By Michelle Smith — Exclusive to Gold Investing News
A large number of resource-rich African countries have seen little benefit from their r esource endowments, says “Gold Mining in Africa: Maximizing Economic Returns for Countries,” a working paper recently published by the African Development Bank (AfDB). For the most part, this is due to unfair mining concessions, especially with regard to royalties, the paper concludes. However, there is also another key factor, which some media sources have done a disservice to miners by omitting. Gold mining is described as a “significant sector” in at least 34 African nations. And though the continent accounts for 20 percent of global gold production, and gold prices have risen to an “almost unprecedented high,” the AfDB report argues that the potential for gold to contribute to both economic growth and development has not been realized. Between 1980 and 2000, GDP growth rates in resource-rich African nations fell below the continent's average rate of growth. The authors note that due to the commodity boom and perhaps better governance, this performance has somewhat changed course post-2000, but add that GDP growth alone is not a sufficient measure of economic development. Africa is failing to reap the maximum benefits of gold mining, they insist, and its failure to do so is largely because of the prevalence of unfair mining concessions. Since most gold mines are owned by multinational companies, the main avenue through which governments benefit is by way of tax revenues. But, often mining companies have negotiated tax exemptions far above the provisions specified in relevant mining codes. In the majority of cases, the authors say, these departures are not justified by the profitability of the mines.