How to govern and how not to govern artisanal and small-scale mining
Editor’s Note: This blog has been adapted from a speech that RCS Global Senior Consultant, Dan Paget, gave at the Intergovernmental Forum On Mining, Minerals and Metals and Sustainable Development Forum meeting at the PDAC International Convention in Toronto, March 5th 2013. Thanks to Nicholas Garrett of RCS for permission to repost this article which I first read on www.goxi.org.
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Government used a variety of ways to work with ASM, but most approaches from 1972 until 2001 fall primarily into one of three types.
Technical assistance was offered by governments to change the technology, equipment or methods used by ASM operations. In the 1970s, this often involved attempts to upgrade ASM into more profitable and modern ventures. Technical assistance often took the form of training, subsidised or free equipment, and the provision of credit.
State-sponsored buying programmes, especially gold-buying programmes, became a second major approach to ASM in the 1980s. In many countries, state companies or bodies became legal monopoly buyers of ASM gold production. Their objectives, in most cases, were to strengthen state gold reserves amid currency crises and to cut out trading intermediaries that were thought to be unduly profiting. In this respect, the approach was not about assisting ASM, or regulating it, but serving other national interests. Most state sponsored buying programmes operated ‘no questions asked’ policies. They required minimal documentation from their buyers, and so overlooked potential contravention of national laws and informality. This meant that a powerful source of leverage over ASM was overlooked.
Formalising and regulating ASM within a tailored framework emerged more recently and became a core part of government activity on ASM at the beginning of the 1990s. Formalisation, it was argued, integrated ASM into a system of government regulation, incentives and control that could be used to address various challenges associated with ASM. In this sense, formalisation became paradigmatically central to ASM reform. In the 1990s and onwards, a wave of mining law reforms saw the introduction of separate legal categories for ASM and efforts to integrate ASM into the formal economy.
Beginning in the 1990s but crystallising in the 2000s, governments have begun to focus on ASM more consistently as a development issue, and as a sustainable development issue. That has meant considering not just economic growth, but issues such as environmental impact, child labour, human rights, sustainable livelihoods. As a result, formalisation has stayed at the heart of national governments’ approaches to ASM. Technical assistance has also continued to play a key part in ASM approaches, but it has become more and more focused on managing the environmental impact of ASM, particularly mercury-reduction. National buying schemes, in contrast, have become unpopular. Many struggled to preserve a market share and to make a positive development impact, even though, hypothetically, well-managed programmes could strengthen government control over ASM.
Approaches to ASM of the present
Governments’ and donors’ focus on these issues – formalization, technical assistance, economic development, buying schemes – was a good thing. It reflected a broad set of priorities and had a feasible end-point – a productive, formalized sector that would be governed by a regulatory system. However, this agenda has been diverted over the last ten years by two issues: mercury reduction and conflict minerals.
Mercury-reduction in artisanal and small-scale gold mining has been growing as an international issue since the 1980s, but in the 2000s, the United Nations Environment Programme (UNEP) and other agencies have supported several international programmes with the objective to reduce mercury-use.
The ‘conflict minerals’ issue has attracted a series of international responses, beginning with the Kimberley Process and more recently the United States Dodd-Frank Act Section 1502, which requires companies to exercise due diligence to determine the origin of the mineral and metal content in their products.
I do not want to detract from the importance of both of those agendas, but while they have received international attention and funding, the core agenda of ASM formalization and assistance was not championed with the same energy or forcefulness. Although Communities and Small-scale Mining – CASM – was founded in 2001, it facilitated debate and information sharing without effectively driving policy programmes. National governments have often been unable to focus on the core agenda, because donor leadership has driven them to focus on mercury-reduction and conflict minerals compliance instead.
Challenges to ASM governance
If these attempts to assist and regulate ASM in the past and present have one common feature, it is the low rate of success. There are qualified success stories, such as the reforms conducted by the Government of Zimbabwe in the early 1990s or the legal reforms by the Government of Peru in the late 1990s and 2000s. However, in most developing countries where ASM takes place, it continues to display the same challenges that governments and donors have been seeking to address for decades.
Part of the reason is that ASM has outgrown the responses. Across the developing world, ASM has increased in a number of key minerals and metals since the 1980s, and especially since 2002. As government task force and subunits have been set up to address ASM, ASM operations have quickly become too numerous for those units to deal with.
Other reasons for failure include a series of implementation challenges. First among them is government capacity. Regulating and assisting ASM requires technical knowledge, monitoring and enforcement activities and well-run administrative procedures on the ground and across the country. In their absence, regulation is easy to avoid, and costly to adhere to.
Second, little attention is paid to the incentives facing ASM operators. Technical assistance often relies upon providing alternative technologies to miners that they then adopt, and low rates of take-up often come down to under-appreciation by implementing agencies of the burden that a business faces to switch methods, especially if those methods do not yield improved, or even equally effective results.
Third, many programmes have put great faith in a fallacy that once ASM operation are given ‘a push’ up-scaling and formalisation will follow naturally. In the outcome document of a 1995 Roundtable on Artisanal Mining, there was great talk about ‘ASM transformation’. In reality, while there are possible virtuous cycles of formalising, up-scaling, and growth, there are many practical barriers that can only be removed with time and patience. Perhaps the greatest common mistake of governments, and donors in particular, has been to treat ASM challenges as something that might be fixed in a short intervention. To address ASM issues, governments must build and maintain a monitoring and enforcement system that must keep pace with a changing industry. It will take time, institutional reform, resources, and commitment.
Commitment has been one of the biggest shortcomings in approaches to ASM to date. It is important to appreciate that national governments have mixed interests to ASM reform. Many interested parties benefit from the status quo, none the least dealers and traders of artisanally mined minerals. ASM represents an important political constituency in any emerging democracy, but often politicians can gain more popularity by raising anger against large-scale mining companies or promising immediate support rather than committing to some gradual process of reform. Donors’ interest in ASM, meanwhile, has often been fleeting.
The summation of all of these common challenges in project design and implementation is that there are many straightforward changes that could be made to ASM projects.
- ASM Baseline Assessments should be built-in consistently to ASM projects to ensure that projects are based on consistent information. This information could be used, for example, to calculate the potential benefits that governments and communities will gain from formalising ASM, such as gains in tax revenue;
- Institutional and stakeholder analysis should be built into project design so that when donors work with national governments, they can assess what the institutional interest in – and opposition to – reform will be;
- There are ways that ASM laws and regulations can be adjusted to incentivise formalisation and to encourage investment and up-scaling of ASM operations, such as creating legal subcategories for artisanal mining and small-scale mining, harmonising tax categories, and making transformation from one type of license to another feasible;
- Conduct a cost-benefit analysis to assess the incentives that ASM operators face and test whether ASM programmes are aligned with their incentives and priorities; and
- Treat ASM formalisation as an enforcement issue, and not just as a development issue. Formalisation will take place when it is feasible, but also when there are disincentives to remaining informal.
There are many more examples. Practical and process-based guidance on how to approach ASM effectively is something programmes often lack. A large number of challenges in ASM come down to shortcomings in project design and implementation, which could be avoided with proper precautions and project planning. While ASM approaches will always need to be informed by local realities, there are only fragmented pieces of good practice in the public domain. There is no ‘toolkit’ or ‘guidance’ for national governments and practitioners that informs for approach design. A toolkit could profile examples of successful methods, offer guidance on what approaches and responses work under a range of circumstances, and provide resources and links to other good practice that can be used by practitioners.
Beyond purely technical issues of project design, interested parties should take a fresh approach to how they can cooperate and coordinate on ASM.
There are plenty of ambiguities in the responsibilities on ASM support that different stakeholders should carry. In the absence of well-established norms to which stakeholders can be held to account, there will always be those that shirk or pass on their responsibilities to others. National governments and donors should lead a debate about what roles other stakeholders have in the process, including ASM organisations and representatives themselves. Whenever ASM have organised civically to represent their interests, ASM has become a stronger national priority, and often the governance of ASM has improved.
Equally, companies’ possible contributions to ASM issues have been neglected. While ASM is a development issue at large, for some large-scale mining companies it is an acute risk issue. Large-scale mining companies have had as little luck in sustainably resolving ASM issues in the past as national governments have, but a collection of companies have recently demonstrated their willingness to play a proactive role in addressing ASM issues, and have plenty of special capacities that they can bring to the process.
Moreover, downstream users of metals are potential partners in ASM initiatives. Some initiatives such as Fairtrade and Fairmined Gold have created demand-driven ways to improve and assist ASM. The challenge to Fairtrade Gold is scale. The success of Fairtrade will be confined by the size of demand, which is limited to a small consumer market. I believe that changes in the culture of due diligence mean that there are new opportunities to develop closed-pipe ethical certification initiatives that reach larger markets.
On a closing note, I’d like to observe that ASM issues are not special. In fact, they are challenges that we can trace through history; struggles between state authorities that wish to regulate and economic ventures that wish to access land while avoiding interference. The lessons from the past are that the goals are attainable, and that the only obstacles are practical. Interested parties need to shift their focus from conceptual issues to how implementation can be improved and standardised. ASM challenges can be met by governments and other stakeholders, but only if they have the will to do so.
RCS Global works at the forefront of ASM strategy in the contexts of government policy, mining company – ASM relations and co-existence and downstream company due diligence. For more details, please contact RCS Global’s Head of ASM Practice, Nicholas Garrett.
