNICALCOMMITTEESELECTSTHESUCCESSFUL
APPLICANTONTHEBASISOFCRITERIASETOUTINTHEDIRECTIVE
4HEREISANAPPARENTSCOPEFORBIASEDORCOMPROMISEDHANDLINGOFEXPLORATIONLICENSINGUNDERTHISLICENSING
ADMINISTRATIONESPECIALLYASNORECEIPTISGIVENONTHESUBMISSIONOFAPPLICATIONS%VENWITHAPERFECTLY
TRANSPARENTEVALUATIONOFAPPLICATIONSTHESYSTEMSTILLIMPLIESTHATOBJECTIVECRITERIAFORSELECTINGONElRM
EXISTANDTHATTHECOMMITTEEHASADEQUATEINFORMATIONONlRMSANDEXPERTISETOAPPLYTHECRITERIA
4HEINTERVIEWSCARRIEDOUTAMONGGOVERNMENTOFlCERSCONSISTENTLYEMPHASIZEDTHEUSEOFTHISALTERNATIVE
SYSTEMINPRACTICEBECAUSETHEGOVERNMENTINTENDSTODISCOURAGESPECULATIVEAPPLICATIONS4HEYALSO
POINTEDATTHECRITICALCAPACITYCONSTRAINTSOFTHELICENSINGAUTHORITYTOASSESSAPPLICATIONSONTIME)NAFUTURE
REFORMPROCESSTHEMANAGEMENTATTHEMINERALLICENSINGOFlCEPOINTEDOUTTHATTHEYWOULDRATHERWORK
ONADDRESSINGTHEINSTITUTIONALCONSTRAINTSFORTHEEFFECTIVEIMPLEMENTATIONOFTHISSYSTEMTHANSTREAMLINING
THEPROCESSFORAPURELY@lRSTCOME
lRSTSERVEDCRITERIA
!LTERNATIVEMETHODSTODISCOURAGESPECULATIONCOULDINCLUDERAISINGAPPLICABLEFEESSEERECOMMENDATIONS
BELOW ASTHECOSTSFORHOLDINGLANDFOREXPLORATIONANDESPECIALLYFORMININGIN%THIOPIAARELOWINCOMPARISON
WITHSOMENEIGHBOURINGCOUNTRIESANDSELECTEDMININGNATIONS4ABLE )TISNOTEDTHATTHE%THIOPIAN
APPROACHTOCHARGINGFORTHEREGISTRATIONOFAPPLICATIONSTHATISPERPAGEAPPEARSTOBEFAIRLYUNIQUE)TIS
ALSONOTEDTHAT%THIOPIAISTHEONLYCOUNTRYTHATHASASPECIlCh,ICENSEFEEv
4ECHNICALANDlNANCIALCOMPLIANCEMONITORINGALSOFALLSUNDERTHEDUTIESOFTHELICENSINGANDADMINISTRATION
DIRECTORATE-ONITORINGISNOTADEQUATEDUETOALACKOFCAPACITYANDAHIGHNUMBEROFEXPLORATIONLICENSES
APPARENTLYHAVEEXPIREDORSHOULDBEREVOKEDDUETONON
COMPLIANCEBUTONLYVERYFEWHAVEBEENREVOKED
&ROMTHEINTERVIEWSCARRIEDOUTWITH-O-STAFFWITHINTHISPROJECT-O-MAYALSOCHOSENOTTORELINQUISH
GROUNDINCASESOFNON
CONFORMANCEORWHERECOMPANIESHAVELEFTFOROTHERREASONSASTHE3TATEMAYWISH
TOTAKETHEAREAINQUESTIONTOBIDDING3TILLINOTHERCASESGEOGRAPHICALAREASARERESERVEDFORSTATEINTEREST
ANDISTHUSNOTOPENFORAPPLICATIONSSUCHASINTHECASEOFTHE%THIO
#HINESEJOINTVENTUREFORWHICHLARGE
AREASOFSOUTHWESTERN%THIOPIAARERESERVED4OGETHERWITHTHEPROCESSFORTHEASSESSMENTOFEXPLORATION
LICENSEAPPLICATIONSPARAGRAPHS
ABOVE THISCREATESASYSTEMTHATISUNCLEARANDRATHERUNCERTAINFOR
INVESTORS7HILETHEPOLICYFRAMEWORKENVISIONSTHEGOVERNMENTTOFACILITATEPROMOTEANDREGULATETHEMINERAL
SECTORTHE-INING0ROCLAMATIONDOESPROVIDEFORANENTREPRENEURIALROLEFORTHEGOVERNMENTINMINING
SEE#HAPTERPARAGRAPHS
ANDFORPOLICYANDLEGALPROVISIONSANDRELATEDDISCUSSIONS
62 FINAL REPORT
4HECADASTRESYSTEMATTHECENTRALLICENSINGOFlCEFORRECORDINGANDMANAGEMENTOFMINERALLICENSES
HASNOTBEENWORKINGFORSOMETIMEWHICHISREPORTEDTOBEDUETOALACKOFFUNDSFORSOFTWAREUPGRADING
ANDTECHNICALSUPPORT4HEORIGINALINTENTIONATIMPLEMENTATIONWASFORASYSTEMWHERETHEFEDERALOFlCE
ISCONNECTEDTOREGIONALOFlCES4HISWASNOTFULLYACHIEVEDRESULTINGINARISKOFISSUEDLICENSESTOOVERLAP
SPATIALLYANDWHICHEMPHASIZESTHENEEDTOCOORDINATETHEFUNCTIONINGOFREGIONALANDFEDERALOFlCES
REGARDINGTHECADASTREANDREGISTRATIONOFLICENSES
Table 9.2. Comparison of costs of holding ground for exploration and mining in Ethiopia with some neighbouring countries,
and selected mining nations. Note that these types of comparisons can only be approximate, as no two mining
laws and associated regulations are identical, and detailed stipulations differ from country to country (data from
Ethiopian mining regulations No. 182/1994, and Spatial Dimension, 2013).
Appr. USD South
Ethiopia Botswana Sweden Kenya Tanzania Zambia Rwanda
equivalents, Sudan
PROP
3EPT PROP
Reconnaissance
license
!PPLICATION
PROCESSINGFEE
2EGISTRATIONFEE
,ICENSEFEE
!NNUALRENTKM
Exploration license
!PPLICATION
PROCESSINGFEE
2EGISTRATIONFEE
,ICENSEFEE
!NNUALRENTKM
Small-scale mining
license; precious
minerals
!PPLICATION
PROCESSINGFEE
2EGISTRATIONFEE
,ICENSEFEE
!NNUALRENTKM
Small-scale mining
license; other
minerals
!PPLICATION
PROCESSINGFEE
2EGISTRATIONFEE
SEEABOVE SEEABOVE SEEABOVE
,ICENSEFEE
!NNUALRENTKM
Large-scale mining
license
!PPLICATION
PROCESSINGFEE
2EGISTRATIONFEE
,ICENSEFEE
!NNUALRENTKM
"ASEDONTHEMININGREGULATIONSWHICHAREAPPLIEDTODAY,ICENSEFEESAREPERMININGBLOCKnMAXIMUMLICENSEAREAS
WHICHSIZESAREDElNEDINTHEREGULATIONS
#HARGEDPERPAGEOFTHELICENSEAPPLICATIONDOCUMENT
9EAR
THEREAFTERRENTSESCALATE
EAR
THEREAFTERRENTSESCALATE
'OLDKIMBERLITICDIAMONDSANDGEMSTONESOTHERMINERALSIS53$KM
'RANTINGOFLICENSESOUTSIDETHELEGISLATEDPROCEDURESFORAPPLICATIONANDEVALUATIONISAPRIMARYDETERRENT
TOINVESTMENTINTHEINDUSTRY4HEESTABLISHMENTOFRULESANDPROCEDURESFORDISCRETIONARYGRANTINGOF
EXPLORATIONORMININGLICENSESMAYTHUSBECONSIDERED
!LTERNATIVEMETHODSFORREDUCINGSPECULATIONWHICHISGIVENASTHEMAINREASONFORTHEDISCRETIONARY
EVALUATIONOFLICENSEAPPLICATIONSDOEXISTEG !MORERIGOROUSEXAMINATIONOFTHECRITERIAALREADYIN
THELAWCONCERNINGTECHNICALANDlNANCIALCAPACITYFOREXPLORATIONANDSTRICTAPPLICATIONOFTHESETOEACH
INDIVIDUALAPPLICATION 2AISINGFEESFORLICENSESANDHOLDINGGROUNDTOALEVELUNSUSTAINABLEEXCEPTBY
lRMSSERIOUSLYCOMMITTEDTOINVESTMENTANDEXPLORATION)NTHISRESPECTACOMPARATIVESTUDYOFTHECOSTS
FORMINERALRIGHTSAPPLICATIONSANDTHECOSTSOFHOLDINGGROUNDISRECOMMENDED
!PERMANENTSOLUTIONFORADEQUATEBUDGETSUPPORTFORTHEMININGCADASTRESYSTEMWOULDSUPPORTITS
CONTINUOUSOPERATION3OFTWARESUPPORTANDMAINTENANCECONTRACTSARESTANDARDINALLCUSTOMISEDSOFTWARE
IMPLEMENTATIONSANDADEQUATEBUDGETINGFORHARDWAREANDNETWORKMAINTENANCEISNECESSARY!FUNCTIONING
CADASTRESYSTEMCOMPRISINGSTAFFCAPACITYSOFTWAREHARDWARENETWORKANDCOMMUNICATIONSSOLUTIONSAND
)4SUPPORTISCRITICALFORADEQUATEREGULATIONANDFAILUREOFTHESYSTEMCANHAVEMAJORNEGATIVEIMPACTSON
INVESTORCONlDENCETRANSPARENCYINLICENSING-O-WORKLOADANDULTIMATELYINACHIEVINGSECTORGROWTH
TARGETS&ORINCREASEDACCESSTOINTERESTEDPARTIESINVESTORSNON
COREAUTHORITIESCIVILSOCIETYETC THE
CADASTRECOULDBEPUBLISHEDONLINEANDUPDATEDONAFREQUENTBASISINREALTIMEORATLEASTDAILY
4HEREISANEEDTOCOORDINATETHEFUNCTIONINGOFTHECADASTREATFEDERALANDATREGIONALSTATESLEVEL)FTHERE
ARESPATIALOVERLAPSINLICENSEAREASBETWEENLICENSESGRANTEDATTHEREGIONALORSUB
REGIONALLEVELSAND
THOSEGRANTEDATTHE-O-THENPROCEDURESSHOULDBEMODIlEDSOTHATSUCHOVERLAPSAREIMPOSSIBLETO
CREATE
)NSOMEJURISDICTIONSTHELICENSESFEESAREUSEDTOWARDSTHECOSTSOFTHECADASTREMAINTENANCE4HISMAYNOT
POSSIBLEUNDERTHECURRENTINSTITUTIONALSET
UPMINERALLICENSINGADMINBEINGPARTOFTHE-O-STRUCTURE
BUTTHEPOSSIBILITYFORTHISMAYBEINVESTIGATEDUNDERAREVISEDORGANIZATIONALSET
UPSEE3ECTION
64 FINAL REPORT
© The Swedish Geological AB
!24)3!.!,-).).'-!.!'%-%.4
!RTISANALANDSMALLSCALEMININGOPERATIONSEXISTINMANYDEVELOPINGCOUNTRIES4HISPARTOFTHEMINING
SECTORHASBEENSTUDIEDRATHERINTENSELYINTHELASTCOUPLEOFDECADESANDTHEREISANOVERALLAGREEMENTTHAT
ALTHOUGHTHESETYPESOFACTIVITIESMAYBECOMEASOURCEFORTHEDEVELOPMENTOFLOCALENTREPRENEURSHIPAND
OVERALLECONOMICDEVELOPMENTITISALSOASECTORWHICHISASSOCIATEDWITHSIGNIlCANTNEGATIVEENVIRONMENTAL
IMPACTSANDOFTENWITHPOORSOCIALCONDITIONSCF&IGURE &URTHER!3-ISOFTENPERFORMEDINREMOTE
AREASWHICHGOVERNMENTAGENCIESMAYHAVEDIFlCULTIESINACCESSINGMAKINGSUPERVISIONANDCONTROLOFTHE
SECTORASIGNIlCANTCHALLENGE
Inability to Insufficient
control sector income
Inability to
collect taxes
or royalties
Poor health and safety,
environmental damage,
illegal operations
O !NARTISANALMININGLICENSEISAPPLIEDFORATTHE2EGIONAL-INING"UREAUS)TMAYBEGRANTEDONLYTO%THIOPIAN
INDIVIDUALSORORGANISATIONSCOMMONLYCOOPERATIVES 4HELICENSEPROVIDESANEXCLUSIVERIGHTTOEXPLORE
ANDMINEFORTHEMINERALSWITHINTHELICENSEAREA)TISVALIDFORYEARSANDMAYNOTBERENEWED4HE
ARTISANALLICENSEISCONCERNEDWITHOPERATORSTHATARENON
MECHANIZEDANDTHATISWORKEDATADEPTHLESS
THANMVERTICALDEPTH4HEREISNONEEDTOHAVEANYSPECIlEDlNANCIALRESOURCESTECHNICALCOMPETENCE
PROFESSIONALSKILLSANDEXPERIENCETOACQUIREANARTISANALMININGLICENSE
4HE.ATIONAL"ANKISCHARGEDWITHBUYINGTHEGOLDPRODUCEDBYARTISANALMINERSANDITISCHARGEDWITHDOING
SOWITHAINCREMENTCOMPAREDTOTHEDAILYOFlCIALGOLDPRICEAROYALTYISPAYABLETOTHESTATE 4HIS
GOLDBUYINGMECHANISMISRATHERUNIQUEANDITHASRECEIVEDQUITEABITOFATTENTIONFROMOTHERCOUNTRIES
ANDORGANISATIONSTHATARECONCERNEDWITH!3-MANAGEMENT(OWEVERASDESCRIBEDBELOWPARAGRAPH
THESYSTEMISNOTFULLYEFFECTIVE
66 FINAL REPORT
+EYlNDINGS
%THIOPIAHASALONGTRADITIONOFARTISANALGOLDANDGEMMINING4HESECTORREMAINSIMPORTANTAND-O-
ESTIMATESTHATATOTALOFABOUTMILLIONPEOPLEAREDIRECTLYENGAGEDIN!3-IN%THIOPIAABOUTA
THIRDOFWHICHARECONCERNEDWITHGOLDMINING(OWEVERITNEEDSTOBEKEPTINMINDTHATITISDIFlCULTTO
ESTIMATETHENUMBEROFARTISANALMINERSANDTHATSUCHESTIMATESMUSTBEINTERPRETEDWITHSOMECAUTION
0ROBLEMSWITHPROVIDINGESTIMATESRELATETOTHEFACTTHATTHESEACTIVITIESARETOALARGEEXTENTINFORMALAND
UNREGISTEREDTHETERRAINISOFTENDIFlCULTTOACCESSANDMANYMINERSARENOTFULL
TIMEMINERSBUTCOMBINE
MININGWITHOTHERLIVELIHOODSSEEBOX
Box 5: How many Artisanal and Small scale (ASM) gold miners are there?
Estimates of the number of people involved in ASM often provide large numbers but these are generally
not based on reliable census work.
)FACOUNTRYHASBOTHAFORMALANDANINFORMALGOLDSECTORTHENTHEDIFFERENCEBETWEENTHEOFlCIAL
production by companies, and the total gold produced, is used to estimate the number of artisanal
miners. An often used method to estimate the number of ASM miners is based on the supposition that a
typical artisanal gold miner produces, say, 0.5-1g gold per day. If a miner works 200 days/year then 1kg
gold produced corresponds to 5-10 miners.
For example, in 2009 in Tanzania, total gold produced was about 40 tons, of which 36 tons derived from
formal mines. If the “missing” 4 tons are apportioned to ASM activities, then this corresponds to 20-
40,000 miners.
Problems and uncertainties with these types of estimates include the fact that artisanal miners may work
only part time as miners, whereas their main occupation could be, for example, subsistence agriculture;
and that gold deriving from undisclosed sources may be apportioned to ASM activities, thereby
legitimising its origins.
Gold mining
4HEAMOUNTOFGOLDPRODUCEDBY!3-ISREPORTEDTOHAVEINCREASEDDRAMATICALLYINRECENTYEARSFROMA
BITMORETHANKGOZ INTOINTHEEXCESSOFKILOSOZ IN
4HELATTERAMOUNTISREMARKABLYLARGEANDWELLINEXCESSOFTHEGOLDPRODUCEDBY!3-MINERSINSUCH
ESTABLISHEDGOLDMININGCOUNTRIESAS'HANAOR4ANZANIA&URTHERTHElNDINGSOFTHEADMITTEDLY FEWlELD
VISITSPERFORMEDDURING3TRATEGIC!SSESSMENTOF-INERAL3ECTOR3!-3 SEEBOX SUGGESTTHATTHE!3-
GOLDSECTORMAYBERATHERLESSDEVELOPEDTHANTHEIMPRESSIVEPRODUCTIONlGURESINDICATE
"OX3UMMARYlNDINGSON!3-DURINGlELDVISITS
PERFORMEDDURING3!-3
$OLOVIA/DO3HAKISO7OREDA/ROMIAnSOUTH
Located 2 km southwest of the Lega Dembi mine, it is
the largest ASM site in the area. Gold bearing quartz
veins are reached through the manual sinking up to
25 m deep shafts, followed by manual crushing and
washing of ore. Dolovia is controlled by a cooperative,
which has some 50 members and which, in turn,
employs hundreds of temporary miners and workers.
According to the cooperative, the production is 100
g – 200 g gold/month, and more than 3 tons of ore
is crushed daily. The operations are run in a strict
© The Swedish Geological AB hierarchic system with cooperative managers at the
top, and foremen managing the operations on site. The workforce is almost entirely comprised of
young men; some women are providing food and other provisions to the workers. A small but thriving
mining settlement, referred to as “Rock City” has arisen next to the mining site. The Dolovia cooperative
requests assistance in mechanically removing topsoil and waste rock, so that the ore may be more easily
accessed.
4HEPRODUCTIVITYOF!3-GOLDMINERSVARIES(OWEVERINTHEMAINLYPLACERBASEDGOLDDEPOSITSOFWESTERN
%THIOPIASURVEYSSUGGESTTHATONAVERAGEONEMINERPRODUCESSOMEnGGOLDPERMONTHDEPENDING
UPONWHETHERTHEMININGISCONDUCTEDPART
ORFULLTIME!TTHESITEINSOUTHERN/ROMIA$OLOVIAWHICHIS
REPORTEDLYTHELARGEST!3-COOPERATIVEINTHATREGION WHEREPRIMARYOREISBEINGEXPLOITEDAWELLORGANISED
COOPERATIVEOPERATIONWITHSOMEMEMBERSISPRODUCINGSOMEnGGOLDMONTHWHICHTRANSLATES
TOABOUTnGGOLDPERMEMBERANDMONTH)FTHESEPRODUCTIONlGURESAREREPRESENTATIVEOFTHE!3-
SECTORASAWHOLETHENTHISWOULDIMPLYTHATTHEREPORTED!3-PRODUCTIONOFGOLDDURING
KILOSOROZ REQUIREWELLINEXCESSOFONEMILLIONINDIVIDUALMINERSORALTERNATIVELYTHEEXISTENCEOF
MORETHANCOOPERATIVESOFTHESIZEOFTHE$OLOVIACOOPERATIVE
68 FINAL REPORT
4HESMUGGLINGANDILLICITSALESOFGOLDTONON
LICENSEDBUYERSISREPORTEDTOBERATHERWIDESPREADAND
THISHASOCCURREDINSPITEOFTHEGOVERNMENTPOLICYOFPAYINGAPREMIUMOVERTHEDAILYGOLDPRICE4HE
REASONSBEHINDTHESEILLICITSALESINCLUDEAWISHTOAVOIDPAYINGROYALTY ANDABELIEFTHATTHEPRICE
PAIDBYTHEILLICITTRADERSISHIGHERTHANTHOSEBEINGPAIDBYTHEGOVERNMENT4HESElNDINGSARENOTINLINE
WITHTHEPREVAILINGBELIEFTHATTHEGOLDBUYINGMECHANISMTHATISINPLACEISEFFECTIVEWHICHINTURNSUGGESTS
THATFURTHERSTUDIESAREREQUIRED
!3-ACTIVITIESREQUIREWATERANDTHEYARETHEREFOREOCCURRINGNEARWATERSOURCES7ITHREGARDSTOALLUVIAL
GOLDTHESOURCEISGENERALLYARIVERORSTREAM!T$OLOVIAWHEREMININGOFPRIMARYOREISCONDUCTEDTHE
MATERIALISBROUGHTTOANEARBYRIVERFORPROCESSING!SALLPROCESSINGACTIVITIESAREDEPENDENTONWATERAND
ASTHEREAREUSUALLYNOFACILITIESFORPUMPINGWATERTHISDEPENDENCYONWATERISCRUCIALANDISLIMITINGTHE
RESOURCESTHATMAYBEUTILISEDBY!3-MINERS
4HEUSEOFMANUALUNSKILLEDLABOURINCOMBINATIONWITHPRIMITIVETECHNOLOGIESLEADSTOARISKYWORK
ENVIRONMENT3ERIOUSACCIDENTSARETHEREFORECOMMONPLACE&URTHERTHETYPEOFWORKTHATISDONEISIN
SOMECASESSEENTOBESUITABLEFORTHEUNDER
AGEDANDTHEREAREREPORTSOFCHILDLABOUR
!CCESSTOSAFEDRINKINGWATERISSCARCEINMANYOFTHE!3-MININGAREAS&URTHERTHELIMITEDAVAILABILITY
OFSAFEWATERPLACESASEVERESTRAINONTHEMINERSANDPARTICULARLYONTHEWOMENWHOARERESPONSIBLEFOR
FETCHINGWATERFORHOUSEHOLDANDINPLACESESPECIALLYIN"ENISHANGUL
'UMUZALSOFORTHEWASHINGOFORE
!3-ISCAUSINGSIGNIlCANTENVIRONMENTALIMPACTSINTHEAREASWHERETHEYOCCUR4HEMAINIMPACTSRELATE
TOINCREASEDSUSPENDEDSEDIMENTSLOADINGANDTURBIDITYINRIVERSASTHEEXTRACTIONOFMATERIALFROMHILLSIDES
ANDRIVERBANKSISCAUSINGEROSIONANDASSOCIATEDSILTINGOFRIVERS3IMILARLYTHEWASHINGOFOREISOFTENDONE
INRIVERSORNEXTTOTHEMLEADINGTOGREATERTURBIDITYINDOWNSTREAMRIVERSANDSTREAMS3U$#!$EVELOPMENT
#ONSULTANTS NOTESSIGNIlCANTDEFORESTATIONINSOMEMININGAREASESPECIALLYINTHE"ENISHANGUL
'UMUZREGION4HEUSEOFMERCURYISHOWEVERNOTWIDESPREADWHICHISFROMANENVIRONMENTALPOINTOF
VIEWVERYPOSITIVE&URTHERTHEENVIRONMENTALIMPACTSAREINGENERALNOTSUCHTHATTHEYSPREADMUCH
BEYONDTHESPECIlCAREASWHEREMININGISBEINGCONDUCTED
4HEREARECASESOF!3-ACTIVITIESINTERFERINGORINFRINGINGONLARGERSCALEMINESANDPROJECTS3UCHPROBLEMS
EXISTINTHE.YOTALICENSEAREATOSOMEEXTENTAT,EGA$EMBIANDTHEYAREREPORTEDTOBESEVEREATTHE
STATEOWNED!DOLAMINE)NTHELATTERCASETHISFACTISSAIDTOBECONTRIBUTINGTOTHEDIFlCULTYOFPRIVATISING
THEOPERATION!T,EGA$EMBIITISREPORTEDTHATINVASIONSBY!3-ONMINEPROPERTYOCCURFROMTIMETO
TIMEBUTTHATTHELOCALWOREDAADMINISTRATIONISEFFECTIVEINMANAGINGANDCONTROLLINGTHISPROBLEMWITHTHE
RESULTTHATTHISISNOTCONSIDEREDBYTHEMINETOBEAMAJORPROBLEM
!3-SITESAREUSUALLYSITUATEDINREMOTEAREASWHEREACCESSTOROADSISLIMITEDANDELECTRICITYDOESNOTEXIST
3U$#!$EVELOPMENT#ONSULTANTS NOTESTHATTHESITUATIONISSEVEREINREMOTEPARTSOF"ENISHANGUL
'UMUZREGIONWHEREMININGISCOMPARATIVELYMOREIMPORTANTASASOURCEOFINCOMEPROVIDINGOPPORTUNITIES
FORTHOSEWHOAREWITHOUTOTHERSOURCESOFINCOME
3U$#!$EVELOPMENT#ONSULTANTS NOTESTHATCROPFARMINGISTHEMOSTIMPORTANTALTERNATIVELIVELIHOODS
FORMOSTMINERSFOLLOWEDBYLIVESTOCKREARING,ANDCOMPETITIONBETWEENMININGANDAGRICULTUREISAN
ISSUEINSOMEPLACESALTHOUGHSURVEYSINDICATETHATACCESSTOLANDFORMININGINMOSTAREASISNOTAGREAT
DIFlCULTYEXCEPTINSOMEPARTSOF/ROMIAWHERELANDUSECONmICTISMORECOMMONPLACE
3U$#!$EVELOPMENT#ONSULTANTS NOTESTHATTHEREISNOETHNICGROUPTHATDOMINATESINTHEMINING
INDUSTRYMINERSBACKGROUNDVARYFROMREGIONTOREGION-IGRATIONBYMINERSWITHINTHECOUNTRYISSUBSTANTIAL
INPLACES
)NMININGAREASTHEMALEPOPULATIONWIDELYEXCEEDSTHATOFFEMALETHEREARETHREETIMESMOREMALES
ENGAGEDINMININGTHANFEMALES3U$#!$EVELOPMENT#ONSULTANTS REPORTSTHATWOMENENGAGEMENTS
INMININGAREMORESIGNIlCANTIN"ENISHANGUL
'UMUZAND4IGRAYWHEREASITISALMOSTNEGLIGIBLEINOTHER
REGIONS3URVEYSSUGGESTTHATONAVERAGEINMININGAMANEARNSNEARLYTWICEOFWHATISBEINGEARNEDBYA
WOMAN
3ETTLEMENTSTHATHAVEDEVELOPEDAROUNDESTABLISHED!3-SITESREPRESENTOPPORTUNITIESFORDEVELOPMENTAND
INCOMEGENERATION!TTHESAMETIMETHESESITESOFTENBECOMEBURDENEDWITHLESSDESIRABLECHARACTERISTICS
SUCHASTHESPREADOFDISEASEINCLUDING()6!)$3 DRUGABUSEANDSOCIALCONmICTSBETWEENLOCALSAND
MINERSORMINEWORKERSWHOMAYBEFROMOTHERAREASOFTHECOUNTRY4HELATTERMIGRATIONTOGOLDMINING
AREASWASSEENREPORTEDATTHE$OLOVIASITESEEBOX AND3U$#!$EVELOPMENT#ONSULTANTS REPORT
ITTOALSOBERATHERCOMMONPLACEIN"ENISHANGUL
'UMUZ
4HE-O-ESTIMATESTHATTHEREWEREABOUTPEOPLEINASSOCIATIONSINVOLVEDINGEMSTONEPRODUCTION
IN!DDIS&ORTUNEREPORTSTHATTHEREAREARTISANGEMSTONEMINERSANDOVEREXPORTERSIN
Ethiopia-INERSSELLTHEIRSTONESTOBROKERSWHOINTURNWILLHAVETHEMVALUEDBYTHE-O-4HECAPACITY
OF-O-TOPERFORMAMARKETVALUATIONOFTHESESTONESISHOWEVERNOTYETWELLDEVELOPED
!SOF.OVEMBERTHE-INISTRYOF-INESISNOTACCEPTINGLICENSEAPPLICATIONSFORGEMSTONES)TISTOO
EARLYTOASSESSHOWTHISWILLAFFECTTHECURRENTARTISANALMININGCOMMUNITIES
Table 10.1 Opal production over the last six years (source: Ministry of Mines).
0RODUCTION
KG
'40TARGET
KG
3CALINGUPOFPRODUCTIONFOROPALISLIMITEDBYTHETECHNICALITIESOFPRODUCTIONTHEYARESUITEDTOARTISANAL
ANDSMALLSCALEMINING!USTRALIAWHICHISCURRENTLYTHELARGESTGLOBALSUPPLIEROFOPALSTONESESTIMATEDTO
ACCOUNTFORAROUNDOFTHEGLOBALMARKET PRODUCESSTONESTHROUGHARTISANALMININGASWELLASSMALL
SCALEPRODUCTION/PEN
CUTOPERATIONSCANBEUSEDTOEXPANDTHESCALEOFOPERATIONSBUTDOESREQUIRE
MACHINERYINTHEFORMOFBULLDOZERS TOREMOVETHEOVERBURDEN
#REATINGGREATERVALUEFROMTHEROUGHSTONESHASBEENRECOGNIZEDBYTHE3TATEANDEFFORTSHAVEBEENMADE
TOENCOURAGEVALUEADDITIONACTIVITIESIN%THIOPIA7ITHTHISINMINDTHE-INISTRYOF-INESANNOUNCEDABAN
ONEXPORTSOFROUGHOPALSIN*ANUARYTOCOMEINTOFORCEIN*UNEOFTHESAMEYEAR4HEBANWASNOT
ACTUALLYIMPOSEDANDHADBEENDISCARDEDBYTHEENDOF
#URRENTLYTHEREARENOPOLISHEDOPALPRODUCERSINTHECOUNTRY)NDIANlRMS)NDIABEINGTHELARGESTDESTINATION
FOR%THIOPIANOPALEXPORTS HAVESHOWNINTERESTINSETTINGUPPOLISHINGPLANTSWITHINTHECOUNTRYTHESE
INVESTMENTPLANSAREATAFEASIBILITYSTAGEATTHETIMEOFWRITINGOFTHISREPORT,OCALPRODUCERSHAVEALSO
SHOWNINTERESTINSETTINGUPPOLISHINGFACILITIESEQUIPMENTCANCOSTBETWEENTO"RTO
53$ 'EMSTONEPOLISHINGlRMSAREUSUALLYSMALLTOMEDIUMSIZEDBETWEENTOPEOPLE AND
ARENOTENERGYINTENSIVE4HEMAJORREQUIREMENTISOFSKILLEDGEMSTONECUTTERSANDPOLISHERS7HILETHE
ADDITIONINVALUEBYMOVINGFROMROUGHTOPOLISHEDSTONESCANBEHIGHTHISISDEPENDENTONSKILLEDCUTTING
ANDPOLISHINGTECHNIQUES
%XPORTREVENUESFROMOPALSHAVEBEENINCREASINGOVERTHEPASTFEWYEARSWITHTHEOPALSSOLDTHROUGH
LICENSEDEXPORTERS%XPORTERSAREREQUIREDTOREPATRIATE53$KGFORlRSTGRADEROUGHSTONES53$
KGFORSECONDGRADEAND53$KGFORTHIRDGRADEOPALS4HE-INISTRYOF-INESISENTITLEDTOREVISE
THEREPATRIATEDAMOUNTINCONSIDERATIONWITHINTERNATIONALPRICES&ORPOLISHEDOPALEXPORTERSAREREQUIRED
TOREPATRIATE53$KG4HEREAREINDICATIONSTHATOPALSARENOTALWAYSSOLDTHROUGHLICENSEDAGENTS
/PALSHAVEBEENASIGNIlCANTSOURCEOFFOREIGNEXCHANGEACCOUNTINGFOROVEROFTHEPRECIOUSSTONE
EXPORTREVENUESEARNEDIN53$MILLION AND53$MILLION 4HELARGESTDESTINATION
FORUNWORKEDSTONESWAS)NDIAWHILETHE53WASTHEMAINDESTINATIONFORPOLISHEDSTONES
4HEPOTENTIALFORTHEOPALSECTORIN%THIOPIATOCONTRIBUTETOWARDSFOREIGNEXCHANGEEARNINGSDOMESTIC
REVENUEANDEMPLOYMENTWITHINTHECOUNTRYISDEPENDENTONTHEABILITYOFTHE3TATETOMOVETHESECTOR
TOWARDVALUEADDITION!USTRALIAAND)NDIANEXPORTSOFUNWORKEDPRECIOUSSTONESINCLUDINGMORETHANJUST
OPAL WEREVALUEDAT53$MILLIONAND53$MILLIONRESPECTIVELYWITHlNISHEDSTONESAT53$MILLION
AND53$BILLIONRESPECTIVELYIN
70 FINAL REPORT
4HEGEMSTONESECTORISMAINLYARTISANALMINERSWITHLIMITEDTONOABILITYTOGENERATEBACKWARDLINKAGES
WITHSOMEPOSSIBILITYOFVALUEADDITION4HEGOVERNMENTHASMADEPOLICYOVERTURESTOWARDSDEVELOPINGA
GEMSTONEPOLISHINGSECTORWHICHWILLCONTRIBUTETOJOBCREATIONANDSECONDARYINCOMEGENERATIONBUTTHIS
LINKAGEWILLBELIMITED0OLISHINGUNITSAREUSUALLYMEDIUMTOSMALLSCALElRMSANDTHUSTHENUMBEROF
JOBSCREATEDISLIMITEDFROMTOINEACHlRM&ORTHEGEMSTONESECTORTOMAKELARGERCONTRIBUTIONSTO
THEECONOMYTHESECTORREQUIRESACOMPREHENSIVESTRATEGICASSESSMENTWHEREVALUECHAINSFROMROUGH
STONESTOHIGHVALUEADDITIONSUCHASJEWELRY CANBEMAPPED&OREXAMPLEINTHEDIAMONDVALUECHAIN
IFROUGHGEMSTONESARETAKENTOHAVEAVALUEOFCUTTINGANDPOLISHINGCANTAKETHEVALUEUPTO
JEWELRYMANUFACTURINGTOANDMARKETINGANDRETAILTO4HUSlSCALLINKAGESCANBETHEBIGGESTGAIN
MADEBYTHECOUNTRYFROMTHEGEMSTONESECTOR
10.3. Recommendations
!RTISANALMININGACTIVITIESAREDRIVENBYTHEOPPORTUNITYTHATTHEPRECIOUSMINERALSPROVIDEBUTALSOBY
POVERTYANDTHELACKOFOTHERECONOMICPOSSIBILITIES4HUSTHEACTIVITIESWILLCONTINUETOEXISTASLONGAS
THEREISALACKOFALTERNATIVELIVELIHOODS4HISSUGGESTSTHATTHEONLYWAYTOINTHELONGERTERMAVOIDTHE
ENVIRONMENTALSOCIALANDHUMANHEALTHPROBLEMSTHATAREINTIMATELYASSOCIATEDWITHTHISTYPEOFACTIVITYIS
TOENSUREANOVERALLPOSITIVEECONOMICDEVELOPMENTOFTHE%THIOPIANECONOMY
'OVERNMENTEFFORTSTOENCOURAGEINDIVIDUALMINERTOCOMETOGETHERTOFORMMININGASSOCIATIONSANDTHENTO
JOINTLYAPPLYFORMININGCERTIlCATESHASMETWITHSOMESUCCESS%NCOURAGEMENTTOFORMMININGCOOPERATIVES
SHOULDBEASSOCIATEDWITHTHEPROVISIONOFTRAININGONTECHNICALlNANCIALANDENVIRONMENTALISSUES4HIS
MAYTHENLEADTOASITUATIONWHERETHEREISABETTERANDCLOSERRELATIONSHIPBETWEENGOVERNMENTOFlCIALS
ANDMINERSANDWHERETHEN-O-STAFFCANBETTERINmUENCETHEBEHAVIOURANDPERFORMANCEOFINDIVIDUAL
MINERS)TISTHEREFORERECOMMENDEDTHATSUCHEFFORTSAREPROMOTED!SPECIALEFFORTCOULDBESPENTON
TRAININGMINERSTOBECOMEMOREENVIRONMENTALLYAWAREANDRESPONSIBLE(OWEVERONENEEDSTOBEMINDFUL
OFTHEFACTTHATSUPPLYINGINDIVIDUALSANDORASSOCIATIONSWITHTECHNICALSKILLSANDCAPACITYMAYLEADTO
INCREASEDMECHANISATIONANDTOENVIRONMENTALIMPACTSBECOMINGMORESEVERE
%FFORTSTOSUPPORT!3-MUSTBEACCOMPANIEDWITHASTRENGTHENEDCOMMITMENTANDCAPACITYBYTHE
AUTHORITIESTOSUPERVISECONTROLANDENFORCEEXISTINGLAWSANDREGULATIONS)TISOFSPECIALIMPORTANCETHAT
CASESWHERE!3-ACTIVITIESAREINTERFERINGWITHLARGEANDFORTHEWHOLECOUNTRYIMPORTANTPROJECTAREWELL
MANAGEDANDCONTROLLED)FTHATISNOTACHIEVED%THIOPIARISKSBECOMINGLESSATTRACTIVEASADESTINATIONFOR
MININGRELATEDINVESTMENTS!TTHESAMETIMEITISVITALTHATWHATEVERMEASURESARETAKENTOCONTROLSUCH
PROBLEMSTHATTHEBASICHUMANRIGHTSOFTHE!3-MINERSAREPROTECTEDANDTHATATTEMPTSAREMADETO
lNDALTERNATIVELIVELIHOODSFORTHOSEWHOMAYHAVELOSTOPPORTUNITIESWITHINTHE!3-SECTOR
'EMSTONEMARKETSARELIMITEDMAINLYTOJEWELRYANDORNAMENTDEMAND4HE7OLLO/PALHASRECEIVEDGOOD
PUBLICITYINTHEGEMSTONEMARKETSSOFARANDCOULDBEFURTHERDEVELOPEDASABRANDNAME)NORDERTO
COMPETEINTHEINTERNATIONALMARKETACOMPREHENSIVESTRATEGYNOTJUSTTOWARDSENCOURAGINGVALUEADDITION
WITHINTHECOUNTRYBUTALSOTOWARDSBRANDINGMARKETINGANDPROMOTIONNEEDSTOBEUNDERTAKEN
&URTHERRECOMMENDATIONSTOREALIZETHEFULLPOTENTIALOFTHEOPALSECTORINCLUDECOMMISSIONINGAFULLSTRATEGIC
ASSESSMENTOFTHEPRODUCTIONPOTENTIALANDCAPABILITIESWITHINTHECOUNTRY
%.6)2/.-%.4!,!.$3/#)/%#/./-)#-!.!'%-%.4
11.1. Legislation and regulation
4HEREARENOCOMPREHENSIVELEGALINSTRUMENTSFORMANAGINGENVIRONMENTALANDSOCIALASPECTSANDTHOSETHAT
EXISTHAVELITTLEINWAYOFDETAILEDPROVISIONS4HEKEYINSTRUMENTFORENVIRONMENTALANDSOCIALMANAGEMENT
ISTHE%)!0ROCLAMATION.O4HE%)!PROCLAMATIONISAFRAMEWORKLAWTHATREQUIREREGULATIONS
ANDORDIRECTIVESTOGIVEBETTEREFFECTTOTHEPROCLAMATIONNONEOFWHICHEXISTS4HUSTHEREISTOACERTAIN
EXTENTALACKOFLEGALBASISFORTHEPROPERENFORCEMENTOFTHE%)!0ROCLAMATION4HE%NVIRONMENTALAND
#OMMUNITY$EVELOPMENT$IRECTORATEOF-O-ISRESPONSIBLEFORTHEENFORCEMENTOFTHE%)!0ROCLAMATION
FORMINERALSECTORPROJECTSANDTHECAPACITYOFTHEDIRECTORATEISDISCUSSEDIN3ECTIONPARAGRAPH
0ROVISIONSFORSTAKEHOLDERCONSULTATIONANDPUBLICPARTICIPATIONINTHE%)!0ROCLAMATIONAREGENERALINNATURE
4HE%)!0ROCLAMATIONREQUIRESTHE%)!TOBEMADEACCESSIBLETOTHEPUBLICANDTHECOMMENTSMADEBY
THEPUBLICTOBEINCLUDEDINTHE%)!REPORTANDITSEVALUATION0UBLICCONSULTATIONISALSOPARTOFTHE%)!
'UIDELINEFOR-INERALAND0ETROLEUM/PERATION0ROJECTS BUTTHESEDONOTPRESCRIBEPROCEDURESIN
DETAIL)TISTHECONSULTANTSIMPRESSIONTHATTHEAUTHORITIESGENERALLYREGARDACOMPANYSPRESENTATIONOFA
PROJECTTONEARBYAFFECTEDCOMMUNITIESANDTHEINCORPORATIONOFMEETINGMINUTESINTHE%)!TOBESUFlCIENT
INTERMSOFHAVINGCOMPLETEDASTAKEHOLDERCONSULTATION
!CCESSTOLANDFORMININGISBASEDONTHEFACTTHATTHE3TATEOWNSALLLANDANDTHATCOMPENSATIONFORPROPERTY
ISPROVIDEDTOLANDHOLDERSIFPRIORITYISGIVENTOMININGPROJECTS4HE#ONSTITUTIONSPECIlESTHATTHERIGHTTO
OWNERSHIPOFLANDASWELLASOFALLNATURALRESOURCESISEXCLUSIVELYVESTEDINTHE3TATEANDINTHEPEOPLESOF
%THIOPIAANDLANDSHALLNOTBESUBJECTTOSALEOROTHERMEANSOFEXCHANGE)TFURTHERACKNOWLEDGESTHERIGHT
OFPEASANTSTOOBTAINLANDWITHOUTPAYMENTANDTOBEPROTECTEDAGAINSTEVICTIONFROMTHEIRPOSSESSIONAS
WELLASTHERIGHTOFPASTORALISTSTOhFREELANDFORGRAZINGANDCULTIVATIONASWELLASTHERIGHTNOTTOBEDISPLACED
FROMTHEIROWNLANDSv
72 FINAL REPORT
HABITATSVILLAGESWATERRESERVOIRSANDDAMSSITESETC4HE'OVERNMENTCANHOWEVERRESERVEANYLAND
FORMININGOPERATIONSIFCONSIDEREDTOBETHEBESTINTERESTOFTHECOUNTRYANDTHE-INISTRYCANAUTHORIZE
EXCEPTIONSFORMININGINTHOSEPROTECTEDSITES
4HE-INERAL0ROCLAMATION!MENDMENTPROVIDESTHEDETERMINATIONOFCOMPENSATIONANDRELATEDCOMPLAINTS
ANDAPPEALS PURSUANTTO0ROCLAMATION.OCALLED%XPROPRIATIONOF,ANDHOLDINGSFOR0UBLIC0URPOSES
AND0AYMENTOF#OMPENSATION0ROCLAMATION 0ROCLAMATION.OISCURRENTLYINUSESUBSTITUTING
!RTICLEOFTHE#IVIL#ODE4HEPROCLAMATIONLAYSDOWNPRINCIPLESTOCOMPENSATELANDHOLDERSFORPROPERTY
SITUATEDONTHELANDANDFORPERMANENTIMPROVEMENTSMADEONSUCHLANDONTHEBASISOFREPLACEMENT
COSTS
4HE0ROCLAMATIONTO0ROVIDEFORTHE$EVELOPMENT#ONSERVATIONAND5TILIZATIONOF7ILDLIFE.O
ESTABLISHESVARIOUSTYPESOFWILDLIFECONSERVATIONAREAS4ABLE
!CCORDINGTOTHE2EGULATIONTO0ROVIDEFOR7ILDLIFE$EVELOPMENT#ONSERVATIONAND5TILIZATION.O
ARTICLEH EXPLORATIONANDMININGAREEXPLICITLYPROHIBITEDWITHIN.ATIONALPARKSWILDLIFESANCTUARIES
ANDWILDLIFERESERVES(OWEVERARTICLEF PROVIDESFOR@MININGANDOTHERDEVELOPMENTACTIVITIESTOBE
UNDERTAKEN@INACCORDANCEWITHWILDLIFEDEVELOPMENTPROTECTIONANDUTILIZATIONACTIVITIES&URTHERMOREAS
MENTIONEDABOVETHE-INING0ROCLAMATIONPROVIDESFORTHE'OVERNMENTTOOPENANYPROTECTEDOR
RESERVEDAREAFOREXPLORATIONANDMININGWHENCONSIDEREDTOBEOFNATIONALINTERESTSEEFURTHERPARAGRAPH
&ORESTDEVELOPMENTCONSERVATIONANDUTILIZATIONISPROVIDEDFORTHROUGH0ROCLAMATION.O!RTICLE
DElNESA@PROTECTEDFORESTASAFORESTTOBECONSERVEDANDDEVELOPEDFREEFROMHUMANORANIMAL
INTERFERENCEFORTHEPURPOSEOFWATERSHADEMANAGEMENTANDTHECONSERVATIONOFGENETICRESOURCES
BIODIVERSITYANDTHEENVIRONMENTINGENERALASWELLASFORTHEPURPOSEOFTRAININGANDRESEARCH
!SDESCRIBEDIN#HAPTERTHE%NVIRONMENTALAND#OMMUNITY$EVELOPMENT$IRECTORATEOF-O-ISRESPONSIBLE
FORSUPERVISINGCONTROLLINGANDCOMPLIANCEMONITORINGOFTHE%)!PROCESS(OWEVERTHEDIRECTORATECURRENTLY
LACKSSTAFFWITHEXTENSIVEEXPERIENCEANDSUFlCIENTQUALIlCATIONSINTHElELDSREQUIREDMININGENVIRONMENT
SOCIOECONOMICSCOMMUNITYDEVELOPMENTAND/(3
!DDITIONALTOOLSANDORGUIDELINESTHATSUPPORTENVIRONMENTALANDSOCIALMANAGEMENTOFTHESECTORISLIMITED
TOTHREEGUIDELINESI %NVIRONMENTAL)MPACT!SSESSMENT0ROCEDURAL'UIDELINE nDESCRIBINGTHE%)!
PROCESSROLESANDRESPONSIBILITIESANDLISTSDIFFERENTTYPESOFPROJECTSREQUIRINGAN%)!II 4HE'UIDELINES
3ERIES$OCUMENTSFOR2EVIEWING%NVIRONMENTAL)MPACT3TUDY2EPORTS nAIMEDTOASSISTSECTORAL
AUTHORITIESINASSESSING%)!SAND4HE%)!'UIDELINEFOR-INERALAND0ETROLEUM/PERATION0ROJECTS
nAIMEDTOASSISTINVESTORS!LLGUIDELINESARESTILLINDRAFTFORM7HILETHElRSTGUIDELINEPROVIDESUSEFUL
INFORMATIONONTHE%)!PROCESSTHELATTERTWOARESTILL@WORKINGDOCUMENTSTHATNEEDIMPROVEMENTBOTHIN
STRUCTURETOMAKETHEDOCUMENTSMOREEASILYACCESSIBLEFORTHEREADERANDINCONTENTDETAILSTOMAKETHEM
COMPLETEANDUPDATED4HEMODESTQUALITYOFTHETWOLATTERGUIDELINESMAYSUGGESTATALACKOFCAPACITY
ANDEXPERIENCEINTHEAREAOFMINERALSECTORENVIRONMENTALANDSOCIALMANAGEMENT
4HEMAINCATCHMENTAREASFORlVEMAJORTRANSBOUNDARYRIVERSARELOCATEDIN%THIOPIATHE.ILEmOWINGINTO
3UDANTHE-AREBOR'ASH CONSTITUTINGPARTOFTHEBORDERTO%RITREAANDmOWINGINTO%RITREATHE!WASH
mOWINGINTO$JIBOUTIANDTHE*UBAAND3HEBELEBOTHmOWINGINTO3OMALIA
4HEDIVERSETOPOGRAPHICFEATURESOF%THIOPIAANDTHESEASONALMOVEMENTOFTHE)NTER
TROPICALCONVERGENCE
ZONE)#4: PRODUCEWIDEVARIATIONSINCLIMATEASWELLASINTHEDISTRIBUTIONOFNATURALVEGETATIONANDSOIL
CONDITIONS7HILETHEAVERAGEANNUALRAINFALLISRATHERHIGHATAROUNDMMTHEREAREEXTREMEVARIATIONS
SPATIALLYANDBETWEENDIFFERENTYEARSWITHSIGNIlCANTDROUGHTANDmOODEVENTSOCCURRINGEVERY
YEARS
7ORLD"ANK !VERAGEANNUALRAINFALLVARIESFROMMMINNORTHEASTANDEASTERNPARTSTOMM
INTHECENTRALHIGHLANDSANDTHERAINFALLISHIGHLYSEASONABLEWITHMOSTRAINFALLINGINASINGLEANDSHORT
SEASONOFTENPRODUCINGHIGH
INTENSITYSTORMS
4HERUGGEDTOPOGRAPHYOFLARGEPARTSOF%THIOPIAANDITSLONGHISTORYOFHUMANIMPACTCOUPLEDWITHTHE
EXTREMEVARIATIONSINRAINFALLHAVERESULTEDINSIGNIlCANTIMPACTONTHENATURAL@BACKGROUNDENVIRONMENT
(UMANACTIVITIESHAVELEDTOSIGNIlCANTDEFORESTATIONHISTORICALLYTHEFORESTCOVEROF%THIOPIAISBELIEVEDTO
HAVEBEENABOUTWHILEABOUTOFTHECOUNTRYISNOWCOVEREDBYFOREST2EUSING HAVE
SHOWNTHATINTHESNATURALHIGHFORESTCOVEREDONLYOFTHECOUNTRYANDTHISISNOWREDUCEDTO
OFWHICHTHEDOMINANTPARTISCONlNEDTOTHE.ATIONAL0RIORITY&OREST!REASSEEBELOW
)NORDERTOENSURESOMELEVELOFFORESTRESOURCESCONSERVATIONINCLUDINGGENETICRESOURCESANDBIODIVERSITY
.ATIONAL0RIORITY&OREST!REAS.0&!S WEREDELINEATEDWITHINTHE%THIOPIAN&ORESTRY!CTION
0ROGRAM4HETOTALORIGINALAREAOFTHESE.0&!SWASMILLIONHECTAREABOUTOF%THIOPIASTOTALLAND
AREA BUTTHESIZESOFTHESE.0&!SHAVEDIMINISHEDDUETOHUMANSETTLEMENTDUETOPOPULATIONGROWTH
ANDAGRICULTURALENCROACHMENTS.0&!SAREDISTRIBUTEDACROSSTHECOUNTRYSEEEXAMPLESIN&IGURE
74 FINAL REPORT
ANDCOVERMOSTOFTHEECOSYSTEMSVEGETATIONZONES&IGURE 4HE.0&!SAREALSOINPLACETOPROTECT
BIODIVERSITYANDENDEMICPLANTSPECIES4HETOTALPLANTDIVERSITYOF%THIOPIAISABOUTSPECIESANDABOUT
OFTHESPECIESAREENDEMIC4HESEENDEMICPLANTSPECIESAREDISTRIBUTEDACROSSVARIOUSECOSYSTEMS
VEGETATIONTYPESOF%THIOPIA&LORAOF%THIOPIAVOLUMES
4HEREAREANUMBEROF7ILDLIFE#ONSERVATION!REASIN%THIOPIA!SMENTIONEDIN3ECTIONNATIONAL
PARKSWILDLIFESANCTUARIESWILDLIFERESERVESAND.0&!S&IGURE AREPROTECTEDFROMEXPLORATIONAND
MININGBYLAWWHILETHE'OVERNMENTMAYMAKEEXEMPTIONS#OMMUNITYCONSERVATIONAREASWHERELOCAL
COMMUNITIESMAYUTILIZEWILDLIFERESOURCESANDCONTROLLEDHUNTINGAREAS&IGURE DONOTCARRYTHE
SAMELEVELOFPROTECTION.ATIONALPARKSWEREESTABLISHEDMAINLYTOPROTECTmAGSHIPSPECIESEG7ALIAIBEX
-OUNTAIN.YALAANDTHE%THIOPIANWOLF3IMILARLYTHEWILDLIFESANCTUARIESWEREMEANTTOPROTECTTHREATENED
SPECIESSUCHAS3WAYNES(ARTEBEESTANDANELEPHANTSUBSPECIES"ABILE%LEPHANT3ANCTUARY 4HEFAUNA
DIVERSITYOF%THIOPIAHASNOTBEENSYSTEMATICALLYDOCUMENTED(OWEVERVARIOUSSTUDIESSHOWTHATTHEREARE
ATLEASTSPECIESOFMAMMALSOFWHICHSPECIESAREENDEMIC
"IRDLIFE)NTERNATIONALHASRECOGNISED)MPORTANT"IRD!REAS)"! IN%THIOPIABYUSINGBIRDSASINDICATORS
FORBIODIVERSITYCONSERVATION)NCONTRASTTO.0&!SAND7ILDLIFE#ONSERVATION!REAS)"!SDONOTCARRYANY
ENVIRONMENTALPROTECTIONBYLAWUNLESSTHEYFALLWITHINWILDLIFEORFORESTPROTECTEDAREAS-OST)"!SARE
LOCATEDOUTSIDETHE0ROTEROZOICAREASWHEREANYFUTURELARGE
SCALEMININGISEXPECTEDTOOCCUR%THIOPIA
HASAHIGHDIVERSITYOFBIRDOVERSPECIES ANDTHIRTY
ONESPECIESHAVEBEENIDENTIlEDTOBEOFGLOBAL
CONSERVATIONCONCERNWWWBIRDLIFEINTERNATIONALORG
14°N YEMEN
E
A
Shire lowlands
Dessa'a forest
Metu-Gore-Tepi forests
Abijjata-Shalla Lakes
6°N 6°N
S O U T H S U D A N Omo
Mago
Anferara Forest
Liben plains
Mankubsa welenso forest
Chelbi
Arero Forest
Yabello Sanctuary
¹
SOMALIA
Dawa-Wachile Gerale
Km
K E N YA
0 50 100 200 300
Figure 11.3. Wildlife conservation areas and important bird areas in relation to late Proterozoic terrains and exploration and
KE NYA
UGANDA
mining licenses issued during 2005-2012. Examples (names) of NPFAs are also indicated.
R
E
D
14°N
S
14°N YProterozoic terrains
EMEN
E
A
License Areas
Potential Natural Vegetation
SUDAN
Dry Evergreen Afromontane forest
Combretum-Terminalia Woodland
Afroalpine Vegetation
G U L F O F Moist Evergreen Afromontane Forest
ADEN
DJIBOUTI Transitional Rainforest
Salt Lakes- Open Water Vegetation
Acecia-Commiphora Woodland
Acecia Wooded Grassland
10°N 10°N
Desert and Semi-desertScrubland
Ericaceous Belt
Freshwater marshes and swamps
Salt Pans
Wooded Grassland
6°N 6°N
S O U T H S U D A N
¹
SOMALIA
Km
K E N YA
0 50 100 200 300
Figure 11.4. Potential ecosystems/vegetation zones of Ethiopia (ref) in relation to late Proterozoic terrains and exploration and
mining licenses issued during 2005-2012.
!SCANBESEENIN&IGUREMOSTWILDLIFECONSERVATIONAREASAND)"!SARELOCATEDOUTSIDETHE0ROTEROZOIC
TERRAINSWHICHARETHEMOSTPROSPECTIVEFORMINERALSANDTHUSTHEMOSTLIKELYTOBEIMPACTEDBYEXPLORATION
ANDMININGACTIVITIESINTHEFUTURE(OWEVERTHEREARECASESWHENCONSERVATIONANDEXPLORATIONLICENSE
AREASOVERLAPASEXEMPLIlEDBELOW7HEREASTHISMAYBEDUEACASE
SPECIlCDECISIONSBYTHE'OVERNMENT
WHEREMININGHASBEENGIVENPRIORITYOVERCONSERVATIONINTERESTSCFPARAGRAPHANDABOVE INTERVIEWS
CARRIEDOUTWITHINTHISPROJECTINDICATETHATITMAYINSOMECASESBEDUEALACKOFSPATIALINFORMATIONON
CONSERVATIONAREASATTHE-INERAL,ICENSINGAND!DMINISTRATION$IRECTORATE4HEDIRECTORATEISNOWWORKING
ONINTEGRATINGTHISINFORMATIONINTOTHEMININGCADASTRESYSTEM
!HANDFULLICENSESINTHENORTHFALLINSIDETHEREMNANTDRYAFROMONTANEFORESTSANDINPARTICULARWITHIN
THE$ESSAAAND(UGUMBRDA.0&!SWHICHAREHOMETOKEYBIODIVERSITYPLANTSPECIESANDECOLOGICAL
PROCESSESTHATAREVITALTOTHELIVELIHOODOFLOCALCOMMUNITIES)NTHEREWASALSOEXPLORATIONLICENSES
ISSUEDACROSSLARGEAREASOFTHE+EFTA3HIRARO.ATIONAL0ARKINTHEFARNORTHEAST&IGURE
)NTHESOUTHERN0ROTEROZOICTERRAINTHEMOIST!FROMONTANEFORESTISREMNANTINNATUREANDCOVERSONLY
ASMALLPORTIONOFTHEHIGHLANDS3IMILARLYTHEDRY!FROMONTANEFORESTSAREFRAGMENTEDINNATUREAND
THREATENEDBYHUMANIMPACT3OMELICENSEAREASFALLINSIDE.0&!SEG!RERO!NFERARAAND-ANKUBSA
7ELENSOFORESTS WHICHAREALSOHOUSE)"!SWITHENDEMICANDRAREBIRDSPECIES3OMELICENSESALSO
COINCIDEWITHWILDLIFESANCTUARIESEG9ABELLO
)NTHENORTHEASTERNPARTOFTHE2IFT6ALLEYSOMELICENSEAREASFALLINSIDEWILDLIFERESERVEEG-ILLE3ERDO
76 FINAL REPORT
PARTSOF/ROMIA7EST7OLLEGAZONEAND'UJIZONE 4HESEAREASARECOMPARATIVELYSPARSELYPOPULATED
(OWEVERSOMEPARTSOFESPECIALLY4IGRAYANDSOUTHERN/ROMIAREPRESENTAREASWHEREHIGHPOPULATIONAND
PROSPECTIVEGEOLOGYINTERSECT
/VERALLDEMOGRAPHICANDHEALTHRELATEDINDICATORSSHOWTHATTHEAREASWITHPROSPECTIVEGEOLOGYARE
AREASTHATARELESSURBANISEDANDLESSWELLDEVELOPEDCOMPAREDTOTHENATIONALAVERAGE4HESEAREAS
AREEXPERIENCINGRAPIDPOPULATIONGROWTHANDAREASSOCIATEDWITHRATHERPERILOUSHEALTHSTATUSAMONGTHE
POPULATION4ABLE "ENISHANGUL
'UMUZISTHECOMPARATIVELYLEASTDEVELOPEDAREAAMONGTHETHREE
GEOLOGICALLYPROSPECTIVEAREAS
%THIOPIAISAVERYDIVERSECOUNTRYWITHMANYCULTURESANDLANGUAGESEXISTINGSIDEBYSIDE3OMEOFTHESE
COMMUNITIESARELESSNUMEROUSANDMAYBEMOREVULNERABLETOIMPACTSFROMMININGDEVELOPMENTSWHICH
MAYIFNOTMANAGEDCAREFULLYENDUPNEGATIVELYIMPACTINGONAVARIETYOFSOCIOCULTURALASPECTS)N4IGRAY
NEARLYALLRURALINHABITANTSARE4IGRAYANS3IMILARLYIN/ROMIAMOSTRURALDWELLERSARE/ROMOALTHOUGHIN
THESEAREASTHEREISALSOASIZEABLE!MHARICMINORITYPRESENT#ONVERSELYRURAL"ENISHANGUL
'UMUZISMORE
DIVERSEWITHTHEMOSTSIZEABLECOMMUNITIESBEING"ERTA'UMUZ!MHARA/ROMOAND
3HINASHA
Figure 11.5. Map showing areas of prospective geology (Proterozoic) as well as mines and how these relate to areas of high
population density.
78 FINAL REPORT
3. Accumulation/spread of solid waste
Potential threat from toxics in solid waste Tailings deposits
Sediment runoff from mining sites Waste rock heaps
Accidents due to lack of stability of waste Leaching heaps
material; tailings dam failures
4. Water use and/or pollution
Overexploitation of groundwater sources Excessive use of process water
Changes in groundwater table Discharge of contaminated water from tailings
Withdrawal of water in competition with other dams or directly from plants
utilisation Acid mine drainage (AMD) from mines
Contamination of surface water used for drinking, AMD from tailings and waste rock disposals
irrigation, aquaculture, recreation Contamination by reagents used in mineral
Suspended solids in drainage processing
Contamination of groundwater wells and springs
5. Air pollution
3PREADOFlNEMINERALDUSTOFDETRIMENTALTO Dusting from dry tailings deposits
humans and nature SO2 emissions from smelters
!CIDIlCATIONOFWATERBODIESANDSOILFROMSMELTER Emissions of lead, arsenic and other substances
gases through smelter gases
Contamination from air transported particles, Release of methane from mines
metallic compounds and gases
6. Soil pollution
The contamination of agricultural soil Transport of metals and other substances related
Contamination of ground in inhabited areas to mining operations by air, water or vehicles
%FFECTSONmORAANDFAUNA
Destruction of natural habitat The combined effect of contaminations radiating
Destruction of adjacent habitat from mining operations
Disturbance of wildlife Deforestation related to operations or the activity
of intruding settlers
)MPACTSONAQUATICLIFEmORAANDMICROFAUNA
8. Noise and vibration
Effects on human health Mine blasting
Damage to buildings Operation of vehicles and other heavy equipment
9. Radioactivity and uranium
Gamma radiation Radiation from natural sources
Uranium as a toxic Uranium in ores being exploited
10. Environmental emergencies
Catastrophic failures of tailings dams $ElCIENTDESIGNORMANAGEMENTOFTAILINGSOR
Collapse of underground workings and their other waste disposal structures
consequences at the surface The use of unsafe exploitation methods
Accidental spillage of toxic substances Poor facilities for storage and transport of toxics
11. General issues in industrial establishments
Oil and fuel spillages Vehicle servicing
PCB Leaking transformers
CFC Leakages from refrigeration plants and air-
Spread of scrap conditioning
Uncontrolled spread of sewage $ElCIENTMATERIALSHANDLING
7ATERMANAGEMENTISOFTENAKEYISSUEINMININGASCOMPROMISINGWATERQUANTITYANDQUALITYMAYHAVE
EFFECTSFARDOWNSTREAMOFTHEOPERATION7ATERMANAGEMENTIN%THIOPIAISOFKEYCONCERNASITISAHIGHLY
VARIABLEANDOFTENSCARCERESOURCEAS%THIOPIANCATCHMENTSARETHEMAJORSOURCEFORSEVERALTRANSBOUNDARY
RIVERSANDASSILTINGOFWATERCOURSESISALREADYAPROBLEMINMANYPARTSOF%THIOPIADUETOTHEDEFORESTRATION
ANDTOPSOILLOSS)NPARTICULARPARTSOFTHESOUTHERNANDNORTHERN0ROTEROZOICTERRAINSARELOCATEDINDROUGHT
PRONEAREASTHATALSOHAVEMUCHHIGHERINTERANNUALVARIATIONINRAINFALLAMOUNT$EMEKE
%THIOPIAHASANUMBEROFPLANTANDMAMMALENDEMICSPECIESWHILEAREASRESERVEDFORBIODIVERSITY
CONSERVATIONARERATHERLIMITEDANDTHESEAREASARENOTFULLYPROTECTEDFROMINDUSTRIALDEVELOPMENTBYTHE
LAW%VENIFMININGCOMMONLYIMPACTSRATHERSMALLAREASINCLUDINGASSOCIATEDINFRASTRUCTURECOMPAREDTO
FOREXAMPLEFORESTRYORAREASAFFECTEDBYDEFORESTRATIONINGENERAL ITISIMPORTANTTOCONSIDERTHECUMULATIVE
IMPACTOFALLINDUSTRIALANDCOMMUNITYDEVELOPMENTSINAPOTENTIALMININGAREAANDTOASSESSINDETAILTHE
BIODIVERSITYVALUEOFTHEAREA
4HELARGERANGEANDCOMPLEXITYOFPOTENTIALIMPACTSRELATEDTOMININGSEEBOXABOVE REQUIRESAPPROPRIATE
LEGISLATIONANDBROADCAPACITYFORSUPERVISIONANDREGULATIONBYTHEAUTHORITIES7ITHTHISNOTYETBEING
PLACE3ECTION ENVIRONMENTALMANAGEMENTWILLHAVETORELYONGOODCOMPANYPERFORMANCE&ROM
ASAMPLEOFMININGPROJECT%)!SREVIEWEDTHEQUALITYAPPEARSTOVARYSUBSTANTIALLY4HOSEUNDERTAKENBY
INTERNATIONALPUBLICCOMPANIESAREOFGOODINTERNATIONALSTANDARDANDTHISISOFTENTHECASEWORLD
WIDE
ASTHEMARKETANDlNANCIERSEGTHE)&# SOREQUIRE4HESECOMPANIESASWELLAS-IDROC,EGA$EMBI
INVOLVEEXPERIENCEDINTERNATIONALCONSULTANCYlRMSTOASSISTWITHTHE%)!ANDENVIRONMENTALMANAGEMENT
(OWEVERTHEREVIEWED%)!SUNDERTAKENDOMESTICALLYFOREXAMPLEFORLIMESTONEANDCLAYMININGWERE
OFVERYPOORQUALITYWITHISSUESRANGINGFROMKEYPARTSSIMPLYMISSINGORTEXTSECTIONSBEINGUNRELATEDTO
HEADINGSTO%)!SWITHAREASONABLYGOODBASELINEDESCRIPTIONBUTBEINGLOWONHARDDATAFACTSANDWITH
MITIGATIONMEASURESANDMONITORINGPROCEDURESHAVINGASERIOUSLACKOFDETAIL
80 FINAL REPORT
0OTENTIALFORLANDUSECONmICTSRELATEDTOMINING
!LLLANDISCONTROLLEDBYTHE3TATEANDRESETTLEMENTTOMAKEROOMFORAMININGOROTHERTYPE PROJECTCAN
OCCURIFADEQUATECOMPENSATIONISMADE4HESEFACTSPROVIDEAGOODPLATFORMFORRESOLVINGLANDUSECONmICTS
THATTYPICALLYOCCURDURINGEXPLORATIONANDMINEDEVELOPMENT2ECENTEXPERIENCESRELATEDTOTHE4ULU+API
AND!LLANAPOTASHPROJECTSSUGGESTTHATLANDUSECONmICTSMAYBEADDRESSEDCONSTRUCTIVELYTHROUGHAND
WITHSOMESUCCESSBYUSINGOF)&#GUIDELINESONRESETTLEMENTANDCOMPENSATIONWHILECLEARLYTHISISA
VERYSENSITIVEANDCRUCIALISSUETHATNEEDSTOBECONSIDEREDFURTHERINFUTUREPROGRAMSANDPROJECTS4HISIS
EXEMPLIlEDBYTHE,EGA$EMBIOPERATIONSWHICHAREHAVINGSIGNIlCANTPROBLEMSINBEINGALLOWEDTOACCESS
LANDADJACENTTOTHEMINETHATISNOWUSEDBYFARMERSCOFFEE ANDWHICHISNEEDEDFOREXPLORATION4HIS
LIMITATIONISPREVENTINGEXPLORATIONTHATNEEDSTOTAKEPLACEIFTHELIFEOFMINEISTOBEEXTENDEDSEEBOX
Box 8: Land use – does mining have priority at Lega Dembi?
At the Lega Dembi mine, neighbouring coffee farmers are refusing the company access for exploration
activities on their land, thus hindering the further expansion of the mine eastwards. According to
mine staff, mining should have priority, and access to land should be provided, as long as adequate
compensation is made. However, there are contradictory stipulations in the mineral legislation, and the
laws regulating agricultural activities. This, in turn, has caused an impasse where neither local, regional
nor the federal authorities have been willing to side with the company, and resolve the situation so that
mining may be allowed to continue. This case, where the presently most important foreign exchange
earner of the country is unable to expand its operation due to a number of small farmers resisting,
provides a clear example, of the need to streamline legislations that deals with land use, land access
for exploration and mining, as well as to a need for local, regional and federal authorities to be better
coordinated in their decision making. The “Lega Dembi case” shows that this is a complex issue that
needs to be seriously considered in all future plans, programs and projects, for mining to be sustained
while the rights of landholders are protected.
7ITHREGARDSTO#32RELATEDEFFORTSTAKENBYMININGCOMPANIESA$&!4$lNANCEDSTUDYPERFORMEDBY
3YNERGY'LOBAL#ONSULTING CONCLUDESTHATTHENEWINVESTORS.YOTAAND!LLANAHAVEBEENUSING
)&#GUIDELINESTOENSURETHATCOMMUNITYRELATEDISSUESAREMANAGEDINAPROPERWAY4HESAMESTUDY
RECOMMENDSTHATTHESE)&#GUIDELINESMAYBEUSEDASMINIMUMREQUIREMENTSFORHOWMININGCOMPANIES
SHOULDBEHAVEIN%THIOPIA
11.4. Recommendations
4HEBENElTSOFMININGLEDDEVELOPMENTMAYIFWELLMANAGEDBENElTTHEWHOLENATION.EGATIVEIMPACTS
HOWEVERRISKBEINGEXPERIENCEDINTHEAREASWHEREMININGISACTUALLYISOCCURRING%FFORTSARENEEDEDTO
ENSURETHATSUCHIMPACTSAREMITIGATEDMANAGEDANDORCOMPENSATED
4HEOVERALLGOALFORANENVIRONMENTALLYANDSOCIALLYSOUNDINDUSTRYMAYBEEXPRESSEDASTHEEFFECTIVE
UTILISATIONOFACOUNTRYSRAWMATERIALSANDMANUFACTURINGRESOURCESFORTHEBENElTOFITSPOPULATIONWITHOUT
CAUSINGHARMTOHUMANHEALTHORDAMAGINGBIOLOGICALDIVERSITYANDECOLOGICALSTABILITY)TISTHERESPONSIBILITY
OFGOVERNMENTSTOFULlLTHISGOALBYTRANSFORMINGVISIONINTOPOLICIESANDPRACTICALACTION*USTASTHEMINING
INDUSTRYREPRESENTSMERELYONESEGMENTOFACOUNTRYSECONOMYPUBLICENVIRONMENTALANDSOCIALADMINISTRATION
OFTHEMININGSECTORISUSUALLYAWELL
INTEGRATEDELEMENTINAMUCHWIDERNATIONALENVIRONMENTALAGENDA
3UCHADMINISTRATIONIMPLIESESTABLISHINGPOLICIESLEGISLATIONANDENFORCEMENTPROCEDURESACOMPLEXTASK
COMBININGAVARIETYOFISSUESANDACTIONSWHICHJOINTLYCOULDBECALLEDA.ATIONAL%NVIRONMENTALAND3OCIAL
-ANAGEMENT3YSTEMCFBOXBELOW %THIOPIAMAYCONSIDERREVIEWINGALLTHEELEMENTSOFSUCHASYSTEM
KEYASPECTSAREDISCUSSEDBELOW
Policy – strategy
Development of an environmental policy, including the establishment of operational goals.
Formulation of strategies, including the choice of policy instruments, for accomplishing these goals.
Legislation
Promulgation of a principal environmental law, an ”umbrella law” consistent with existing policies.
%NACTMENTOFSPECIlCLAWSANDREGULATIONSSUCHASINCLUDINGTHEINTRODUCTIONOFCOMPLEMENTARY
legal and economic instruments.
Standards
Establishment of goals for environmental quality of different ecosystems, related to both pollutants
and the protection of nature.
$ElNITIONOFBASELINECONDITIONS
Establishment of public organisations for environmental and social management and law enforcement.
Introduction of work standards and procedures for an effective public environmental management.
Establishment of auditing, inspection and reporting as tools in environmental supervision.
Industry-oriented initiatives
Introduction of procedures and incentives for environmental and social development and self-
control within industry.
Promotion of environmental knowledge and information, and the encouragement of public
participation in environmental matters.
82 FINAL REPORT
#ONSIDERINGTHEFACTTHATENVIRONMENTALANDSOCIALMANAGEMENTOFTHEMINERALSECTORISREGULATEDONLY
THROUGHTHE%)!0ROCLAMATIONTHEADVANTAGESANDDISADVANTAGESOFASYSTEMTHATISHIGHLYREGULATEDOR
LITTLEREGULATEDMAYBECONSIDERED)TISPROPOSEDTHATENVIRONMENTALPROVISIONSREVIEWEDANDTHEDRAFTING
OFENVIRONMENTALANDSOCIALREGULATIONSSPECIlCTOMINERALSECTORENVIRONMENTALPROTECTIONISCONSIDERED
)NMANYCOUNTRIESSPECIlCMINERALSECTORREGULATIONSEXISTFOREXAMPLEFORREHABILITATIONANDMINECLOSURE
INTERNALANDEXTERNALAUDITS/(3ETC)NAMOREREGULATEDREGIMETHEREWOULDBELESSNEEDFORNEGOTIATIONS
WITHCOMPANIESINDETERMININGTHESOCIALANDENVIRONMENTALCONDITIONSTHATSHOULDPREVAILINANYCERTAIN
PROJECTORMINEIN%THIOPIA
4HETHREESETSOF%)!
RELATEDGUIDELINESCOULDBENElTFROMREVISIONANDSTREAMLINING4HECURRENT%)!
GUIDELINEFORPROPONENTSCOULDBESPLITINTOTWOONEFORMINERALSANDONEFORPETROLEUMFORINCREASED
CLARITYANDSTRUCTURE2EVISIONOFTHEGUIDELINESWOULDBENElTFROMASSISTANCEFROMEXTERNALEXPERTSWHO
COULDALSOPROVIDETRAININGTOTHE%NVIRONMENTALAND#OMMUNITY$EVELOPMENT$IRECTORATEOF-O-INTHE
AREAOFENVIRONMENTALANDSOCIALMANAGEMENTANDREGULATION!DDITIONALGUIDELINESSHOULDBECONSIDERED
'UIDELINESCOULDALSOBEDEVELOPEDTOASSISTBOTHTHEREGULATORANDTHEINVESTORINTHEAREASOFFOREXAMPLE
COMMUNITYCONSULTATIONANDPUBLICPARTICIPATIONBASELINESTUDIESENVIRONMENTALANDSOCIALMONITORING
AUDITINGETC
!SMENTIONEDUNDER3ECTIONCAPACITYBUILDINGATTHE%NVIRONMENTALAND#OMMUNITY$EVELOPMENT
$IRECTORATEOF-O-ISREQUIRED&ROMTHECURRENTSTATUSOFTHEUNITAFTERTRANSITIONANDSUPPORTOVERA
NUMBEROFYEARSFROMTHE%0!ITISCONCLUDEDTHATTHE%0!DOESNOTHAVESUFlCIENTCAPACITYTOSUPPORT
THEUNITANDTHE%0!DOESALSONOTHAVETHEREQUIREDEXPERTISEINTHElELDOFMINING#APACITYBUILDINGFOR
THESUPERVISIONANDCONTROLOFEXPLORATIONANDMININGPROJECTSATTHEREGIONALANDLOCALGOVERNMENTALLEVELS
WOULDALSOBEREQUIRED
)NTER
INSTITUTIONALCOLLABORATIONBETWEEN-O-ANDINSTITUTIONSSUCHASTHE%THIOPIAN7ILDLIFE$EVELOPMENTAND
#ONSERVATION!UTHORITY-INISTRYOF!GRICULTUREANDTHE)NSTITUTIONFOR"IODIVERSITY#ONSERVATIONTOSAFEGUARD
NATURALHABITATSANDBIODIVERSITYMAYBECONSIDERED4HERATHERCOMMONOVERLAPBETWEENEXPLORATION
LICENSESISSUEDBETWEENANDANDVARIOUSTYPESOF.0&!SANDWILDLIFECONSERVATIONAREASISA
SIGNOFTHATMORESTRINGENTPROTECTIONOFTHESEAREASISPERHAPSREQUIRED4HEPROPOSEDCOLLABORATIONWOULD
AIMTOENSURETHATPROTECTIONOFNATURALHABITATSANDBIODIVERSITYISCONSIDEREDFROMTHEON
SETOFAPROJECT
ATTHEEXPLORATIONLICENSEAPPLICATIONSTAGE)SSUINGOFEXPLORATIONLICENSESINPROTECTEDAREASOCCURSALSO
FOREXAMPLEIN3WEDENTHEREASONINGBEINGTHATMINERALDEPOSITSOFHIGHERNATIONALINTERESTTHANTHEVALUE
OFPROTECTEDNATUREMAYBEDISCOVERED(OWEVERTHEREISACONCERNTHATEVENIFALATER%)!SHOWSTHATA
MININGPROJECTMAYHAVESIGNIlCANTNEGATIVEIMPACTSTHEREMAYBEPRESSUREONDECISION
MAKERSTOGRANTA
MININGLICENSE)TISNOTEDTHATINLINEWITHTHISRECOMMENDATIONTHE-INERAL,ICENSINGAND!DMINISTRATION
$IRECTORATEISWORKINGONUSINGSHAPElLESFORPROTECTEDAREASINTHEMINERALCADASTRESYSTEMASAWAYTO
ASSESSPOTENTIALOVERLAPS
)MPROVEDSUPERVISIONANDCONTROLOFTHEENVIRONMENTALANDSOCIALPERFORMANCEOFMININGCOMPANIESWOULD
NEEDTOBECOMPLEMENTEDBYTHESTRENGTHENINGCAPACITYOFIMPACTEDCOMMUNITIESTOUNDERSTANDTHEPOTENTIAL
BENElTSANDNEGATIVEIMPACTSTHATMAYBEASSOCIATEDWITHMININGPROJECTS4HESTRENGTHENEDCAPACITY
CANBEACHIEVEDTHROUGHAVARIETYOFMEANSINCLUDINGWORKINGTHROUGHTRADITIONALANDLOCALORGANISATIONS
THROUGH.'/#3/ORTHROUGHTHEEDUCATIVESYSTEM!SCONSIDERABLERESOURCESARENEEDEDFORSUCHWORK
ITISSTRONGLYRECOMMENDEDTHATTHEEFFORTSAREFOCUSEDONTHEAREASWITHANESPECIALLYGOODGEOLOGICAL
POTENTIALANDTHOSEAREASWHEREMININGACTIVITIESAREALREADYONGOING
).&2!3425#452%!.$$%6%,/0-%.40,!.3
12.1. Infrastructure development
4HEIMPORTANCEOFTHEPROVISIONOFAFFORDABLEPHYSICALANDECONOMICINFRASTRUCTURESUCHASSURFACETRANSPORT
ENERGYANDTELECOMMUNICATIONSINFRASTRUCTURETOSUPPORTECONOMICGROWTHEMPLOYMENTCREATIONSOCIAL
WELFAREANDINDUSTRIALDEVELOPMENTHASBEENCONSISTENTLYRECOGNIZEDIN%THIOPIASNATIONALDEVELOPMENT
PLANS
3TRENGTHENINGTHEINFRASTRUCTURALBACKBONEOFTHECOUNTRYWASONEOFTHEEIGHTSTRATEGICPILLARSOFTHE0LAN
FOR!CCELERATEDAND3USTAINED$EVELOPMENTTO%ND0OVERTY0!3$%0
-ANYOF
THEINFRASTRUCTUREDEVELOPMENTACHIEVEMENTSATTAINEDUNDERTHE0!3$%0ARERECORDEDINTHE'ROWTHAND
4RANSFORMATION0LAN'40
THATALSONOTESARANGEOFCONTINUINGCHALLENGESINTHE
VARIOUSINFRASTRUCTURESUB
SECTORS"EYONDTHATTHE'40ALSODECLAREShENHANCINGEXPANSIONANDQUALITY
OFINFRASTRUCTUREDEVELOPMENTvASONEOFITSSEVENSTRATEGICPILLARS)TGOESFURTHERTOSTATETHAThEVENTHOUGH
LARGEINVESTMENTSHAVEBEENMADEOVERTHEPREVIOUS0!3$%0 PLANPERIODTHEINFRASTRUCTUREBACKBONE
OFTHECOUNTRYHASNOTYETREACHEDTHEQUANTITYANDQUALITYDESIREDxv4HISISATTRIBUTEDTOTHEVERYLOW
NATIONALECONOMICINFRASTRUCTURESTOCKTHELARGECAPITALINVESTMENTSNEEDEDANDTHEHIGHFOREIGNCURRENCY
COMPONENTOFTHOSEINVESTMENTSASWELLASINADEQUATEDOMESTICHUMANANDORGANIZATIONALCAPACITIES
)NTHE'40COMMITMENTSAREMADETOVERYLARGEINVESTMENTSTOFURTHEREXPANDINFRASTRUCTURESERVICESTO
STRENGTHENTHEFOUNDATIONOFLONG
TERMSUSTAINABLEGROWTHANDDEVELOPMENT)NORDERTOMINIMIZEEXTERNAL
OFlCIALDEVELOPMENTASSISTANCEIMPROVINGLEVELSOFDOMESTICSAVINGSANDACHIEVINGFOREIGNEXCHANGE
SAVINGSTHROUGHPROMOTINGIMPORTSUBSTITUTIONARECITEDASMEANSTOINCREASINGTHEAVAILABILITYOFDOMESTIC
RESOURCESTOlNANCETHEINFRASTRUCTUREDEVELOPMENTPROGRAMMESOFTHE'40
)NORDERTOGAINASENSEOFTHEMAGNITUDEOFTHEINFRASTRUCTUREDEVELOPMENTCHALLENGEFACING%THIOPIAFROM
AlNANCIALPERSPECTIVETHE!)#$COUNTRYREPORTFORTHECOUNTRYCITESANANNUALEXPENDITUREREQUIREMENTOF
53$BILLIONOVERTHEDECADE
2EPRESENTINGMORETHANOF'$0ANDATOVERTHREETIMES
THEINFRASTRUCTURESPENDINGACHIEVEDINTHEMID
STHISLEVELOFINVESTMENTMAYNOTBEEASILYATTAINABLE
Energy Infrastructure
%NDOWEDWITHVASTHYDROPOWERPOTENTIALANDTHEPOSSIBILITYOFACHIEVINGACOMPETITIVELONG
TERMMARGINAL
COSTOFDEVELOPINGNEWGENERATIONCAPACITY%THIOPIACOULDBECOMEONEOF!FRICASLARGESTPOWERPRODUCERS
ANDEXPORTERS"UTPARADOXICALLYWITHONEOFTHEMOSTUNDERDEVELOPEDPOWERSYSTEMSINSUB
3AHARAN
!FRICATHECOUNTRYSGREATESTINFRASTRUCTUREDEVELOPMENTCHALLENGELIESINTHEPOWERSECTOR
84 FINAL REPORT
ANDTHEEFlCACYOFTHEUTILITYHASHISTORICALLYBEENDIMINISHEDASARESULT!SPARTOFTHEAFOREMENTIONED
%.2%0AMODERNIZATIONPROGRAMISUNDERWAYAT%%0#/THATINVOLVESTHEINSTALLATIONOFAN%NTERPRISE
2ESOURCES0LANNING%20 SYSTEMINTENDEDTOENHANCElNANCIALCONTROLBILLINGSYSTEMSENERGYMANAGEMENT
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ANNOUNCEDTHESPLITOF%%0#/INTOTWOINDEPENDENTENTITIES%THIOPIAN%LECTRIC0OWERISTASKEDTOUNDERTAKE
ANDOVERSEETHECOUNTRYSPOWERPROJECTSINCLUDINGMEGAHYDROPOWERPROJECTSANDTRANSMISSIONLINESAND
%THIOPIAN%LECTRIC3ERVICESWILLBERESPONSIBLEFOROPERATIONSDISTRIBUTIONANDSALESOFELECTRICPOWER4HE
LATTERWILLBEMANAGEDUNDERAMANAGEMENTCONTRACTBYACONSORTIUMOF)NDIANAND%THIOPIANCOMPANIES
)TISTOOEARLYTOSEEWHETHERORNOTTHISWILLIMPROVETHEMANAGEMENTANDADMINISTRATIONOFTHEPROVISIONOF
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4OTHISENDTHE'OVERNMENTOF%THIOPIAHASCOMMITTEDITSELFTOINITIATINGANUMBEROFENERGYDEVELOPMENT
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ANEXPECTEDGENERATIONCAPACITYOF-7ANDTHE/MO2IVER'ILGEL'IBE)))PROJECTUNDERCONSTRUCTION
ANDEXPECTEDTOBECOMPLETEDIN WITHAFURTHER-7!FURTHERSIXPROJECTSATVARIOUSSTAGESOF
PREPARATIONWILLADDAFURTHER-7OFNEWGENERATIONCAPACITY)NORDERTOPROMOTEAMIXOFENERGY
SOURCESANUMBEROFWINDANDGEOTHERMALPROJECTSMOSTLYATEARLYSTAGESOFPREPARATIONCOULDADDAFURTHER
-7INTHEMEDIUMTOLONG
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)NTANDEMWITHTHEDEVELOPMENTOFADDITIONALGENERATIONCAPACITYITWILLBENECESSARYTOEXPANDTHE
TRANSMISSIONSYSTEMTONEWLOADCENTRESANDREINFORCETHEEXISTINGNETWORK!CCORDINGLYTHE'40ALSOSETS
TARGETSFORTHEMODERNIZATIONOFTHEEXISTINGTRANSMISSIONLINESANDDISTRIBUTIONNETWORKINCLUDINGDOUBLING
THELENGTHOFTHETRANSMISSIONNETWORKTOKMANDINCREASINGTHENUMBEROFCONSUMERSWITHACCESS
TOELECTRICITYFROMTOMILLION!NEXTENSIVETRANSMISSIONANDSUBSTATIONREHABILITATIONANDUPGRADING
PROJECTISALREADYUNDERWAY
4HE'40ALSOEMPHASIZESEXPORTINGPOWERTHROUGHREGIONALINTERCONNECTIONSANDASAFOUNDERMEMBER
OFTHE%AST!FRICAN0OWER0OOL%THIOPIAISCOMMITTEDTOTHEREGIONALINTEGRATIONTHROUGHPOWERSYSTEMS
INTERCONNECTION4HECOUNTRYHOSTSTHE%AST!FRICAN0OWER0OOL3ECRETARIATIN!DDIS!BABAWHICHISALSO
THELOCATIONOFTHE%ASTERN.ILE2EGIONAL/FlCEOFTHE.ILE"ASIN)NITIATIVE
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PHASE0OWER0URCHASE!GREEMENTTHATSECURESPROJECT
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THATTHEREISLIKELYTOBESUFlCIENTCAPACITYTOMEETTHEEARLY
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OFPROPOSEDGENERATIONTRANSMISSIONANDDISTRIBUTIONINFRASTRUCTUREISFUNDED0OWEREXPORTSWILLBEAN
IMPORTANTSOURCEOFFOREXFOR%THIOPIAANDANIMPORTANTINSTRUMENTINREGIONALGEO
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)NCREASEDPOWEREXPORTSDEPENDONCOMMISSIONINGOFLARGESCALEHYDRO'IBE)))AND'RAND2ENAISSANCE
$AM00!SUNDERPINNINGTRADEWILLBELONG
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0OTENTIALLYLIMITEDACCESSTOELECTRICALPOWERALSOLIMITSTHEEXTENTTOWHICHSUPPLYCHAINSCANBEDEVELOPED
)NKEEPINGWITHTHE$JIBOUTI0ORTAND&REE:ONE!UTHORITYSSTRATEGYFORSPECIALIZATIONTHENEW0ORTOF
4ADJOURAHISTOBEBUILTACROSSTHE'ULFOF4ADJOURAHFROMTHEEXISTING0ORTOF$JIBOUTIWITHTWOLINEARQUAYS
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OF0OTASHEXPORTSFROM%THIOPIA4HEPROJECTISNOWFULLYFUNDEDANDUNDERCONSTRUCTION4HEPORTWILLBE
CONNECTEDTOEXISTINGSURFACETRANSPORTNETWORKSBYAPAVEDROADTO"ALHOLINKINGTOTHE%THIOPIANROAD
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TOOTHERMINERALEXPORTERSASANDWHENANYBULKMINERALEXPORTPROJECTSAREIMPLEMENTEDIN%THIOPIA
0RIORTOTHE%THIOPIANRAILWAYSYSTEMCONSISTEDOFANOPERATIONALLINECONNECTING!DDIS!BABAWITH
THEPORTOF$JIBOUTIOVERADISTANCEOFKMWITHKMLOCATEDWITHIN%THIOPIAANDKMIN$JIBOUTI
!NARROWGAUGEMM LIGHTRAIL
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PEAKEDATATOTALFREIGHTVOLUMEOFMILLIONTPAWHICHWASINSUFlCIENTTOSUSTAINECONOMICALLYVIABLE
OPERATIONS$URINGTHEPERIODTOATTEMPTSTOCONCESSIONTHELINEWEREATTEMPTEDANDFAILEDAN
INITIATIVEDESIGNEDTOUPGRADETHELINETOHEAVIERAXLELOADSTOINCREASECAPACITYTOMILLIONTPAFAILEDTO
SECURElNANCINGANDTHEREAFTERACONTRACTTOCARRYOUTAPARTIALTRACKUPGRADEWASSTARTEDTHENABANDONED
LEADINGTOCLOSUREOFTHELINEFOROPERATIONS!NAPPROXIMATELYKMSECTIONBETWEEN$JIBOUTIAND$IRE$AWA
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OPERATIONALTODAY
4HE'OVERNMENTOF%THIOPIAHASSUBSEQUENTLYDECIDEDTOPROCEEDWITHPLANNINGANDDEVELOPMENTOFANEW
MODERNSTATEOFTHEARTSTANDARDGAUGERAILWAYNETWORKMM WITHTHEOBJECTIVEOFACCELERATINGTHE
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ORMAJORCUSTOMERS )NITSPLANNINGTHE%THIOPIAN2AILWAY#ORPORATIONESTABLISHEDINWITHAREMIT
TODEVELOPTHENATIONALRAILWAYNETWORKANDANURBANLIGHT
RAILNETWORKIN!DDIS!BABAHASIDENTIlEDEIGHT
RAILWAYCORRIDORSWITHATOTALESTIMATEDLENGTHINCLUDINGBUFFERS OFKM
86 FINAL REPORT
Figure 12.1. Ethiopian railway construction plans.
4HESO CALLED.ATIONAL2AILWAY.ETWORKOF%THIOPIAISTOBEDEVELOPEDINTWOPHASES&IGURE
Phase 1:
I 4HE!DDIS!BABA
$JIBOUTI2AILWAY0ROJECT
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I *IMMA
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)TISUNCLEARWHETHERTHEPROJECTEDTRAFlCVOLUMESUNDERLYINGPROPOSALSFORTHEDEVELOPMENTOFTHE%THIOPIAN
RAILNETWORKBASEDINANYWAYONACONSIDERATIONOFPOTENTIALMINERALSCOMMODITYTRAFlC)TISALSOUNCLEAR
IFANYASSUMPTIONSHAVEBEENMADEREGARDINGTHEEXPECTEDSHIFTOFTRAFlCFROMROADTORAIL!TTHISTIME
GIVENTHESMALLSCALEOFTHEMININGSECTORTHERESEEMSTOBELITTLEALIGNMENTOFRAILWAYLINESANDORPHASING
COINCIDEWITHPRIORITYMINERALSECTORDEVELOPMENTS
4HEGOVERNMENTHASALREADYBUILTTHEPAVEDROADFROM!FDERATO4ADJOURAANDHASCOMMITTEDTOEXTENDING
TOEXTENDINGTHEPAVEDROADTO$ALLOLMINESITE (OWEVERTHECOMPANYHASINCLUDEDCONTINGENCYFUNDING
FORKMOFHAULROADCLOSESTTOTHEMINESITEIFTHECOMMITMENTFAILSTOMATERIALIZEONTIME4HEPROPOSED
RAILWAYTRACKANDITSIMPACTONTHEPROJECTARESHOWNIN&IGURE
Figure 12.2. Proposed railway tracks an impacts on projects (source: Allana Potash company presentation)
4HERELATIVEIMPORTANCEOFRAILANDROADTRANSPORTWILLBEDETERMINEDTOSOMEEXTENTBYTHETYPESOFCOMMODITIES
MINEDEXPORTVOLUMESDISTANCESTOPOINTSOFEXPORTANDTHEIRDOWNSTREAMBENElCIATIONPOTENTIAL&OR
EXAMPLEINTHECASEOFGOLDPOORTRANSPORTHASONLYHASAMARGINALIMPACTONTHECOSTOFTRANSPORTING
SMALLQUANTITIESOFHIGH
VALUEMINERALOUTPUTTHOUGHITCANIMPACTNEGATIVELYONTHECOSTOFPRODUCTION
WHERETHEMININGINPUTSAREPROCUREDFROMSOURCESDISTANTFROMTHEMINE #ONTRASTTHISWITHMANYBASE
METALSWHEREPROJECTVIABILITYITSELFCANBEVERYSENSITIVETOTHECOSTPERTONNEKILOMETREOFEVACUATINGLARGE
QUANTITIESOFLOW
VALUEHIGHMASSMINERALOUTPUT)NEXTREMECASESTHEVALUEOFTHEPRODUCTMINEDCAN
BEINSUFlCIENTTOMEETTHECOSTOFTRANSPORTOVERTHEDISTANCEFROMMINETOPOINTOFSALEOREXPORTSO
CALLED
hSTRANDEDvMINERALDEPOSITS !LSOGIVENTHECURRENTDOMINANCEOFROADTRANSPORTFORTHEMOVEMENTOF
FREIGHTIN%THIOPIAITWILLBEIMPORTANTTOUNDERSTANDTHESCOPEFORMINERALSDEVELOPMENTTOSUPPORTFROM
THEPERSPECTIVEOFPOTENTIALLYPROVIDINGBANKABILITYFORTHERAILINVESTMENTBASEDONLONG
TERMRAILTRANSPORT
AGREEMENTSFROMMINERALPROJECTDEVELOPERS THE'OVERNMENTOF%THIOPIASPLANSFORTHEDEVELOPMENTOF
RAILTRANSPORT
88 FINAL REPORT
Other Infrastructure Issues
4HEUNAVAILABILITYOFWATERTOSUPPLYTHENEEDSOFMININGANDMINERALPROCESSINGOPERATIONSCANREPRESENT
AFATALmAWFORTHEDEVELOPMENTOFCERTAINMININGPROJECTS'IVENTHATCERTAINAREASWITHIN%THIOPIACAN
BECONSIDEREDWATERRICHWHILEOTHERSAREWATERSCARCETHEHYDROLOGYOFTHECOUNTRYMAYWELLBEAMAJOR
DETERMINANTOFITSABILITYTOREALIZEIDENTIlEDMINERALDEVELOPMENTOPPORTUNITIES
4HEREHAVEBEENHEAVYINFRASTRUCTUREINVESTMENTSINTHECOUNTRYINRECENTYEARS#URRENTLYTHEREISNO
EVIDENCEOFPUBLICPRIVATEPARTNERSHIPSINTHEINFRASTRUCTURESECTOR4HESEINVESTMENTSHAVEBEENFUNDED
BYTHESTATEINCLUDINGTHEPROJECTSAWARDEDTO#HINAAND4URKISHlRMS%VENFORLARGEPROJECTSSUCHASTHE
MEGAWATT'RAND%THIOPIAN2ENAISSANCE$AMESTIMATEDTOCOST53$BILLIONTOBECOMPLETEDBY
THESTATEAIMSTOUSEITSOWNlNANCES#URRENTLYAPUBLICPRIVATEPARTNERSHIPPROCLAMATIONISBEING
DRAFTEDBYTHEGOVERNMENTANDTHEREFORECANNOTBEEVALUATEDATTHISSTAGE
%THIOPIACANLEARNFROMTHEEXPERIENCEOFOTHERCOUNTRIESINCREATINGSYNERGIESFORMININGLEDINFRASTRUCTURE
INVESTMENTS&OREXAMPLETHE-OZAMBIQUEGOVERNMENTINASSOCIATIONWITHMININGCOMPANIESUSED
PROGRESSIVEPOLICIESANDCREATEDTOUPGRADEINFRASTRUCTUREINTHE:AMBEZI6ALLEYSUCCESSFULLYLEVERAGING
MINERALINVESTMENTSTOENABLEDIVERSIlEDECONOMICDEVELOPMENTSEE0ERKINSAND2OBBINSFOR
DETAILS
)NFRASTRUCTUREDEVELOPMENTISNOTMININGLEDATTHISTIMEWHICHISUNDERSTANDABLEDUETOTHELACKOFLARGESCALE
MININGOPERATIONS(OWEVERTOENCOURAGEBOTHEXPLORATIONACTIVITIESANDMININGOPERATIONSTHEINFRASTRUCTURE
NEEDSPARTICULARLYROADANDRAILWAYSWILLNEEDTOBEEXTENDEDBEYONDCURRENTROUTS&URTHERMOREWHILE
PUBLICPRIVATEPARTNERSHIPSFORINFRASTRUCTUREPROJECTSISNON
EXISTENTATTHISTIME%THIOPIASHOULDCONSIDER
LEVERAGINGITSPOTENTIALRESOURCESTOSEEK@INFRASTRUCTUREFORCOMMODITIESDEALSWITHEMERGINGECONOMIES
SUCHAS#HINAAND"RAZILALBEITONLYONTERMSANDCONDITIONSTHATAREMUTUALLYADVANTAGEOUSANDNOTUNDER
ASCENARIOTHATUNDULYFAVOURSTHEPROVIDEROFINFRASTRUCTURETOTHERELATIVEDETRIMENTOFHOSTCOUNTRY
12.2. Recommendations
4HE%THIOPIANMININGSECTORISSTILLINITSEARLYSTAGESOFDEVELOPMENTGIVINGITAMPLESPACEANDTIMETO
DEVELOPACOMPREHENSIVEACTIONPLANTOBENElTFROMITSNATURALRESOURCES5SINGA@RESOURCECORRIDOR
APPROACHCANHELPDESIGNAHOLISTICACTIONPLANTOLEVERAGEINVESTMENTSINITSNATURALRESOURCESTOSTIMULATE
HARDSOFTINFRASTRUCTUREANDENCOURAGETHEPRODUCTIONOFGOODSANDSERVICESTHATCANBENElTTHEECONOMY
ATLARGEANDNOTJUSTTHEEXTRACTIVESECTOR2ESOURCECORRIDORSREQUIREBOTHSPATIALFOCUSINGFROMTHELOCAL
TOTHEREGIONALLEVELANDTEMPORALPLANNING!TTHETIMEBEINGTHELOCATIONOFFUTUREMININGPROJECTSARE
UNKNOWNAPARTFROM!LLANA0OTASHSPROJECTINTHE$ANAKHILDEPRESSIONPREVENTINGADETAILEDAREA
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-INISTRYOF4RANSPORTANDOTHERCONCERNEDAUTHORITIES
%THIOPIAMAYALSOCONSIDERTHEUSEOFPUBLICPRIVATEPARTNERSHIPINCLUDINGTHOSEWITHMININGCOMPANIES
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USERANDENHANCE
ECONOMICDIVERSIlCATIONANDDEVELOPMENT4HEPOTENTIALFORSUCHPARTNERSHIPSAPPEARSTOBEUNDEREXPLORED
ATTHISTIME,OCALANDINTERNATIONALRESOURCESCANBEMOBILISEDTOAUGMENTDOMESTICCAPACITIESTODEVELOP
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ASITSTANDSTODAYAREASONABLYACTIVEEXPLORATIONINDUSTRYASMALLLARGESCALESECTORANDALARGEARTISANAL
MININGSECTOR/THERMEASURESAREMOREIMPORTANTFORTHEDEVELOPMENTANDGOVERNANCEOFTHEMINERAL
SECTORINALONGERTIMEPERSPECTIVE&ORARANGEOFMOREDETAILEDRECOMMENDATIONSSEETHElNALSECTIONOF
EACHCHAPTER
90 FINAL REPORT
/RGANIZATIONALREVIEWOF-O-AND'3%4OADDRESSHIGHSTAFFTURNAROUNDANDFOR
INCREASEDEFlCIENCYINEXECUTINGCOREMANDATES4URNINGTHEMINERALLICENSING
ANDADMINISTRATIONDIRECTORATEANDTHEENVIRONMENTALSOCIALUNITOF-O-INTO
AUTONOMOUSGOVERNMENTALORGANSSIMILARTOTHE'3%MAYBECONSIDERED3CALING
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SUPERVISIONAND LEASTEXPERTHALF
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INCLUDEDIN--!S0ROPOSEDLONGERTERMEXTERNALASSISTANCEATLEASTEXPERTHALF
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THEMINERALSECTOR DEVELOPEDINAPROCESSTHATINVOLVESALLRELEVANTAUTHORITIESANDAGENCIESASWELLAS
PRIVATESECTOR.OTONLYWILLTHISPROCESSENDUPWITHAUSEFULPRODUCTTHEPROCESS
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SECTOR WILLPROBABLYPOINTTOWARDWHETHERTHESTIPULATIONSINTHE-INING,AWANDDRAFT
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92 FINAL REPORT
2%&%2%.#%3
$*-ORGAN )NDUSTRIAL-INERALSAND!RTISANAL-INING3TUDY%THIOPIA7ORLD"ANK%NERGY!CCESS0ROJECT
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