Illegal mining practice in Ethiopia

In PublicationsJune 27, 20236 Minutes

Illegal mining practice in Ethiopia

By Staff Writer


Illegal mining has become a significant problem in Ethiopia, particularly in recent years, with Chinese involvement in the sector being one of the aggravating factors. Such actors were recently discovered to have been hiding behind various investment schemes in Ethiopia. By analyzing information from reliable sources, academic papers, government reports, and other news articles, we aim to examine the extent of illegal mining in Ethiopia given its implications on the environment, economy, and society at large.

Mining is one of the key industries in Ethiopia, contributing to the country’s economic growth and development. According to the Economic Commission for Africa, the sector accounts for 14% of the country’s exports and is projected to account for 10% of the nation’s GDP. Given that the sector is relatively underexplored and untapped, it has attracted foreign investment interests, particularly from China. However, illegal mining has become a significant challenge in the country’s economy- not only due to the loss in national revenue but also due to its adverse effects on environmental, ecological, and societal well-being. Illegal mining involves extracting precious minerals without the required licenses and permits, and it often comes with unsafe mining practices and severe environmental degradation.

The Extent of Illegal Mining in Ethiopia

Illegal mining has become a significant challenge in Ethiopia, especially in the regions with significant mineral deposits, such as the Oromia, Benishangul- Gumuz, Tigray, Somali, and Southern regions. A report by the Ethiopian Geological Survey (EGS) states that illegal gold mining has been widespread in Ethiopia, with an estimated 60,000 to 70,000 artisanal miners operating in the country. These artisanal miners operate without licenses and often use crude methods that harm the environment, such as using cyanide to extract gold from ore.

The impact of illegal mining is visible in various ways. For instance, illegal/ unregulated mining activities cause deforestation, soil erosion, water pollution, and the destruction of agricultural land. This has a significant impact on the environment, affecting agriculture, biodiversity, and climate variability. Illegal mining also creates social problems, such as the displacement of people, human rights abuses, and inhumane and unsafe working conditions that often lead to injuries and fatalities.

Chinese Involvement in Illegal Mining in Ethiopia

The involvement of Chinese companies in illegal mining in Ethiopia has been reported by various sources.
Although Chinese companies, that often present themselves as investors, have denied these allegations; their actions suggest otherwise. In some cases, Chinese workers were found engaging in illegal mining, exploiting the country’s mineral resources without the necessary licenses and permits.

In other cases, Chinese companies have been accused of using Ethiopian employees as “fronts” for their illegal gold mining operations to avoid legal scrutiny.

Moreover, Chinese investment in Ethiopia’s mining industry may also be further exacerbating the problem of illegal mining. In Ethiopia, Chinese companies have invested heavily in the mining sector, with an investment of US$1.6 billion in 2018 alone. However, this investment has not necessarily helped Ethiopia’s mining sector to comply with environmental and social regulations. Instead, Chinese companies have been accused of using their investment as a cover to engage in illegal mining activities, and extraction of minerals without legal backing and adequate environmental protection measures. Chinese companies operating in Ethiopia’s mining sector have been accused of ignoring environmental regulations and collaborating with Ethiopian employees to engage in illegal mining activities.

The government of Ethiopia recently announced that 28 Chinese nationals in the country, with different visas, were caught red-handed in illegal mining activities. They were discovered to have been working hand-and-glove with local partners, who were since apprehended, in their illicit mining activities.

The problem of illegal mining in Ethiopia has far-reaching implications for the environment, economy, and society of the country. It is crucial that the Ethiopian government and the international community take effective measures to curb illegal mining activities, protect the environment, and ensure that investments in the mining sector adhere to sustainable practices and human rights principles. Given Ethiopia’s ambitious goal of growing the mining sector to account for 10% of the country’s GDP: as outlined in the National Growth and Transformation Plan, sustainable investment and responsible mining practices should be the ultimate goal for Ethiopia’s promising mining industry

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What is in Belt & Road Initiative for African Continental Free Trade Agreement?

In PublicationsJune 2, 202319 Minutes

What is in Belt & Road Initiative for African Continental Free Trade Agreement?

By Endalkachew Sime (Ph.D. Candidate, Peking University)

Mr. Endalkachew Sime has extensive experience in the Ethiopian private sector working in progressive leadership positions in key sectors of the economy for more than a few couple of decades. Having obtained his first degree in Agricultural Economics and his second degree in Development Economics, Mr. SIME also worked as a Senior Economic Advisor, and board member representative for the African Cotton and Textile Industries Federation (ACTIF) and COMESA Business Council (CBC). He has worked as the Secretary General of the national private sector organization, the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA), as well as the CEO of the Ethiopian Textile and Garment Manufacturers Association (ETGAMA). Most recently, Endalkachew Sime served a term as a State Minister of the Ministry of Planning and Development of Ethiopia. Mr. Endalkachw is currently a Ph.D. student at Peking University, Institute of South-South Cooperation and Development (ISSCAD), majoring in National Development.

I. Introduction

This article tries to explain the relevance of the Belt and Road Initiative (BRI) for the four-year-old African Continental Free Trade Agreement (AfCFTA). In doing so, the article attempts to site counter-intuitive examples to gauge the claim of Shaffer and Gao (2020), which considers BRI as a re-purposed exporting tool of the Chinese development model aims at nurturing the new Sino-centric economic order that stretches to ‘outgrow’ the existing Western-led liberal model of development. In the following sections, we will see the critical gap BRI could fill in the new continental economic development space being created under AfCFTA against the above backdrop. This article concludes by proposing actionable recommendations based on observed limitations, targeted to key stakeholders of BRI mainly China, as well as decision-makers of the African Union and its member states as an audience.

II. The African Continental Trade Agreement (AfCFTA)

Having more than 16% of the global population, Africa’s share of global trade and GDP remains as small as 2.1% and 2.9% respectively (IMF, 2020). And Africa has embarked upon a development plan called ‘Agenda 2063’ to change this situation.
According to the African Union Commission (2015), Agenda 2063 is a 50-year development blueprint prepared by the African Union (AU) in 2013 and forwards a vision of building an integrated, prosperous, and peaceful Africa by 2063. Creating One African Market through the African Continental Free Trade Agreement (AfCFTA) is one of the flagship projects of Agenda 2063.

AfCFTA is an agreement that provides a framework for trade liberalization of goods and services among African countries. Once fully implemented, AfCFTA is expected to cover all 55 African countries with an estimated combined GDP of US$2.5 trillion and a population of over 1.2 billion. In terms of population, the AfCFTA will be the largest free trade area in the world (IMF, 2020).

After its launch in May 2019, 54 of the 55 African counties endorsed AfCFTA and moved to implementation on January 1, 2021. Its implementation entails the gradual dismantling of tariffs on 97 percent of intra-African trade over 13 years. Full implementation of the agreement is forecasted to boost intra-African trade from 13% to around 52% (A. Mold, 2022).

According to World Bank (2020), the full implementation of the AfCFTA has the ability to lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day by boosting wages for skilled workers by 9.8% and the wages for unskilled workers by 10.3%.

But Africa’s large infrastructure deficit in roads and ports are among the major challenges hindering AfCFTA implementation. Estimates by the African Development Bank (AfDB, 2018) show that the continent’s infrastructure needs amount to $130–170 billion a year, with a financing gap in the range of $68–108 billion. The same document shows Poor infrastructure shaves on average up to 2 percent off Africa’s average per capita growth rates.

On the other hand, debt distress is affecting African nations’ eligibility for international infrastructure financing. According to China Daily (2022), from 1970 to 1987, the ratio of total external debt to GDP in African countries skyrocketed from an estimated 16% to 70%. And unsettled multilateral debt obligations rose from $58.7 billion to $110.45 billion between 2010 and 2018. This critically challenges the loan-soliciting efforts of African nations to finance their infrastructure gaps.

In summary, there is a pressing need to address Africa’s infrastructure gap to make the attractive promises of AfCFTA a reality. But on the other hand, debt stress is shadowing the attractiveness of Africa for International financers.

III. The Belt and Road Initiative (BRI)

The Belt and Road Initiative – China’s proposal to build a Silk Road Economic Belt and a 21st Century Maritime Silk Road in cooperation with related countries – was unveiled by Chinese President Xi Jinping during his visits to Central and Southeast Asia in September and October 2013 (Silk Road Briefing, 2021).

Infrastructure connectivity is high on the BRI agenda. According to Silk Road Briefing (2021), as of April 2020, China had invested in BRI projects in 42 different African countries in 74 Ports either as developers or operators, or both. One of the most noticeable discussions around these projects includes the study by Shaffer and Gao (2020). This paper considers BRI as non-original thought but a repurposing of an existing one. It further depicts BRI as an exporting tool of the Chinese development model with the purpose of building a new Sino-centric economic order that emphasizes the key role played by the government through massive infrastructure investments. Such a move, according to the paper, contrasts the liberal model of development of the West, grounded in private enterprise and market competition. This short article lacks the necessary scope and depth to prove or disprove the diverse list of claims described in the paper.

But rather, it tries to shed light on what is BRI for Africa especially in the context of the crying need of Africa to harness its new opportunity seen in AfCFTA. Let us cite a specific example, the Addis Ababa-Djibouti Railway (AADR) project, whether Shaffer and Gao’s claim of China’s imposition of development model has got space on the ground or not.

After 1992, when a couple of Ethiopia’s Red Sea ports (Asab and Massawa) were lost to the then-new state of Eritrea and Ethiopia became land-locked, the port-related logistics were a growing concern for the Ethiopian economy. Many research discussions were being made both in the government as well as in the private sector, especially in the Ethiopian Chamber of Commerce. And through the proactive move of the Ethiopian government and cooperative responses from the Chinese government, the Addis Ababa-Djibouti Railway (AADR) became a reality in 2017.

According to Capital Ethiopia (2022), before AADR replaces the century-old Italian-built Ethio-Djibouti railway in 2017, containers were taking more than 3 days to reach Addis Ababa, the capital of Ethiopia, from Djibouti port. The electric-driven AADR has reduced the 3 days to less than 20 hours and has also reduced the cost by at least one-third. The same report shows that the volume of goods transported is increasing by 25% every year on average, which was interrupted during the COVID-19 period.

Therefore empirically speaking, the above reality shown with AADR project, as part of BRI, does not go with the conclusion made by Sheffer and Gao, which describes BRI as a Sino-centric tool of exporting China’s development model to build a new global economic order.

IV. Challenges – sustainability and performance

Key stakeholders, especially the African Union and member states need to give attention to sustaining the growing role of BRI in addressing Africa’s infrastructure gap. According to R. Bociaga (2023), Belt and Road investment in sub-Saharan Africa fell by 54% in 2022, to $7.5bn from $16.5bn in 2021, according to a recent report from the Green Finance and Development Centre at Fudan University in Shanghai. The reason behind such changes needs to be closely followed up. The above report also explains, since December 2019, the US Congress has been funding a ‘Countering Chinese Influence Fund’ used by the executive branch to challenge Chinese influence, including through the BRI, in Africa and elsewhere. African Union and member states need to be aware of such situations that might reduce the growing Africa-BRI cooperation and take the necessary actions.

The other challenge is related to implementation and project management. All BRI projects in Africa are not successful. There should be a detailed performance evaluation of projects that leads to the success of all projects, which is important to attract more investments.

V. A Way forward?

For a better realization of AfCFTA’s aspirations, BRI can be taken as one strategic opportunity to address the infrastructure gaps in Africa. But what are the key points key stakeholders should give attention to?

1. Strategic planning on Infrastructure

Efficient utilization of expensively built infrastructure helps in addressing the growing concern of debt distress in Africa. The best way to address this is to strategically align each infrastructure project into the country’s national development plans.

2. Cross border Infrastructure for Intra-Africa Connectivity

It is common to plan and build infrastructures at a country level. But cross-border initiatives like AfCFTA needs cross-border infrastructure planning that connects compatible comparative advantages of neighboring countries.

Learning from others on the intra-regional trade-building process.

Even though Africa has been dealing with many RECs (Regional Economic Cooperation) and trade agreements, AfCFTA is a huge task for the AU and member states to deal with 54 fragmented market spaces with diverse statuses and political-economic thinking. Africa can learn a lot from Asia in this aspect. Osvaldo R. (2007) explains that mounting evidence suggests trade liberalization and the ability of much of Asia to respond flexibly to world demand is the best explanation for the spectacular growth of South-South trade.
Therefore, the South-South Cooperation (SSC) platform should be seen by AU and member states as one soft capacity-building opportunity. SSC has gained good momentum in its relatively intensive past engagements in Asia, which can be used by Africa to learn from past experience.

Improving debt management capacity

The other learning area for Africa is debt management. The spectacular promises of AfCFTA we have seen above in figures are trapped in challenges such as infrastructure gaps. On the other hand, debt distress is a growing challenge in the continent. And as recommended by A. Mugasha (2007), Trade and proper debt management are the two solutions for the growing debt of middle-income developing countries. Prudent and strict implementation of the plans of AfCFTA enables Africa to gain from its intra and inter-Africa Trade for its debt distress. But on the other hand, the debt management capacity of Africa needs special emphasis. The available menu of options for debt management, as explained by A. Mugasha (2007) includes securitization, secondary markets, renegotiation including debt write-off as well as debt-for-equity schemes. The capacity of Africa to implement such debt management schemes should be strengthened both at the continental organization level such as AU and AfDB, as well as at the level of the member states.

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