89139 Ministry  of  Mines   Federal  Democratic  Republic  of  Ethiopia STRATEGIC  ASSESSMENT  OF  THE     ETHIOPIAN  MINERAL  SECTOR FINAL  REPORT ՙpÛĜØΎÕÃáŒΎÅ0ij œHß¹Ύß36 ÕćF ØΎ-ļ0p Disclaimer: 4HElNDINGS INTERPRETATIONS ANDCONCLUSIONSEXPRESSEDHEREINARETHOSEOFTHEAUTHORS 4HElNDINGS INTERPRETATIONS ANDCONCLUSIONS EXPRESSEDINTHISPAPERDONOTNECESSARILYREmECTTHEVIEWSOFTHE)NTERNATIONAL"ANKFOR2ECONSTRUCTIONAND$EVELOPMENT4HE7ORLD"ANK ANDITSAFlLIATEDORGANIZATIONSORTHE%XECUTIVE$IRECTORSOF4HE7ORLD"ANKORTHEGOVERNMENTSTHEYREPRESENT4HE7ORLD"ANK&OREIGN !FFAIRS 4RADEAND$EVELOPMENT#ANADA$&!4$ THE'OVERNMENTOF!USTRALIAANDTHE$EPARTMENTFOR)NTERNATIONAL$EVELOPMENT 5+ $&)$ DONOTGUARANTEETHEACCURACYOFTHEDATAINCLUDEDINTHISWORK4HEBOUNDARIES COLORS DENOMINATIONS ANDOTHERINFORMATION SHOWNONANYMAPINTHISWORKDONOTIMPLYANYJUDGMENTONTHEPARTOF4HE7ORLD"ANKCONCERNINGTHELEGALSTATUSOFANYTERRITORYORTHE ENDORSEMENTORACCEPTANCEOFSUCHBOUNDARIES Copyright  Statement: 4HEMATERIALINTHISPUBLICATIONISCOPYRIGHTED#OPYINGANDORTRANSMITTINGPORTIONSORALLOFTHISWORKWITHOUTPERMISSIONMAYBEAVIOLATION OFAPPLICABLELAW4HE)NTERNATIONAL"ANKFOR2ECONSTRUCTIONAND$EVELOPMENT4HE7ORLD"ANKENCOURAGESDISSEMINATIONOFITSWORKAND WILLNORMALLYGRANTPERMISSIONTOREPRODUCEPORTIONSOFTHEWORKPROMPTLY &ORPERMISSIONTOPHOTOCOPYORREPRINTANYPARTOFTHISWORK PLEASESENDAREQUESTWITHCOMPLETEINFORMATIONTOTHE#OPYRIGHT#LEARANCE #ENTER )NC 2OSEWOOD$RIVE $ANVERS -! 53! 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STRATEGIC  ASSESSMENT  OF  THE     ETHIOPIAN  MINERAL  SECTOR FINAL  REPORT ՙpÛĜØΎÕÃáŒΎÅ0ij œHß¹Ύß36 ÕćF ØΎ-ļ0p Ministry  of  Mines   Federal  Democratic  Republic  of  Ethiopia ACKNOWLEDGEMENTS 4HISECONOMICSECTORWORK%37 ISPARTOFTHEANALYTICALSUPPORTPROVIDEDBYTHE7ORLD"ANK'ROUPTOTHE DEVELOPMENTOF%THIOPIASMININGSECTOR4HEREPORTISAJOINTEFFORTBYTHE%THIOPIA-INISTRYOF-INESANDTHE7ORLD "ANK'ROUP ANDITHASBEENPREPAREDBYTHE3WEDISH'EOLOGICAL!" )NTIERRA2-'AND)2)3#ONSULT UNDERTHE DIRECTIONOFTHE7ORLD"ANK'ROUP4HESTUDYHASBEENSUPPORTEDBYTHE!USTRALIAN'OVERNMENT THE#ANADIAN $EPARTMENTOF&OREIGN!FFAIRS 4RADEAND$EVELOPMENT$&!4$ 5+$EPARTMENTFOR)NTERNATIONAL$EVELOPMENT $&)$ ANDTHE)NTERNATIONAL&INANCE#ORPORATION 4HE7ORLD"ANKTEAMINCLUDED+IRSTEN(UND44, AND!NTIA0ORTILLO'ARCIA!GROUPOFEXPERTSFROMTHE7ORLD "ANK'ROUP INCLUDING"RYAN,AND 2EMI0ELON !DRIANA%FTIMIE !SFERACHEW!BATE!BEBEAND-ESlN'IRMA "EZAWAGAW PEERREVIEWEDMAJOROUTPUTSOFTHESTUDY/THERPROJECTDONORSREPRESENTATIVES INCLUDING3UE -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 "UREAUSSTAFF ASWELLASMININGCOMPANIES COMMUNITIESANDARTISANALMINERSFORTHEIRINPUTSANDSUPPORTIN GATHERINGINFORMATION3PECIALTHANKSGOTO-O-SSTAFF!LMAZ"ELAYNEH (UNDIE-ELKA AND!BAYNEH4ILAHUN /THER7ORLD"ANK'ROUPPUBLICATIONSANDRESEARCHONEXTRACTIVEINDUSTRIESAREAVAILABLEFORDOWNLOADFROMHTTP WWWWORLDBANKORGENTOPICEXTRACTIVEINDUSTRIES FOREWORD   Ethiopia  Mineral  Sector  Assessment  |  July  2014   #AN%THIOPIASMINERALRESOURCESBEUSEDFORGROWTHANDTRANSFORMATION %THIOPIASMININGSECTORSHOWSSTRONGPOTENTIALFORLONGTERMDEVELOPMENT!LTHOUGHLARGESCALEMININGHASUP TONOWBEENMINIMAL SEVERALLARGEPROJECTSAREINDEVELOPMENT)NADDITION THECOUNTRYHASGEOLOGICALPOTENTIAL FORTHEDISCOVERYOFNEW SIZEABLEMINERALDEPOSITS%THIOPIAALSOHASANEXTENSIVEANDUNIQUEARTISANALMINING SECTOR WHICHMAKESITANIMPORTANTSOURCEOFJOBCREATION INADDITIONTOITSPOTENTIALASANIMPORTANTSOURCEOF FOREIGNCURRENCYANDGOVERNMENTREVENUE)FEFFECTIVELYMANAGED THEMININGSECTORCANPLAYATRANSFORMATIVE ROLEFORSOCIALANDECONOMICDEVELOPMENTOF%THIOPIA-ININGISANEXPORT ORIENTEDSECTORTHATSATISlESINCREASING DEMANDFROMINDUSTRIALPRODUCTION AGRICULTUREANDHIGH TECHSECTORS ANDHAVETHEPOTENTIALTOCREATELOCAL LINKAGESFORSOCIALANDECONOMICDEVELOPMENT 4HISREPORTISTHElRSTCOMPREHENSIVEASSESSMENTOFTHE%THIOPIAN-INING3ECTOR)TEXAMINESTHESECTORSPRIMARY OPPORTUNITIESANDCHALLENGESFORGROWTHANDTRANSFORMATION WHILEALSOPROVIDINGANINITIALANALYSISOFPOLICYOPTIONS FOR%THIOPIANDECISIONMAKERS"UILDINGONTHEIRPOLITICALCOMMITMENTTOTHISSECTOR THE'OVERNMENTOF%THIOPIA 'O% NEEDSTODEVELOPABROADVISIONFORREALIZINGITSPOTENTIALINCLUDINGSOCIO ECONOMICBENElTS4HEINTERESTS OFANARRAYOFSTAKEHOLDERSNEEDTOBEBALANCEDANDSOCIAL ENVIRONMENTAL ANDECONOMICIMPACTSHAVETOBE MANAGED)NADDITIONTO'O%SFACILITATINGANDLEADINGROLE THEREPORTHIGHLIGHTSTHENEEDFORTWOIMPORTANTSTEPS TOBETAKEN   THECOLLECTIONANDMARKETINGOFHIGH QUALITYGEOLOGICALGEOPHYSICALDATATOCLEARLYIDENTIFY%THIOPIAS MININGPOTENTIAL AND   THEESTABLISHMENTOFANEFFECTIVEMINERALMANAGEMENTSYSTEMANDINSTITUTIONSTOENSURETHEDEVELOPMENT OFARESPONSIBLEMININGSECTOR !BROAD BASEDGROUPOFSTAKEHOLDERS INCLUDINGREGIONALGOVERNMENTS LARGE SCALECOMPANIES ARTISANALMINERS ANDCOMMUNITIESWERECONSULTEDTHROUGHOUTTHISREPORTSPREPARATION4HE%THIOPIA-INISTRYOF-INES THE7ORLD "ANK'ROUP ANDFUNDINGPARTNERSWOULDLIKETOACKNOWLEDGEANDTHANKALLOFTHEMFORTHEIRCOMMITMENTAND IMPORTANTCONTRIBUTIONSTOTHESTUDY 4HISREPORTISONLYAlRSTSTEPINANEXPANDINGPROCESSOFDIALOGUEANDCOLLABORATION7ELOOKFORWARDTOENGAGING WITHPUBLICANDPRIVATESECTORPARTNERSTOADVANCETHEDISCUSSIONANDACCELERATEACTIONTOREALIZETHEBENElTSOF THEEXTRACTIVEINDUSTRIESFORALL%THIOPIANS STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR III CONTENT &INAL2EPORT   &INAL2EPORT  I !CKNOWLEDGEMENTS II &OREWORD   III !CRONYMSANDABBREVIATIONS VI %XECUTIVESUMMARY  )NTRODUCTION    4HECURRENTSTATEOFTHE%THIOPIANMINERALSECTOR   0OTENTIALMININGDEVELOPMENT   #ONSIDERATIONSFORSECTORDEVELOPMENTANDSUSTAINABILITY   3UMMARYOFRECOMMENDATIONS  Õ-ļ0lΎćF ØΎ6`  ù]Ø    ՙpÛĜØΎÕÃáŒΎÅ0ijΎ·Hn¹Ύ‹n½x  œ HΎÕÃáŒΎp  CĊڇpΎ ¼ΎpΎ ŒΎÜ+ùΎ— [p  ćF ØΎ ¤+Ύ6axΎ3UMMARYOF2ECOMMENDATION    )NTRODUCTION    "ACKGROUNDANDREPORTSTRUCTURE    4HE%THIOPIANECONOMYANDCONTRIBUTIONFROMMINING    -INERALSECTORCHARACTERISTICSANDDEVELOPMENTINGENERAL   'EOLOGY MININGANDEXPLORATIONACTIVITIES    2EGIONALGEOLOGYANDMINERALOCCURRENCES    'EOLOGICALDATAANDINFORMATION    -ININGANDMINEPROSPECTSIN%THIOPIAANDTHEREGION    %XPLORATIONACTIVITIES    2ECOMMENDATIONS   3CENARIOSFORMININGDEVELOPMENTANDECONOMICIMPLICATIONS    &UNDAMENTALGEOLOGICAL EXPLORATIONANDMININGFACTORSTOCONSIDER    0ROPOSEDSCENARIOS    2EVENUEANDEMPLOYMENTPOTENTIAL    #URRENTANDPROJECTEDECONOMICLINKAGES    2ECOMMENDATIONS   (UMANRESOURCESANDEDUCATION    #URRENTEMPLOYMENTANDNEEDSFORTHEFUTURE    %DUCATIONANDVOCATIONALTRAININGIN%THIOPIA    2ECOMMENDATIONS  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  STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR V ACRONYMS  AND  ABBREVIATIONS  !!3 !TOMIC!BSORPTION3PECTROSCOPY  !!5 !DDIS!BABA5NIVERSITY  !)#$ !FRICA)NFRASTRUCTURE#OUNTRY$IAGNOSTIC  !-$ !CID-INE$RAINAGE  !-6 !FRICAN-INING6ISION  !3- !RTISANALAND3MALL3CALE-INING  !4! !GRICULTURAL4RANSFORMATION!GENCY  #!3- #OMMUNITIESAND3MALL 3CALE-INING  #3/ #IVIL3OCIETY/RGANISATION  #32 #ORPORATE3OCIAL2ESPONSIBILITY  $&!4 $EPARTMENTOF&OREIGN!FFAIRSAND4RADE !USTRALIA  $&!4$ #ANADIAN$EPARTMENTOF&OREIGN!FFAIRS 4RADEAND$EVELOPMENT  $F)$ $EPARTMENTFOR)NTERNATIONAL$EVELOPMENT  %$& %UROPEAN$EVELOPMENT&UND  %%0#/ %THIOPIAN%LECTRIC0OWER#ORPORATION  %&!0 %THIOPIAN&ORESTRY!CTION0ROGRAM  %)! %NVIRONMENTAL)MPACT!SSESSMENT  %)4) %XTRACTIVE)NDUSTRIES4RANSPARENCY)NITIATIVE  %0! %NVIRONMENTAL0ROTECTION!UTHORITY  &$) &OREIGN$IRECT)NVESTMENT  'O% 'OVERNMENTOF%THIOPIA  '3% 'EOLOGICAL3URVEYOF%THIOPIA  '40 'ROWTHAND4RANSFORMATION0LAN  )"! )MPORTANT"IRD!REAS  )#-- )NTERNATIONAL#OUNCILON-ININGAND-ETALS  )#0 /%3 )NDUCTIVELY#OUPLED0LASMA /PTICAL%MISSION3PECTROSCOPY  )#4: )NTER TROPICAL#ONVERGENCE:ONE  )&# )NTERNATIONAL&INANCE#ORPORATION  *3$& *APANESE3OCIAL$EVELOPMENT&UND  -O&%$ -INISTRYOF&INANCEAND%CONOMIC$EVELOPMENT  --! -ODEL-INING!GREEMENT  -O- -INISTRYOF-INES  .'/ .ON 'OVERNMENTAL/RGANISATION  .0&! .ATIONAL0RIORITY&OREST!REA  0!3$%0 0LANFOR!CCELERATEDAND3USTAINED$EVELOPMENTTO%ND0OVERTY  00! 0OWER0URCHASE!GREEMENT  000 0UBLIC0RIVATE0ARTNERSHIP  3!-3 3TRATEGIC!SSESSMENTOF-INERAL3ECTOR  3'!" 3WEDISH'EOLOGICAL!"  3IDA 3WEDISH)NTERNATIONAL$EVELOPMENT#OOPERATION!GENCY  3..0 3OUTHERN.ATIONS .ATIONALITIESAND0EOPLES2EGION  393-). 3YSTEMOF3TABILIZATIONOF%XPORT%ARNINGSFROM-INING0RODUCTS  46%4 4ECHNICALAND6OCATIONAL%DUCATIONAND4RAINING  82& 8 RAY&LUORESCENCE VI FINAL  REPORT ©  Allana  Potash  Afar  Plc. EXECUTIVE  SUMMARY Introduction  4HISREPORTPROVIDESAREVIEWOFTHE%THIOPIANMININGSECTOR ANDASSESSESITSPOTENTIALTOCONTRIBUTETO SUSTAINABLEECONOMICGROWTHANDDEVELOPMENT)TFURTHERPROVIDESRECOMMENDATIONSFORTHEINITIATIVESAND ACTIONSTHATWILLBEREQUIREDFORSUCHDEVELOPMENTTOTAKEPLACE ANDIDENTIlESTHERISKANDOPPORTUNITIES THATTHISENTAILS4HENEEDFORTHISTYPEOFSTRATEGICANALYSISFOLLOWSFROMTHE'OVERNMENTOF%THIOPIAS'O%  AMBITIONTO ASPARTOFTHE'ROWTHAND4RANSFORMATION0LAN'40 DEVELOPTHEMININGSECTORTOBECOMEA MAINPILLAROFTHEECONOMY  4HEBASISFORTHEREVIEWISPROVIDEDINTHEFORMOFTWOMAINANALYSESI ANANALYSISOFTHEGEOLOGICALAND MINERALOGICALPOTENTIALOF%THIOPIATOSUPPORTMININGPROJECTSANDII ASCENARIOBASEDMODELLINGAND ANALYSIS BASEDONMININGSECTORDATAANDASSOCIATEDFORECASTS OFTHEREVENUESTHATMAYBEGENERATED THROUGHTHEDEVELOPMENTOFALREADYEXISTINGMINESANDMININGACTIVITIES ASWELLASIDENTIlEDANDPROMISING MINERALRELATEDPROJECTSINAYEARPERSPECTIVE4HESESCENARIOSARETHENCONSIDEREDINTERMSOFTHEIR IMPLICATIONSFORARANGEOFISSUESTHATRELATETOSUSTAINABLEDEVELOPMENT SUCHASECONOMICANDSOCIAL IMPACTSENVIRONMENTALCONCERNSINSTITUTIONALDEVELOPMENTINFRASTRUCTURENEEDSANDREQUIREMENTS LEGISLATIVEDEVELOPMENTlNANCIALANDlSCALCONCERNSETC  4HEREPORTWASPRODUCEDINTHEPERIOD-AYTO-ARCH)TWASCOMMISSIONEDBYTHE7ORLD"ANK ANDITSPARTNERS)&# $&!4$ THE!USTRALIAN'OVERNMENTAND$F)$ WITHTHEAIMTOASSISTTHE'O%INITS EFFORTSTODEVELOPTHEMININGSECTOR4HUS THEREPORTHASBEENPRODUCEDINCLOSECOOPERATIONWITHSTAFFATTHE %THIOPIAN-INISTRYOF-INES-O- )TSlNDINGSAREMOSTLYBASEDONDESKTOPREVIEWSOFEXISTINGDOCUMENTS  ONALARGENUMBEROFMEETINGSANDINTERVIEWSWITHAFFECTEDANDINTERESTEDSTAKEHOLDERSANDALSOONSOME lELDWORKPERFORMEDINTHESOUTHERNANDWESTERNPARTSOFTHECOUNTRY2EGULAROVERSIGHTANDFEEDBACKHAS BEENPROVIDEDBYREPRESENTATIVESFROMTHE7ORLD"ANKANDITSPARTNERS The  current  state  of  the  Ethiopian  mineral  sector    0LACERGOLDHASBEENMINEDIN%THIOPIAFORMORETHANYEARS BUTASIGNIlCANTLARGESCALEMININGSECTOR has  not  yet  developed.!RTISANALMININGISEXTENSIVEANDPRIMARILYFOCUSSEDONGOLD4HEGOLDISMINED MOSTLYFROMALLUVIALDEPOSITSINTHE0ROTEROZOICTERRAINSINTHESOUTH WESTANDNORTHOFTHECOUNTRYSEEMAP BELOW ANDISBEINGMINEDBYNUMEROUSARTISANALANDSMALLSCALEMINERS!3- )NTHESOUTH THEREISALSO ASMALLSTATEOWNEDMINECALLED!DOLA WHEREALLUVIALGOLDHASBEENMINEDFOROVERHALFACENTURY4HERE ISCONSIDERABLEGEMMINING ANDSOMEBYVALUEOFTHISDERIVESFROMOPALMININGATONELOCALITYINTHE .ORTH7OLLO:ONE#ONCERNINGTHELARGESCALESECTOR THEREISONLYONEOPERATINGMINEIN%THIOPIA -IDROCS ,EGA$EMBIGOLDMINE RANKEDNUMBERINTHEWORLDINTERMSOFVALUEOFPRODUCTIONIN!FAIRLY MATUREGOLDPROJECTAT4ULU+API WHICHHAS)&#INVOLVEMENT WASONHOLDDURINGTHESECONDHALFOF BUTCHANGESINOWNERSHIPANDADDITIONALlNANCINGHASNOWALLOWEDFOREXPLORATIONACTIVITIESTOCONTINUE 4HESTATE OWNED+ENTICHATANTALUMMINEISASIZEABLEPROJECT HOWEVERPRODUCTIONWASONHOLDIN  ASTHESTATEATTEMPTSTOPRIVATIZETHEMINE  Ethiopia  is  also  endowed  with  a  range  of  industrial  minerals  deposits.#EMENTRAWMATERIALSANDDIMENSION STONEAREMINEDATASMALLINDUSTRIALSCALE WHILEOTHERINDUSTRIALMINERALSAREORHAVEBEENMINEDATA SMALLER OFTENARTISANAL SCALE-OSTENCOURAGINGLYFORSECTORDEVELOPMENT THEREISALARGESCALEPROJECTFOR POTASH!LLANA0OTASH WHICHHAS)&#INVOLVEMENT ANDWHICHISEXPECTEDTOSTARTPRODUCTIONBYMIDTO LATE4HECURRENTPLANFORTHE!LLANAMINEISTOPRODUCE-TYEARDURINGALIFEOFMINEOFSOME YEARS ANDTOEMPLOYSOMEPEOPLE STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 1  Despite  the  fact  that  large  scale  mining  is  still  virtually  non-­existent,  Ethiopia  does  have  the  geological   potential  for  the  discovery  of  new  and  sizeable  economic  deposits.4HEAREASWHICHAREIDENTIlEDASBEING PROMISINGARETHE0ROTEROZOICBASEMENTAREASINTHENORTH WESTANDSOUTHOFTHECOUNTRY ANDTHEYARE GEOGRAPHICALLYRATHEREXTENSIVECOMPAREDTOPROSPECTIVEAREASINMANYOTHER!FRICANCOUNTRIES%XPLORATION ACTIVITIESINTHESEAREASHAVEINCREASEDOVERTHELASTCOUPLEOFYEARSWHILETHEYARESTILLATARELATIVELYMODEST LEVEL)NADDITION THEPOTASHOCCURRENCESINTHE$ANAKILDEPRESSIONINNORTHEASTERNPARTOFTHE2IFT6ALLEY ARESIZEABLEANDCANSUPPORTLARGESCALEPRODUCTION ASEVIDENTFROM!LLANA0OTASHSPROJECT 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. Potential  mining  development  )NTHElSCALYEAR THE%THIOPIANMININGSECTORCONTRIBUTEDABOUTTO'$0TOT53$BILLION  4HESECTORACCOUNTEDFOR53$MILLION OFTHECOUNTRYSEXPORTS WITHGOLDMAKINGUPCLOSETO OFTHEMININGSECTOREXPORTS)NCOMPARISON AGRICULTURECONTRIBUTED INDUSTRYAND MANUFACTURINGTO'$0ANDTHELARGESTEXPORTCOMMODITY COFFEE GENERATED53$MILLION  INEXPORTREVENUES  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 %THIOPIATOGENERATECRITICALMASS THEECONOMICPOTENTIALFROMTHESECTORISCLEARLYDIFlCULTTOPREDICT (OWEVER THREESCENARIOS CONSERVATIVE POSSIBLEANDPROBABLE AREGENERATED ANDTHESEARECONCERNED WITHGOLD POTASH TANTALUMANDCOPPERTHESEBEINGTHECOMMODITIESPRIMARILYEXPLOREDNOW   )NAPROBABLESCENARIO ITISPROPOSEDTHATTHEMINERALSECTORCOULDGENERATEREVENUEUPTO53$BILLIONBY 2024  and  in  an  optimistic  scenario  some  USD  2  million.)NTHEPROBABLESCENARIO THEREVENUECORRESPONDSTO ABOUTOFTHECURRENTEXPORTVALUEOFGOLDIN4ANZANIA53$IN ANEMERGINGMININGECONOMY DOMINATEDBYGOLDPRODUCTION)N'HANA WHICHHASALONGMININGHISTORYWHEREGOLDACCOUNTSFORMORE THANOFTHETOTALMINEDVALUE GOLDEXPORTSWEREWORTHALMOST53$BILLIONIN 2 FINAL  REPORT )N TOTALSALESFROMTHEMININGSECTORIN!FRICAWHEREVALUEDAT53$BILLIONTHISDOESNOTINCLUDE MININGFORINDUSTRIALMINERALS REPRESENTINGNEARLYOFTHECONTINENTS'ROSS0RODUCT)N!FRICA METAL MININGANDCOALMININGAREABOUTTHESAMEMAGNITUDEINTERMSOFVALUE!MONGTHEMETALS GOLD COPPERAND IRONOREMAKEUPMORETHANHALFOFTHEVALUE)FONEASSUMESTHATTHEGEOLOGYOF%THIOPIAISASPROSPECTIVE ASTHE!FRICANhAVERAGEv THENTHESENUMBERSWOULDIMPLYTHATTHEPRESENTDAYECONOMICPOTENTIALFORTHE DEVELOPMENTOFTHE%THIOPIANMININGSECTORWOULDBETOACHIEVEANANNUALTURNOVEROFNEARLY53$BILLION WITH%THIOPIACOVERING  KMÜOF!FRICASSURFACE  3000 2500 2000 USD Millions 1500 1000 500 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Conservative Probable Possible #ONSERVATIVE$UETOTHEMANYPOSSIBLERISKSFACINGMINERALSECTORINVESTMENT EXPLORATIONIN%THIOPIAISNOTINTENSIlED 0ROBABLE/NLYSMALLINCREASEINMINING PRIMARILYDUETOTHECURRENTLYLOWNUMBEROFADVANCEDPROJECTSANDRATHERLOW INTENSITYOFEXPLORATION 0OSSIBLE7ILLREQUIRESTRONGINTENSIlCATIONOFEXPLORATIONACTIVITIES Figure  ii.  Estimated  total  sales  revenues  based  on  mining  development  scenarios  for  gold,  copper,  tantalum  and  potash. 4HROUGHCORPORATEINCOMETAXANDROYALTYPAYMENTSTHESCENARIOSGRAPHABOVE GIVETHATTHE3TATECAN GAINBETWEEN53$AND53$MILLIONBY&URTHER DIRECTEMPLOYMENTFROMTHEMININGSECTOR CANRANGEFROMTO DEPENDINGONWHICHSCENARIOISFULlLLED 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       STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 3 Considerations  for  sector  development  and  sustainability  Ethiopia  aims  to  build  and  develop  an  essentially  new  economic  sector-­-­-­  the  large-­scale  mineral  sector.  The   LEADTIMESFROMEXPLORATIONTOALARGE SCALEMINEBEINGCOMMISSIONEDARELONGOFTEN YEARS ANDTHUS  a  similarly  long-­term  perspective  is  necessary  when  supporting  and  managing  the  sector.4HECURRENTPOLICY FRAMEWORKENVISIONSTHEMINERALSECTORTOBETHE@BACKBONEOFTHEINDUSTRYBY  WITHANINCREASE INTHECONTRIBUTIONTOTHE'$0FROMTHECURRENTTO ANDA FOLDINCREASEINITSCONTRIBUTIONTO FOREIGNCURRENCYEARNINGS4HERAPIDDEVELOPMENTENVISIONEDINTHEPOLICYFRAMEWORKMAYNOTBEREALIZED CPDEVELOPMENTSCENARIOSABOVE ANDTHEDEVELOPMENTOFTHEMINERALSECTORCOULDBENElTFROMADOPTING ALONGERTERMVIEWBASEDONASLOWERGROWTHRATE!SLOWERGROWTHRATECAN INSOMEWAYS BEVIEWEDAS BEINGPOSITIVEASITPROVIDESTIMEFORNEEDEDGOVERNANCESTRUCTURESTODEVELOPWHICH INTURN WILLMAKE ITMORELIKELYTHATTHESECTORDEVELOPSINASUSTAINABLEMANNER!LONGTERMVIEWNEEDS INGENERAL TOBE BASEDONTHESECTORSPARTICULARCHARACTERISTICSSUCHASTHEINHERENTGEOLOGICALANDlNANCIALUNCERTAINTIES  THEINDUSTRYSCYCLICALNATURE ANDTECHNICALREQUIREMENTSFORADVANCEDEXPLORATION  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.   4HESCOPEOFTHEPOLICYISBROAD REQUIRINGAWIDERANGEOFGOVERNMENTALINSTITUTIONSTOBEINVOLVEDINTHE FURTHERREVISIONOFTHEPOLICY INTHEFORMULATIONOFMOREDETAILEDPOLICYACTIONS ANDINITSIMPLEMENTATION  !POLICYANDLEGALFRAMEWORKWHICHCLEARLYDElNESTHEROLEOFTHESTATE WHENOTHERTHANREGULATORYnIS important  for  the  orderly  and  successful  development  of  any  mineral  sector.&URTHERMORE ITISBENElCIAL TOBOTHINVESTMENTANDGOVERNANCETHATTHISROLEISCLEARLYCOMMUNICATEDTOSTAKEHOLDERSANDINVESTORS ANDTHATITISREmECTEDINALLACTIONSTHATRELATETOSTATEINVOLVEMENTINTHESECTOR4HE%THIOPIANPOLICY ENVIRONMENTEXPLICITLYENVISIONSMINERALSECTORDEVELOPMENTTOBEDRIVENBYPRIVATESECTORINVESTMENTAND RECENTATTEMPTSTOPRIVATIZESTATE OWNEDMINESLENDSSUPPORTTOTHISINTENTION!TTHESAMETIME THEPOLICY ANDLEGALFRAMEWORKDOESPROVIDEFORSTATEINVOLVEMENTINMINING @BYITSELFORINPARTNERSHIPWITHPRIVATE INVESTORS4HE%THIOPIANGOVERNMENTCOULDCONSIDERTHELESSONSLEARNEDFROMELSEWHERE ANDDEVELOPAND IMPLEMENTPOLICIESTHATAREINLINEWITHTHEWEALTHOFEXPERIENCESTHANEXISTWITHREGARDSTOSTATEINVOLVEMENT INMINING4HEREAREEXAMPLESOFPARTLYORFULLYSTATE OWNEDMININGCOMPANIESSUCCESSFULLYCOEXISTING WITHTHEPRIVATESECTOR3UCHSUCCESSESAREGENERALLYBASEDONLONGHISTORIESANDSIGNIlCANTCONTRIBUTIONS FROMTHERESPECTIVECOMPANIESTONATIONALDEVELOPMENT BUTALSOONCLEARPOLICIESANDRULESFORHOWSUCH COMPANIESSHOULDBEMANAGEDANDRUN ASWELLASTHETRANSPARENTIMPLEMENTATIONOFTHESERULES  In  a  mineral  sector  driven  by  the  private  sector,  investments  in  exploration  are  mainly  made  on  the  basis  of   geological  prospectivity.)NTHEABSENCEOFRECENThSUCCESSSTORIESvAPARTFROM!LLANA0OTASHINTHECASE OFTHEINDUSTRIALMINERALSSECTOR ANDWITHLIMITEDGEOLOGICALGEOPHYSICALDATAPERTINENTTOEXPLORATION THE COLLECTIONOFNEWHIGH QUALITYDATA ANDTHESUBSEQUENTMARKETINGOFTHESEDATATHROUGHALONGTERMSTRATEGY FORINVESTMENTPROMOTIONASSUMEVITALIMPORTANCE4HEFACTTHATINVESTORSAREMAINLYDRAWNBYGEOLOGICAL PROSPECTIVITYISEXEMPLIlEDBYLARGEINVESTMENTSBEINGMADEINCOUNTRIESWITHWHATISREGARDEDASUNSTABLE ANDORCOMPARATIVELYLESSATTRACTIVEMININGREGULATORYREGIMES'IVENTHELARGECAPITALTHATISNEEDEDTO STARTANYSIZEABLEMODERNMINE THEINVESTMENTNEEDEDWILLBYNECESSITYHAVETOCOMEFROMINTERNATIONAL 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,AWITSELFGUARANTEETHISSECURITYOFLICENSESANDTENURE BUTTHE ADMINISTRATIONOFTHE,AWNEEDSTOBETRANSPARENT DECISIVEANDEFlCIENT!NUMBEROFPROVISIONSINTHE -INING0ROCLAMATIONHAVERESULTEDINRULES WHICHNEGATETHEPOLICYOBJECTIVEOFALEGALREGIMETHATIS ATTRACTIVETOINVESTORSANDTHATCANBEPERCEIVEDASCONTRADICTORY4HUS DIFFERENTARTICLESPROVIDEFORI THE DEALINGWITHEXPLORATIONLICENSEAPPLICATIONSINORDEROFRECEIPTWHICHMAYBEUNDERSTOODTOIMPLYA@lRST COME lRST SERVEDSYSTEM II PRIORITYTOBEDETERMINEDBYTHEAUTHORITIESONTHEBASISOFTHECOMPANIES TECHNICALANDlNANCIALABILITIES ACCORDINGTODElNEDCRITERIA ADIRECTIVETHATBECAMEEFFECTIVEIN/CTOBER PROVIDESFORTHECOLLECTIONANDASSESSMENTOFEXPLORATIONLICENSEAPPLICATIONSONAMONTHLYBASISIII  DISREGARDOFAPPLICATIONSALTOGETHER ANDTHESUBSEQUENTBIDDINGFORTHEAREAINQUESTION4HEPROCESSAND CRITERIAINVOLVEDINCOMPETITIVEBIDDINGARENOTYETESTABLISHED4HEREISCURRENTLYACONSIDERABLEBACK LOGIN THEASSESSMENTOFEXPLORATIONLICENSEAPPLICATIONS WHILETHEINTENTIONISTOASSESSTHESEONAMONTHLYBASIS 4HISMAYINPARTBEDUETOEFFORTSTODISCOURAGESPECULATIVEAPPLICATIONSANDORCOMPANIESTHATDONOTHAVE THENECESSARYKNOW HOWORRESOURCES)TISHOWEVERALSOCLEARTHATTHEREEXISTSOMECRITICALCAPACITYCONSTRAINTS THATPREVENTTHELICENSINGAUTHORITYTOASSESSAPPLICATIONSONTIME)NADDITIONTOTHEABOVE THEREHAVEBEEN CASESWHENTHESTATEDOESNOTRELINQUISHGROUNDINCASEOFCOMPANIESNOTCONFORMINGTOLEGALREQUIREMENTSOR WHENACOMPANYLEAVESANAREAFOROTHERREASONS ANDTHEAREATHENBECOMESRESERVESFORPOTENTIALBIDDING )NALL THEREMAYEXIST CONSEQUENTLY SCOPEFORBIASEDORCOMPROMISEDHANDLINGOFEXPLORATIONLICENSING 4 FINAL  REPORT  !COMPUTERIZEDMININGCADASTRESYSTEMWASCOMMISSIONEDIN BUTSINCETHEN ITHASPARTLYFALLENINTO DISUSE ANDDURINGPARTOFITHASNOTBEENFUNCTIONING4HEREASONSFORTHEPARTIALNON FUNCTIONINGOFTHE EXISTINGSYSTEMISPARTLYREPORTEDTOBEDUETOSOFTWAREPROBLEMS ANDTHEABSENCEOFABUDGETTOPERFORM NECESSARYUPDATESANDPERFORMhBUGlXESv ANDPARTLYDUETOTHEGOVERNMENTSCHANGEINPOLICIESWITH REGARDSTOHOWLICENCESFORMININGANDEXPLORATIONSHOULDBEAWARDED  A  clear  legal  framework  is  important  both  to  attract  investors  and  to  facilitate  regulation  of  the  industry.  The   KEYLEGISLATIONGOVERNINGTHEMINERALSECTORISTHE-INING/PERATIONS0ROCLAMATION.O AND ARECENT AMENDMENTTOTHEPROCLAMATION WHILETHEREGULATIONTHATISCURRENTLYINUSEWASDRAFTED PURSUANTTOTHEOLDMININGPROCLAMATIONFROM4HEREISALSOA-ODEL-INING!GREEMENT--! THAT WASDRAFTEDPURSUANTTOTHEOLDMININGPROCLAMATION)NPRACTICE EXPLORATIONLICENSEHOLDERSMUSTNEGOTIATE ANDENTERINTOA-INING!GREEMENTWITHTHE'OVERNMENTTOGETGRANTEDALARGE SCALEMININGLICENSEAND THE--!ESTABLISHESTERMSINARATHERGENERALMANNER WITHOUTELABORATINGMUCHONIMPORTANTlNANCIAL  ENVIRONMENTALANDCOMMUNITYASPECTSANDLEAVINGAFEWPROVISIONSOPENFORNEGOTIATION4HUS DRAFTINGOF NEWREGULATIONSTOPROVIDEFURTHEREFFECTTOTHENEWMININGPROCLAMATIONANDREVISINGTHE--!TOMAKEIT CONSISTENTWITHTHENEWMININGPROCLAMATIONWILLMAKETHELEGALFRAMEWORKMORECOMPLETE!COMPREHENSIVE REVISIONOFTHE--! INTHELIGHTOFNEWLAWSANDREGULATIONS INCOMINGTRANSPARENCYREQUIREMENTSAND SUSTAINABLEDEVELOPMENTCOMMITMENTS WOULDALSOMAKEITAUSEFULTOOLFORCOORDINATINGTHEWORKOFDIFFERENT 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 EMPLOYEES THEOVERALLCAPACITYAT-O-AND'3%FORPROPERPROMOTION SUPERVISIONANDREGULATIONOFTHE SECTORISLIMITED4HEMAINREASONSFORTHISINCLUDETHEHISTORICALLYNON EXISTENTLARGESCALEMININGSECTOR  WHICHHASNOTPROVIDEDTHEOPPORTUNITYFORCONSISTENTCAPACITYDEVELOPMENTTHEHIGHNUMBEROFSTAFFAT-O- ANDTHE'3%TOTALLY ACCORDINGTOTHESTRUCTURALPLANSWITHCURRENTNUMBEROFEMPLOYEESBEINGABOUT  OFWHICHTHEMAJORITYAREWORKINGINADMINISTRATIONORSUPPORTPROCESSESRATHERTHANCOREPROCESS AHIGHTURNOVEROFSTAFFANDADECREASEINTHENUMBEROFLONG TERMEXPERIENCEDSTAFF PREVENTSCONSISTENT CAPACITYBUILDING ANDWHICHISRELATEDTOCIVILSECTORSALARIESBEINGSIGNIlCANTLYLOWERTHANTHOSEOFFEREDBY THEPRIVATESECTOR ANDNON mEXIBLEBUDGETINGANDPROCUREMENTPROCEDURES WHICHINPARTICULARHAMPER WORKATTHEDRILLINGANDLABORATORYUNITSOFTHE'3%)MPORTANTAREASAFFECTEDINCLUDEMAINLYTHEPROVISION OFGEOLOGICALINFORMATIONMINERALRIGHTSADMINISTRATIONANDREGULATIONENVIRONMENTALANDSOCIALREGULATION WHICHWASRECENTLYTRANSFERREDFROMTHE%0!TO-O- ANDMININGCONTRACTNEGOTIATIONS)NSTITUTIONAL RESTRUCTURING TOFACILITATEINCREASEDSALARIESANDMOREEFlCIENTPROCESSES ANDCAPACITYBUILDINGPLANSCOULD 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 REGIONALLEVELS3OMETYPESOFMINERALLICENSES ANDASSOCIATEDREGULATION AREUNDER CONTROLOFTHEREGIONS ANDWOREDASARESIGNIlCANTLYINVOLVEDIN!3-MANAGEMENT,ACKOFCAPACITYISALSO ANISSUEATTHEREGIONALANDSUB REGIONALLEVELSOFGOVERNANCEANDTHEDEGREEANDSUCCESSOFCOORDINATION BETWEENFEDERAL REGIONALANDSUB 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&URTHERMORE THEQUALITYOFHIGHEREDUCATIONSPECIALIZEDTOWARDSEXPLORATION  MININGANDMINERALPROCESSINGISLOWASTHEREISASERIOUSLACKOFQUALIlEDTEACHERSANDTECHNICALRESOURCES ATEDUCATIONALINSTITUTIONS7HILETHEDEVELOPMENTOFMININGRELATEDTRAININGAT46%4INSTITUTIONSISPARTOF THEGOVERNMENTSSTRATEGY THEREAREASYETNOCURRICULADEVELOPED!SARESULT MANYEXPLORATIONCOMPANIES SOURCESKILLEDSTAFFFROMOUTSIDE%THIOPIA%VENTHOUGHMININGISNOTLABOURINTENSIVE COMPAREDTOFOR EXAMPLETHEMANUFACTURINGINDUSTRY THEPRESENCEOFALOCALSKILLEDWORKFORCEISIMPORTANTINATTRACTING INVESTMENTANDTHEPRESENCEOFWELL TRAINEDNATIONALSWILLENSURETHATTHELARGERSCALEMININGPROJECTSDO NOTTURNINTOhENCLAVEECONOMIESv WHEREEXPATRIATEWORKERSmYINANDOUTTOCONDUCTTHESPECIALISEDWORK 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 INDUSTRIALDEVELOPMENT ANDMAYBEANIMPORTANTLIVELIHOODFORWHATAREUSUALLYRURALCOMMUNITIESWHO HAVELIMITEDALTERNATIVEECONOMICOPPORTUNITIES)TALSOCONSTITUTESASIZEABLESOURCEOFEMPLOYMENT WITH THE-O-ESTIMATINGTHATUPTOMILLIONPEOPLEMAYTOSOMEEXTENTBEINVOLVEDIN!3-ACTIVITIES!3-GOLD MININGISASIGNIlCANTECONOMICSECTORIN%THIOPIABUTITIS HOWEVER ALSOASSOCIATEDWITHSOMETROUBLESOME CHARACTERISTICS THATINCLUDEINFORMALITYNOTBEINGLEGAL SOCIALANDENVIRONMENTALIMPACTS ANDTHATTHESE ACTIVITIESMAYHINDERTHEDEVELOPMENTOFLARGESCALEMININGOPERATIONS4HE-O-ISHEAVILYINVOLVEDIN STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 5 ATTEMPTINGTOBETTERORGANISEANDDEVELOPTHESECTOR ANDTOMAKEITPARTOFTHEFORMALECONOMY7ITHREGARDS TOTHEGOLDSECTOR THE.ATIONAL"ANKOF%THIOPIAHASBEENIMPLEMENTINGAPROGRAMMEWHEREGOLDISBOUGHT FROM!3-MINERSATAINCREMENTTOTHEPREVAILINGGOLDPRICE4HISMECHANISMHASBEENSUCCESSFULAND INATOTALOFAROUNDTONOFGOLDWASREPORTEDTOHAVEBOUGHTTHISWAY(OWEVER lNDINGSFROMlELDWORK PERFORMEDTHEPRESENTPROJECTSUGGESTTHATTHEPRODUCTIVITYOFTHE!3-GOLDMINERSISRATHERLOW ANDTHAT MUCHOFTHEGOLDPRODUCEDISSOLDNOTTOTHE.ATIONAL"ANKBUTTHROUGHILLICITCHANNELS)TISFURTHERCLEAR THATTHEREAREOCCURRENCESOFLANDUSECONmICT MOSTCOMMONLYWITHFARMERSBUTPERHAPSMOSTIMPORTANTLY  WITHLARGERSCALEEXPLORATIONPROJECTSANDMINES4HELATTERMAYCONSTITUTEASIGNIlCANTDETERRENTFORFUTURE INVESTMENTSINTHE%THIOPIANMININGSECTOR4HEREEXISTSANEEDTOPERFORMPROPERBASELINESTUDIES SOTHAT ABETTERUNDERSTANDINGOFTHESECTORCANBEOBTAINEDWHICH INTURN CANFORMTHEBASISFORINFORMEDPOLICY ANDMANAGEMENTDECISIONS  Gender  inequalities  are  apparent  in  many  areas  of  the  Ethiopian  mineral  sector,  and  related  education.4HUS  THENUMBEROFMENEMPLOYEDBYTHECURRENTLYACTIVEEXPLORATIONANDMININGCOMPANIESFAREXCEEDSTHE NUMBEROFWOMEN#ONCERNING!3- THEMALEPOPULATIONINMOST!3-AREASCOMMONLYEXCEEDSTHATOF FEMALEWIDELY THEIRRESPECTIVEDUTIESOFTENDIFFER ANDSURVEYSFURTHERSUGGESTTHATAMANEARNSNEARLYTWICE OFWHATISBEINGEARNEDBYAWOMAN!TUNIVERSITIES ALTHOUGHTHEEXACTlGUREISNOTKNOWN LESSTHAN POSSIBLYMUCHLOWER OFTHESTUDENTSPURSUINGMININGRELATEDEDUCATIONAREFEMALE ANDONLYOFTHE ACADEMICSTAFFTEACHINGMINERALSECTORRELATEDSUBJECTSAREFEMALE&OR46%4S WHILETHEREISNODATAFOR MINERALSECTORPROFESSIONALSTRAINING INOFALLTHESTUDENTSENROLLEDAT46%4INSTITUTIONS WEREFEMALE!MONG46%4TRAINERS HOWEVER ONLYSOME 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  NORWHERETHEREAREASIGNIlCANTAMOUNTOFPROTECTEDOROTHERWISEUNIQUEAREAS(OWEVER SOMEAREASOF POTENTIALCONmICTEXIST ANDTHESENEEDTOBEACKNOWLEDGEDANDMANAGED)FNOT MININGITSELFMAYWELL LOOSETHESUPPORTOFLOCALCOMMUNITIES ASWELLASATTRACTOPPOSITIONFROMBOTHNATIONALANDINTERNATIONAL ORGANISATIONS)NTERMSOFENVIRONMENTALLEGISLATION THEREISONLYTHE%)!0ROCLAMATIONANDAFEWGENERAL PROVISIONSOFTHE-INING0ROCLAMATION4HUS THELEGISLATIONISQUITEGENERALINNATURE ANDGOVERNANCECOULD BENElTFROMTHEDEVELOPMENTOFFURTHER MOREDETAILEDREGULATIONS ASWELLASGUIDELINESTOSUPPORTBOTHTHE AUTHORITIESANDTHEINDUSTRY7ITHEXISTINGLEGISLATIONPROVIDINGRATHERSIGNIlCANTROOMFORINTERPRETATION THE REQUIREMENTFORCOMPANIESTOBEPROACTIVE ANDTOBEHAVERESPONSIBLYISPARAMOUNT4HIS INTURN MEANS THATEFFORTSTOENCOURAGECOMPANIESTOUNDERTAKESERIOUSANDWELLTHOUGHTOUTCORPORATESOCIALRESPONSIBILITY #32 RELATEDACTIVITIESAREIMPORTANT)NTHISLINE FURTHERWORKTODEVELOPAMORECOMPREHENSIVE--!  THANTHEONEINEXISTENCECOULDBEUSEFUL!LSO IMPACTEDCOMMUNITIESABILITYTOUNDERSTANDANDhMONITORv MININGANDEXPLORATIONACTIVITIESNEEDTOBESTRENGTHENED 4HEREARELANDUSERELATEDCONmICTSANDORDISAGREEMENTSINMININGAREASEXAMPLESINCLUDETRESPASSINGOF !3-MINERSONTOLARGESCALEPROJECTSAT!DOLAAND4ULU+API ANDCONmICTBETWEENFARMERSANDEXPLORATION ACTIVITIESAT,EGA$EMBI!SALLLANDISESSENTIALLYCONTROLLEDBYTHEPROVINCIALSTATES ONEMAYCONCLUDE THATSUCHISSUESSHOULDBEFAIRLYREADILYHANDLEDANDRESOLVED(OWEVER TOACHIEVESUCHRESOLUTIONS THERE NEEDSTOEXISTCLARITYONHOWLANDMAYBEALLOCATEDTOMININGPROJECTS ANDTHISISNOTALWAYSTHECASE&OR EXAMPLE THEREAREEXAMPLESWHEREPROVINCIALSTATEPOLICYONAGRICULTURE ISNOTINLINEWITH&EDERALSTATE POLICYONMININGWITHTHERESULTTHATITISUNCLEARWHICHACTIVITYMAYTAKEPRECEDENCE 4HEREAREARANGEOFFORESTRYANDWILDLIFEAREASPROTECTEDBYLAW BUTINMANYOFTHESE MININGANDEXPLORATION MAYBEALLOWEDIFDEEMEDTOBEAPRIORITYBYTHE3TATE)TISUNCLEARUNDERWHATCIRCUMSTANCESTHESEACTIVITIES MAYBEALLOWED WHICHCAUSESOVERALLUNCERTAINTYANDALSOTHERISKTHATANADVENTUROUSEXPLORATIONCOMPANY UNDERTAKESWORKINAREASWHEREOTHERSTAKEHOLDERSMAYSEETHISTOBEUNACCEPTABLE WHICHINTURNMAY AFFECTTHEREPUTATIONOFTHEWHOLESECTOR  4HE'O%SDIRECTINCOMESTHATRELATETOMINERALPROJECTSTEMFROMEQUITYPARTICIPATION MINING INCOMETAX and  royalties.4HE--!PROVIDESFORTHEACQUISITIONOFAPARTICIPATIONINTERESTBYTHE'OVERNMENTWITHOUT ACOST WHICHISALSOPARTOFTHERECENTAMENDMENTTOTHE-INING0ROCLAMATIONWHERETHE3TATEIS GIVENASHAREFREECARRY INALLLARGEANDSMALL SCALEMININGPROJECTSWITHTHEPOSSIBILITYTONEGOTIATE ADDITIONALEQUITYPARTICIPATIONBYAGREEMENT!TPRESENT THEINCOMETAXFORLARGE SCALEMININGWHICHISlXED ANDSETATTHEFEDERALLEVELWASRECENTLYLOWEREDFROMTOPAYABLETOTHEFEDERALSTATE WHILETHE REGIONALSTATESHAVETHEMANDATETOSETTHEINCOMETAXFORSMALL SCALEMININGATTHEREGIONALLEVEL SOTHERE ISNOlXEDRATEFORSMALL SCALEMINING2OYALTIESARECALCULATEDINADVALOREMBASISANDARECHARGEDAT FORPRECIOUSMINERALS FORMETALLICMINERALSANDFORINDUSTRIALMINERALS4HEROYALTYRATEISRATHER SIMILARTOOTHER!FRICANCOUNTRIESWHEREASTHECORPORATETAXRATEANDTHEPERCENTAGEOFEQUITYPARTICIPATION ISLOWERTHANWHATISTHECASEINMANY!FRICANMININGCOUNTRIES 6 FINAL  REPORT 4HECURRENTEXPORTREVENUEFROMTHEMINERALSECTORISSMALLDUETOTHELIMITEDSIZEOFTHESECTOR ALTHOUGH STILLIMPORTANTFOR%THIOPIAANDASOURCEOFFOREIGNEXCHANGE OFTOTALINTHELASTFEWYEARS 4HEREIS NOSPECIALFUNDFORCOLLECTING SAVINGORINVESTINGMINERALRELATEDREVENUES3UCHAFUNDWOULDBEUSEFULIF THEREWASASUDDENhSURGEOFCAPITALvRELATEDTOMINING ANDWHEREARGUMENTSCOULDBEMADETHATSUCH REVENUESWOULDRISKCAUSINGhDUTCHDISEASEvINmATION APPRECIATIONOFDOMESTICCURRENCY OUTCOMPETITION OFOTHERSECTORSETC ORWHEREONEARGUESTHATTHEINCOMESARESOLARGETHATTHESESHOULDALSOBESHARED WITHFUTUREGENERATIONS )NTHELEGISLATION THEREISAREVENUESHARINGMECHANISMINPLACE WHEREPERCENTOFTHEROYALTIESCOLLECTED FROMLARGESCALEOPERATIONSAREALLOCATEDTOTHEFEDERALGOVERNMENTANDTHEREMAINEDISALLOCATEDTOTHE PROVINCIALSTATEWHERETHEMINEINQUESTIONISLOCATED3IMILARLY FORSMALLSCALEMINES PERCENTOFTHE ROYALTIESREMAININTHESTATEWHERETHEMINEISLOCATED WHEREASPERCENTISALLOCATEDTOTHEFEDERAL GOVERNMENT  %THIOPIAAPPLIEDFOR%XTRACTIVE)NDUSTRIES4RANSPARENCY)NITIATIVE%)4) CANDIDACYFORTHESECONDTIMEIN/CTOBER  THElRSTAPPLICATIONWASDECLINEDDUETOCONTROVERSIESOVERTHECOUNTRYSCIVILSOCIETYLEGISLATION   !CHIEVING%)4)CANDIDATESTATUSWOULDBECONDUCIVETOCURTAILINGPOSSIBLECORRUPTIONINTHESECTOR ASWELL ASSENDAPOSITIVESIGNALTOFOREIGNINVESTORSANDLOCALSTAKEHOLDERS4HELEGISLATIONRELATEDTO#3/.'/ REMAINSTHEMAINSTUMBLINGBLOCKINACHIEVINGFULLYCOMPLIANT%)4)STATUSANDITWOULDPOSSIBLYNEEDTOBE REVIEWEDIF%)4)COMPLIANTSTATUSISTOBEACHIEVED  4HELINKSFROMMININGTOTHEMANUFACTURINGSECTORANDTOBENElCIATIONOFMINERALSARERATHERLIMITEDASA direct  result  of  the  paucity  of  sizeable  projects.4HECURRENTSTATEOFECONOMICLINKAGESBETWEENTHEMINERAL SECTORANDTHERESTOFTHEECONOMYARESTRONGESTFORTHECEMENTSECTOR/NCEPOTASHPRODUCTIONSTARTS  LINKAGESTOTHEAGRICULTURALSECTORAREEXPECTEDTODEVELOPTHROUGHPROVISIONOFFERTILISER 4HELINKAGES BETWEENTHE,EGA$EMBIOPERATIONASWELLASTHELARGEREXPLORATIONPROJECTS!LLANA0OTASHAND.YOTA -INERALS4ULU +APIPROJECT WITHTHERESTOFTHEECONOMYBEINGRATHERWEAK ASTHECURRENTCAPACITYOFTHE DOMESTIClRMSTOPROVIDEINPUTSANDSERVICESFORINTERNATIONALMININGlRMSREMAINSLIMITED)TISCLEARTHAT lSCAL CONSUMPTIONANDPRODUCTIONLINKAGESFROMTHEMININGSECTORCANBEFURTHERDEVELOPED WITHBOTH THEINDUSTRIALSECTORASWELLASTHEECONOMYATLARGE 7HILETHERATHERAMBITIOUSPOLICYTARGETSPARAGRAPH MAYNOTBEMETINTHENEXTDECADE THESECTOR DEVELOPMENTTHATISACHIEVEDSHOULDBESUPPORTEDBYCOMPREHENSIVEWORKONESTABLISHINGVALUECHAINS 4HISISINORDERTOGAINTHEECONOMICBENElTSOFFORWARDANDBACKWARDLINKAGES7ITHREGARDSTOINDUSTRIAL MINERALSMINING DETAILEDSTUDIESOFMARKETREQUIREMENTSCOUPLEDWITHSTUDIESOFMINERALSPECIlCATIONS AREREQUIREDFORTHESECTORTOGROWANDLINKAGESTODEVELOPFURTHER-ININGFORINDUSTRIALMINERALSDOESOFTEN NOTATTRACTNEARLYASMUCHINTERESTASPRECIOUSMINERALSMINING(OWEVER THEINDUSTRIALMINERALSSECTORIS SIZEABLEAND INADDITION 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ALSOONSOMElELDWORKPERFORMEDINTHESOUTHERNANDWESTERNPARTSOFTHECOUNTRY2EGULAROVERSIGHTAND FEEDBACKHASBEENPROVIDEDBYREPRESENTATIVESFROMTHE7ORLD"ANKANDITSPARTNERS  4HISCHAPTERPROVIDESANINTRODUCTIONTOTHE%THIOPIANECONOMYANDTHECURRENTCONTRIBUTIONFROMMINING  ANDDESCRIBESGENERALASPECTSOFMINERALSECTORDEVELOPMENTANDHOWITMAYCONTRIBUTETOECONOMIC DEVELOPMENT#HAPTERPRESENTSTHEGEOLOGICALPOTENTIALOFTHECOUNTRY MINERALOCCURRENCES ANDMINING ANDEXPLORATIONPROJECTS"UILDINGON#HAPTER #HAPTERPRESENTSPOSSIBLESCENARIOSFORFUTUREMINERAL SECTORGROWTHWITHECONOMICIMPLICATIONS ANDFURTHERDISCUSSESINDUSTRYLINKAGES#HAPTERS INCLUDE ASSESSMENTSOFDIFFERENTMINERALSECTORFRAMEWORKAREAS ANDRECOMMENDATIONSAREPROVIDEDINTHEEND OFEACHCHAPTER#HAPTERPRESENTSCURRENTINFRASTRUCTUREANDDEVELOPMENTPLANSAND lNALLY #HAPTER PRESENTSASUMMARYANDPRIORITIZATIONOFRECOMMENDATIONS The  Ethiopian  economy  and  contribution  from  mining 1.2.    %THIOPIAHASAVERAGEDAECONOMICGROWTHRATEOVERTHELASTTENYEARSANDWASCITEDASTHETH FASTESTGROWINGECONOMYBYTHE7ORLD"ANKIN!CCORDINGTOTHE7ORLD"ANK%THIOPIA%CONOMIC 5PDATE WITHTHEPROVISIONTHATITCANCONTINUEITSHISTORICGROWTHPERFORMANCE ITCOULDPOTENTIALLY REACHMIDDLEINCOMESTATUSBY  4HEMAJORDRIVEROFTHE%THIOPIANECONOMYISITSAGRICULTURALSERVICES ACCOUNTINGFOROFTHEVALUE ADDEDTO'$0IN4ABLE FOLLOWEDBYTHESERVICESSECTORWITH%XPORTSACCOUNTFOROF '$0 WHILEIMPORTSARE4HEMANUFACTURINGSECTORREMAINSSMALL ALTHOUGHEFFORTSAREBEINGMADETO INCREASEITSSIZE  4HE'ROWTHAND4RANSFORMATION0LANISTHEMAINNATIONALDEVELOPMENTROADMAPFOR%THIOPIAFORTHE PERIOD  FOCUSINGONSTRUCTURALTRANSFORMATIONANDSECTORTARGETINGTOACHIEVEBROADBASEDAND EQUITABLEGROWTH4HEMAINFEATUREOFTHEPLANISTOENSURE'$0GROWTHRATESOF PERYEARANDTO CREATEINVESTMENTOPPORTUNITIESINAGRICULTURALANDINDUSTRIALSECTORS4HEECONOMICSECTORPERFORMANCE CREATESSPECIlCTARGETSFORTHEAGRICULTURAL INDUSTRIALANDMININGSECTORS&INANCINGFROMBOTHTHEPUBLIC ANDPRIVATESECTORISENVISIONED4HEOTHERMAJORSUB HEADINGSFORTHEPROGRAMINCLUDEIMPROVEMENTSIN THECOUNTRYSINFRASTRUCTUREASWELLASSOCIALDEVELOPMENTINDICATORSEDUCATIONANDTRAINING ANDHEALTH  4HElNALSEGMENTFOCUSESONCAPACITYBUILDING INFORMATIONANDCOMMUNICATIONSTECHNOLOGYDEVELOPMENT  DEMOCRACYANDGOODGOVERNANCE4HEPLANTAKESINTOCONSIDERATIONCROSSCUTTINGISSUES SUCHASGENDER ANDYOUTHDEVELOPMENT ()6!)$SPREVENTIONANDCONTROL LABOURAFFAIRS ENVIRONMENTANDCLIMATECHANGE STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 15 4ABLE %CONOMICPROlLEFOR%THIOPIA 2000   GDP  Indicators '.)PERCAPITA 000CURRENTINTERNATIONAL     '$0CURRENT53MILLION       '$0GROWTHANNUAL    Sectoral  Distribution  of  GDP !GRICULTURE VALUEADDEDOF'$0    )NDUSTRY VALUEADDEDOF'$0    -ANUFACTURING VALUEADDEDOF'$0    3ERVICES ETC VALUEADDEDOF'$0    'ROSSCAPITALFORMATIONOF'$0    Trade  Indicators 4RADEOF'$0    -ERCHANDISETRADEOF'$0    %XPORTSOFGOODSANDSERVICESOF'$0    )MPORTSOFGOODSANDSERVICESOF'$0    Natural  Resource  Rents 4OTALNATURALRESOURCESRENTSOF'$0    -INERALRENTSOF'$0    &ORESTRENTSOF'$0    3OURCE7ORLD$EVELOPMENT)NDICATORS ACCESSEDRD/CTOBER HTTPDATABANKWORLDBANKORG  )NTHElSCALYEAR THE%THIOPIANMININGSECTORCONTRIBUTEDABOUTTO'$0 WITHMINERALRENTS THEDIFFERENCEBETWEENCOSTOFPRODUCTIONANDITSREVENUEVALUE ACCOUNTINGFOROF'$04HESECTOR ACCOUNTEDFOR53$MILLION OFTHECOUNTRYSEXPORTS WITHGOLDMAKINGUPCLOSETOOFTHE MININGSECTOREXPORTSANDWITHMOSTOFTHISGOLDABOUT COMINGFROMARTISANALMINING)NCOMPARISON  %THIOPIASLARGESTEXPORTCOMMODITY COFFEE GENERATED53$MILLION INEXPORTREVENUES4HE CONTRIBUTIONFROMMININGTOEMPLOYMENTIN%THIOPIAISTODAYSMALLAFEWTHOUSAND ASTHESECTORISSMALL ANDMININGISNOTALABOURINTENSIVEINDUSTRY!RTISANALMININGONTHEOTHERHANDISLIKELYTOINVOLVESEVERAL HUNDREDTHOUSANDWORKERS  !TTHESTARTOFTHE'40 ONEOFTHEMAINOBJECTIVESOFTHEGOVERNMENTWASFORTHEMINING SECTORTOCONTRIBUTETOEXPORTREVENUESANDTOPROVIDEINPUTSTOTHEAGRICULTURALSECTORANDADDTOLOCAL MANUFACTURINGCAPABILITIES/VERACOUPLEOFYEARSBEFORE EXPORTREVENUESFROMTHEMINERALSECTOR AVERAGEDAROUND53$MILLION ANDACCOUNTEDFORTOOFTHEFOREIGNEXCHANGEEARNINGSFORTHE COUNTRY)NTHEYEAR THE'40REVIEWREPORTSTHATTHEMINERALSECTORSECURED53$MILLION INFOREIGNEXCHANGEEARNINGS  "ETWEENANDPRIVATEINVESTMENTWASNOTALLOWEDINTHEMINERALSECTOR WHILEGOVERNMENT INSTITUTIONSWEREMANDATEDTODEVELOPTHEMINERALWEALTHOFTHECOUNTRY!SARESULTOFTHEPOLITICALCHANGE THATTOOKPLACEIN ANEWMOREMARKETORIENTEDECONOMICPOLICYWASINTRODUCEDINTHECOUNTRY)NTHE MININGSECTOR THEGOVERNMENTPROMULGATEDANEWMININGPROCLAMATIONANDMININGINCOMETAXPROCLAMATIONS TOENCOURAGETHEPARTICIPATIONOFPRIVATECAPITALINMINERALSECTORDEVELOPMENT4HISHASNOTYETLEDTOA SIGNIlCANTEXPANSIONOFTHECOUNTRYSMININGSECTORANDTHE%THIOPIANMININGSECTORCANBEVIEWEDTOBE INITSINFANCYSTAGE BUTWITHGOODPOTENTIALFORFUTUREDEVELOPMENT #URRENTLY THELARGESTFOREIGNINVESTMENTINTHEMININGSECTORISBY!LLANA0OTASH FORA0OTASHPROJECT WHICH PLANSTOSTARTPRODUCTIONBYMIDTOLATE.YOTA-INERALS4ULU+APIPROJECT WHICHWASONHOLDDURING THESECONDHALFOFBUTWHEREACTIVITIESHAVENOWCONTINUEDAFTEROWNERSHIPCHANGESANDADDITIONAL lNANCING HASREACHEDANADVANCEDSTAGE!PARTFROMTHESETWOADVANCEDPROJECTS THEREAREANUMBER OFEXPLORATIONPROJECTSATVARIOUSDEVELOPMENTSTAGESSEEFURTHER#HAPTER  )NTHEFRAMEWORKOFTHE-INING6ALUE#HAIN&IGURE %THIOPIACANBEVIEWEDASBEINGATTHESTAGEOF DEVELOPINGANDIMPROVINGGOVERNANCERELATEDTOTHElRSTTHREESTEPS!CCESSTORESOURCES -ONITORINGOF OPERATIONS AND#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 Cross  cutting  issues  (e.g.,  institutional  arrangements,  capacity,  accountability  mechanisms) Sector  policy,  law  and  basic  regulations,  including  social/environmental  aspects   Promotion  of  mineral,  petroleum  and  gas  resources Cadastres  and  mineral  rights  procedures 2OLElSCALREGIMEOFOPERATORSINCLUDINGPRICERISKSHARING Regulatory  authority  (approval/monitoring/enforcement) Monitoring  and  evaluation  of  environmental  and  social  impacts   Accounting  and  audit  procedures 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 Mineral  sector  characteristics  and  development  in  general 1.3.   4HEMININGSECTOR INGENERAL MAYBEDIVIDEDINTOTHREEMAINSUBSECTORSI METALSANDPRECIOUSMINERALS MININGII COALMININGANDIII INDUSTRIALMINERALSMINING#OALMININGHASANECONOMICWORTHANDGLOBAL TURNOVERTHATISONPARWITHALLMETALSANDPRECIOUSMINERALSMININGCOMBINED)NDUSTRIALMINERALSMINING MAINLYQUARRYING ISSOMETIMESOVERLOOKED WHENTHEMININGSECTORISBEINGCONSIDEREDINSPITEOFITBEING ASUBSECTORWHICHISVITALFORTHEFUNCTIONINGOFSOCIETY ANDWHICHHASACONSIDERABLEECONOMICVALUETOTHE DOMESTICECONOMY7ITHREGARDSTOINDUSTRIALMINERALS THEVALUETOBULKRATIOISOFTENSMALL ANDTHEREFORE THEPOTENTIALFOREXPORTISLIMITEDASTHEINTERNATIONALTRANSPORTCOSTSWILLOFTENFAROUTWEIGHTHEVALUEOFTHE MATERIALITSELF -INERALPROJECTDEVELOPMENT FROMEARLYEXPLORATIONTOTHESTARTOFINDUSTRIAL SCALEPRODUCTIONUSUALLYTAKES  YEARSORMORE4ABLE ANDITMAYEVENTAKESOME YEARSFROMTHEINITIALESTIMATIONOFMINERAL RESOURCESUNDERTAKENDURINGTHEEXPLORATIONPHASEBEFOREAMINEISCOMMISSIONED4HISTIMEISUSEDTOCARRY OUTDETAILEDRESOURCEESTIMATES TODOTHEVARIOUSMETALLURGICAL GEOTECHNICAL lNANCIALANDENVIRONMENTAL STUDIESNECESSARYFORABANKABLEFEASIBILITYSTUDY ANDTOARRANGElNANCINGANDMINERALANDENVIRONMENTAL PERMITTING4HEMANAGEMENTOFTHESECTORNEEDSTOBECHARACTERISEDBYASIMILARLYLONG TERMVIEW4HESE ESTIMATESMAYBESOMEWHATLOWERFORTECHNICALLYSIMPLE SMALLERGOLDMINESANDFORINDUSTRIALMINERALS PROJECTS BUTCANBESUBSTANTIALLYHIGHERFORLARGEANDCOMPLEXPOLYMETALLICMINES0OST PRODUCTION MINE CLOSUREANDREHABILITATIONUSUALLYTAKESACOUPLEOFYEARSORMORE ANDTHISISSOMETIMESFOLLOWEDBYA PROLONGEDPERIODOFENVIRONMENTALMONITORING DEPENDINGONTHETYPEOFMINE )TALSOIMPORTANTTOKEEPINMINDTHATFEWEXPLORATIONPROJECTSACTUALLYLEADTOMINEDEVELOPMENT&OR EXAMPLE LOOKINGATMAJORMETALS OVERARECENT YEARPERIOD OUTOF GREENlELDDISCOVERIES IN#ANADAREACHEDFEASIBILITYSTAGE&OR!USTRALIA THENUMBERSWEREOUTOF OR&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  STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 17 4HENEEDSANDREQUIREMENTSFORESTABLISHINGAMINEAREDEPENDENTUPONWHICHCOMMODITYISBEING CONSIDERED(IGHBULKCOMMODITIESSUCHASIRONOREANDCOALARECRUCIALLYDEPENDENTUPONTHEAVAILABILITY OFINFRASTRUCTUREFORTRANSPORTRAILROADS HARBOURS ANDOTHERSUPPORTINGINDUSTRIESANDACTIVITIESOFTEN REFERREDTOAShLINKAGESv #ONVERSELY MINESFORLOWBULKCOMMODITIESEGGOLDANDDIAMONDS MAYBE INITIATEDWITHACOMPARATIVELYLESSERNEEDFORASSOCIATEDLINKAGESANDINFRASTRUCTURE -ININGISACYCLICALBUSINESS WITHCOMMODITYPRICESVARYINGINWHATISSOMETIMESREFERREDTOAShSUPER CYCLESv WHICHINTURNMAYSPANOVERONEORSEVERALDECADES4HUS THEDECADEPRECEDINGANDTHE RISEOFDEMANDOF#HINA WASCHARACTERISEDBYLOWCOMMODITYPRICES&IGURE ANDLIMITEDEXPLORATION )NCONTRAST SINCETHEWORLDHASSEENABOOMINTHEMININGSECTOR FUELLEDTOAGREATEXTENTBY#HINESE DEMAND LEADINGTOWHATATTIMESHASBEENNEARFRANTICACTIVITYANDINTERESTINTHESECTOR4HELASTYEAR  SINCE HASSEENASLOWINGDOWNANDDECREASESINCOMMODITYPRICES4HEMANAGEMENTOFTHESECTOR NEEDSTOTAKETHESEFUNDAMENTALCHARACTERISTICSINTOACCOUNT 7HENCONSIDERINGTHE@DEVELOPMENTOFTHEMININGSECTOR PARTICULARLYITSCONTRIBUTIONTOECONOMICGROWTH ANDEXPORTREVENUES THEGENERATIONOFLARGEECONOMICRENTSISMORELIKELYTOCOMEFROMMEDIUMTOLARGE SCALEMININGPROJECTS RELATIVETOTHOSEFROMARTISANALANDSMALLSCALEPROJECTS&URTHERMORE ECONOMIES OFSCALEAREMORELIKELYTORESULTWITHINCREASEDMINESIZEANDWHENTHEREAREAFEWLARGESCALEMINESIN PRODUCTION 4HEMININGSECTORHOLDSSUBSTANTIALPROSPECTSFORFOSTERINGDEVELOPMENTANDECONOMICGROWTH4HESECTOR IS HOWEVER ALSOSEENTOBEASSOCIATEDWITHANUMBEROFLESSDESIRABLECHARACTERISTICSSUCHASENVIRONMENTAL IMPACTS SOCIO ECONOMICUNREST LAND USECONmICT lNANCIALINSTABILITYEG$UTCHDISEASE ANDDUETOTHE LARGEAMOUNTSOFMONEYINVOLVED TOBEPRONETOCORRUPTIONANDILLICITlNANCIALTRANSACTIONS-EASURESARE NEEDEDTOADDRESSTHESEPROBLEMAREAS SUCHASTHEDEVELOPMENTOFASUITABLEREGULATORYREGIME ASWELL 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 2.   GEOLOGY,  MINING  AND  EXPLORATION  ACTIVITIES Regional  geology  and  mineral  occurrences 2.1.    4HEOLDESTROCKSIN%THIOPIAAREOFLATE0ROTEROZOICAGE -A ANDCOVERSOMEWHATLESSTHANAQUARTER OFTHECOUNTRY4HESEROCKSDISPLAYEDINDARKGREEN GREYANDBLACKIN&IGURE AREMAINLYEXPOSEDIN THREEAREASOFTHECOUNTRY TOTHENORTH WEST ANDSOUTH ANDTOALESSEREXTENTAROUND(ARARINTHEEAST4HE 0ROTEROZOICBASEMENTOF%THIOPIAISLOCATEDATTHEINTERPHASEOFTHE!RABIAN .UBIAN3HIELDTHATCONTINUES TOTHENORTHINTO3UDAN %GYPTAND3AUDI!RABIAANDTHE-OZAMBIQUE"ELT WHICHMAKESUPMUCHOFTHE GEOLOGICALBASEMENTTHROUGHOUTEASTERN!FRICA  4HE0ROTEROZOICBASEMENTINCLUDESAVARIETYOFVARIOUSLYDEFORMEDANDMETAMORPHOSEDSEDIMENTARY  VOLCANICANDINTRUSIVEROCKS)NGENERAL GNEISSESAREMORECOMMON ANDTHEMETAMORPHICGRADEHIGHER IN THESOUTHERNANDWESTERNTERRAINSCOMPAREDTOTHENORTHERNTERRAIN4HENORTHERNTERRAINISPREDOMINANTLY MADEUPOFVOLCANICANDSEDIMENTARYROCKSOFLOWERMETAMORPHICGRADE3OCALLEDGREENSTONEBELTSOCCUR INALLTHREEAREAS &IGURE3IMPLIlEDGEOLOGICALMAPOF%THIOPIASOURCE'3%   'REENSTONEBELTSMAYHOSTAVARIETYOFMINERALSDEPOSITS ESPECIALLYGOLD4HEYARETHOUGHTTOHAVEFORMEDALONGTHEMARGINSOF !RCHAEANCRATONSnMILLIONYEARS BUTTHETERMISSOMETIMESALSOUSEDFORSIMILARGEOLOGICALENVIRONMENTSOFYOUNGER AGE4HEYCONSISTOFAMIXOFMETAMORPHOSEDMAlCTOULTRAMAlCVOLCANICSEQUENCESWITHASSOCIATEDSEDIMENTARYROCKS4HENAME GREENSTONECOMESFROMTHEGREENHUEOFSOMEOFTHEMETAMORPHICMINERALSPRESENT STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 19  $OMINANTLY-ESOZOIC -A ANDSOMESLIGHTLYOLDERMARINEANDCONTINENTALSEDIMENTARYROCKSCOVER ABOUTOF%THIOPIA4HEYOCCURACROSSLARGEAREASOFEASTERN%THIOPIATHE/GADENBASIN ANDALSOIN TWOSEDIMENTARYBASINSINTHECENTREANDTOTHENORTHOFTHECOUNTRYBLUEIN&IGURE 4HE-ESOZOIC FORMATIONSINCLUDEROCKSSUCHASSANDSTONE SHALE LIMESTONEANDGYPSUM  !BOUTOFTHECOUNTRYISCOVEREDBY4ERTIARY -A AND1UATERNARY-AnPRESENTTIME VOLCANIC ANDSEDIMENTARYROCKS RELATEDTOTHEFORMATIONOFTHE%THIOPIANRIFT4HERIFTRUNSFROMNORTHEASTTOSOUTHWEST ACROSS%THIOPIA ANDISPARTOFTHEGREATER%AST!FRICAN2IFT4HUS THE%THIOPIANHIGHLANDSAREUNDERLAIN MAINLYBYTHICKSEQUENCESOFmOODBASALTTHATERUPTED MILLIONYEARSAGOOLIVECOLOUR&IGURE WHILE THERIFTVALLEYITSELFISCOVEREDMAINLYBY1UATERNARY-A VOLCANICROCKSANDASSOCIATEDSEDIMENTARY ROCKSGREEN&IGURE 1UATERNARYSEDIMENTSALSOOCCURINOTHERPARTSOFTHECOUNTRYYELLOW AND4ERTIARY SEDIMENTSINTHEFAREASTORANGE   4HEDIFFERENTGEOLOGICALTERRAINSDESCRIBEDABOVEAREPROSPECTIVEFORDIFFERENTTYPESOFROCKSANDMINERALS !PARTFROMEXTENSIVEARTISANALMINING THEREAREANDHAVEBEENVERYFEWMINESIN%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 5LTRAMAlCINTRUSIONS ANDRELATEDALLUVIAL ELUVIALPLACERSINTHE -OSTIMPORTANT WESTERNTERRAIN TERRAINFORMETALLIC MINERALS 0HOSPHATE "ASICINTRUSIONS TOGETHERWITH&E $IMENSIONSTONE 3EVERALAREASINTHE0ROTEROZOICTERRAINS !LSODIMENSION STONE REFRACTORY 2EFRACTORYRAW 3OUTHERNTERRAIN MINERALSAND MATERIALSKYANITE  CERAMICRAW GRAPHITE TALC MATERIALS +AOLIN 3OUTHERNTERRAINANDINTHE(ARARAREAALSOINSOMEAREASWITH 1UATERNARYVOLCANICS &ELDSPARQUARTZ 0EGMATITEINSOUTHERNTERRAINANDINTHE(ARARAREA Mesozoic  sediments   ,IMESTONE !NUMBEROFDEPOSITSINALLTHREE-ESOZOICSEDIMENTARYBASINS BLUEIN&IGURE GYPSUM 3ILICASAND 3EVERALDEPOSITSINTHE-ESOZOICBASINS )MPORTANTFORTHE MAINCEMENTRAW MATERIALS 0OTASH %VAPORITESINTHECENTRALPARTSOFTHE$ANAKHILDEPRESSION Tertiary-­Quaternary   0UMICE !NUMBEROFAREASINTHEFELSICVOLCANICSOFTHE2IFT6ALLEY volcanics  and   Diatomite !NUMBEROFAREASINLACUSTRINESEDIMENTSOFTHE2IFT6ALLEY SEDIMENTSOLIVE "ENTONITE !NUMBEROFAREASINLACUSTRINESEDIMENTSOFTHE2IFT6ALLEY GREENIN&IGURE 2OCKSALT /CCURSINSOMELAKESINTHECENTRAL SOUTHERNPARTOFTHE2IFT6ALLEY )MPORTANTFORA 3ODAASH /PALOCCURSINTHEAREASSURROUNDINGTHENORTHERN CENTRALAND NUMBEROFINDUSTRIAL SOUTHERNPARTSOFTHERIFTVALLEY IN4ERTIARYVOLCANICS MINERALSAND GEMSTONES 'EMSTONES /THERGEMSTONESSUCHASBERYL EMERALD SAPPHIRE TOURMALINE ANDGARNETAREFOUNDMAINLYINTHESOUTHERNPARTSOFTHERIFT !LSOCOALAND #OAL ,IGNITETOBITUMINOUSDEPOSITSINSEDIMENTSMOSTLYWITHIN4ERTIARY EPITHERMALGOLD VOLCANICFORMATIONSINSOUTHWESTERNANDNORTHERN%THIOPIA %PITHERMALGOLD ,OW GRADEGOLDOCCURRENCESINTHERIFTVALLEY NORTHERNPARTS 3OURCES 4ADESSE VARIOUSPROMOTIONALDOCUMENTSAVAILABLEATTHE'3%WWWGSEGOVET ACCESSED.OVEMBER  DISCUSSIONSWITH-O-STAFF 20 FINAL  REPORT Geological  data  and  information 2.2.    4HE'EOLOGICAL3URVEYOF%THIOPIAWASESTABLISHEDINWITHTHEPRIMARYAIMTOCONDUCTSYSTEMATIC GEOLOGICALMAPPINGANDMINERALEXPLORATION0RIORTOTHESVERYLITTLEGEOLOGICALMAPPINGWORKHAD BEENUNDERTAKEN!BROADDESCRIPTIONOFAVAILABLEGEOSCIENTIlCINFORMATIONISPROVIDEDBELOW   Geological  mapping:!NATIONALGEOLOGICALMAPATTHESCALEOF  WASlRSTPUBLISHEDIN  ANDREVISEDIN4HESEMAPS HOWEVER DElNEDMUCHOFTHEBASEMENTASBEINGOF!RCHEANAGE  -A 3TUDIESUNDERTAKENDURINGTHESBYTHE'3%INCOLLABORATIONWITHOTHERINSTITUTIONS  ANDMORERECENTGEOLOGICALMAPPING INDICATESTHATTHEBASEMENTISOFLATE0ROTEROZOICAGE-A   2EGIONALMAPSATTHESCALEOF HAVEBEENPRODUCEDSINCETHEEARLY MIDSANDTODAY COVERALMOSTOFTHECOUNTRY INCLUDINGMOSTAREASOFTHECOUNTRYAPARTFROMTHE/GADENBASININ THEEAST.OREGIONALGEOLOGICALMAPPINGHASBEENUNDERTAKENATSCALESlNERTHAN    Geochemical  mapping:   'EOCHEMICALSURVEYSHAVEBEENUNDERTAKENATDIFFERENTSCALESOVERTHEYEARS  WITHFOCUSONTHE0ROTEROZOICAREAS!BOUTOFTHECOUNTRYHASBEENMAPPEDATTHE OR lNERSCALES)N SYSTEMATICSURVEYSATTHESCALEOF WEREINITIATEDINPARALLELWITHTHE GEOLOGICALMAPPING   Airborne  geophysical  surveys:!IRBORNEGEOPHYSICALSURVEYSFOCUSEDONMINERALEXPLORATIONHAVEBEEN UNDERTAKENOVERSOMEPARTSOFTHE0ROTEROZOICTERRAINS(OWEVER THESURVEYSWEREMAINLYDONEINTHE EARLYSANDTOALESSEREXTENTIN WITHALINESPACINGOF KMANDTHEDATAISOFLOWQUALITY COMPAREDTOWHATCANBEACHIEVEDTODAYWITHMODERNMETHODSANDTIGHTERLINESPACING!HELICOPTER BORNEELECTROMAGNETIC MAGNETICANDSPECTROMETRYSURVEYWASALSOCARRIEDOUTININTHE!DOLA 'OLDAREA WITHALINESPACINGOFM   Ground  gravity  surveys:'ROUNDGRAVITYMEASUREMENTSHAVEBEENPERFORMEDINTERMITTENTLYSINCETHE S4HEGRAVITYNETWORKWASSIGNIlCANTLYEXPANDEDDURINGTHECOUNTRYWIDEGRAVITYSURVEY  4HEGRAVITYSTATIONSARELOCATEDMAINLYALONGPRIMARYANDSECONDARYROADSIENOGRIDSYSTEM WITHA SPACINGOFKMANDTHE0ROTEROZOICAREASARENOTWELLCOVERED   Mineral  potential  studies:4HE'3%HASOVERTHEYEARSINVESTIGATEDANUMBEROFDEPOSITSTHROUGHPETROGRAPHIC ANDGEOCHEMICALSTUDIES ANDTOALESSEREXTENTTHROUGHDRILLINGANDASSAYING-INERALRESOURCEESTIMATES HAVEBEENREPORTEDFORANUMBEROFDEPOSITSWHILETHEMETHODOLOGIESARENOTCOMPLIANTWITHMODERN PROCEDURESMETHODS   Geoscience  data  and  information  management:   4HE'3%HOUSESBIBLIOGRAPHYANDMINERALOCCURRENCES META DATADATABASESATTHE'EOSCIENCE$ATA#ENTREWHICHAREALSOAVAILABLEON LINEATWWWGSEGOV ET ANDAGEOCHEMICALDATABASEATTHE'3%,ABORATORIES4HEREIS HOWEVER ALARGEAMOUNTOFDATAAND INFORMATIONATTHE'3%THATISNOTYETENTEREDINTODATABASES   Promotion  of  the  mineral  sector:4HE-O-HASBEENPRESENTATTHE-INING)NDABA&AIRIN#APE4OWN  HASANACTIVEANDFAIRLYINFORMATIVEWEB PAGEANDHASPRODUCEDSPECIALIZEDPROMOTIONALBROCHURES;A NUMBEROFGOODPROMOTIONALDOCUMENTSWEREPRODUCEDIN  INPARTWITHSUPPORTFROMEXTERNAL DEVELOPMENTPARTNERS'%53 = AVAILABLEATTHE'3%WEBSITE-ININGPROMOTIONLITERATUREISALSOINCLUDED ASACHAPTERINTHEBOOKLETSISSUESBYTHE)NVESTMENT0ROMOTION!GENCY  $UETOALACKOFCAPACITY MUCHOFTHE'3%SWORKISNOWFOCUSEDONCOMPLETINGTHE GEOLOGICAL MAPPINGANDLITTLERESOURCESAREGIVENTOGEOCHEMICALANDGEOPHYSICALSURVEYSSEEFURTHER3ECTION  3OMEOFTHEOLDMAPSSHEETSFROMTHE  WOULDPROBABLYHAVETOBEREVISITEDANDREVISEDINLIGHT OFSTRATIGRAPHICREVISIONNEEDEDASTHEREISVERYLIKELYNO!RCHEANBASEMENTIN%THIOPIA Mining  and  mine  prospects  in  Ethiopia  and  the  region 2.3.   4HEPURPOSEOFTHISSECTIONISTOPROVIDEABROADVIEWOFTHEGEOLOGICALPOTENTIALBYDESCRIBINGON GOINGMINING ASWELLASMINEPROSPECTSIN%THIOPIAANDTHESURROUNDINGREGIONS Gold 1.     4HEREISCURRENTLYONEOPERATINGLARGESCALEGOLDMINEIN%THIOPIA THE,EGA$EMBIOPENPITMINEINTHESOUTHERN 0ROTEROZOICTERRAIN OWNEDBY-IDROC'OLD-INE0LC,EGA$EMBIOPENEDINANDHASATANAVERAGE PRODUCEDSOMETYRTONNESOR OZIN )NSOMETWOYEARSTIME THEOPERATIONWILLCONTINUE UNDERGROUNDANDALSOINCLUDETHE3AKARODEPOSITLOCATEDRIGHTNEXTTO,EGA$EMBI.EARBY THEREISALSOTHESTATE OWNED!DOLAMINEWHEREALLUVIALGOLDATLEASTINPARTDERIVEDFROMTHE,EGA$EMBIDEPOSITS HASBEENMINED FOROVERHALFACENTURY STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 21 %XTENSIVEARTISANALANDSOMESMALL SCALE GOLDMININGSHOWSTHEPOTENTIALFORGOLDINALLTHE0ROTEROZOICAREAS OF%THIOPIA4HETOTALARTISANALPRODUCTIONINLATERYEARSISREPORTEDTOHAVEBEENABOUTTWICETHATOF,EGA$EMBI  WITHSOMETONNESOFGOLDABOUT OZ REPORTEDBY-O-TOHAVEBEENPRODUCEDIN )N3UDAN KMNORTHOFTHE3OUTH3UDANESEBORDERTHEREISTHE YEAROLD(ASSAIGOLDMINE WHICHIS OPERATEDBY,A-ANCHAANDITHASSOFARPRODUCEDSOMEABOUTMILLIONOZOFGOLD4HEREISALSOARTISANAL GOLDMININGBEINGUNDERTAKENAROUNDTHE(ASSAIMINEASWELLASACROSSTHEBORDERFROMWESTERN%THIOPIA AND FURTHERINLANDTOTHEWEST /NEGOLDPROSPECTIN%THIOPIAHASREACHEDANADVANCEDEXPLORATIONSTAGE .YOTA-INERALS,TDS4ULU+APIPROJECT 4HEPROJECTHASESTABLISHEDPROBABLERESERVESOF-T GTTOTALLY OZ ANDINDICATEDANDINFERRED RESOURCESOF-T GTTOTALLY  OZ ASOFMID 4HEPROJECTWASONHOLDDURINGTHESECOND PARTOFBUTRECENTOWNERSHIPCHANGESANDADDITIONALlNANCINGHASALLOWEDFOREXPLORATIONACTIVITIESTO CONTINUE4HEPROJECTSHOWSTHEPOTENTIALFORGOLDDEPOSITSINTHEWESTERN0ROTEROZOICTERRAIN Polymetallic  deposits 2.     4HE!RABIAN .UBIANSHIELDIN%RITREA 3UDAN %GYPTAND3AUDI!RABIAHOSTSANUMBEROF6-3 TYPEPOLYMETALLIC DEPOSITS4HEREARETHREEADVANCEDGOLDPROJECTSIN%RITREA ONEOFWHICHHASREACHEDTHEMININGSTAGE4HE "ISHAMINECOMMENCEDPRODUCTIONINANDITISAHIGH GRADEDEPOSITWITHGOLDANDSILVEROXIDESATSURFACE UNDERLAINBYCOPPERANDZINCSULPHIDES4HERESOURCESTATEMENTOF-AYESTIMATESCONTAINEDMETALOF  TONNESOF#U   TONNESOF:N  OZ!UAND  OZ!GINTHE)NDICATEDAND )NFERRED2ESOURCECATEGORIES 3.  Potash 4HEREISASYETNOPOTASHMININGIN%THIOPIABUTTHE$ANAKHILDEPRESSIONINTHEFARNORTHEASTOFTHECOUNTRYHOLDS SIGNIlCANTPOTASHRESERVES!LLANA0OTASHHASBEENGRANTEDAFULLMININGLICENSEANDISPLANNINGTOCOMMENCE CONSTRUCTIONDURINGTHElRSTHALFOFANDSTART UPPRODUCTIONINTHELATTERHALFOF0ROVENANDPROBABLE SYLVINITERESERVESAMOUNTTO-T  +#L-EASURED INDICATEDANDINFERREDSYLVINITERESOURCESAMOUNT TO-T  +#L4HECURRENTMINEPLANISFOR-TYROVERYEARS4HESYLVINITEOCCURSINTHEUPPERMOST SEDIMENTHORIZON,ARGECARNALLITEANDKAINITITERESOURCESAREPRESENTINLOWERHORIZONS WHICHMAYBEEXTRACTED INTHEFUTURE/THERCOMPANIESAREPURSUINGEXPLORATIONATNEARBYLOCALITIES 4.  Tantalite 4HESTATE OWNED;%THIOPIAN-INERALS$EVELOPMENT%NTERPRISE%-$% =+ENTICHATANTALUMMINELOCATEDIN SOUTHERN%THIOPIAHASBEENPRODUCINGTANTALUMINTHERECENTPASTANDSHOWSTHEPOTENTIALFORPEGMATITE HOSTED TANTALUMINTHEAREA4HEPRODUCTIONISCURRENTLYONHOLDDUETOATTEMPTSTOPRIVATIZETHEOPERATION4HISSEEMS TOHAVEFAILEDANDTHECURRENTPLANSAREFOR%-$%TOCONTINUEPRODUCTIONIN4HEURANIUMCONTENTOFTHE OREISQUITEHIGH ANDLOCALPROCESSINGTOREMOVETHEURANIUMWOULDBEREQUIREDFORMANYEXPORTMARKETS 5.  Cement  raw  materials 4HE%THIOPIANCEMENTPRODUCTIONCAPACITYHASINCREASEDFROM -TTOSOME -TYROVERTHEPASTCOUPLEOF YEARS2AWMATERIALSFORCEMENTLIMESTONE GYPSUM CLAYANDPUMICE AREPLENTIFULINTHE-ESOZOICFORMATIONS OF%THIOPIAANDMINEDLOCALLY OFTENINCLOSEVICINITYTOTHECEMENTFACTORIES 6.  Other  industrial  minerals Rock  saltHASBEENMINEDFORALONGTIMEINTHE$ANAKHILDEPRESSIONTHROUGHNON MECHANISEDARTISANALMINING )NTHERECENTPAST THEREHAVEBEENATTEMPTSTOCOMMENCELARGERSCALEINDUSTRIALPRODUCTIONOFSALTINTHEAREA Kaolin,  silica  sand,  soda  ash  quartz  and  feldspar,AREORHAVEBEENMINEDTHROUGHARTISANALANDSMALL SCALEMINING 7.  Dimension  stone 4HEMOSTIMPORTANTPRODUCEROF dimension  stoneIN%THIOPIAISTHE.ATIONAL-INING#OMPANY-IDROCGROUP  -ARBLEFROMTHE"ENISHANGUL 'UMUZAREAINTHEWESTANDGRANITEANDLIMESTONEFROMAROUND(ARARINTHEEAST ARETURNEDINTOlNISHEDPRODUCTSATTHEMANUFACTURINGFACILITYIN!WASH CENTRAL%THIOPIA3ANDSTONEANDVOLCANIC ROCKSSUCHASIGNIMBRITEANDBASALTHAVEALSOBEENQUARRIED MOSTLYONASMALLSCALEFORLOCALDIMENSIONSTONEUSE  -INERALRESOURCESINFERRED INDICATEDANDMEASURED ANDMINERALRESERVESPROBABLEORPROVEN AREESTABLISHEDINACCORDANCEWITH INTERNATIONALSTANDARDS SUCHASTHE*ORC#ODEANDTHE.) 4HEYINCLUDEESTIMATIONSOFTHEAMOUNTOFORECONTAINEDWITHINA MINERALDEPOSITANDFORMACENTRALPARTOFFEASIBILITYSTUDIES 22 FINAL  REPORT 8.  Coal #OALWASMINEDONASMALLSCALEIN INTHE$ELBI -OYEAREA MAINLYINATTEMPTSTOSUBSTITUTEFORIMPORT TOPROVIDECEMENTINDUSTRYWITHENERGY4HEREHASRECENTLYBEENRENEWEDINTERESTINTHISDEPOSIT 9.  Gemstones 'EMSTONESAREPRODUCEDTHROUGHARTISANALMINING ANDTHEMAJORTYPESOFGEMSTONESFOUNDIN%THIOPIAINCLUDE GARNETS EMERALDS RUBIESANDOPALS/PALSACCOUNTFORNEARLYOFPRECIOUSSTONEEXPORTSOFTHECOUNTRY /PALSFROMDEPOSITSIN-EZEZO3HEWAPROVINCE WEREMINEDFROM BUTWEREOFLOWQUALITYANDUNSTABLE OPALSARESENSITIVETOHEATANDWATERANDCANCRACKEASILY ANDTHEREFOREDIDNOTGAINTRACTIONASANEXPORTABLE PRODUCT/PALSWEREALLOWEDONTHEEXPORTABLEITEMSLISTIN BUTITWASNOTUNTILTHATTHEOPALPOTENTIAL FOR%THIOPIAWASMOREFULLYREALISED WITHTHEDISCOVERYOFOPALFROMTHE.ORTH7OLLO:ONE IN!MHARAREGION 4HESEOPALSWEREOFMUCHHIGHERQUALITYANDCONSIDEREDMORESTABLETHANTHOSEOFOTHERAREASIN%THIOPIA4HE 7OLLO/PALALSOKNOWNAS7ELO WASPRESENTEDATTHE4UCSON'EMAND-INERAL3HOWINANDHASGAINED POPULARITYINTHEWIDERGLOBALMARKETSSINCETHEN Exploration  activities 2.4.    4HEISSUINGOFMINERALEXPLORATIONLICENCESIN%THIOPIAHASINCREASED INPARTICULAROVERTHELAST YEARS &IGURE 4HEREARECURRENTLYABOUTISSUEDEXPLORATIONLICENCESREGISTEREDATTHECENTRALLICENSING OFlCE -INISTRYOF-INES ANDTHEMAJORITYOFTHESEAREFORPRECIOUSANDBASEMETALS4HENUMBEROFEXPLORATION LICENSESISLOWCOMPAREDTOOTHERMOREACTIVEMININGCOUNTRIESWITHCOMPARABLESIZEOFPROSPECTIVETERRAINS  WHERETHENUMBEROFLICENSESCANREACHSEVERALHUNDREDOREVENTHOUSANDSASFOREXAMPLEIN4ANZANIA  Figure  2.2.  Licenses  (mainly  exploration)  issued  in  2005-­2007  (left)  and  in  2010-­2011  (right).  4WOEXPLORATIONPROJECTSHAVEREACHEDANADVANCEDSTAGEWHEREMINERALRESERVESHAVEBEENESTABLISHED INACCORDANCEWITHINTERNATIONALSTANDARDSSUCHASTHE*/2#CODEORTHE.) 4HESEINCLUDE!LLANA 0OTASHS$ALLOLPOTASHPROJECTAND.YOTA-INERALSS4ULU+APIGOLDPROJECT)TSHOULDBENOTEDTHATEVENAT THISADVANCEDEXPLORATIONSTAGEVARIOUSFACTORSSUCHASTECHNICALISSUES COMMODITYPRICE lNANCINGETC  MAYMAKEANYPROJECTUNECONOMICORDELAYPROGRESS!SMENTIONEDABOVE !LLANA0OTASHPLANSTOSTART PRODUCTIONBYMIDTOLATE WHILETHE4ULU+APIPROJECTHASBEENONHOLDDURINGTHESECONDPARTOF BUTNEWlNANCINGHASRECENTLYPROVIDEDFORACONTINUATIONOFEXPLORATIONACTIVITIES .INETEENCOMPANIESAREUNDERTAKINGMOREORLESSADVANCEDEXPLORATIONACROSSATOTALOFTWENTY EIGHT LICENSES4ABLE BUTNONEOFTHESEPROJECTSHAVEPROGRESSEDFARENOUGHFORMINERALRESOURCESORRESERVES ESTIMATESTOBEESTABLISHED APARTFROM4ULU+API4HEMAJORITYAREEXPLORINGFORGOLDANDBASEMETALSINTHE NORTHERN WESTERNANDSOUTHERN0ROTEROZOICTERRAINS ONEFORIRONOREINTHE!MHARAREGIONANDTWOAPART FROM!LLANA FORPOTASHINTHE$ANAKHILDEPRESSION STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 23 Table  2.2.     More  or  less  advanced  exploration  projects  in  Ethiopia.  Mineral  reserves  or  resources  (see  footnote,  page  22)   have  not  as  yet  been  established  in  accordance  with  internationally  recognized  standards  for  any  of  these   projects,  except  for  Tulu  Kapi. License   Licensee  Name 2EGION,OCALITY Mineral  type Exploration  activities Number "ENSHANGUL'UMUZ 3TREAM 3OIL 2OCK#HIP "ARUDA "ULEN !BLARUS  0RECIOUS  -/-< 3AMPLING 4RENCHING "AHU !NJAKOYA  "ASE2ARE < 0ITTING 'ROUND'EOPHYSICS 9ABANJA7EST4ANGOY -ETALS )NTENSIVE$RILLING -IDROC'OLD ,OCALITIES -ETEKEL:ONE -INE0LC "ENSHANGUL'UMUZAND 3TREAM 3OIL 2OCK#HIP !MHARA-ENTAWEHA "ASE-ETALS  -/-< 3AMPLING 4RENCHING ,OCALITY 'UANGUA 'OLD )RONAND %,<< 0ITTING 'ROUND'EOPHYSICS $IBATE7EREDA !GEW 2ARE-ETALS )NTENSIVE$RILLING !WIAND-ETEKEL:ONES 3TREAM 3OIL 2OCK#HIP 3AMPLING 4RENCHING !STER !SCOM-INING -/-< "ENISHANGUL'UMUZ 'OLDAND IMAGEINTERPRETATION 'ROUND 0LC < 3HUNGUAND.AZALI "ASE-ETALS !IRBORNE'EOPHYSICS )NTENSIVE$RILLING $ONIA'ONDA "ENESHANGUL'UMUZ 3TREAM 3OIL 2OCK#HIP -/- 'OLD"ASE -INERAL2ESOURCE 3HERKOLE,OCALITY  3AMPLING 4RENCHING 'ROUND %, -ETALS #ORPORATION,TD !SOSSA:ONE 'EOPHYSICS$RILLING "ENISHANGUL 'UMUZ /DA'ODERE,OCALITY  3TREAM 3OIL 2OCK#HIP 2AYAN -/-< 'OLD"ASE -ENGI/DA'ODERE 3AMPLING 4RENCHING 'ROUND )NVESTMENT0LC %,<< -ETALS 7EREDAS !SSOSA 'EOPHYSICS$RILLING +AMASHI:ONES 3TREAM 3OIL 2OCK#HIP "ENSHANGUL'UMUZ 'OLD"ASE   3AMPLING 4RENCHING!IRBORNE !SOSAAND+URMUK -ETALS 'EOPHYSICS)NITIAL$RILLING "ENZU'OLD /ROMIA'IRJA -INING%TH 0LC (ARAMFAMAAND'ENALE 'OLD 3TREAM 3OIL 2OCK#HIP -/-< +ORCHA -EDA7ELLABU  !SSOCIATED 3AMPLING 4RENCHING!IRBORNE %,<< !DOLANA/DDO3HAKISO -INERALS 'EOPHYSICS)NITIAL$RILLING 7EREDA "ALEAND'UJI :ONE 4IGRAY4ERAKEMTI  3TREAM 3OIL 2OCK#HIP (ARVEST-INING 'OLD"ASE   .EFASIT (AMLO )GUB  3AMPLING 4RENCHING0ITTING  0LC -ETALS !DI .EBRID 'ROUND'EOPHYSICS$RILLING 4IGRAY2AHWA,OCALITY  3TREAM 3OIL 2OCK#HIP %ZANA-INING 4)'< !SEGDE4SIMBELAAND 'OLD"ASE 3AMPLING 4RENCHING 0ITTING $EVELOPMRNT0,# %,<< 4SILEMTI7EREDAS 7EST -ETALS $RILLING 4IGRAT:ONE  3TREAM 3OIL 2OCK#HIP 3HEBA  4IGRAY5NA$ERIAM 'OLD"ASE 3AMPLING 4RENCHINGN %XPLORATION,TD -/- ,OCALITY -ETALS $RILLING %, 4IGRAY!DI$AIRO 3TREAM 3OIL 2OCK#HIP ,OCALITY ,AELAY!DIYABO 0RECIOUSAND 3AMPLING 4RENCHING 'ROUND  < AND4AHTAY!DIYABO "ASE-ETALS !IRBORNE'EOPHYSICS 7EREDAS 7ESTERN )NTENSIVE$RILLING 4IGRAY2ESOURCES 4IGRAY )NCORPORATED0LC 4IGRAY7EST3HIRE 3TREAM 3OIL 2OCK#HIP ,OCALITY !DIYABO -/-< 0RECIOUSAND 3AMPLING 4RENCHING 'ROUND AND4AHTAY!DIYABO < "ASE-ETALS !IRBORNE'EOPHYSICS 7EREDAS 7ESTERN )NTENSIVE$RILLING 4IGRAY 24 FINAL  REPORT 4IGRAY%NTICHO,OCALITY  +OLA4EMBEN 7ERIE 3TREAM 3OIL 2OCK#HIP -/-< ,EHE 'ANTA!FESHUM 0RECIOUSAND 3AMPLING )NTENSIVE4RENCHING  %,<< AND(AWZEN7EREDAS  "ASE-ETALS !IRBORNE'EOPHYSICS #ENTRALAND%ASTERN 4IGRAY:ONES /ROMIA9UBDO,OCALITY  'OLD 3ILVER  /RECORP-INERALS 3TREAM 3OIL 2OCK#HIP -/-< 9UBDO$ILE,ALOAND #OPPER ,EAD  0LC 3AMPLING 4RENCHING !IRBORNE %,<< .OLE+ABA7EREDAS  :INCAND 'EOPHYSICS$RILLING 7ESTERN7ELLEGA:ONES .ICKEL /ROMIA'ENJI,OCALITY  'OLD 3ILVER  "OJI 'IMBI (ARU ,ALO 3TREAM 3OIL 2OCK#HIP -/-< #OPPER ,EAD  !SABI .OLE+ABAAND 3AMPLING )NTENSIVE4RENCHING %,<< :INCAND 9UBDO7EREDAS 7EST !IRBORNE'EOPHYSICS NICKEL 7ELLEGA:ONE 'OLD 3TREAM 3OIL 2OCK#HIP -/-< 4IGRAY#HINI7ORK !SSOCIATED 3AMPLING 4RENCHING0ITTING  < Amba .ATIONAL-INING -INERALS 'ROUND'EOPHYSICS$RILLING #ORPORATION0LC -/-< 3TREAM 3OIL 2OCK#HIP /ROMIA/KOTE "ORENA 'OLD"ASE %,< 3AMPLING 4RENCHING0ITTING  'UJI:ONE -ETALS < 'ROUND'EOPHYSICS$RILLING 3TREAM 3OIL 2OCK#HIP 'OLD .YOTA-INERALS /ROMIA4ULU+API 3AMPLING 4RENCHING'ROUND   0LATINUM %TH ,TD !NCHORE 77ELLEGA !IRBORNE'EOPHYSICS 'ROUP-ETALS 'EOPHYSICS)NTENSIVE$RILLING 3TREAM 3OIL 2OCK#HIP -/- /ROMIA'UJI!NKORE  'OLD"ASE 3AMPLING 4RENCHING'ROUND %, 9UBDO 77ELLEGA -ETALS !IRBORNE'EOPHYSICS 'EOPHYSICS)NTENSIVE$RILLING /ROMIA3IYO(AWI7ELE 'OLD 3TREAM 3OIL 2OCK#HIP  -ETU$ARIMUAND %L-INING0LC !SSOCIATED 3AMPLING )NTENSIVE4RENCHING  'AWA,OCALITY 7ESTERN -INERALS 'ROUND'EOPHYSICS 7ELLEGA:ONE 3TREAM 3OIL 2OCK#HIP 3OMALI(ARAMSAMAND 3AMPLING 4RENCHING ,ANDSAT -'-'OLD-INES -/-< (ASAMITE,OCALITY ,IBEN 'OLD )MAGE)NTERPRETATION !IRBORNE 0,# < :ONE 'EOPHYSICSPREVIOUSLYSOME $RILLING  'OLD 3ILIVER  3TREAM 3OIL 2OCK#HIP !FAR4ENDAHO AND"ASE 3TRATEX -/- 3AMPLING$RILLING -ETALS )NTERNATIONAL0LC %, -/- !FAR'ABALAAND'IRA 0RECIOUSAND 3TREAM 3OIL 2OCK#HIP %, ,OCALITY "ASE-ETALS 3AMPLING$RILLING 3..02$IZI 3HEKA 'OLD 3TREAM 3OIL 2OCK#HIP %4./-INING -/-< AND3URMA7EREDAS  !SSOCIATED 3AMPLING )NTENSIVE4RENCHING 0LC %,\< "ENCH-AJI:ONE -INERALS 0ITTING'ROUND'EOPHYSICS !MHARA3EKOTA 0ITTING4RENCHING 'ROUND !CCESS#APITAL !-(< ,OCALITY 3EKOTA7EREDA  )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   STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 25 Recommendations 2.5.   3UMMARIZINGTHEABOVE %THIOPIAHASPROSPECTIVEGEOLOGYBUTTHEREISONLYONEOPERATINGLARGE SCALEMINE ANDTHEREAREFEWADVANCEDSTAGEEXPLORATIONPROJECTSCOMPAREDTOOTHERCOUNTRIESWITHPROSPECTIVEGEOLOGY )NVESTORSAREDRAWNTOALARGEEXTENTBYGEOLOGICALPROSPECTIVITY ASEXEMPLIlEDBYTHELARGEINVESTMENTS BEINGMADEINCOUNTRIESWITHWHATISREGARDEDASUNSTABLEANDORCOMPARATIVELYLESSATTRACTIVEMINING REGULATORYREGIMES4HEBESTMARKETINGPOSSIBLEAREhSUCCESSSTORIESvTHATINTHEMSELVESATTRACTINTEREST  ANDDRAWINVESTORSTOTHECOUNTRY)NTHEABSENCEOFSUCCESSSTORIES THECOLLECTIONOFNEWGEOLOGICALDATA  ANDTHESUBSEQUENTMARKETINGOFTHESEDATAASSUMEVITALIMPORTANCE2ECOMMENDATIONSBELOWAREAIMED ATATTRACTINGINVESTMENTINTOEXPLORATIONTHATMAYLEADTOLARGE SCALEMINING&ORFURTHERDISCUSSIONAND RECOMMENDATIONSONINDUSTRIALMINERALS SEE3ECTIONSAND !IRBORNEGEOPHYSICALDATAISOFFUNDAMENTALIMPORTANCETOMINERALEXPLORATIONANDTHEAVAILABILITYOFTHIS TYPEOFDATAISOFVERYHIGHINTERESTTOINVESTORS!IRBORNEGEOPHYSICALSURVEYSSHOULDPRIMARILYBEUNDERTAKEN ACROSSTHELATE0ROTEROZOICTERRAINSORPARTSOFTHESE  'EOLOGICALMAPPINGRELIESHEAVILYONAIRBORNEGEOPHYSICALDATAANDAIRBORNEDATAISAPREREQUISITETO QUALITYGEOLOGICALMAPPING-OREDETAILEDGEOLOGICALMAPS ATAlNERSCALEEG  WOULDFACILITATE EXPLORATION4HISCOULDBECOUPLEDWITHGEOCHEMICALSURVEYSINSELECTEDREGIONS 4HEIMPLEMENTATIONOFANINTEGRATEDGEOLOGICALANDDATAANDINFORMATIONMANAGEMENTSYSTEM ALSOINCLUDING GEOCHEMICALDATA ISPROPOSED3UCHASYSTEM BASEDONSPATIALDATA WOULDFACILITATETHEHANDLINGOFDATA ANDINFORMATION ANDBEAVERYUSEFULEXPLORATIONTOOL)NITIALLY THEESTABLISHMENTOFAPOLICYDElNINGDATA OWNERSHIP ANDRULESANDWAYSFORDISSEMINATINGDATACOULDBECONSIDERED -O-AND'3%COULDCONSIDERESTABLISHINGAPROMOTIONSTRATEGYFORTHE%THIOPIANMINERALSECTOR INCOOPERATION WITHTHE)NVESTMENT0ROMOTION!GENCY4HISMAYINCLUDEPUBLISHINGININTERNATIONALTRADEJOURNALSAND GENERATINGPROMOTIONALMATERIALFORWIDERCIRCULATIONPLANNEDPRESENCEATINTERNATIONALMINERALSECTOR CONFERENCESANDEVENTSDIRECTCONTACTWITHTARGETEDINVESTORSANDPRODUCTIONOFMONTHLYNEWSLETTERS  ETC&ORAHOLISTICSTRATEGYTOTAKEINTOACCOUNTINVESTORSPOSITIVEPERCEPTIONS ANDREQUIREMENTREQUESTFOR INFORMATION CONCERNSETC THEFORMULATIONOFTHESTRATEGYWOULDBENElTFROMANINITIALSURVEYOFINVESTORS PERCEPTIONOF%THIOPIAASAMININGDESTINATION)TWOULDBEIMPORTANTTOINCLUDECURRENTINVESTORS PAST INVESTORSTHATHAVEWITHDRAWN ANDPOTENTIALINVESTORS4HESURVEYSHOULDALSOINCLUDEDIFFERENTSIZED COMPANIES IEJUNIORSANDMAJORS )NTHESHORT TERM THECURRENTLYAVAILABLEPROMOTIONALMATERIALMAYBEREVIEWEDANDUPDATED)NTHELONGER TERM THESEMATERIALSWOULDTHENBEUPDATEDCONTINUALLY 7HILETHE'3%ISCURRENTLYREDESIGNINGITSWEBSITETOBECOMEMOREUSER FRIENDLYANDATTRACTIVE ANDTOMAKE DATAANDINFORMATIONMOREACCESSIBLE THE-O-COULDALSOCONSIDERDOINGSO4HEWEBSITEISOFTENTHElRST POINTOFCONTACTFORPOTENTIALINVESTORSANDTHE-O-WEBSITECOULDPROVIDEMOREDETAILEDINFORMATIONTO ASSISTPOTENTIALINVESTORS INTERMSOFFOREXAMPLEAPPLICABLEREGULATORYPROCESSESANDPROCEDURES 26 FINAL  REPORT ©  Yara  Dallol  BV  3#%.!2)/3&/2-).).'$%6%,/0-%.4!.$%#/./-)# IMPLICATIONS  4HISCHAPTERFOLLOWSONFROMTHEPREVIOUSCHAPTERSEXAMINATIONOFTHECURRENTSTATUSOFTHE%THIOPIANMINING SECTOR ANDBASEDONTHISINFORMATION ITGENERATESTHREEFUTURESCENARIOSFORMEDIUMTOLARGESCALEMINE PRODUCTIONINTHECOUNTRY4HESCENARIOSAREBASEDONEXISTINGMINESANDPROJECTS ANDCURRENTEXPLORATION ACTIVITIES'IVENTHEDERIVEDSCENARIOS PROJECTIONSFORCASHmOWSTOTHESTATEASWELLASDIRECTEMPLOYMENT NUMBERSAREGENERATED  %XISTINGMINESINCLUDE-IDROCS,EGA$EMBIGOLDMINE ARTISANALGOLDMINING ANDTHESTATEOWNED+ENTICHA TANTALUMMINE WHEREPRODUCTIONISCURRENTLYONHOLD7ITHREGARDSTOPOTENTIALFUTUREMINES ITISONLYTHE !LLANA0OTASHS$ALLOLPROJECTTHATHASREACHEDSUCHANADVANCEDSTAGEPRE CONSTRUCTION THATONEMAY EXPECTWITHSOMECERTAINLYTHATTHEPROJECTWILLREACHTHEPRODUCTIONSTAGE%XCEPTFOR.YOTA-INERALS4ULU +APIPROJECT NONEOFTHEMOREORLESSADVANCEDEXPLORATIONPROJECTS4ABLE HAVEESTABLISHEDMINERAL RESOURCESORRESERVES4HUS FUTUREPRODUCTIONRATESCANONLYBEESTABLISHEDTOALIMITEDEXTENTWITHCERTAINTY IEBASEDONCURRENTMINESORPROJECTSTHATBEYONDDOUBTWILLBECOMEPRODUCINGMINES 4HEPROPOSED SCENARIOSARETHUSBASEDON@NORMALRATESFOREXPLORATION MINEDEVELOPMENTSUCCESSGIVENTHEGEOLOGICAL FOUNDATIONANDTHENUMBERANDPROGRESSOFEXPLORATIONPROJECTS ANDCOMMONLEADTIMESFROMEXPLORATION TOMINEDEVELOPMENT ASFURTHERDISCUSSEDIN3ECTION  4HEDEVELOPMENTOFECONOMICLINKAGESFROMTHEMININGSECTORISESSENTIALTOPREVENTTHEDEVELOPMENTOF AN@ENCLAVEMININGSECTOR&ORWARDANDlSCALLINKAGESARETHEMAINFOCUSFORTHESTATE WHILEATTENTION MUSTALSOBEPAIDTOBACKWARDLINKAGES WHICHINCLUDESARANGEOFSERVICEPROVISIONSASWELLASDEVELOPING LOCALMANUFACTURINGCAPABILITY4HUS THECHAPTERPROVIDESFURTHERCONSIDERATIONSOFTHEEXISTINGLINKAGES BETWEENMININGANDOTHERSECTORSOFTHEECONOMY ANDRECOMMENDATIONSAREMADEFORHOWSUCHLINKAGES MAYBEIMPROVED Fundamental  geological,  exploration  and  mining  factors  to  consider 3.1.    4HEEXISTINGGOLDPROJECTS EXTENSIVEARTISANALGOLDMININGANDPOLYMETALLICPROJECTSINNEIGHBOURING%RITREA SHOWTHEPOTENTIALFORGOLDINALLTHE0ROTEROZOICTERRAINSANDFORPOLYMETALLICDEPOSITSINPARTICULARINTHE NORTHERNTERRAIN4ABLEINDICATESTHEAPPROXIMATESURFACEAREASUNDERLAINBYPROSPECTIVEGEOLOGYIN SOMEGOLDPRODUCINGCOUNTRIES ALONGWITHTHOSECOUNTRIESANNUALGOLDPRODUCTION4HELATE0ROTEROZOIC TERRAINSIN%THIOPIAAREGEOGRAPHICALLYEXTENSIVE ALTHOUGHITISNOTEDTHATTHEGOLDPOTENTIALOF%THIOPIACANNOT BEDIRECTLYDERIVEDFROMTHEOTHERCOUNTRIESASGOLDIN'HANA "URKINA&ASOAND'UINEAISFOUNDINEARLY 0ROTEROZOICAND!RCHEANTERRAINSRATHERTHANLATE0ROTEROZOICTERRAINS 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 !PPROXIMATELY OZOFWHICHABOUTIS Ethiopia   REPORTEDTOCOMEFROMARTISANALMINING  3OURCE2AW-ATERIALS'ROUP -O- %THIOPIA STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 27  &ROMTHERECENTEXPLORATIONWORK UNDERTAKENPRIMARILYBY!LLANA0OTASH THE$ANAKHILDEPRESSIONISKNOWN TOHOSTLARGERESOURCESOFPOTASH)TMAYBEASSUMEDTHATATLEASTONEMINE!LLANA0OTASH WILLBEDEVELOPED BASEDONTHESERESOURCES WITHTHEPOSSIBLEDEVELOPMENTOFADDITIONALMINESINTHEFUTURE  %XPLORATIONFORMINERALSIN%THIOPIAHASINCREASEDSUBSTANTIALLYOVERTHELAST YEARS WHILEBOTHADVANCED ANDGREENlELDPROJECTSARESTILLCOMPARATIVELYFEW(OWEVER FROMEARLYEXPLORATIONTOTHESTARTOFINDUSTRIAL SCALEPRODUCTIONUSUALLYTAKESYEARSORMOREANDITMAYEVENTAKESOME YEARSFROMTHEINITIAL ESTIMATIONOFMINERALRESOURCES4HISTIMEISUSEDTOCARRYOUTDETAILEDRESOURCEESTIMATES TODOTHEVARIOUS METALLURGICAL GEOTECHNICAL lNANCIALANDENVIRONMENTALSTUDIESNECESSARYFORABANKABLEFEASIBILITYSTUDY  ANDTOARRANGElNANCINGANDPERMITTING4HESEESTIMATESMAYBESOMEWHATLOWERFORTECHNICALLYSIMPLE  SMALLERGOLDMINES ANDCANBESUBSTANTIALLYHIGHERFORLARGEANDCOMPLEXPOLYMETALLICMINES  )TISALSOIMPORTANTTOKEEPINMINDTHATFEWEXPLORATIONPROJECTSACTUALLYLEADTOMINEDEVELOPMENT&OR EXAMPLE LOOKINGATMAJORMETALS OVERARECENT YEARPERIOD OUTOF GREENlELDDISCOVERIES IN#ANADAREACHEDFEASIBILITYSTAGE&OR!USTRALIA THENUMBERSWEREOUTOF OR &ARFEWER PROJECTSWOULDSURVIVEALLTHEWAYTOTHEMINECONSTRUCTIONSTAGE Proposed  scenarios   3.2.    'IVENTHECURRENTSTATEOFMININGANDEXPLORATIONIN%THIOPIA MEDIUMTOLARGESCALEOVERTHENEXTTWENTY YEARSISMOSTLIKELYTOBEFORGOLD POTASH TANTALUMANDCOPPER4HEREFOREECONOMICPROJECTIONSAREMADE ONTHEBASISOFMININGFORTHESECOMMODITIES  'IVENFACTSABOVEANDTAKINGINTOACCOUNTTHEVERYFEWADVANCEDPROJECTSANDRELATIVELYFEWSERIOUS GREENlELDPROJECTSIN%THIOPIATODAY EVENINTHEBESTCASE ONLYAMODERATEINCREASEINNUMBEROFMINES ANDPRODUCTIONISEXPECTEDOVERTHENEXTYEARS)NTHELONGERTERM HOWEVER THECOMPARATIVELYLARGE AREASWITHPROMISINGGEOLOGYCANLEADTOANUMBEROFNEWMINESANDEXTENSIONOFEXISTINGPROJECTS PROVIDED THATEXPLORATIONACTIVITIESWILLCONTINUETOINTENSIFYINTHEFUTURE 4HREEDIFFERENTSCENARIOSTERMEDCONSERVATIVE PROBABLEANDPOSSIBLEAREGIVENIN4ABLE)TISEMPHASIZED THATTHESCENARIOSREMAINSPECULATIVEASTHEREAREFEWADVANCEDPROJECTSPARAGRAPH ANDARANGEOFFACTORS THATAREDIFlCULTTOPREDICTMAYDRIVEDEVELOPMENTTOWARDSEITHEROFTHETHREESCENARIOSEGGOVERNMENT POLICYANDINPARTICULARCLARITYANDATTRACTIVENESSOFTHELICENSINGPROCEDURE COMMODITYPRICES GLOBAL ECONOMICCLIMATE TECHNICALISSUES POLITICALRISKS SOCIALCONmICTSETC Table  3.2.  Proposed  scenarios  for  mineral  production  over  the  next  20  years.   -IDROCOPERATIONS,EGA$EMBI CONTINUETOPRODUCEGOLDATABOUT OZYR FORYEARS!FTERGOINGUNDERGROUND ,EGA$EMBI 3AKAROPRODUCES OZYRFOR Conservative ANOTHERYEARS $UETOTHEMANY   !RTISANALGOLDPRODUCTIONCONTINUESATCURRENTLEVELS TYR POSSIBLERISKS    4HEONLYADVANCEDMETALSPROJECT .YOTAS4ULU+API PREVIOUSLYBELIEVEDTOGOINTO EXPLORATIONIN MININGIN ISNOTREALIZED %THIOPIAISNOT   4ANTALITEPRODUCTIONREMAINSHALTED INTENSIlED   !LLANA0OTASHWILLSTARTPRODUCINGBYMIDTOLATEBUTATHALFTHEPLANNEDRATE -TYR DUETOUNFORESEENPRODUCTIONORLOGISTICALISSUES   -IDROCOPERATIONS,EGA$EMBI CONTINUETOPRODUCEGOLDATABOUT OZYRFOR YEARS!FTERGOINGUNDERGROUND,EGA$EMBI 3AKARO WITHSOMERESOURCEEXTENSIONS CONSIDEREDLIKELY PRODUCE OZYRFORANOTHERYEARS Probable   !RTISANALGOLDPRODUCTIONCONTINUESATCURRENTLEVELS ABOUTTYR /NLYSMALL   4ULU+API ORANOTHERSMALLGOLDDEPOSITISIDENTIlED STARTSPRODUCING OZA INCREASEIN IN MINING PRIMARILY   /NEOTHERSMALLGOLDDEPOSITIDENTIlED STARTSPRODUCING OZAIN due  to  the   COMPARATIVELYFEW   4WOSMALLGOLDDEPOSITSAREIDENTIlED STARTPRODUCING OZAEACHFROM ADVANCEDPROJECTS   4ANTALITEOREPRODUCTIONRE STARTSIN ABOUTTYRINACCORDANCEWITH ANDLOWINTENSITY GOVERNMENTALPLANS ANDREMAINSATTHISLEVELASTHEDEPOSITISDEPLETEDANDNEW OFEXPLORATION DEPOSITSAREIDENTIlED   !LLANASTARTSPRODUCINGANDEXPORTINGPOTASHASPLANNED AT-TYRBYMIDTOLATE   !NOTHERSMALLERPOTASHOPERATIONSTARTSPRODUCINGINAT-TYR  2AW-ATERIALS'ROUP  28 FINAL  REPORT   -IDROCOPERATIONS,EGA$EMBI CONTINUETOPRODUCEGOLDATABOUT OZYRFOR YEARS!FTERGOINGUNDERGROUND,EGA$EMBI 3AKARO WITHSOMERESOURCEEXTENSIONS CONSIDEREDLIKELY PRODUCE OZYRFORANOTHERYEARS   !RTISANALGOLDPRODUCTIONCONTINUESATCURRENTLEVELS ABOUTTYR   4ULU+API ORANOTHERSMALLGOLDDEPOSITIDENTIlED STARTSPRODUCING OZAIN    /NEOTHERSMALLGOLDDEPOSITISIDENTIlED STARTSPRODUCING OZAEACHFROM Possible  7ILLREQUIRE   !LARGERGOLDDEPOSITISIDENTIlED STARTSPRODUCING OZABY VERYSTRONG   4WOSMALLGOLDDEPOSITSAREIDENTIlED STARTPRODUCING OZAEACHFROM INTENSIlCATION OFEXPLORATION   4ANTALITEOREPRODUCTIONRE STARTSIN ABOUTTYRINACCORDANCEWITH ACTIVITIES GOVERNMENTALPLANS ANDREMAINSATTHISLEVELASTHEDEPOSITISDEPLETEDANDNEW DEPOSITSAREIDENTIlED   !LLANASTARTSPRODUCINGANDEXPORTINGPOTASHASPLANNED AT-TYRBYMIDTOLATE    !NOTHERSMALLERPOTASHOPERATIONSTARTSPRODUCINGINAT-TYRANDINCREASES PRODUCTIONTO-TYRIN   !6-3DEPOSITISIDENTIlED STARTSPRODUCINGGOLD OZYR FROMAND COPPERKTYR FROM Revenue  and  employment  potential   3.3.   !SSUMINGTHECURRENTCORPORATEINCOMETAXRATEOFISMAINTAINED ANDROYALTYRATESAREKEPTATTHE PRESENTLEVELPRECIOUSMETALS METALLICMINERALSANDINDUSTRIALMINERALS 4ABLESHOWSTHE ESTIMATEDECONOMICIMPACTFROMTHETHREESCENARIOS#ORPORATETAXATIONANDROYALTYREVENUEGENERATED FROMTHEPROJECTSAREESTIMATEDONTHEPROJECTEDPRICESEEBELOW ANDTONNAGEFORECASTFORTHEPROJECTS %MPLOYMENTSRATESAREBASEDONTHEDIRECTEMPLOYMENTATMINESITEBASEDONASSUMEDSCALEOFTHESE PROJECTSANDDONOTINCLUDESECONDARYEMPLOYMENTORARTISANALMINERS  )N goldACCOUNTEDFOROFTHEVALUEOFGLOBALMINEPRODUCTIONEXCLUDINGCOAL (OWEVER BETWEEN  GOLDOREPRODUCTIONISEXPECTEDTODECREASEBY/REGRADESFORGOLDAREALSOLIKELYTOFALL FROMGPTINTOGPTBY)NGENERAL GOLDMINESHAVEEXPERIENCEDCONSIDERABLEINCREASE INCOSTSANDHAVEHADDIFlCULTIESMEETINGOUTPUTTARGETS!FRICACURRENTLYACCOUNTSFOROFPROJECT PIPELINECAPITALEXPENDITURESFORGOLD WITH3OUTH!FRICA 4ANZANIA 'HANAAND"URKINA&ASOACCOUNTING FORJUSTBELOWHALFOFTHESEPROJECTS4HEPRICEOUTLOOKFORGOLDWOULDINDICATEAPRICERANGEOF53$  AND53$ OZTILLBELOWTHE53$ PRICEREACHEDINAND   Potash,MAINLYUSEDBYTHEAGRICULTURALSECTOR ISLIKELYTOSEESTRONGDEMANDINTHENEXTDECADE PARTICULARLY FROMEMERGINGECONOMIESSUCHAS"RAZILAND#HINA4HEGLOBALPOTASHMARKETSAREDOMINATEDBYSUPPLIES FROM#ANADAAND2USSIA AND%THIOPIANPRODUCTIONWILLBEASMALLSHAREOFTHEGLOBALMARKET)NRECENT DEVELOPMENTSTH*ULY THEPRICEEXISTINGCARTELFOR0OTASHTOOKAMAJORBLOWWHEN5RALKALIMAJOR 2USSIANPRODUCER WALKEDAWAYFROMPRICEAGREEMENTS INSTEADCHOOSINGTOPURSUEAPOLICYOFSALESVOLUME OVERPRICE#ONSEQUENTLY PRICEFORMATIONINTHE0OTASHMARKETSISmUIDATTHISTIME ASSTAKEHOLDERSADJUSTTO THERAMIlCATIONSOFTHEBREAKUPOFTHEPRICECARTEL"YTHEENDOF PRICESPLUNGEDTOBELOW53$ TONNE RELATIVETOTHEHIGHOF53$TONNEATTHESTARTOFTHEYEAR)N PRICESTABILISATIONISEXPECTED AROUNDTHE53$TONNEMARK4HEMAJORIMPACTOFTHISPRICEFALLWOULDBEONTHECONTINUEDFEASIBILITY OFPOTASHPROJECTSINTHECOUNTRY ANDTHEEXPECTEDIMPACTONREVENUESDUETOLOWERPRICES0OTASHEXPORTS HAVENOTBEGUNYET BUTTHEFALLININTERNATIONALPOTASHPRICESWILLHAVEANIMPACTONCONTINUEDINVESTMENT INTHESECTOR ASWELLASREVENUEGENERATIONFORTHESTATEFROMTAXATION 0RICESFORtantalumARESUBJECTTOSHARPCHANGES GIVENTHELIMITEDNUMBEROFSUPPLIERSINTHESECTOR4HEREFORE CHANGESINONEMAJORPRODUCERCANCAUSESUBSTANTIALmUCTUATIONS7HILETHEAVERAGEFORTHEMETALOVER THE DECADEHASBEENAROUND53$KG SPIKESININCREASEDPRICESTONEARLY53$ KGFORASHORTPERIOD4HESESHORTPRICESPIKESAREUSUALLYASARESULTOFPANICBUYINGBYCONSUMERS WHEN MINEPRODUCTIONISHALTEDORINVENTORYLEVELSAREPERCEIVEDTOBELOW(OWEVER ASSOONASSUPPLYISRESTORED  THEPRICESRETURNTOTHEIRAVERAGELEVELS#HANGESINTHEDEMANDFORELECTRONICEQUIPMENT THEMAINUSEFOR TANTALUM WILLAFFECTPRICELEVELS0RICESFORTHENEXTTHREEYEARSAREFORECASTAT53$TO53$KG CopperPRICESGENERALLYREmECTTHESTATEOFTHEGLOBALECONOMY WITHCOPPERPRICESRISINGINPERIODSOF ECONOMICGROWTH)NRECENTYEARS GLOBALCOPPERDEMANDHASMAINLYBEENDRIVENBY#HINESEDEMAND AND PRICEmUCTUATIONSOFTENOCCURINRESPECTTOCHANGESINTHEPERFORMANCEOFTHE#HINESEECONOMY)N  COPPERPRICESRECEDEDSOMEWHATFROMTHEIRPREVIOUSHIGHSINTHE53$TONANDTHEYCURRENTLYRESIDE STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 29 INTHE53$TONREGION#OPPERPRICESAREFORECASTTOFALLMARGINALLYINASNEWPRODUCTIONCOMES ONLINE WITHARETURNTOAROUND53$IN)NTHELONGTERMUNTIL COPPERPRICESSHOULD AVERAGEATTHE53$ TONMARK 4HESCENARIOSPRESENTEDIN4ABLEREmECTTHEPRESENTLIMITEDDEVELOPMENTOFLARGEANDMEDIUMSCALE MININGIN%THIOPIA WITH,EGA$EMBIBEINGTHEONLYCURRENTMINEINPRODUCTIONANDWITH!LLANA0OTASHAND +ENTICHATANTALUM EXPECTEDTOSTARTPRODUCTIONINTHENEXTTWOYEARS4HEMAJORITYOFTHEOTHERPROJECTS  INCLUDEDINTHEPOSSIBLEANDPROBABLESCENARIOS ARENOTEXPECTEDTOCOMEONLINEBEFORE MAKING PRICEFORECASTSFORTHEIRMINERALPRODUCTIONOPENTOCONSIDERABLEUNCERTAINTYANDMARGINSOFERROR Table  3.3.    Estimation  of  economic  impact  (corporate  tax  and  royalties)  and  employment  based  on  development   scenarios. %CONOMIC)MPACTMILLION53$   2024   #ONSERVATIVE      0ROBABLE      0OSSIBLE      $IRECT%MPLOYMENT0OTENTIAL.UMBER #ONSERVATIVE      0ROBABLE      0OSSIBLE       &IGURESHOWSTHEREVENUEFROMTHESALESOFTHEPROJECTSLISTEDIN4ABLE4HESHARPRISEINREVENUE  ISMAINLYLINKEDTOSTARTPRODUCTIONOFNEWGOLDPROJECTS WHILETHEFALLINREVENUEINISLINKED TODEPLETIONOFRESOURCESAT-IDROCS,EGA$EMBIMINE!SNEWPRODUCTIONCOMESONLINEFORGOLDIN  REVENUESPICKUPAGAIN )NAPROBABLESCENARIO ITISPROPOSEDTHATTHEMINERALSECTORCOULDGENERATEREVENUEUPTO53$BILLION BYANDINANOPTIMISTICSCENARIOSOME53$MILLIONSEEGRAPHABOVE )NTHEPROBABLESCENARIO  THEREVENUECORRESPONDSTOABOUTOFTHECURRENTEXPORTVALUEOFGOLDIN4ANZANIA53$IN  ANEMERGINGMININGECONOMYDOMINATEDBYGOLDPRODUCTION)N'HANA WHICHHASALONGMININGHISTORY WHEREGOLDACCOUNTSFORMORETHANOFTHETOTALMINEDVALUE GOLDEXPORTSWEREWORTHALMOST53$ 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 Conservative Probable Possible Figure  3.1.  Conservative,  possible  and  probable  sales  revenues. )N TOTALSALESFROMTHEMININGSECTORIN!FRICAWHEREVALUEDAT53$BILLIONTHISDOESNOTINCLUDE MININGFORINDUSTRIALMINERALS REPRESENTINGNEARLYOFTHECONTINENTS'ROSS0RODUCT)N!FRICA METAL MININGANDCOALMININGAREABOUTTHESAMEMAGNITUDEINTERMSOFVALUE!MONGTHEMETALS GOLD COPPERAND IRONOREMAKEUPMORETHANHALFOFTHEVALUE)FONEASSUMESTHATTHEGEOLOGYOF%THIOPIAISASPROSPECTIVE ASTHE!FRICANhAVERAGEv THENTHESENUMBERSWOULDIMPLYTHATTHEPRESENTDAYECONOMICPOTENTIALFORTHE DEVELOPMENTOFTHE%THIOPIANMININGSECTORWOULDBETOACHIEVEANANNUALTURNOVEROFNEARLY53$BILLION WITH%THIOPIACOVERING  KMÜOF!FRICASSURFACE  30 FINAL  REPORT Current  and  projected  economic  linkages   3.4.   %XPLORATIONACTIVITIESMAYGENERATEBACKWARDLINKAGESTHROUGHTHENEEDFORLOGISTICALSERVICES LABORATORYAND TESTINGSERVICESANDOTHERSUPPLEMENTARYSERVICES4ELECOMMUNICATIONSANDLOGISTICSARETHELARGERSECTORS THATCANBENElTFROMDEVELOPMENTOFBACKWARDLINKAGES(OWEVER RESTRICTIONSONFOREIGNPARTICIPATIONIN TELECOMMUNICATIONANDLOGISTICS WITHOUTTHEEXISTENCEOFCOMPETITIVENATIONALALTERNATIVES EFFECTIVELYMEANS THATTHEFULLPOTENTIALOFCREATINGBACKWARDLINKAGESINTHISREGARDISNOTBEINGACHIEVED/THERSERVICES  SUCHASTHEEXISTENCEOFNATIONALLYBASEDLABORATORYANDTESTING PROVISIONOFSECURITY CATERING ACCOUNTING  AND)4SERVICESCANALSOBEEXPANDED%FFECTIVEPARTICIPATIONBYTHEPRIVATESECTORCANCONTRIBUTETOCOST REDUCTIONSINPROVIDINGTHESESERVICES WHICHINTURNCONTRIBUTESTOAMOREATTRACTIVEINVESTMENTENVIRONMENT FORMININGANDEXPLORATIONlRMS(IGHERPARTICIPATIONRATESCANLEADTOINCREASEDEMPLOYMENTANDINCOME OPPORTUNITIES ,ARGESCALE INTERNATIONALMINEOPERATORSTENDTOIMPORTNECESSARYEQUIPMENTANDMATERIAL IFNOTFOUND DOMESTICALLY&URTHER INTERNATIONALSUPPORTlRMS SUCHASEQUIPMENTPROVIDERS LOGISTICALSERVICES CHEMICALS ANDOTHERMATERIALINPUTS LABORATORYSERVICESETCTENDTOFOLLOWANDBECLOSELYASSOCIATEDWITHNEWLARGE MININGPROJECTS4HIS INTURN RESTRICTSPOSSIBILITIESTODEVELOPWITHINCOUNTRYLINKAGES7HILE-O-HAS CONCENTRATEDONATTRACTINGEXPLORATIONANDMININGlRMS ITCOULDALSOLOOKATTHENEEDSOFTHEMINING SECTORINTERMSOFINPUTSFROMOTHERTYPESOFlRMSANDSECTORS#OORDINATIONWITHOTHERMINISTRIESSUCH ASTHE-INISTRYOF)NDUSTRYAND-INISTRYOF%DUCATION TODEVELOPTHESECAPACITIESLOCALLY INSTEPWITHTHE DEVELOPMENTOFTHEMINERALSECTOR WILLENSUREGREATERBACKWARDLINKAGESINTHEECONOMYAREESTABLISHED #URRENTLYTHECONTRIBUTIONOFTHEMININGSECTORTOEXPORTINCOMESISLIMITEDTOREVENUESBEINGGENERATEDFROM GOLDANDGEMSTONEEXPORTS WITHPOTASHEXPORTSEXPECTEDTOCOMEONLINEINTHENEXTTWOYEARS0RODUCTION OFINDUSTRIALMINERALSISLIMITEDTODOMESTICCONSUMPTION 4HECURRENTMINERALPRODUCTIONISSMALL WHICHINTURNEXPLAINSALOWLEVELOFEXISTINGLINKAGES BOTHFORWARD ANDBACKWARD WITHTHERESTOFTHEECONOMY%MPLOYMENTLEVELSINTHELARGESCALEMININGSECTORAREALSO LOW ANDTHEREISLITTLEEVIDENCESEENSOFAROFTHESECTORLINKINGWITHTHEINDUSTRIALANDMANUFACTURINGSECTOR -ININGOFLIMESTONEANDOTHERINDUSTRIALMINERALSARE HOWEVER USEFULLYANDSTRONGLYCONTRIBUTINGTO AND LINKINGWITH THECEMENTANDCONSTRUCTIONSECTORS 4HE,EGA$EMBIMINEOFFERSLOCALEMPLOYMENTANDALSOGENERATESSIGNIlCANTSECONDARYANDASSOCIATED EMPLOYMENT/VERALL FORWARDLINKAGESFROMGOLDARELIMITED ASNEARLYOFTHEVALUEISCREATEDATTHE MINESTAGEANDNOTFROMBENElCIATION"ACKWARDLINKAGES INTERMSOFINPUTSINTOMININGOPERATIONSSUCH ASSERVICEPROVISION CHEMICALINPUTS MACHINERYETC HAVEGREATERPOTENTIAL&OREXAMPLEIN'HANA THE GOLDMININGSECTORCONTRIBUTESAROUNDTO'$0 EMPLOYINGNEARLY PEOPLE4HECOUNTRYSCAPITAL EXPENDITUREBYTHEGOLDSECTORlRMSWAS53$MILLION WITHLOCALPURCHASESEXCLUDINGFUELPOWER WERE 53$MILLIONIN)NADDITION VOLUNTARYCONTRIBUTIONSTOWARDSCOMMUNITYDEVELOPMENTPROJECTSBY JUSTONEOFTHEGOLDMININGlRMSAMOUNTEDTO53$MILLIONINALONE-ORRISETAL   4ANTALUMEXPORTSFROM%THIOPIAHAVEBEENSPORADIC WITHFEWLINKAGESCURRENTLYBEINGEVIDENT4ANTALUM ISUSEDINCHEMICALPROCESSEQUIPMENT CAPACITORS NUCLEARREACTORSANDAIRCRAFTPARTSANDTHEREFOREIS UNLIKELYTOSERVEASARAWMATERIALFORTHEDOMESTICMANUFACTURING&URTHER THEPRODUCTIONAT+ENTICHAIS ASSOCIATEDWITHCHALLENGESWITHREGARDSTOPROCESSING ASTHEPRODUCTHASELEVATEDLEVELSOFRADIOACTIVITY (ENCE INTHISCASE INITIATIVESRELATEDTOIMPROVETHEPROCESSINGANDTHEREBYADDINGVALUETOTHEPRODUCT WOULDBEMOSTBENElCIAL ANDITWOULDRESULTINHIGHEREXPORTREVENUES!SSESSMENTSNEEDTOBECONDUCTED  WEIGHINGTHECOSTSANDBENElTSFROMCONTINUINGTOEXPORTTANTALITEORETOINITIATINGABENElCIATIONEXERCISE THATCANBECOSTLY 0OTASHMINING WITHPOTASHBEINGANINTERNATIONALLYTRADEDCOMMODITYOFFERSSUBSTANTIALOPPORTUNITIES FORECONOMICLINKAGES)THASAPOTENTIALTOCONTRIBUTESUBSTANTIALLYTOTHEDOMESTICAGRICULTURALSECTOR)N TERMSOFFORWARDLINKAGES THE!LLANA0OTASHPROJECTWILLCONTRIBUTETOTHElSCALLINKAGESTOTHEECONOMY  THROUGHEXPORTANDTAXREVENUES%MPLOYMENTCREATIONISEXPECTEDTOBEAROUNDJOBSONCETHEFACILITY ISINPRODUCTION WITHEMPHASISBEINGPLACEONRECRUITINGLOCALLY(OWEVERFORSOMESKILLEDJOBS EXPATRIATE LABOURISREQUIREDGIVENTHELACKOFCERTIlCATIONOFDOMESTICLABOUR4HISFOLLOWSASINTERNATIONALOPERATORS  PARTICULARLYTHOSEHEADQUARTEREDIN.ORTH!MERICAAND%UROPE AREREQUIREDTOENSURETHATMINESITE PERSONALHAVEINTERNATIONALLYACCEPTABLEQUALIlCATIONS WHICHARENOTAVAILABLEFORDOMESTICLABOUR STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 31 4HEAGRICULTURALSECTORISTHEMAINSTAYOFTHE%THIOPIANECONOMYANDLINKAGESFROMTHEMININGSECTOR  FROMPOTASH MAYCONTRIBUTESIGNIlCANTLYTOINCREASEDAGRICULTURALPRODUCTIVITY7ITHTHEAGRICULTURALSECTOR BEINGRESPONSIBLEFOROFTHE'$0ANDOFTOTALMERCHANDISEEXPORTREVENUES LINKAGESBETWEENTHE MININGSECTORANDAGRICULTUREAREOFHIGHIMPORTANCETOTHESTATE%THIOPIAMAYGAINFROMANINCREASEIN AGRICULTURALPRODUCTIVITY&OREXAMPLE CURRENTLYFORCEREALITSYIELDAREAT HGHA COMPAREDTO%GYPTS  HGHA OR:AMBIAS HGHA 4HEESTIMATEDCONSUMPTIONOFFERTILIZERSIN%THIOPIAIN WAS TONNESPERYEAR WHEREASTHEREQUIREDCONSUMPTIONTOREACHNATIONALAGRICULTURALPRODUCTIVITY OBJECTIVESINISESTIMATEDATMILLIONTONNESPERYEAR.OTONLYDOESFERTILIZERCONSUMPTIONNEEDTO DOUBLE BUTAMOREDIVERSERANGEOFFERTILISESAPARTFROMONLY52%!AND$!0 ISALSOREQUIRED7ITHTHIS NEEDINMIND !LLANA0OTASHANDTHE!4!HAVESIGNEDAMEMORANDUMOFUNDERSTANDING IN&EBRUARY  TOFUNDANATIONALFERTILIZERBLENDINGPROGRAMTODEMONSTRATETHEBENElTSOFPOTASHTHROUGHSYSTEMATIClELD TRIALS !PARTFROMPOTASH %THIOPIAHASSEVERALTYPESOFINDUSTRIALMINERALDEPOSITS4ABLE BUTONLYCEMENT RAWMATERIALSANDDIMENSIONSTONEAREMINEDATANINDUSTRIALSCALE!PARTFROMCEMENTRAWMATERIALSAND DIMENSIONSTONE SALTANDSILICASANDAREMINEDQUITEEXTENSIVELYTHROUGHSMALL SCALEANDARTISANALMINING 'YPSUM CLAYS KAOLINETCHAVEBEENMINEDONASMALLSCALEINTHEPAST -ANYOFTHEINDUSTRIALMINERALSANDCOAL AVAILABLEIN%THIOPIAAREIMPORTEDANDTHEREISCERTAINLYSCOPEFOR THESECTORTOGROW PRIMARILYTOSERVETHEDOMESTICMARKET/FTHEINDUSTRIALMINERALSTHATAREIMPORTED THEY ARELARGELYSOURCEDFROM#HINAANDTHE%UROPEAN5NION WHILECOALISIMPORTEDFROMTHE%UROPEAN5NION ASWELL5KRAINE)NTHEPAST ATTEMPTSTOSUPPLYTHEDOMESTICMARKETWITHINDUSTRIALMINERALSHAVEFAILED MAINLYDUETOINCONSISTENTSUPPLYANDTHELACKOFPROPERSPECIlCATIONSFORTHEDIFFERENTPRODUCT-ORGAN    Table  3.4  Overview  of  key  industrial  minerals  resources. Commodity Main  application 0RODUCTIONPOTENTIAL ,IMESTONE #EMENTPRODUCTION !LLCEMENTRAWMATERIALSAREREADILYAVAILABLEANDMINED 'YPSUM WITHIN%THIOPIA4HECURRENTCEMENTPRODUCTIONCAPACITY ISTWICETHEDOMESTICDEMAND 0UMICE #LAY "ASALT 3ANDSTONE $IMENSIONSTONE "UILDINGCONSTRUCTION ,OCALLYPRODUCEDDIMENSIONSTONEISUSEDEXTENSIVELYIN MARBLE GRANITE EXTERIORANDINTERIORAPPLICATIONSIN%THIOPIA4HEREHAS LIMESTONE ALSOBEENSOMEEXPORTINTHEPAST "ENTONITE $RILLINGMUD BINDER 3OMETESTINGOF%THIOPIANBENTONITEINDICATESSUITABLE PROPERTIESBUTESSENTIALLYALLBENTONITEISIMPORTED #OAL %NERGYFORCEMENTPRODUCTION #OALISCURRENTLYIMPORTEDFORUSEASENERGYBYCEMENT FACTORIES)NTHEFUTURE LOCALLYMINEDCOALHASTHE POTENTIALTOSUBSTITUTEFORIMPORTEDCOAL Diatomite )NDUSTRIALlLTERS MILD 3OMETESTINGOF%THIOPIANBENTONITEINDICATESSUITABLE ABRASIVE PESTICIDER  PROPERTIESBUTMOSTISIMPORTEDTHEREISSOMEARTISANAL ABSORBANT MINING  +AOLIN #ERAMICS TOOTHPASTE lLLER  -OSTOFTHEKAOLINUSEDIN%THIOPIAISPRODUCEDIN PAINTPRODUCTION COUNTRY BUTSOMEISIMPORTED 3ILICASAND 'LASSWARE 3ILICASANDASWELLASOTHERINGREDIENTSFORGLASS DOLOMITE FELDSPAR LIMESTONE AREMINEDLOCALLYBUTTHERE AREISSUESRELATEDTOTHECONSISTENCYOFQUALITYDELIVERED 3ODAASH 0RODUCTIONOFCAUSTICSODAFOR -OSTSODAASHUSEDISIMPORTEDWHILETHEREAREPLANSTO MANUFACTURINGOFDETERGENTS UPGRADETHEPLANTAT,AKE!BIYATATOMEETTHEDOMESTIC DEMAND 3OURCES 4ADESSE VARIOUSPROMOTIONALDOCUMENTSAVAILABLEATTHE'3% WWWGSEGOVET ACCESSED.OVEMBER   DISCUSSIONSWITH-O-STAFF 32 FINAL  REPORT -ARBLEEXPORTSGENERATESOMESMALLREVENUESONLY ANDTHEACTIVITIESMAYBENElTFROMEFFORTSTOINCREASE THESCALEOFPRODUCTION ANDTOGENERATEBETTERLINKAGESWITHOTHERACTIVITIES-OSTOFTHEMARBLEISPRODUCED BYONEDOMINANTlRM.ATIONAL-INING#ORPORATION WHICHOWNTHE!WASH-ARBLEPROCESSINGPLANT $ALLETI -ARBLE1UARRYAND(ARAR1UARRY ANDTHETOTALVALUEOFPRODUCTIONWASSOME53$ IN-ARBLE ISALSOUSEDINTHECONSTRUCTIONSECTOR WHEREDOMESTICCONSUMPTIONARELIKELYTOINCREASEWITHTHECONTINUED INVESTMENTSINTHATSECTOR7HILEMARBLEPRODUCTIONBOTHFORDOMESTICCONSUMPTIONANDEXPORTS CANBE INCREASED THECURRENTSTRUCTUREONEDOMINANTPRODUCER NUMEROUSSMALLSCALEPRODUCERS OFPRODUCTION MAYNEEDTOSHIFTTOWARDSAGREATERNUMBEROFLARGEANDMEDIUMSCALEPRODUCERSFORGREATEREMPLOYMENT ANDINDUSTRIALLINKAGESTOBEREALIZED 4HE#EMENT)NDUSTRYIN%THIOPIAHASEXPANDEDRAPIDLYINTHEPASTlVEYEARS BUILDINGMAINLYONRAWMATERIALS SOURCEDFROMWITHINTHECOUNTRY4HE'40SAIMISTORAISETHECOUNTRYSTOTALCURRENTPRODUCTIONCAPACITYTO MILLIONTONSPERANNUMBY4HEREVIEWSOFTHE'40REPORTSTHETOTALCURRENTCAPACITY OFTHESECTORTOBEATMILLIONTONS4OSUPPORTTHEDOMESTICINDUSTRY %THIOPIABANNEDCEMENTIMPORTS IN-ARCH #EMENTPLANTSAREOFTENCAPITALINTENSIVE LARGESCALEPROJECTS DOMINATEDBYMULTI NATIONALCOMPANIESTHE LARGESTCOMPANYINTHEWORLD,AFARGE ALONEHASACAPACITYOFMILLIONTONSPERYEAR)N%THIOPIA THE CEMENTSECTORISDOMINATEDBYDOMESTIClRMS WITHONLYONEPLANTPARTLYOWNEDBY3OUTH!FRICAS0RETORIA 0ORTLAND#EMENT)TISREPORTEDTOEXISTTOCEMENTPRODUCERSINTHECOUNTRYTOOFTHESEARELARGE CEMENTMANUFACTURERSWITHACOMBINEDCAPACITYTOPRODUCETOMILLIONTONSYEAR4HEREAREFOUR MAJORINTEGRATEDCEMENTPLANTS WITHTHREELOCATEDIN/ROMIAANDONEINTHENORTHOFTHECOUNTRY CLOSETO THE%RITREANBORDER4HEMAJORCEMENTFACTORIESOWNTHEIROWNQUARRYSITESINCLUDINGTHOSEFORLIMESTONE  GYPSUMANDSAND )N $ANGOTE#EMENT ALARGEANDWELLESTABLISHEDCEMENTPRODUCERFROM.IGERIA  HASSTARTEDCONSTRUCTIONOFITSPLANTIN-UGERVALLEYWITHAMILLIONTONCAPACITY TOCOMEONLINEINTHE SECONDHALFOF 4HERAWMATERIALSFORCEMENTAREMAINLYLIMESTONE GYPSUM CLAYANDSILICASAND#EMENTPLANTSWILL NORMALLYOPERATETHEIROWNQUARRIES WITHPLANTSLOCATEDCLOSETOQUARRYSITESTOREDUCECOSTOFTRANSPORTING RAWMATERIALTOAMINIMUM2AWMATERIALSAREUSUALLYLESSTHANOFTHECOSTOFPRODUCTION ANDTHE MAJORFACTORSFORECONOMICEFlCIENCYARECOSTSOFTRANSPORT ENERGYCOSTSANDTHECAPITALINVESTMENTIN THEPLANTS4RANSPORTATIONCOSTSPLAYALARGEROLEINDETERMININGTHESITEOFCEMENTPLANTS WITHPRODUCERS GENERALLYPREFERRINGTOCHOOSESITESCLOSETOTHEIRSOURCEOFRAWMATERIALS%NERGYCOSTSFUELOIL WASREPORTED TOACCOUNTFOROFTHEPRODUCTIONCOSTSOFTHEMAJORCEMENTPLANTSOPERATINGIN%THIOPIAIN 4HECURRENTPERCAPITACEMENTCONSUMPTIONISESTIMATEDATKGYEAR ANDTHEGOVERNMENTWISHESTO INCREASETHISTOKGYRBY4HISISINLINEWITHTHEHEAVYINFRASTRUCTUREINVESTMENTSBEINGMADEBY THEGOVERNMENTINCLUDINGTHECONSTRUCTIONOFTHE-ILLENNIUM2ENAISSANCE$AM ASWELLASTHEINCREASE INCONSTRUCTIONACTIVITIESWILLINCREASETHEDEMANDFORCEMENTINTHENEXTlVEYEARS(OWEVER WHILETHIS lGUREISSTILLBELOWTHEGLOBALAVERAGEOFKGYR ITISDOUBTFULWHETHERTHE%THIOPIANECONOMYREALLYCAN ABSORBAPRODUCTIONOFKGYR4OILLUSTRATETHISITMAYBEOBSERVEDTHATWHILSTTHE#HINESEECONOMY SUPPORTSAPERCAPITACEMENTCONSUMPTIONOFKGYR IN)NDIA THISNUMBERISKGYR&URTHER THE CEMENTPRODUCTIONIN*ULYWASREPORTEDATMILLIONTONS WHILEDEMANDWASREPORTEDATMILLION TONS%VENWITHEXPECTATIONSOFDEMANDPICKINGUPINTHENEXTFEWYEARS THEINDUSTRYFACESASERIOUSRISK OFOVER SUPPLY WHICHWILLFORCESOMEACTORSOUTOFTHESECTOR 4HEEXPORTOFSURPLUSCEMENTMAYBECONSIDERED(OWEVER REGIONALLY +ENYAHASANESTABLISHEDCEMENT INDUSTRYANDMAYNOTSERVEASAPOSSIBLEMARKET3OMALIASDEMANDFORCEMENT GIVENITSTENSEPOLITICAL ANDECONOMICSITUATION ISUNSTABLEANDSMALL3OUTH3UDANCOULDBEAPOSSIBLEMARKETFORCEMENTEXPORTS HOWEVERTHISPOTENTIALNEEDSFURTHERINVESTIGATION7HILEEXPORTINGOUTSIDETHE!FRICANREGIONISAPOSSIBILITY  ITISNOTEDTHATTHEGLOBALCEMENTMARKETISHIGHLYCOMPETITIVE 4HE'40TARGETSTHESETTINGUPOFCAUSTICSODAANDSODAASHINDUSTRIESUSINGLOCALLYAVAILABLERAWMATERIAL 4HETARGETSINCLUDEDINCLUDEESTABLISHINGACAUSTICSODAMANUFACTURINGPLANTWITHTHECAPACITYOF  TONSPERYEAR ASWELLASASODAASHPLANTWITHTHECAPACITYTOPRODUCE TONSPERYEAR %THIOPIASIMPORTANTPRODUCERSANDSTAKEHOLDERSINVOLVEDINTHECAUSTICSODAANDSODAASHPRODUCTIONINCLUDE !BIJATA3ODA!SHCO ANDTHE.ATIONAL-INING#ORPORATIONANAFlLIATEOFTHE-IDROC'ROUP #URRENTLYTHERE ISALSOONESTATEOWNEDCAUSTICSODAFACTORYOPERATINGIN:EWAY /ROMIA EMPLOYINGPEOPLE 4HE'40TARGETSFORTHE-ETALAND%NGINEERING)NDUSTRYINCLUDETHEENHANCEMENTOFTHEINDUSTRYSPRODUCTION  IMPROVEDQUALITYANDPRODUCTIVITY FOCUSONIMPORTSUBSTITUTION ANDTHEBUILDINGOFCAPACITYTOSUPPORT OTHERMANUFACTURINGUNITS)NTERMSOFTARGETS THISTRANSLATESINTOINCREASINGTHEGROSSVALUEOFDOMESTIC PRODUCTSOFTHEINDUSTRYTOOVER%4"BILLION RAISINGTHECAPACITYUTILIZINGOFTHEINDUSTRYTO AND IMPROVEANNUALPERCAPITAMETALCONSUMPTIONTOSOMEKGBYTHEENDOFTHEPROGRAM4ARGETSALSOINCLUDE IMPROVINGTHEPRODUCTIONANDTECHNOLOGICALCAPACITYTOBEABLETOPRODUCESPAREPARTSANDCOMPONENTS STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 33 FORMAJORMANUFACTURINGINDUSTRIESSUCHASLEATHER TEXTILE SUGAR CEMENT AGRO PROCESSING CONSTRUCTION ANDVEHICLEBODYINDUSTRIES4HE'40REVIEWREPORTSVARIOUSPROJECTSATCONSTRUCTIONANDOTHER PHASESOFOPERATIONSBUTPROVIDESNODETAILS )NRElNEDMETALS %THIOPIASLARGESTIMPORTSINWEREFORIRONANDSTEEL53$MILLION FOLLOWED BYTHATFORCOPPER53$MILLION ANDALUMINIUM53$MILLION 7ITHTHEPLANNEDINFRASTRUCTUREAND CONSTRUCTIONPROJECTS ASWELLASTHEINCREASEDRATESOFURBANIZATIONTHATCANBEEXPECTEDOFTHE%THIOPIAN ECONOMY THEREWILLBEINCREASEDUSAGEOFIRON STEELANDCOPPERINTHENEXTTWODECADES 7HILETHEGOALOFTHE'40ISTOINCREASEIMPORTSUBSTITUTIONFORINPUTSINTOTHEMETALANDENGINEERINGINDUSTRY  ANDEFFORTSAREBEINGMADETOWARDSMANUFACTURINGSPAREPARTSDOMESTICALLY THEREISSTILLONLYLIMITEDLOCAL CAPABILITYFORMETALSMELTINGANDRElNINGCAPACITY(OWEVER IN/CTOBERTHECOUNTRYEXPORTEDTONS OFSTEELMANUFACTUREDFROMIMPORTEDSCRAP THElRSTINTHECOUNTRYSHISTORY Box  1:  Macroeconomic  contributions  of  mining  to  low  and  middle  Income  economies In  terms  of  Foreign  Direct  Investment  (FDI)  mining  investments  can  in  some  cases  account  for  as   MUCHAS OFTOTAL&$)mOWSINLOWANDMIDDLEINCOMEECONOMIES ESPECIALLYINCASESWHERETHE COUNTRYINQUESTIONISNOTSEENASBEINGANOTHERWISEATTRACTIVEDESTINATIONSFORINTERNATIONALCAPITAL -INERALPRODUCTIONMINING ANDMINERALPROCESSINGSMELTINGANDRElNING MAYBELOCATEDINDIFFERENT COUNTRIES THISASPROCESSINGTOAGREATEREXTENTMAYBENElTFROMECONOMIESOFSCALEnTHUSTHEREARE MANYFEWERPROCESSINGPLANTSSMELTERSTHANTHEREAREMINESINTHEWORLD BUTALSOASSOMETYPEOF PROCESSINGREQUIRESHIGHLEVELSOFTECHNOLOGYANDCAPITAL ANDAVAILABILITYOFENERGY WHICHMAYNOTBE READILYAVAILABLEINTHECOUNTRYWHERETHEMININGISDONE&URTHER PROCESSINGFACILITIESAREOFTENLOCALIZED INMORECENTRALIZEDLOCATIONS AGAINDUETOTHEAVAILABILITYOFTRANSPORT MARKETS CAPITALANDOVERALL BUSINESSENVIRONMENTS4HUSTHECONTRIBUTIONOFMININGTOTHENATIONALINCOMEINLOWANDMIDDLEINCOME COUNTRIESMAYBECOMELIMITEDTOEXTRACTIVEACTIVITIES ANDINSUCHCASES THECONTRIBUTIONMAYBELESS  SAYINTHETOOF'$0RANGE/VERALL LARGESCALEMININGTENDSTOGENERATECOMPARATIVELYLOWLEVELS OFDIRECTEMPLOYMENTANDMAYOFTENACCOUNTFORNOMORETHANFROMTOOFTOTALNATIONALEMPLOYMENT INLOWINCOMECOUNTRIES-INERALEXPORTSFORSUCHCOUNTRIESCANBESUBSTANTIAL ACCOUNTINGFROMTO OFALLEXPORTS PARTICULARLYINLOWINCOMEAGRARIANECONOMIES3TATEREVENUESRECEIVEDFROMTHE MININGSECTOR THROUGHDIRECTANDINDIRECTTAXATIONCANACCOUNTFROMTOOFTOTALREVENUES4HISIS APARTICULARLYIMPORTANTCONTRIBUTIONINLOWANDMIDDLEINCOMECOUNTRIESTHATOTHERWISEHAVELIMITEDTAX RAISINGCAPACITY 3OURCE "ASEDON)#-- @4HEROLEOFMININGINNATIONALECONOMIES Recommendations 3.5.   %THIOPIANPOLICYAIMSTOWARDSDEVELOPINGANESSENTIALLYNEWECONOMICSECTOR THATISTHELARGE SCALEMINERAL SECTOR4HELEADTIMESFROMEXPLORATIONTOALARGE SCALEMINEBEINGCOMMISSIONEDARELONGOFTEN  YEARS ANDTHUS ASIMILARLYLONG TERMPERSPECTIVEISNECESSARYWHENSUPPORTINGANDMANAGINGTHESECTOR /URPROJECTIONSSUGGESTTHATTHERAPIDDEVELOPMENTENVISIONEDMAYNOTBEREALIZED ANDTHEREFORETHE DEVELOPMENTOFTHEMINERALSECTORCOULDBENElTFROMADOPTINGALONGERTERMVIEWBASEDONASLOWERGROWTH RATE!LONGTERMVIEWNEEDS INGENERAL TOBEBASEDONTHESECTORSPARTICULARCHARACTERISTICSSUCHASTHE INHERENTGEOLOGICALANDlNANCIALUNCERTAINTIES THEINDUSTRYSCYCLICALNATURE ANDTECHNICALREQUIREMENTS NEEDEDFORADVANCEDEXPLORATIONPROJECTSTOBECOMEACTUALPRODUCINGMINES 7HENDEVELOPINGTHISNEWSECTOR ITNEEDSTOBECONSIDEREDHOWTOBESTESTABLISHECONOMICLINKAGESWITH OTHERNEWANDEXISTINGSECTORS4HElNDINGSOFTHISREPORTSUGGESTTHATARANGEOFAPPROACHESANDACTIVITIES WILLBENEEDED ANDTHESEARELISTEDBELOW )TISNECESSARYTOASSESSTHENEEDSOFTHEDOMESTICECONOMYFORINDUSTRIALMINERALSTHATCANBEGENERATED WITHINCOUNTRY&OREXAMPLERECENTINCREASESINCEMENTPRODUCTIONCAPACITYISTENDINGTOWARDSOVERSUPPLY FORTHEDOMESTICMARKET/VERALL %THIOPIASABSORPTIONCAPACITYNEEDSTOBEASSESSEDBEFOREMOREPROTECTION SUCHASTHEBANONCEMENTIMPORTS ISPROVIDEDTOTHESECTOR 4HEDEVELOPMENTOFINDUSTRIALMINERALMININGWOULDBENElTFROMADETAILEDMARKETANALYSIS)NTHElRST INSTANCE PRODUCTIONWOULDBEAIMEDFORTHEDOMESTICMARKETTOSUBSTITUTEFORIMPORTSANDSUCHANANALYSIS SHOULDESTABLISHQUANTITIESANDQUALITIESDETAILEDSPECIlCATIONS OFDIFFERENTINDUSTRIALMINERALSREQUIRED &OLLOWINGONPREVIOUSSTUDIESOFINDUSTRIALMINERALSDEPOSITSUNDERTAKENBYTHE'3% ADDITIONALSTUDIES WOULDTHENBEREQUIREDTOESTABLISHWHETHERTHEDEPOSITSTHATHAVEBEENIDENTIlEDCANMEETTHEQUALITY REQUIREMENTSOFTHEMARKET 34 FINAL  REPORT /NEOFTHENATURALLINKAGESFROMAMININGSECTORISTOWARDSTHEBENElCIATIONOFTHEMINERALRAWMATERIAL PRODUCEDINTHECOUNTRY!LTHOUGHTHEREISINDICATEDGEOLOGICALPOTENTIALFORBASEMETALSIN%THIOPIA SUCH MINESWILLONLYBEESTABLISHEDINTHELONGERTERMPERSPECTIVE!TTHISTIME THUS %THIOPIASMETALAND ENGINEERINGINDUSTRYREMAINSSMALLANDRELIANTONDOMESTICSCRAPANDIMPORTEDRAWMATERIALS%FFORTSNEED TOBEMADETOALIGNTHEAIMSOFTHEENGINEERINGSECTORWITHTHATOFTHEIDENTIlEDPOTENTIALMINERALS 0OLICIESTOINCREASELINKAGESCANBEAIMEDATANUMBEROFDIFFERENTLEVELS4HESEARESUMMARISEDINTABLE -ACROPOLICIESTHATPROMOTEPROPERTYRIGHTSANDPROVIDEABUSINESSFRIENDLYENVIRONMENTAREWELCOME 4ARGETEDPOLICIESFORTHEMINERALSECTORCANDIFFERONTHEBASISOFTHEMINERALPRODUCEDFOREXAMPLE TARGETEDPOLICIESFORGOLDWILLDIFFERFROMTHOSEFORIRONORE!VALUECHAINANALYSISFOREACHMINERALCOULDBE AUSEFULTOOLINDETERMININGWHERETHEINVESTMENTREDUCINGCOSTSAREINCURREDANDWHERETHELARGESTPROlT MARGINISGENERATED!VALUECHAINANALYSISWILLALSOALLOWFORSTRATEGIESFORBETTERTARGETEDBACKWARDAND FORWARDLINKAGESTOBEDEVELOPED/NAlRMLEVEL THENATUREOFTHELEADlRMCANAFFECTTHELINKAGESTHAT AREGENERATED ANDlRMSWHICHASSISTINLOCALCAPACITYDEVELOPMENTSHOULDBEENCOURAGED Table  3.5.  Macro,  meso  and  micro  policies  to  promote  production  linkages  to  the  resource  sector. 0ROPERTYRIGHTS STABILITY EXCHANGERATE SKILLSAND.ATIONAL3YSTEMOF -ACRO0OLICIES )NNOVATION INFRASTRUCTURE INNOVATION "ASEDONANINFORMEDANALYSISOFDIFFERENTCOMMODITIESSECTORSANDTHEIR LINKAGES TOIDENTIFYINGFEASIBLEBACKWARDANDFORWARDLINKAGESTHROUGHTHE INVOLVEMENTOFVALUECHAINRESTRUCTURINGCONSORTIUMINVOLVINGKEYPLAYERSIN THESECTOR -ESOTARGETING  !NALYSISOFGLOBALVALUECHAINSINEACHCOMMODITIESSECTORTODEVELOPSTRATEGY POLICIES TOSELECTIVELYSOURCEKEYTECHNOLOGIESANDTOENGAGEWITHTHEMOSTCOOPERATIVE GLOBALlRMSWHOSESTRATEGIESLENDTHEMSELVESTOLINKAGEDEVELOPMENT 3ECTORSPECIlCSUPPORTFORKEYMARKETFAILURES NOTABLYWITHREGARDTO CAPABILITIESANDSKILLS THE.ATIONAL3YSTEMOF)NNOVATIONANDINFRASTRUCTURE -ICRO lRMLEVEL ,EADlRMSTRATEGIES SUPPLYCHAINANDCUSTOMERDEVELOPMENTSTRATEGIES lRM POLICIES LEVELUPGRADING 3OURCE -ORRISETAL  4HEMININGSECTORCANCONTRIBUTETOWARDSADIVERSIlEDECONOMY IFPOLICIESAREPUTINTOPLACENOWTOENSURE ITDOESNOTBECOMEANENCLAVESECTOR3UCHPOLICIESNEEDTOFOCUSONDEVELOPINGSKILLSBOTHENTREPRENEURIAL ANDLABOURCAPACITY THATSERVEASSUPPORTINDUSTRIESTOTHEMININGSECTOR4HESECANINCLUDEDEVELOPING LOGISTICALSUPPORT )4SKILLS PROVISIONOFSERVICESSUCHASSECURITYANDCATERING%NGINEERINGSKILLSCANBE DEVELOPEDTOSERVICETHEMACHINERYATOPERATINGMINES%FFORTSCANBEMADETOMANUFACTUREINPUTSFOR THEMININGOPERATIONSTHEMSELVESSTARTINGWITHLOWTECHNOLOGYPRODUCTSSUCHASPIPES MOVINGTOHIGHER TECHNOLOGYPRODUCTSASEXPERTISEDEVELOP 3KILLSDEVELOPEDINSUPPORTINGTHEMININGSECTORCANALSOBE TRANSFERREDTOOTHERSECTORS&OREXAMPLE THECAPACITYTOSERVICEHEAVYMACHINERYFORTHEMININGSECTOR CANBEUTILISEDFORTHECONSTRUCTIONSECTORANDLARGESCALEAGRICULTURALMACHINERY#APACITYDEVELOPEDBY THEPROVISIONOF)4SERVICESCANBEPROVIDEDTOOTHERSECTORSASWELL STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 35 ©  The  Swedish  Geological  AB 4.   HUMAN  RESOURCES  AND  EDUCATION  4HISCHAPTERCONCERNSLOCALHUMANRESOURCESFORWORKINTHEMININGANDEXPLORATIONINDUSTRYWHILETHE READERISREFERREDTO#HAPTERFORANASSESSMENTOFHUMANRESOURCESCAPACITYRELATEDTOMINERALSECTOR GOVERNANCE  7HILELARGE SCALEMININGISACAPITAL INTENSIVEBUSINESS ITCREATESFARLESSDIRECTEMPLOYMENTTHANFOREXAMPLE THEMANUFACTURINGINDUSTRY ANDEVENWITHARELATIVELYSTRONGDEVELOPMENTOFTHESECTOR LESSTHAN  NEWDIRECTMINEJOBSAREEXPECTEDWITHINTHENEXTYEARS3ECTION .EVERTHELESS JOBCREATIONMAY BEOFIMPORTANCETOMAINLYLOCALECONOMIES ANDSHORTAGEOFSKILLEDLOCALLABOURISALSOONEOFTHEPRIMARY BUSINESSRISKSCONSIDEREDBYINTERNATIONALCOMPANIESINTHEIRINVESTMENTSTRATEGIES)NSURVEYSUNDERTAKEN BY%RNST9OUNG SKILLSSHORTAGEWASRANKEDASTHETHHIGHESTBUSINESSRISKIN ANDINTHETWO PRECEDINGANNUALSURVEYSITWASRANKEDASHIGHASND%RNST9OUNG  AND   !$&!4$FUNDEDSTUDYONHUMANRESOURCESREQUIREMENTSFORTHE%THIOPIANMINERALSECTOR ANDTHEPROVISION OFHIGHEREDUCATIONAND46%4TRAINING HASRECENTLYBEENUNDERTAKEN#ATALYSTTO$EVELOPMENT  4HE READERISREFERREDTOTHISSTUDYFORADETAILEDASSESSMENTOFMINERALSECTORHUMANRESOURCESANDEDUCATION Current  employment  and  needs  for  the  future 4.1.    #URRENTMININGANDEXPLORATIONACTIVITIESWEREPRESENTEDIN#HAPTER)NSUMMARY THEREISONELARGE SCALE MINE THE,EGA$EMBIGOLDMINE WHICHEMPLOYSSOMEPEOPLE4HE+ENTICHATANTALUMMINE WHICHIS NOWONCAREANDMAINTENANCE USEDTOEMPLOYSOMEPEOPLE"YMIDTOLATE !LLANA0OTASHPLANS TOSTARTPRODUCTION INITIALLYWITHATOTALWORKFORCEOFSOMEPEOPLE!LLANASPOLICYISTOPUTEMPHASISON RECRUITINGLOCALLY(OWEVERFORMANYSKILLEDJOBS EXPATRIATELABOURISREQUIREDGIVENTHELACKOFCERTIlCATION OFTHESKILLEDDOMESTICLABOUR#ERTIlCATIONREQUIRESTHATANACCEPTABLE@PROOFOFCOMPETENCEISPROVIDED WHICHISTHERESULTOFASYSTEMATICPROCESSBASEDONTESTINGANDACCREDITATION SUCHASNUMBEROFHOURS SPENTUNDERSUPERVISION ATTESTATIONTOTHEABILITYTOPERFORMCERTAINTASKS ETC  !CCORDINGTOTHESCENARIOSDEVELOPEDIN#HAPTER LESSTHAN DIRECTMINEJOBSMAYBEEXPECTED PROBABLESCENARIO WITHINTHENEXTYEARS!SEMPHASIZEDIN#HAPTER THEPROPOSEDSCENARIOSARE HIGHLYUNCERTAINDUETOARANGEOFFACTORSMOREORLESSOUTOFCONTROLTOTHEMININGINDUSTRY  %XPLORATIONACTIVITIESHAVEINCREASEDOVERTHELASTCOUPLEOFYEARS#HAPTER ANDMOSTOFTHE ACTIVE lRMSAREINTERNATIONALORHAVEINTERNATIONALFUNDING-ANYOFTHESECOMPANIESHAVEEMPLOYEDLOCALGEOLOGISTS THATTOALARGEEXTENTCOMEFROM ANDHAVERECEIVEDTRAININGAT THE'EOLOGICAL3URVEYOF%THIOPIA'3% WHICH HASCREATEDASKILLSSHORTAGEATTHE'3%#HAPTER 4HUS THEREIS ANDWILLBE ASHORTAGEOFEXPLORATION GEOLOGISTSIN%THIOPIA$UETOTHEUNCERTAINNATUREOFTHEINDUSTRY THENUMBERISDIFlCULTTOESTIMATE'IVEN THECURRENTLEVELOFEXPLORATION ANDASSUMINGTHATTHISLEVELISMAINTAINEDORWILLINCREASEATAMODERATE LEVEL LABOURREQUIREMENTMAYBEONTHEORDEROFSEVERALHUNDREDTOAFEWTHOUSANDPROFESSIONALSOVERTHE NEXT YEARS  !CCORDINGTO#ATALYSTTO$EVELOPMENT ATTHEEXPLORATIONPHASE AROUNDOFTHEJOBSREQUIRE A"3CDEGREE A46%4LEVELORTECHNICIANLEVELS ANDTHEREMAININGWILLNOTREQUIREFORMAL TRAINING!TTHEMININGPHASE ABOUT OFTHEJOBSWOULDREQUIREA"3COR-3CDEGREE  A.ATIONAL 4ECHNICALAND6OCATIONAL%DUCATION4RAINING46%4 LEVELTECHNICIANLEVEL A46%4LEVELSPECIALIZED WORKER ANDTHEREMAINING WOULDNOTREQUIREANYFORMALTRAINING  (IGHLYSKILLEDLABOUR"3COR-3CLEVEL ATTHEEXPLORATIONPHASEWOULDPRIMARILYINCLUDEGEOLOGISTSAND GEOPHYSICIST SUPPORTEDBYTECHNICIANS DRILLERSANDCASUALLABOUR(IGHLYSKILLEDSTAFFINTHEMININGPHASE "3COR-3CLEVEL WOULDINCLUDEFOREXAMPLEMININGENGINEERS MINERALPROCESSINGENGINEERS MINE 36 FINAL  REPORT GEOLOGISTSANDSURVEYORS/THERQUALIlEDLABOURWOULDINCLUDEFOREXAMPLEVARIOUSTYPESOFTECHNICIANS  DRILLERS BLASTERS HEAVYEQUIPMENTOPERATORS HEAVYVEHICLEOPERATORSETC3EVERALJOBQUALIlCATIONSNOT SPECIlCTOMININGWILLALSOBEREQUIRED SUCHASACCOUNTANTS )4STAFF CIVILENGINEERS HUMANRESOURCES PERSONNEL ENVIRONMENTALEXPERTS ELECTRICIANS WELDERS ETC  3IMILARTOTHEMINERALSECTORGLOBALLY WOMENCONSTITUTEAVERYSMALLPARTOFTHELABOURFORCEINCURRENTLY OPERATINGEXPLORATIONANDMININGCOMPANIES#OMPANIESINTERVIEWEDINTHE#ATALYSTTO$EVELOPMENT  STUDYNEVERTHELESSNOTETHEIMPORTANCEOFANINCREASEDNUMBEROFWOMENINTHEINDUSTRY INPARTICULAR FORPOSITIONSTHATREQUIREGOODCAREFOREQUIPMENT)TISALSONOTEDTHAT!LLANA0OTASHSEEKSTOENCOURAGE WOMENTOWORKASTRUCKDRIVERS(ISTORICALLY MININGHASBEENAMALEDOMINATEDWORKPLACEMAINLYBECAUSE ITHASINVOLVEDPHYSICALLYHARDWORKANDTHEUSEOFRUDIMENTARYMININGTECHNIQUES OFTENINDIRTYAND REMOTEENVIRONMENTSnINMANYCULTURESANDTIMESCONSIDEREDNOTSUITABLEFORWOMEN4ODAY MININGIS ATECHNOLOGICALLYADVANCEDINDUSTRYTHATOFFERSSEVERALTYPESOFPOSITIONS FORWHICHMENANDWOMENARE EQUALLYQUALIlED&URTHERMORE SEVERALSTUDIESSHOWTHATBUSINESSESINGENERALBENElTFROMGENDERBALANCE INTERMSOFNUMBERSOFSTAFFATALLEMPLOYMENTLEVELS IETHEREISABUSINESSCASEFORMAINSTREAMINGGENDER INTOBUSINESSSTRATEGYDEVELOPMENT Education  and  vocational  training  in  Ethiopia 4.2.   Higher  education 4HEINFORMATIONBELOWISLARGELYDRAWNFROM#ATALYSTTO$EVELOPMENT )NGENERAL HIGHEREDUCATION HASEXPANDEDSIGNIlCANTLYOVERTHELASTTWODECADESWITHNEWUNIVERSITIESBEINGFOUNDED ANDTHEVARIETY OFPROGRAMSBEINGOFFEREDISALSOINCREASING2EFERRINGTOTHE-O%WEBSITEON-AY  #ATALYSTTO $EVELOPMENT REPORTSTHATTHEREAREACCREDITEDGOVERNMENTAL ANDNON GOVERNMENTAL HIGHER EDUCATIONINSTITUTIONSIN%THIOPIA (IGHEREDUCATIONOFDIRECTRELEVANCETOTHEMINERALSECTORISHOWEVERLIMITEDTOPROGRAMSIN%ARTH3CIENCE OR'EOLOGYGIVENATUNIVERSITIES AND-INING%NGINEERINGAND-ETALLURGYATUNIVERSITYEACH4HEREARE ALSOPROGRAMSIN'EOMATIC%NGINEERINGUNIVERSITY AND3URVEYING4ECHNOLOGYUNIVERSITIES  )NTHEACADEMICYEAR  THEREWEREALMOST STUDENTSENROLLEDINTHEABOVEMENTIONED PROGRAMS YEAR YEAR4ABLE 4HEMAJORITYWEREENROLLEDINTHE%ARTH3CIENCEAND'EOLOGYPROGRAMS  WHICHACCOUNTFORALMOSTOFTHESTUDENTS4HE-INING%NGINEERINGPROGRAMISGIVENBY5NITY5NIVERSITY  WHICHISASUBSIDIARYOF-IDROC'OLD)NADDITIONTOTHISNOTSHOWNIN4ABLE 5NITY5NIVERSITYRUNSA MININGPROGRAMSINCETWOYEARS WITHSTUDENTSINEACHYEAR-IDROCEXPECTSTHATMOSTOFTHEGRADUATES WILLJOINTHECOMPANYAFTERGRADUATION 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 (OWEVER ITISNOTKNOWNWHETHERTHISISDUETOANACTUALINCREASEDFEMALEENROLMENT ORIFFEMALESTUDENTSHAVEAHIGHERTENDENCYTODROPOUTOFUNIVERSITY4HETOTALSHAREOFFEMALESTUDENTS  ISSOMEWHATLOWERTHANNATIONALUNIVERSITYTOTALOF!SCANBESEENIN4ABLE THEGENDER DISPARITYISTHELOWESTIN%ARTH3CIENCE'EOLOGY 4HEMAJORITYOFTHESTUDENTSAREENROLLEDIN%ARTH3CIENCE'EOLOGYWITHATOTALOFALMOST STUDENTS 4ABLE WHICHGIVESANAVERAGEOFSTUDENTSYEAR!DOPTINGOVER ALLUNIVERSITYGRADUATIONRATEOF ABOUTBASEDONDATAIN#ATALYSTTO$EVELOPMENT  4ABLE WOULDGIVEGEOLOGYGRADUATES YEARANDMANYOFTHESEMAYCHOOSETOWORKINOTHERSECTORSTHANEXPLORATIONANDMINING4HUS THENUMBER OFUNIVERSITYGEOLOGYGRADUATESWOULDLIKELYNEEDTOINCREASETOMEETTHEMINERALSECTORDEMANDS STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 37 Table  4.2.     Male,  female  and  percent  female  students  for  each  year  (1-­4)  in  university  programs  of  relevance  to  the   mineral  sector,  academic  year  2011-­2012. Year Male Female Total Percent  female                     Total       $ATASOURCE-O%%DUCATIONSTATISTICALABSTRACT   ASREFERREDTOBY#ATALYSTTO$EVELOPMENT  4HEUNIVERSITIESAREFACINGSEVERALPROBLEMSRESULTINGINTHATTHEQUALITYOFTHEEDUCATIONISVERYLOW!CCORDING TOTHE-O%!NNUALSTATISTICALABSTRACT   THEREISATOTALOFACADEMICSTAFFATDEPARTMENTS OFRELEVANCETOTHEMINERALSECTOR4HISISDEEMEDTOBESOMEWHATLOW BUTMOREORLESSADEQUATELOOKING ATTHEOVER ALLNUMBEROFSTUDENTS(OWEVER THEREARELARGEDIFFERENCESBETWEENTHEUNIVERSITIES WITH STUDENTTEACHERRATIOSRANGINGFROMABOUTTO WITHMANYGEOLOGYDEPARTMENTSBEINGUNDERSTAFFED &URTHERMORE THELEVELOFQUALIlCATIONOFTHESTAFFISOVER ALLLOWWITHONLYBEING0H$ HOLDING-3C DEGREES WHILETHEMAJORITYOFHOLDABACHELORSDEGREE/NLYOFTHEACADEMICSTAFFAREFEMALE ,ABORATORYANDlELDTRAINING WHICHAREBOTHCENTRALTO'EOLOGYAND%ARTH3CIENCEEDUCATION INGENERAL SUFFERSFROMLACKOFTRANSPORT LABORATORYFACILITIES EQUIPMENTANDINSTRUMENTS ANDFROMALACKOFSUFlCIENTLY QUALIlEDTEACHERSANDTECHNICIANS4HUS THEEDUCATIONISTOAVERYLARGEDEGREETHEORY BASED 4HE!DDIS!BABA5NIVERSITY!!5 THEOLDESTANDBESTDEVELOPEDINTHECOUNTRY STANDSOUTFROMTHERESTWITH MORETHANHALFOFALLTHE0H$ LEVELSTAFFANDWITHABETTEREQUIPPED%ARTH3CIENCEDEPARTMENT!PPARENTLY  MANYOTHERUNIVERSITIESRELYONASSISTANCEFROMTHE!!5 FOREXAMPLEINUSINGTHEIRLABORATORIES(OWEVER  EVENAT!!5THEREARESERIOUSSHORTFALLSWITHREGARDSTOlELDANDLABORATORYTRAINING )NTERVIEWSWITHTHEINDUSTRYUNDERTAKENWITHINTHISPROJECT ANDINFORMATIONRECEIVEDBYTHE!!5#ATALYSTTO $EVELOPMENT  INDICATETHATSTUDENTSAREINGENERALLYPOORLYTRAINEDTOTHEDEGREETHATMANYCANNOT IDENTIFYDIFFERENTROCKTYPES TVET !NEW46%4STRATEGYWASADOPTEDBY'O%IN DESIGNEDTOBEOUTCOMEBASEDANDDEMAND DRIVEN !FTERSECONDARYEDUCATION'RADES  OFTHESTUDENTSTHATCONTINUESTUDYINGAREEXPECTEDTOJOIN 46%4INSTITUTIONSANDAREEXPECTEDTOJOINHIGHEREDUCATIONINSTITUTIONS)N SOME  STUDENTSENROLLEDAT46%4INSTITUTIONSANDOFTHESEWEREFEMALE!MONG46%4TRAINERS HOWEVER ONLY SOME AREFEMALE 46%4INSTITUTIONSOFFERTRAININGATlVELEVELSWHERE,EVEL6WOULDPRODUCEMINERALSECTORPROFESSIONALSSUCH ASTECHNICIANSINMINING MINERALPROCESSINGANDGEOLOGYAND,EVEL))) )6WOULDOFFERMINERALSECTORSPECIlC TRAININGINFOREXAMPLEDRILLING SURVEYING MINERALPROCESSINGEQUIPMENTOPERATION ETC(OWEVER ASYET  NEEDS OCCUPATIONALSTANDARDS AND46%4CURRICULASPECIlCTOTHEMINERALSECTORHAVENOTBEENDElNED WHILE'O%PLANSTOEXPAND46%4TOINCLUDEMINERALSECTORSPECIlCPROFESSIONS &OR,EVEL6 THELACKOF46%4CURRICULAISNOTSPECIlCTOTHEMINERALSECTORBUTTHEREAREOVER ALLVERYFEW PROGRAMSOFFEREDANDGRADUATESATTHISLEVEL3EVERAL46%4 NEVERTHELESS OFFERGENERALTRAININGAT,EVELS ) )6INVARIOUSAREASPLUMBING ENGINEERING DRILLING SURVEYING MACHINEOPERATION ETC PRIMARILYTOMEET THENEEDSOFTHEINDUSTRIALANDAGRICULTURALSECTORS'RADUATESATTHESELEVELCOULD INMANYCASES WORKIN THEMINERALSECTORIFINTERNALTRAININGATEMPLOYMENTISGIVEN $ESPITETHELACKOFCURRICULA 46%4TRAININGPRESUMABLY,EVEL IN3URVEYING4ECHNOLOGYISGIVENATTWO UNIVERSITIES!DAMA5NIVERSITYAND$IRE$AWA5NIVERSITY 4HEREISTOTALOFSTUDENTSENROLLEDBUTONLY OFTHESEAREFEMALE AFARLOWERSHAREWHENCOMPAREDTOBOTH46%4INGENERAL ANDTORECENT UNIVERSITYENROLMENTINMINERALSECTORDISCIPLINES4ABLE  38 FINAL  REPORT Recommendations 4.3.   !NIMPROVEMENTOFTHEQUALITYOFEDUCATIONATHIGHERINSTITUTIONS ANDDEVELOPMENTOF46%4TRAINING WOULD ASSISTINATTRACTINGINVESTMENTINEXPLORATIONANDITWOULDALSOLEADTO%THIOPIABENElTINGBETTERFROMA POTENTIALLYGROWINGMINERALINDUSTRYTHROUGHINCREASEDLOCALEMPLOYMENT)NCREASEDEFFORTSINTHESEAREAS INITIATEDTODAYWOULDBEWELLTIMEDASTHEMININGSECTORISSTILLINITSINFANCY.EVERTHELESS EXPLORATIONSKILLS AREIMMEDIATELYREQUIREDANDNEEDSINTHISAREAAREEXPECTEDTOGROWINTHEFUTURE WHILEANINCREASED REQUIREMENTFORPROFESSIONALSPECIALIZEDINMININGMININGENGINEERSETC ISMORELIKELYEXPECTEDWITHIN SOME YEARS #ATALYSTTO$EVELOPMENT RECOMMENDSASTRATEGYFORSUPPORTTOIMPROVETHEQUALITYOFMINING RELATED EDUCATIONIN%THIOPIA4HEPROPOSEDSTRATEGYTAKESALONGTERMVIEWONIMPLEMENTATIONYEARS ANDHAS AWIDESCOPE INCLUDINGNOTONLYSUPPORTFORIMPROVEDTECHNICALTRAINING BUTALSOFORTHEREINFORCEMENTOF INFORMATIONCAPITALANDORGANIZATIONALCAPITAL4HIS ANDSIMILARINITIATIVES WOULDBEOFFUNDAMENTALIMPORTANCE TOTHEDEVELOPMENTOFTHESECTOR)MPORTANTLY THECURRENTGENDERDISPARITIESSEENATUNIVERSITIESAND46%4S NEEDTOBECONSIDEREDANDSTRATEGIESFORHIGHERWOMENENROLMENTANDEXAMINATIONRATESDEVELOPED 46%4CURRICULAAREDEVELOPEDONTHEBASISOFOCCUPATIONALSTANDARDS ANDACCORDINGTOTHE46%4STRATEGY THEVARIOUSMINISTRIESARERESPONSIBLEFORSETTINGTHESESTANDARDS!PARTFROMDEVELOPINGOCCUPATIONAL STANDARDS ITISPROPOSEDTHAT-O-WOULDBEINVOLVEDINTRAININGDEVELOPMENTTHROUGHTHEMONITORINGAND ASSESSMENTOFTHEREQUIREMENTSOFTHEINDUSTRYSOTHATREQUIREDQUALIlCATIONSANDNUMBERSOFSTUDENTSARE ALIGNEDWITHFUTUREINDUSTRYDEMAND 4HE'3%ANDTHEMINERALSECTORINDUSTRYHOLDAMPLEKNOWLEDGEINTHEAREASOFEXPLORATIONANDMINING %DUCATIONTRAININGOFMINERALSECTORPROFESSIONALCOULDBENElTGREATLYFROMCOLLABORATIONBETWEENUNIVERSITIES AND46%4S ANDTHE'3%ANDTHENEWLYESTABLISHEDMINERALINDUSTRYBUSINESSORGANIZATIONSEE#HAPTER  %THIOPIAHASAVERYINTERESTINGGEOLOGYWITHROCKSRANGINGINAGEFROM0RECAMBRIANTOVERYYOUNGVOLCANIC ROCKSANDON GOINGGEOLOGICALPROCESSESINTHERIFTVALLEY4HISGEOLOGICALENDOWMENTISOFINTERESTTORESEARCH GROUPSGLOBALLYANDCOULDPROVIDEAPOSSIBILITYFORJOINTRESEARCHPROGRAMMES WHEREEDUCATIONALSUPPORT FROMINTERNATIONALUNIVERSITIESCOULDBEINCLUDED STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 39 ©  The  Swedish  Geological  AB  34!+%(/,$%2/6%26)%7 Stakeholders  and  key  sector  involvement 5.1.    &EDERALGOVERNMENTALINVOLVEMENTINTHEMINERALSECTORISCENTREDTOTHE-O-ANDTHE'3%SEENEXT CHAPTER -INISTRYOF&INANCEAND%CONOMIC$EVELOPMENT-O&%$ HASINTERESTINTHESECTORRELATEDTO ITSCONTROLOFTHEBUDGETPROCESSANDPLANNINGPROCESS ITSINTERESTINANDADMINISTRATIONOFREVENUES  TAXES ROYALTIESANDFOREIGNEXCHANGEEARNINGSFROMTHESECTOR ANDITSCONTROLOFTHElNANCIALASPECTSOF DEVELOPMENTPROGRAMSSUPPORTBYDEVELOPMENTPARTNERS4HE.ATIONAL"ANKOF%THIOPIAISINVOLVEDTHROUGH THEGOLD BUYINGPOLICYWHEREGOLDPRODUCEDBYARTISANALANDSMALL 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ARECONCERNEDWITHTHISNEED)TISIMPORTANTTHATTHEEFFORTSINTHIS REGARDAREWELLCOORDINATED&URTHER ASMININGSECTORDEVELOPMENTISSOMETHINGTHATREQUIRESEXTENSIVE PERIODSOFTIME ITISIMPORTANTTHATALLINITIATIVESAREPLANNEDWITHALONGTERMPERSPECTIVE4HEINITIATIVES TAKENSHOULD FURTHERMORE TOTHEEXTENTPOSSIBLEBEUNTIEDTOANYSPECIlCNATIONORORGANISATION ANDTHE BESTANDORMOSTRELEVANTEXPERTISESHOULDBESOUGHT #IVIL3OCIETYSKNOWLEDGEANDUNDERSTANDINGOFMINING ANDITSVARIOUSIMPLICATIONS ISRATHERLIMITEDIN %THIOPIA4HUS ACTIVITIESTHATSTRENGTHENEITHERFORMAL.'/#3/S ORTHATTARGETMOREINFORMALANDTRADITIONAL LOCALORGANISATIONS ARENEEDED4HISTOENSURETHATTHEVOICEANDCONCERNSOFLOCALCOMMUNITIESMAYBE ARTICULATED EXPRESSEDANDCONSIDEREDINTHEDEVELOPMENTOFFUTUREMININGPOLICYASWELLASANYFUTURE MININGANDEXPLORATIONSPROJECTS 3OCIALMOBILIZATIONANDDISPUTERESOLUTIONISANIMPORTANTTOENSURETHATLOCALCOMMUNITIESDONOTUNNECESSARILY BEARTHEBRUNTOFEXTRACTIVEINDUSTRYOPERATIONS#URRENTLY UNDERTHEWORKPLANFORPREPARATIONFORTHE CANDIDACYTOTHE%XTRACTIVE)NDUSTRIES4RANSPARENCY)NITIATIVE%)4) THE-INISTRYOF-INESISWORKINGWITH CIVILSOCIETYORGANIZATIONSTOPROMOTESOCIALMOBILIZATIONANDAWARENESSAMONGCIVILSOCIETYMEMBERSFOR THEMININGSECTOR3OCIALMOBILIZATIONALSOINCLUDESMANAGINGEXPECTATIONSOFTHELOCALCOMMUNITIESWHEN ITCOMESTOMININGOPERATIONSINTHEIRAREAS%DUCATIONHASTOBEANIMPORTANTPARTOFTHISEFFORT 4HEMEDIASROLEININFORMINGTHEPUBLICABOUTMINING ANDININmUENCINGPUBLICOPINIONISIMPORTANTIN ALLCOUNTRIES)NITIATIVESAIMEDATIMPROVINGJOURNALISTSANDOTHERSINTHEMEDIASECTORKNOWLEDGEAND UNDERSTANDINGOFHOWMODERNEXPLORATIONANDMININGISCONDUCTEDWOULDTHEREFOREBEBENElCIAL 42 FINAL  REPORT ©  Yara  Dallol  BV 6.   MINERAL  POLICY  AND  LEGISLATION Introduction 6.1.    4HEMININGSECTORHASRECEIVEDCONSIDERABLEATTENTIONFROMPOLICYMAKERSINLATERYEARS(OWEVER ADECADE ORSOAGO MININGPOLICYISSUESWEREMOSTINTENSELY ANDALMOSTONLY DISCUSSEDANDCONSIDEREDINANYDEPTH ATTHE7ORLD"ANK4ODAY THEREAREANUMBEROFONGOINGPOLICYDEVELOPMENTINITIATIVES BOTHBYNEWLYSET UPINSTITUTIONSASWELLASBYWELL ESTABLISHEDORGANISATIONSANDORTHINKTANKSSUCHASTHE!FRICAN5NION  %UROPEAN5NIONANDTHE7ORLD%CONOMIC&ORUM WHOHAVEPREVIOUSLYGIVENTHEMININGSECTORRELATIVELY LIMITEDINTERESTSEEBOX  Box  2:  Policy  initiatives  for  the  Mining  Sector 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   BASEDONFREEMARKETREFORM ANDTOENSURETHATFOREIGNINVESTMENTSWEREALLOWEDTOmOWINTOEXPLORATION ANDMININGDEVELOPMENT7ITHREGARDSTOEXPLORATION ITWASRECOMMENDEDTHATRIGHTSSHOULDBEISSUES ONAhlRSTCOME lRSTSERVEDvBASIS 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   "ANKPROJECTSANDADEBATEOVERTHEhRESOURCECURSEv LEDTOAREVIEWOFTHEBANKINVOLVEMENTIN PROJECTSINTHEhEXTRACTIVESECTORv4HEh%XTRACTIVE)NDUSTRIESREVIEWv WASCOMPLETEDINANDIT CONCLUDEDTHATTHEPROPERDEVELOPMENTOFEXTRACTIVEINDUSTRIESCANCONTRIBUTETOPOVERTYREDUCTIONAND THAT7ORLD"ANKINVOLVEMENTCANPOSITIVELYINmUENCEINDUSTRYSTANDARDS3INCE THE7ORLD"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   GENERAL THESEEITHERAIMTOENSURETHEFUTURESUPPLYOFMETALSEGTHE%5SRAWMATERIALSINITIATIVE  ORATTEMPTINGTOPROVIDEADVICETORESOURCERICHCOUNTRIESOFHOWTOBETTERENSURETHATBENElTSOFTHE SECTORCANBEBETTERHARNESSED3OMEOFTHELATTERTYPEOFADVICEEGTHE.ATURAL2ESOURCE#HARTER IS suggesting  that  the  mineral  sector  should  be  managed  more  like  the  oil  sector,  including  public  bidding   FORTENEMENTS INCONTRASTTOhlRSTCOME lRSTSERVEDvAPPROACH/THERDEVELOPMENTRELATESTOATTEMPTSTO FORMALISE BETTERSTRUCTUREANDEVENSTIPULATELEGALREQUIREMENTSFORTHE#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 BASEDSERVICES4HENEEDTOENSURELOCALDEVELOPMENTANDCOMMUNITYBENElTSAREHIGHLIGHTED ASARE efforts  to  improve  the  capacity  of  nations  to  negotiate  contracts  with  mining  companies. Ethiopian  mineral  policy 6.2.    4HE'40HASASTRONGROLEIN%THIOPIAINTERMSOFPOLICYFORMULATION ANDTHE-O-HASESTABLISHEDA YEAR PLANINRESPONSETOTHE'40%THIOPIAHASNOTPREVIOUSLYHADANOFlCIALMINERALPOLICYBUTTHEREISNOWA DRAFT-INERAL0OLICYUNDERREVIEW4HE-INING0ROCLAMATIONALSOCONTAINSAFEWPOLICYELEMENTS STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 43  )NLINEWITHMORERECENTPOLICYDEVELOPMENTSSEEBOXABOVE THE%THIOPIANPOLICYFRAMEWORKRECOGNIZESTHE POTENTIALOFTHEMINERALSECTORTOBECOMEA@TRIGGEROFINDUSTRIALIZATIONANDWIDERECONOMICDEVELOPMENT WITH AMBITIOUSGOALSSETINTHE'40(OWEVER THE-O-INDEPENDENTLYPRODUCESITSTARGETSANDBUDGETREQUESTS  ANDTHERESEEMTOBELITTLEORNOCOOPERATIONWITHOTHERRELEVANTMINISTRIESSUCHASTHATFORTRANSPORT INDUSTRY ANDTRADE )TWOULDAPPEARTHATATTHEPLANNINGSTAGE EACHSECTORINDUSTRIAL AGRICULTURAL TEXTILE ETC IS TREATEDASASEPARATEENTITYANDCROSS SECTORALLINKAGESANDCO DEPENDENTDEVELOPMENTISNOTSUFlCIENTLY CONSIDERED  4HEPOLICYFRAMEWORKCLEARLYDElNESTHEROLEOFTHEGOVERNMENTASTHEFACILITATOR 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4HEDRAFT-INERAL0OLICYCOVERSARANGEOFAREASAPPROPRIATEATAPOLICYLEVEL ANDITISCOMPREHENSIVEIN ITSOVERALLCONTENT WHILEITVARIESEXTENSIVELYINCONTENTDETAILANDPOLICYACTIONS4HUS ITISVERYDETAILEDIN SOMEPLACES ANDMANYSECTIONSCOULDBEPLACEDINLAWSORREGULATIONSRATHERTHANPOLICY)NOTHERPLACES  ITISRATHERVAGUEANDGENERALWITHALACKOFPOLICYMEASURESANDACTIONS)NALL THISMAKESITDIFlCULTFOR STAKEHOLDERSTOASSESSTHEPOLICYANDFORTHEAUTHORITIESTOIMPLEMENTTHESAME  %THIOPIAISASIGNATORYTOTHE!-6BUTTHE%THIOPIANPOLICYFRAMEWORKDOESNOTREFERTOTHE!-6ANYWHERE 4HEYDO HOWEVER SHAREMANYOVER ALLPOLICYDIRECTIONS INCLUDINGTHEOUTLOOKTOREGIONALPLANNINGAND COOPERATION ACENTRALVISIONOFTHE!-6  2EGIONALSTATESIN%THIOPIADONOTHAVETHEIROWNMININGPOLICYDOCUMENTS APARTFROMTHEREGIONAL'40S 4HESECTIONINTHE/ROMIA'40CONCERNINGMININGAPPEARSSIMILARTOTHEFEDERAL LEVEL'40 BUTWITHLESS DETAIL Mineral  legislation  and  model  mining  agreement 6.3.    4HEPRIMARYLEGISLATIVEBRANCHOFTHEFEDERALGOVERNMENT THATIS THE(OUSEOF0EOPLES2EPRESENTATIVES  ENACTSFRAMEWORKLAWS0ROCLAMATIONS ANDDELEGATETHE#OUNCILOF-INISTERSTOENACTSECONDARYLEGISLATION 2EGULATIONS 0ROCLAMATIONSOFTENDELEGATEASPECIlCAUTHORITYMINISTRYAGENCYBUREAUBOARDOFlCE TO DEVELOPFURTHERSECONDARYLEGISLATION$IRECTIVES )NCASEOFCONTRADICTIONS 0ROCLAMATIONSPREVAILOVER 2EGULATIONSAND2EGULATIONSPREVAILOVER$IRECTIVES/NESHOULDNOT HOWEVER LOSESIGHTOFEXCEPTIONAL CIRCUMSTANCESWHEREIN0ROCLAMATIONSMIGHTBEAMENDEDBY2EGULATIONS4HEMAINLEGISLATIONFORTHE GOVERNANCEOFTHEMINERALSECTORINCLUDES   4HE#ONSTITUTION    -INING/PERATIONS0ROCLAMATION.O   -INING/PERATIONS!MENDMENT 0ROCLAMATIONPASSEDIN$ECEMBER    -INING/PERATIONS2EGULATION.OBASEDONTHE-INING0ROCLAMATION.O   4RANSACTIONSOF0RECIOUS-INERALS0ROCLAMATION.OPROVISIONSAROUNDBROKERAGE CRAFTING ANDRElNINGOFPRECIOUSMINERALS   $IRECTIVES ISSUEDIN!MHARICONLY   2EGARDINGTHEISSUANCEOFPROFESSIONALCERTIlCATEFORPROVISIONOFCONSULTINGSERVICESINTHEMINING SECTOR !UGUST   4ODETERMINETHEMAXIMUMGEOGRAPHICSCOPEOFLICENCES *UNE  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FORSTATEINVOLVEMENTINMINING4HEREAREGOODEXAMPLESOFPARTLYORFULLYSTATE OWNEDMININGCOMPANIES SUCCESSFULLYCOEXISTINGWITHTHEPRIVATESECTORFOREXAMPLE#/$%,#/IN#HILEAND,+!"IN3WEDEN 3UCH SUCCESSESAREGENERALLYBASEDONLONGHISTORIESANDSIGNIlCANTCONTRIBUTIONSFROMTHERESPECTIVECOMPANIES TONATIONALDEVELOPMENT BUTALSOONCLEARPOLICIESANDRULESFORHOWSUCHCOMPANIESSHOULDBEMANAGED ANDRUN ASWELLASTHETRANSPARENTIMPLEMENTATIONOFTHESERULES)TISRECOMMENDEDTHATTHE%THIOPIAN GOVERNMENTCAREFULLYCONSIDERTHELESSONSLEARNEDFROMELSEWHERESEEBOX ANDDEVELOPSANDIMPLEMENTS POLICIESTHATAREINLINEWITHTHEWEALTHOFEXPERIENCESTHANNOWEXISTWITHREGARDSTOSTATEINVOLVEMENTIN MINING !FORUMFORCOLLABORATIONEGPOLICYCOMMITTEE INVOLVINGOTHERAUTHORITIESTHANTHE-O-EGTRANSPORT  INDUSTRY WATERANDENERGY ENVIRONMENT EDUCATION INVESTMENT WOULDBEBENElCIALTOMINERALPOLICYDElNITION ANDIMPLEMENTATION4HECURRENTDRAFTMINERALPOLICYINCLUDESMANYAREASTHATREQUIREKEYINVOLVEMENT FROMOTHERAUTHORITIES ANDPOLICYMEASURESACTIONSNEEDTOBEBETTERDElNEDTOFACILITATEIMPLEMENTATION -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   HAVECONTINUEDTOEXIST BUTITSRELATIVEIMPORTANCEHASVARIED REmECTINGTHECYCLICALITYOFTHESECTORAS 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#URRENTLY THE%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 STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 47 4HE'40COULDAIMFORAMORELONG TERMVIEWOFTHEDEVELOPMENTOFTHEMININGSECTOR4HISSHOULDBEBASED ONANAWARENESSOFTHESECTORSPARTICULARCHARACTERISTICSINHERENTGEOLOGICALANDlNANCIALUNCERTAINTIES  THEINDUSTRYSCYCLICALNATURE TECHNICALREQUIREMENTSFORADVANCEDEXPLORATION 4HISAWARENESSCANAND SHOULDPERMEATEALLASPECTSOFMANAGEMENTOFSECTORGROWTH FROMTHE'40TOTHEROLEOFTHE-O-4HE ENVISIONEDCONTRIBUTIONFROMTHEMINERALSECTORTOTHENATIONALECONOMYBYMAYNOTBEMET ANDA SLOWERDEVELOPMENTCANBEVIEWEDASPOSITIVEASITGIVESAMPLETIMEFORNEEDEDGOVERNANCESTRUCTURESTO DEVELOP 4HEDEVELOPMENTOFNEWREGULATIONSANDREVISIONOFTHE--! ONTHEBASISOFTHENEWMININGPROCLAMATION WILLLEADTOAMORECOMPLETELEGALFRAMEWORK!COMPREHENSIVEREVISIONOFTHE--! INTHELIGHTOFNEWLAWS ANDREGULATIONS INCOMINGTRANSPARENCYREQUIREMENTSANDSUSTAINABLEDEVELOPMENTCOMMITMENTS WOULD ALSOMAKEITAUSEFULTOOLFORCOORDINATINGTHEWORKOFDIFFERENTREGULATORYAGENCIESWITHAROLEINMINING EGTHEENVIRONMENTALANDWATERAGENCY THERELEVANTAGENCYFORPLANNINGINFRASTRUCTUREANDCOMMUNITY DEVELOPMENT ASWELLDIFFERENTLEVELSOFJURISDICTIONALAUTHORITY nASINLONG TERMMININGAGREEMENTSIN 7ESTERN!USTRALIA!THOROUGHREVIEWOFTERMINOLOGYANDCONSISTENCYWITHTHEOVERALL%THIOPIANLEGALSYSTEM ISALSORECOMMENDED 4HEADVANTAGESANDDISADVANTAGESOFAMININGLICENSINGREGIME WHICHISNOTSTRICTLYBASEDONTHElRST COME lRST SERVED MAYBERECONSIDERED7HILETHEGROUPINGANDASSESSMENTOFEXPLORATIONLICENSEON AMONTHLYBASISMAYHAVESOMEMERITINTHAT@SPECULATIONANDAPPLICANTSTHATDONOTHAVEINMINDTO UNDERTAKESERIOUSEXPLORATIONCANBEAVOIDED ACOMMONVIEWAMONGSTINTERNATIONALEXPLORATIONCOMPANIES ISTHATSUCHAREGIME ANDINPARTICULARTHEPROVISIONTHATALLAPPLICATIONSCANBEDISREGARDEDANDTHEAREA INQUESTIONCANBETAKENTOBIDDING ISAMAJORDISINCENTIVETOINVESTMENT4HUS CURRENTLY THELEGALAND REGULATORYFRAMEWORKHASARATHERLIMITEDROLEINESTABLISHINGTHEENABLINGCONDITIONSFORMININGTOUNLEASH @SUSTAINABLEECONOMICGROWTH WHICHISAKEYVISIONOFTHEMINERALPOLICYFRAMEWORK 3OMECOUNTRIESPROVIDEFORCOMPETITIVEBIDDINGINHIGHLYPROSPECTIVEAREASORWITHREGARDTOCERTAINhSTRATEGICv MINERALS)TWOULDBEBENElCIALTOINVESTMENTANDREGULATIONIFTHEBASISFORCALLINGFORCOMPETITIVEBIDDING ASWELLASTHECRITERIAFORCOMPETITIVEANDTRANSPARENTPROCEDURES WOULDBEESTABLISHEDUNDERTHELAW IN RELEVANTREGULATIONSORDIRECTIVES )TCOULDBEHELPFULTOEXPLORETHEPOSSIBILITYOFESTABLISHINGCATEGORIESOFMINERALSANDRELEVANTACCESSREGIMES  ASWELLASTHEIRRESPECTIVEPRIORITIESANDRELATIONSHIP WHICHARESOMEHOWUNCLEARANDHARDTOIMPLEMENT UNDERTHECURRENTSYSTEM 48 FINAL  REPORT ©  Allana  Potash  Afar  Plc. 7.   INSTITUTIONAL  FRAMEWORK Ministry  of  Mines 7.1.    4HE-INISTRYOF-INES-O- ISRESPONSIBLEFORESSENTIALLYALLASPECTSOFMINERALSECTORDEVELOPMENTAND GOVERNANCE4HEREGULATORYBASISFORTHE-O-ISTHE@0ROCLAMATIONTOPROVIDEFORTHEDElNITIONOFPOWERS ANDDUTIESOFTHEEXECUTIVEORGANSOFTHE&EDERAL$EMOCRATIC2EPUBLICOF%THIOPIA.O4HE POWERSANDDUTIESDElNEDINTHEPROCLAMATIONBROADLYTRANSLATETOTHEFOLLOWINGI PROMOTIONFORSECTOR DEVELOPMENT II COLLECTIONANDMANAGEMENTOFGEOSCIENTIlCDATA III ENCOURAGEINVESTMENTTHROUGH FACILITATINGEXPLORATIONANDMININGOPERATIONSIV REGULATIONOFTHESECTOR INCLUDINGTHEARTISANALANDSMALL SCALEGEMSTONESECTORV ORGANIZATIONOFRESEARCHANDTRAININGCENTRESFORSECTORDEVELOPMENT ANDVI  GRANTINGANDMANAGEMENTOFMINERALRIGHTS)TEMIIANDTOSOMEEXTENTITEMI FALLSUNDERTHE'EOLOGICAL 3URVEYOF%THIOPIA3ECTION   3INCE THE-O-ALSOASSUMESTHERESPONSIBILITYFORTHE%)!PROCESSSUPERVISION EVALUATION AND COMPLIANCEMONITORING ASTHE%0!ISSECONDINGTHISPROCESSTODIFFERENTSECTORIALAUTHORITIESANDREMAINS WITHASUPERVISORYROLE  4HEORGANIZATIONALSTRUCTUREOFTHE-O-ISSHOWNIN&IGURE-ANYOFTHEOFlCESAREGENERICTOGOVERNMENTAL MINISTRIES WHILEOFlCESWITHDUTIESOFDIRECTRELEVANCETOSECTORDEVELOPMENTINCLUDE   -INERAL,ICENSINGAND!DMINISTRATION$IRECTORATE)SSUINGANDADMINISTRATIONOFMINERALLICENSES AND COMPLIANCEMONITORINGOFTECHNICALANDlNANCIALOBLIGATIONS4HEREARECURRENTLYSOMESTAFFATTHE DIRECTORATEBUTTHEREISINSUFlCIENTCAPACITYTOHANDLEANDEVALUATELICENSEAPPLICATIONSANDPERFORM COMPLIANCEMONITORINGSEEFURTHER#HAPTER    %NVIRONMENTALAND#OMMUNITY$EVELOPMENT$IRECTORATE4HEDIRECTORATEWASESTABLISHEDINAND  AFTERATRANSITIONPERIOD THEYARENOWFULLYRESPONSIBLEFORTHE%)!PROCESS INCLUDINGSUPERVISION %)! EVALUATIONANDCOMPLIANCEMONITORING/CCUPATIONAL(EALTHAND3AFETYISALSOPARTOFTHESCOPEOFWORK 4HEREARECURRENTLYSTAFFATTHEDIRECTORATEBUTTHEREISNOSTAFFWITHEXTENSIVEEXPERIENCEANDSUFlCIENT QUALIlCATIONSINTHElELDSREQUIREDMININGENVIRONMENT SOCIOECONOMICS COMMUNITYDEVELOPMENTAND /(3 FOREXAMPLEFORIN DEPTHASSESSMENTOF%)!S4HEREISALSOALACKOFINSTRUMENTSFORENVIRONMENTAL MONITORINGATTHEDIRECTORATE&ROMINTERVIEWSCARRIEDOUTWITHINTHISPROJECT ITAPPEARSASIFTHEDIRECTORATE LACKSPOWERANDRESOURCESFORADEQUATEMONITORINGANDENFORCEMENTEGSOMECOMPANIESHAVENOT LODGEDENVIRONMENTALBONDS    ,EGAL!FFAIRS$RAFTINGOFPOLICIES PROCLAMATIONSANDREGULATIONSASWELLASVARIOUSOTHERLEGALAGREEMENTS  IMPORTANTLYTHE-ODEL-INING!GREEMENTSEE#HAPTER 4HEREARESTAFFAT,EGAL!FFAIRS BUTNONEIS QUALIlEDINMINERALLAW   !RTISANAL-ININGAND4RANSACTIONS#OORDINATION2ESPONSIBLEFORTHEDEVELOPMENTOFTHEARTISANALMINING SECTORTHROUGHTECHNICALANDTRAININGSUPPORTANDENCOURAGEMENTTOFORMCOOPERATIVES)NTHIS THEYWORK CLOSELYWITHREGIONSANDWOREDASANDTHEREISCURRENTLYSTAFFATTHEUNIT4HEUNITHASMADEPROGRESS INCERTAINGEOGRAPHICALAREASINTERMSOFPROMOTINGTHEESTABLISHMENTOFMININGCOOPERATIVES(OWEVER  CONSIDERINGTHEVERYLARGESIZEOFTHEARTISANALSECTOR THEUNITISUNDERSTAFFEDANDALSOLACKCAPACITYFOR ADEQUATESUPERVISIONINTHEAREASOFENVIRONMENTALANDSOCIOECONOMICMANAGEMENT   %)4))MPLEMENTATION3ECRETARIAT4HESECRETARIATISRESPONSIBLEFORTHEPROCESSANDAPPLICATIONFOR%THIOPIA TOBECOMEAN%)4)CANDIDATECOUNTRY4HEREARESTAFFATTHESECRETARIAT STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 49 -INISTERSOFlCE (5) Support  processes Human  Resources  Development  &   Procurement,  Finance  &  Property   Management  Process Administrative  Process (28  /  45) (103  /  141) 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.    -O-HASCONSIDERABLECOMPETENCEAMONGSOMELONG TERMEMPLOYEES(OWEVER OVER ALL FROMINTERVIEWS CARRIEDOUTWITHINTHISPROJECT THEUNDERSTANDINGOFTHEMININGCYCLEANDMININGINDUSTRIALQUESTIONSIN GENERALAMONGMANY-O-STAFFISPERCEIVEDTOBERATHERWEAK WHICHINmUENCESBOTHTHESUPERVISIONTO PRIVATECOMPANIES THEQUALITYANDEFlCIENCYINDECISION MAKING ANDEXPECTATIONSWITHREGARDSTOEXPLORATION ANDMININGDEVELOPMENT)NSUFlCIENTCAPACITYISALSOANISSUEWITHREGARDSTOTHENEGOTIATIONOFMINING CONTRACTS4HUS THEREISINSUFlCIENTSTAFFCAPACITYBOTHINLIGHTOFFULlLLINGVISIONSANDGOALS ANDTOPERFORM COREFUNCTIONSSUCHASLICENSEASSESSMENTANDADMINISTRATION  4HECAPACITYGAPISINPARTARESULTOFAHIGHTURNOVEROFSTAFF WHICHMAKESITDIFlCULTTOCONSISTENTLYBUILD CAPACITYOVERTHELONGERTERMANDTHEHIGHSTAFFTURNOVERISMAINLYRELATEDTOTHELOWPUBLIC SECTORPAY COMPAREDTOTHEPRIVATESECTORDIFFERBYAFACTOROFUPTO 4HEVIRTUALLYNON EXISTENTLARGE SCALEMINING SECTORHASALSONOTREQUIREDSIGNIlCANTCAPACITYBUILDINGFORMINERALSECTORGOVERNANCE  4HEREISATOTALOFALMOSTSTAFFATTHE-O-ANDTHEREISAHIGHNUMBEROFSTAFFINMANAGEMENTANDSUPPORT PROCESSES ASCOMPAREDTOSTAFFINTHECOREPROCESSES nSEE&IGUREINTHISESTIMATION THE %NVIRONMENTAL#OMMUNITY$EVELOPMENT-ONITORING/FlCEISHEREGROUPEDWITHTHECOREPROCESSESASIT INESSENCEHASAREGULATORYFUNCTIONSIMILARTOTHATOFTHEMINERALLICENSINGDIRECTORATE /VERALL OFTHE STAFFAREWOMENBUTTHEGENDERDISTRIBUTIONVARIESBETWEENDIFFERENTUNITS FROMWOMENATTHE,EGAL !FFAIRSOUTOF TOATTHE%THICSOFlCEWHEREALLTHREESTAFFAREFEMALE!CCORDINGTOTHEESTABLISHED 50 FINAL  REPORT STAFFSTRUCTURETHERESHOULDBESTAFFATTHE-O-ANDTHEDISCREPANCYBETWEENCURRENTANDPLANNED STAFFNUMBERSISRELATEDMAINLYTOlVEOFlCES&IGURE   4HE-O-BUDGETFORRECURRENTCOSTS4ABLE SHOWSTHATMANAGEMENT ADMINISTRATIONANDSUPPORT DOMINATETHECOSTS)TISNOTEDTHATWHILEONEOFTHEIMPORTANTCOREDUTIESOFTHE-O-ISTHEISSUINGOF MINERALRIGHTSANDMONITORINGOFCOMPANIESPERFORMANCE THERESPONSIBLEOFlCEISONLYALLOCATEDOF THEBUDGETAPPROVEDBY-O&%$!SIMILARLEVELALLOCATION FORTHEARTISANALMININGANDTRANSACTIONS OFlCEREmECTSTHEPOLICYDECISIONTOPROVIDESIGNIlCANTSUPPORTTOTHEARTISANALMININGSECTOR Table  7.1.     The  MoM  (not  including  the  GSE)  2012/2013  budget  for  recurrent  costs. Birr Part  of  total  budget -ANAGEMENTADMINSUPPORT     -INERALLICENSINGADMIN     0ETROLEUMLICENSINGADMIN     !RTISANALMININGTRANSACTIONS     2ESEARCHDEVELOPMENT    3OURCE -O- (UMAN2ESOURCES$EVELOPMENT-ANAGEMENT Geological  Survey  of  Ethiopia 7.2.    4HE'EOLOGICAL3URVEYOF%THIOPIA'3% WASlRSTESTABLISHEDINASADEPARTMENTWITHINTHE-INISTRY OF-INESAND%NERGY)NITWASTURNEDINTOANAUTONOMOUSGOVERNMENTAGENCYACCOUNTABLETOTHE -O-NAMEDTHE%THIOPIAN)NSTITUTEOF'EOLOGICAL3URVEYS4HECURRENTREGULATORYBASISFORTHE'3%ISTHE @0ROCLAMATIONTOPROVIDEFORTHEESTABLISHMENTOFTHE'EOLOGICAL3URVEYOF%THIOPIA.O  4HERESPONSIBILITIESOFTHE'3%THATRELATESTOMINERALSECTORDEVELOPMENTBROADLYINCLUDESI REGIONAL GEOLOGICALANDGEOCHEMICALMAPPINGII RECONNAISSANCE FOLLOW UPANDDETAILEDEXPLORATIONTOEVALUATE THEMINERALPOTENTIALOFTHECOUNTRYIII ANALYSINGGEOLOGICALSAMPLESMINERAL ROCK SOIL STREAMSEDIMENT  ANDWATERETC RELATEDTOMAPPINGANDEXPLORATIONWORKIV UNDERTAKEGEOPHYSICALSURVEYSIV COLLECT  MANAGEANDDISSEMINATEGEOSCIENCEINFORMATION ANDV CARRYOUTCOREDRILLING 4HEORGANIZATIONALSTRUCTUREISSHOWNIN&IGUREANDASWITHTHE-O- SEVERALOFlCESAREGENERICTO GOVERNMENTALINSTITUTIONSANDMOSTLYCONCERNEDWITHINTERNALPROCESSES WHILElVEUNITSCENTRESAREOFDIRECT IMPORTANCETOMINERALSECTORDEVELOPMENTAREDESCRIBEDBELOW)TISNOTEDTHATAPARTFROMSUPPORTINGMINERAL SECTORDEVELOPMENT THE'3%ISALSOINVOLVEDINRESEARCHANDDEVELOPMENTINTHEAREASOFGROUNDWATER  GEOHAZARDSANDGEOTHERMALENERGY BUTTHESEAREASARENOTCONSIDEREDINTHISREPORT   "ASIC'EOLOGICAL-APPINGSHALLUNDERTAKEGEOLOGICALMAPPING GEOCHEMICALSURVEYSANDGEOPHYSICAL INVESTIGATIONS4HEREARESOMESTAFFASCOMPAREDINTHEOFlCIALSTAFFSTRUCTURE4HE'3%UNDERTOOK EXCELLENTMAPPINGANDEXPLORATIONWORKOVERMANYYEARSAFTERITSESTABLISHMENTINTHELATES ANDSTILL HOUSESCONSIDERABLECOMPETENCE(OWEVER DUETOALACKOFHUMANANDlNANCIALCAPACITY THEPREVIOUS LEVELOFWORKHASNOTBEENUPHELDANDITHASNOTBEENPOSSIBLETOBUILDONTHEWORKEXECUTEDANDTHE COMPETENCEACQUIREDDURINGLARGETRAININGPROGRAMSINTHE S!SARESULT THEEXISTINGWORK ISLARGELYRESTRICTEDTOCOMPLETINGGEOLOGICALMAPPINGATTHE SCALEBYALMOSTOFTHE COUNTRYISNOWCOVERED )NADDITIONTOTHEISSUEOFSTAFFCAPACITY THE'3%VEHICLEmEETANDEQUIPMENT INSTRUMENTSAREINPARTOLDANDSOMETIMESDONOTFUNCTIONWELL4HEQUALITYOFTHEMAPPINGISALSOLIMITED BYTHELACKOFAIRBORNEGEOPHYSICALDATATOSUPPORTTHEMAPPING   -INERAL%XPLORATIONAND%VALUATIONISRESPONSIBLEFOREXPLORATIONFORMETALLICANDINDUSTRIALMINERALSAS WELLASHYDROCARBONS 4HEREISSOME STAFFASCOMPAREDTOINTHESTAFFSTRUCTUREANDTHEWORK ISFOCUSEDONTHEDELINEATIONOFTARGETAREASFORPLACERGOLDTOSUPPORTARTISANALMINING ANDFORINDUSTRIAL MINERALSCLOSETOEXISTINGINFRASTRUCTURETOSUPPORTARTISANALANDSMALL SCALEMINING%XPLORATIONFOR METALLICMINERALSWASAKEYFOCUSINTHEPASTBUTWITHPRIVATECOMPANIESENTERINGTHEMARKET THISWORK HASCOMETOAHALTDUETOSTAFFLOSS   4HE'EOSCIENCE$ATA#ENTREISRESPONSIBLEFORTHEADMINISTRATIONANDDISTRIBUTIONOFDATAANDINFORMATION )THOSTSALIBRARY ABIBLIOGRAPHICDATABASEWITHMAPSANDSOMETECHNICALREPORTSANDAMINERAL OCCURRENCEDATABASEWITHMETADATAFORSOMEOCCURRENCES4HECENTREISALSOINVOLVEDINPRODUCING PROMOTIONALMATERIAL7HEREASTHECENTREISWELLORGANIZED THEREARELARGEAMOUNTSOFINFORMATIONAND DATANOTENTEREDINDATABASES&URTHERMORE COMPANIESAREOBLIGATEDTOPROVIDEEXPLORATIONDATAAND INFORMATIONTOTHE'3% BUTDATAFROMTHECOMPANIESARENOTCURRENTLYCOLLECTED4HEREARECURRENTLY STAFFATTHECENTRE STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 51   4HE'EOSCIENCE,ABORATORYISFOCUSEDONGEOCHEMICALANALYSISWITH!!3 AND82& CAPABILITIES  ANDONE)#0 /%3AWAITINGBUILDINGREFURBISHMENTANDINSTALLATION4HEREISALSOAN82$ THINSECTION PETROGRAPHYFACILITIESANDBASICEQUIPMENTFORMINERALROCKPHYSICALMEASUREMENTS)N MORE THANOFSOME SAMPLESPREPAREDFORGEOCHEMICALANALYSISCRUSHINGANDGRINDING WERE FORTHEPRIVATESECTOR,ESSTHANOFPREPAREDSAMPLESWEREANALYSEDATTHELABORATORY ASPRIVATE SECTORCLIENTSSENDSAMPLESOVERSEASFORANALYSISATACCREDITEDLABORATORIESTHELABORATORYHASBEEN WORKINGTOWARDSACHIEVING)3/ACCREDITATIONSTATUSOVERTHELASTCOUPLEOFYEARS 4HEREISABOUT STAFFATTHELABORATORY OUTOFWHICHMORETHANHALFAREPROFESSIONALSTAFFCHEMISTSANDGEOLOGISTS  4HEANALYTICALOUTPUTISLOWCONSIDERINGTOTHENUMBEROFSTAFFANDTHEINSTRUMENTALCAPACITY+EYISSUES INCLUDEALACKOFASTRONGCLIENTBASE THECUMBERSOMEPROCUREMENTPROCESSFORPURCHASEOFSPAREPARTS ANDCONSUMABLES ANDTHEFACTTHATMANYOFTHEINSTRUMENTSAREAGING   4HE$RILLING3ERVICESCENTREHAS COREDRILLINGRIGSANDALSORIGSEACHFORWATERHOLEANDGEOTHERMAL DRILLING 4HECOREDRILLINGWORKUNDERTAKENISALMOSTEXCLUSIVELYFORPRIVATECLIENTS WHEREASINTHEPAST COREDRILLINGWASANINTEGRALPARTOFTHE'3%EXPLORATIONWORK!TTHEENDOF.OVEMBER lVEOF THECOREDRILLINGRIGSWEREDEPLOYEDINTHElELDANDTHERESTWEREINWORKSHOPFORMAINTENANCE$ELAY INTHEPROCUREMENTOFSPAREPARTSANDCONSUMABLESDUETOTHECUMBERSOMEBUDGETINGANDTENDERING PROCEDURESISAKEYISSUE4HEREARESOMEDRILLERSANDSUPPORTSTAFF OFWHICHDRILLERSARE CURRENTLYASSIGNEDTOGEOTHERMALDRILLINGFOR%"#/ASTATEENTERPRISE %XPLORATIONCOMPANIESBELIEVE THATTHE'3%DRILLINGCENTREHASGOODEQUIPMENTANDSKILLEDDRILLERS BUTCLAIMTHATTHEDRILLINGSERVICE ISVERYINEFlCIENT!SFAST HIGH QUALITYDRILLINGISOFPRIMARYIMPORTANCEINEXPLORATION MANYCOMPANIES PREFERTOUSEPRIVATEDRILLINGCOMPANIES Director  General Public  Relation  &   Legal  Affairs   Geoscience  Data   Change   Communication   ITC  Unit Audit  Unit Unit Centre Management  Unit Unit Human   Proc.  &  Fin.,  Property  Admin  &   Planning,   Resources  &   HIV  AIDS  Focal   Gen.  Services,  Drilling  Equip.  &   Gender  Main-­ Ethics  Liaison   Monitoring  &   Development   Person Vehicle  Maintenance  &  Transp.   streaming  Unit /FlCE Evaluation  Unit Unit Support  Unit Chief  Geologist Basic   Groundwater   Geothermal   Mineral  Exploration   Geohazards   Geoscience   Resource   Resource   &  Evaluation Investigations Mapping Assessment Assessment 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- THEMAJORITYOFTHEEMPLOYEESWORKINMANAGEMENT ADMINISTRATIONANDSUPPORTABOUT STAFFTHATFALLUNDERh0ROC&IN 0ROPERTY!DMIN'EN3ERVICES ETCvIN&IGURE !CCORDINGTO THE'3%STRUCTURETHERESHOULDBEATOTALOFTECHNICALSTAFFVARIOUSTYPESOFGEOSCIENTISTS CHEMISTS  ETC WHILETHENUMBEROFTECHNICALSTAFFTODAYISABOUT !PARTFROMTHEYEARLYGOVERNMENTALBUDGETALLOCATIONTOTHE'3% BASEDONSTAFFSTRUCTUREANDPLANNED ACTIVITIES THE'3%ISTOALARGEEXTENTRELIANTONDONOR SUPPORTEDPROJECTSFORTHECORETECHNICALWORKTOBE UNDERTAKEN ANDMUCHOFTHEHISTORICALWORKINCOLLECTINGGEO SCIENTIlCDATA INSTITUTIONALSTRENGTHENING ANDTRAININGHASBEENINPROJECT FORM BASEDONDONORFUNDS4HEREISCURRENTLYA YEARPROGRAMWITHTHE #HINESEGOVERNMENTFOCUSEDONTHEDElNITIONOFTARGETAREASINSOUTHERN%THIOPIA LABORATORYSUPPORT AND TRAININGOFSTAFF !SFORTHE-O-ANDTHE'3%WORKISALSOHAMPEREDBYINSUFlCIENTSTAFFCAPACITYBOTHINLIGHTOFVISIONS ANDGOALS ANDTOPERFORMCOREFUNCTIONS WHICHISINPARTDUETOTHEVERYHIGHTURNOVEROFSTAFFMAKINGIT DIFlCULTTOBUILDCAPACITYOVERTHELONGERTERM&OREXAMPLE INABOUTTECHNICALSTAFFLEFTTHE'3% ANDABOUTNEWSTAFFWERERECRUITED4HE'3%ISPERCEIVEDASHAVINGCONSIDERABLECOMPETENCEAMONG MANYLONG TERMEMPLOYEESBUTMANYEXPERIENCEDSTAFFLEAVEANDNEWRECRUITSARENOTSUFlCIENTLYQUALIlED ANDTHEYOFTENSTAYONLYFORASHORTTIME 4HE'3%REPORTSTHATTHEYRECEIVESUFlCIENTBUDGETALLOCATIONS BASEDONTHEIRANNUALREQUESTS$ESPITE THIS ITISARGUABLETHATBUDGETSFORTHESEINSTITUTIONSARENOTSUFlCIENTFORFUNCTIONSFORWHICHTHEYTAKE RESPONSIBILITY%VENIFTHEISSUEOFTHELEVELOFSTAFFSALARIESISTREATEDSEPARATELY BUDGETSUPPORTFORlELD ACTIVITIES MAPPINGPROGRAMS ETCAREPROBABLYTOOLOW Other  institutions 7.3.   !SFOROTHERMINISTRIESANDGOVERNMENTALORGANIZATIONS -O&%$HASINDIRECTINVOLVEMENTINTHESECTOR4HIS ISTHROUGHITSCONTROLOFTHEBUDGETPROCESSANDPLANNINGPROCESS ANDITSINTERESTINANDADMINISTRATIONOF REVENUES TAXES ROYALTIESANDFOREIGNEXCHANGEEARNINGSFROMTHESECTOR-O&%$WOULDALSOBEINCONTROL OFANYLOANSORPROGRAMSFORDEVELOPMENTOFTHESECTORFROMINTERNATIONALDEVELOPMENTAGENCIES /THERMINISTRIESANDGOVERNMENTALOFlCESSEEMTOHAVENOKNOWLEDGEANDVERYLITTLEINVOLVEMENTINMINERAL SECTORPLANNINGDEVELOPMENT4HEREISNOOFlCIALFORUMFORCOLLABORATIONANDJOINTPLANNINGBETWEENTHE VARIOUSMINISTRIESAUTHORITIESTHATAREORSHOULDBECONCERNEDWITHTHEDEVELOPMENTOFTHEMINERALSECTOR )SSUESCANBEADDRESSEDAT#OUNCILOF-INISTERMEETINGS BUTCOMMUNICATIONSEEMSTOBEMAINLYTHROUGH THE-O-NOTIFYINGOTHEROFlCESOFEXPLORATIONANDMININGPROJECTSUNDERWAYASANDWHENNEEDED(OWEVER  THISNORMALFORACOUNTRYWITHLITTLEHISTORICALMININGANDANUNDEVELOPEDMININGSECTOR#OUNTRIESSUCH AS3OUTH!FRICA 'HANAANDTHE53!HAVESEENMORETHANYEARSOFMOREORLESSFORMALIZEDMINING  OREVENSEVERALHUNDREDYEARSINTHECASEOF3WEDEN4HISHASALLOWEDFORLONGTERMDEVELOPMENTOFLEGAL ANDGOVERNANCESTRUCTURES WHILEITISEMPHASIZEDTHATEVENINTHESEREGIMES GOVERNANCESTRUCTURESAND PROCEDURESARECONTINUOUSLYBEINGDEVELOPEDANDIMPROVED 4HEREGIONALSTATES FOLLOWINGTHEGENERALORGANIZATIONALSET UPOFTHE%THIOPIANSTATE HAVEAGOVERNMENTAL STRUCTURERELATEDTOMININGTHATPARALLELSTHEFEDERAL LEVELSTRUCTURE&OREXAMPLE /ROMIAREGIONALSTATEHAS A7ATER -INERALAND%NERGY"UREAUWITHA-INERALDEPARTMENTWITHINIT STAFFEDBYGEOLOGISTSANDOTHER PROFESSIONALANDNON PROFESSIONALSTAFF)NFACT THEPARALLELSTRUCTURETHEORETICALLYEXTENDSDOWNTOTHEZONE  WOREDAANDKEBELESUB REGIONALLEVELS(OWEVER INPRACTICALTERMSSUB REGIONALLEVELSAREDEPENDENTON REGIONALCAPACITYANDACTASEXTENSIONSOFTHEREGIONALMININGAUTHORITIES 7OREDALEVELARESIGNIlCANTLYINVOLVEDIN!3-MANAGEMENTORGANIZATIONOFCOOPERATIVES OUTREACH FOLLOW UP CONmICTRESOLUTIONETC 4HEWOREDAINVOLVEMENTPRESUMABLYVARIESASMUCHASTHE!3-ACTIVITIES THEMSELVES ACROSSTHECOUNTRY 4HEDEGREEANDSUCCESSOFCOORDINATIONBETWEENFEDERAL REGIONALANDSUB REGIONALLEVELSISQUITEUNCLEAR  WITHCONTRADICTORYASSERTIONSHEARDTHAThEVERYTHINGRUNSSMOOTHLYvTOhTHEREISNOREALCOORDINATIONv)NA LONGER TERMPERSPECTIVE FEEDBACKFROMSTAKEHOLDERS PARTICULARLYMININGCOMPANIESANDLOCALCOMMUNITIES AFFECTEDBYMINING WILLREVEALHOWWELLCOORDINATIONISWORKING STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 53 Recommendations 7.4.   -O-AND'3%MAYCONSIDERORGANIZATIONALREVIEWSANDRESTRUCTURINGFORINCREASEDEFlCIENCYANDTOALLOWFOR INCREASEDSTAFFSALARIES ASKEEPINGSTAFFISVITALTOCONSISTENTLYBUILDCAPACITYINTHELONGERTERM)NGENERAL IT ISCONSIDEREDTHATTHELARGENUMBEROFSTAFFATTHE-O-ANDTHE'3%INTOTALABOUT COMPAREDTOSOME  REQUIREDBYTHESTRUCTURALPLANS ISMIRROREDNEITHERBYTHEIROUTPUTNORBYTHENEEDSFORMANAGING ASECTOR WHICHISSTILLRATHERLIMITEDINSIZE)TISAPPARENTTHATTHEEXECUTIONOFCOREMANDATESSUFFERSFROM ASERIOUSLACKOFCAPACITY WHILETHEREARECOMPARATIVELYLARGERESOURCESCONCENTRATEDONMANAGEMENT  ADMINISTRATIONANDVARIOUSTYPESOFSUPPORTPROCESSES !CCORDINGTOACIVILSERVICEEXPERTCONSULTEDWITHINTHISPROJECT THE'3%ALREADYHASTHEREQUIREDINSTITUTIONAL STATUSTOALLOWFORINCREASEDSALARIES AS0ROCLAMATION.OESTABLISHESTHE'3%ASANAUTONOMOUS FEDERALGOVERNMENTALORGAN HAVINGITSOWNJURIDICALPERSONALITY4HE0ROCLAMATIONPROVIDESTHATSTAFFSALARIES ANDPERDIEMRATESSHALLBEDETERMINEDBYDIRECTIVESISSUEDBYTHEGOVERNMENT7HILEINCREASINGSALARIESFOR SEVERALHUNDREDSTAFFMAYNOTBElNANCIALLYVIABLE ADETAILEDREVIEWOFTHEINSTITUTIONALSTRUCTUREANDSTAFF REQUIREMENTSTOPERFORMCOREMANDATESSHOULDlRSTBEUNDERTAKEN#ONSIDERINGTHATAGOVERNMENTALCAREER OFFERSGREATERJOBSECURITYANDPOSSIBLYOTHERNON MATERIALBENElTSSUCHASJOBSATISFACTION OPPORTUNITIES FORTRAINING ETCINTERVIEWSWITH-O-STAFFINDICATETHATASALARYINCREASEMAYNOTNEEDTOBEATTHELEVELOF PRIVATESECTORSALARIESFORSTAFFTOBERETAINED )TMAYBECONSIDEREDTHATOFlCESWITHREGULATORYFUNCTIONSBELIFTEDOUTOF-O-ANDTURNEDINTOAUTONOMOUS ORGANIZATIONS SIMILARTOTHE'3% ANDTHAT-O-REMAINSWITHPOLICYDElNITIONASTHEKEYMANDATE4HE LICENSINGANDADMINISTRATIONDIRECTORATEANDTHEENVIRONMENTAL SOCIALANDCOMMUNITYDEVELOPMENTUNIT ARECRITICALTOTHESUSTAINABLEDEVELOPMENTOFTHEMINERALSECTOR YETTHEYAREINSERIOUSLACKOFHUMANAND TECHNICALCAPACITY3EPARATINGTHESEFROMTHE-O-WOULDPROVIDEFORINCREASEDSALARIESANDTHEPOSSIBILITY TOFUNCTIONMOREEFFECTIVELYINSMALLERORGANIZATIONS4HEWORKOFTHESETWOUNITSOVERLAPINMANYAREAS  ANDTHEIRAMALGAMATIONINTOONEAGENCYMAYBECONSIDERED4URNINGGOVERNMENTALUNITSINTOAUTONOMOUS INSTITUTIONSHASBEENSUCCESSFULLYAPPLIEDATANUMBEROFOTHER%THIOPIANMINISTRIES &ORTHELABORATORIESANDTHEDRILLINGUNITS THEIRCONTINUEDEXISTENCEASPARTOFTHE'3%SHOULDBERECONSIDERED 4HEIROUTPUTISCONSIDEREDTOBERATHERLOWCOMPAREDTOTHEIRINSTRUMENTANDEQUIPMENTCAPACITYAND STAFFNUMBERSTHISISINPARTDUETOLACKOFCLIENTSANDINPARTDUETOLACKOFSPAREPARTSANDCONSUMABLES &URTHERMORE INTHELONGERTERM THEIRABILITYTOCOMPETEWITHPRIVATESERVICEPROVIDERSISREGARDEDTOBE SEVERELYLIMITED4HEYARENOTINCHARGEOFTHEIROWNBUDGETSBUTHAVETORELYONYEARLYBUDGETREQUESTS ANDALLOCATIONSFROM-O&%$%VENIFTHEYWERETURNEDINTOSTATEENTERPRISES ACCORDINGTOOURINFORMATION THEYWOULDHAVETOSURRENDEROFTHEIRREVENUESTOTHESTATE)TISPROPOSEDTHATEITHERSCALINGDOWNTO MEETTHENEEDSONLYOFTHE'3%ORPRIVATIZATIONOFTHESEUNITSISCONSIDERED #APACITYBUILDINGISREQUIREDTHROUGHOUTTHE-O-ANDTHE'3%,ONG TERMPLANSFORTHISSHOULDBECONSIDERED INCONJUNCTIONWITHTHEPOSSIBLERE ORGANIZATIONOFTHEINSTITUTIONS )NTHESHORTERTERM VARIOUSCAPACITYBUILDINGEFFORTSSHOULDBECONSIDERED4HISSHOULDBEPRIMARILYFOCUSED ONTHE-INERAL,ICENSING!DMINISTRATION$IRECTORATEANDTHE%NVIRONMENTAL#OMMUNITY$EVELOPMENT -ONITORING/FlCE)TISPROPOSEDTHATTHISCAPACITYBUILDINGISNOTINTHEFORMOF@STAND ALONETRAININGCOURSES OREDUCATIONALPACKAGES2ATHER ITISPROPOSEDTHATEXTERNALEXPERTISEISBROUGHTINTOASSISTWITHON GOING WORKONACONTINUOUSORCONTINUALBASISANDTHATTRAININGISPROVIDEDON THE JOB ANDALSOTHATSTRUCTURED TRAININGORCOURSEWORKAREINCLUDEDASANINTEGRALPARTOFTHECONSULTANCY 3IMILARLY ITISPROPOSEDTHATEXTERNALEXPERTISEISBROUGHTINFORTHENEGOTIATIONOFMININGAGREEMENTS!S DISCUSSEDABOVE ACOMPARATIVELYLOWLEVELOFREGULATION#HAPTER ANDSEEALSO#HAPTERFORENVIRONMENTAL ANDSOCIALREGULATION REQUIRESEVENSTRONGERNEGOTIATIONCAPACITY3UCHCONSULTANCYSERVICESSHOULDALSO BECOMBINEDWITHTRAININGOFSTAFF 3UPPORTISALSOREQUIREDTO2EGIONAL/FlCES INPARTICULARINTHEAREAOFARTISANALMININGMANAGEMENT !SITISASOLIDPOLICYOFTHEGOVERNMENTTHATARTISANALMININGREMAINSAKEYSECTORCONTRIBUTINGTOFOREIGN CURRENCYEARNING JOBCREATIONANDLOCALECONOMICDEVELOPMENT REGIONALOFlCESWOULDREQUIRECAPACITY BUILDINGPRIMARILYINTHEAREAOFENVIRONMENTALANDSOCIALMANAGEMENT 54 FINAL  REPORT ©  Allana  Potash  Afar  Plc.  &)3#!,2%')-% Fiscal  regulations 8.1.    4HELEGALBASISTOCOLLECTTAXANDROYALTYPAYMENTEMANATESFROMASETOFPROCLAMATIONS REGULATIONSAND DIRECTIVESINCLUDINGTHE-INING/PERATIONS0ROCLAMATION -INING4AX0ROCLAMATION.O -INING )NCOME4AX0ROCLAMATION!MENDMENT .OAND.O )NCOME4AX0ROCLAMATION.O  AND#OUNCILOF-INISTERS2EGULATIONON-INING/PERATIONS.O!DRAFTMININGINCOME TAXPROCLAMATIONOFISUNDERREVIEW  /VERALL THE%THIOPIANCORPORATETAXRATESANDROYALTYRATESAREINLINEWITHTHOSEINTHEREGION!HOLDEROFA SMALL SCALEMININGLICENSEPAYSINCOMETAXONTAXABLEINCOMEANDTHE0ROVINCIAL3TATEGOVERNMENTS COLLECTTHISPAYMENT4HEINCOMETAXFORLARGE SCALEMININGISCOLLECTEDBYTHE&EDERALGOVERNMENTBY -O&%$ 4HISFEDERALTAXWASRECENTLYLOWEREDTO4HEREISALSOATAXONDIVIDENDS WHICHIS CALCULATEDAFTERAPPROPRIATEINCOMETAXESAREPAID  2OYALTIESARECALCULATEDONANADVALOREMBASIS!DVALOREMBASISISCOMPUTEDINPROPORTIONTOTHEESTIMATED VALUEOFTHEGOODSORTRANSACTIONCONCERNEDANDISOFTENCONNECTEDWITHTHELEVYINGOFTAXORCUSTOMDUTIES 2OYALTIESUNDER%THIOPIANMININGLAWAREPAIDBASEDONTHEhSALESPRICEvSETINTHECOMMERCIALTRANSACTION OFMINERALSPRODUCED4HEROYALTYRATESFORMINEDPRODUCTSAREASFOLLOWS   0RECIOUS-INERALS    )NDUSTRIALMINERALSSALT    3EMI PRECIOUSMINERALS    #ONSTRUCTIONMINERAL    -ETALLICMINERALS    'EOTHERMAL   -ININGROYALTIESARECOLLECTEDATTWOLEVELSFORTHEPRECIOUSMINERALSANDMETALLICMINERALS ORLARGESCALE PROJECTS THEROYALTIESACCRUETOTHEFEDERALSTATE&ORINDUSTRIALANDCONSTRUCTIONMINERALS ANDSMALLSCALE MINESAPARTFROMPRECIOUSANDMETALLICMINERALS THEROYALTIESACCRUETOTHEREGIONALSTATESINWHICHSUCH QUARRIESOPERATE2OYALTIESARECOLLECTEDBY-O-ORBYTHEREGIONALMININGBUREAUSATTHEREGIONALLEVEL  4HELEGISLATIONDElNESAREVENUESHARINGMECHANISM WHEREPERCENTOFTHEROYALTIESCOLLECTEDFROMLARGE SCALEOPERATIONSAREALLOCATEDTOTHEFEDERALGOVERNMENTANDTHEREMAINDERISALLOCATEDTOTHEPROVINCIAL STATEWHERETHEMINEINQUESTIONISLOCATED3IMILARLY FORSMALLSCALEMINES PERCENTOFTHEROYALTIES REMAININTHESTATEWHERETHEMINEISLOCATED WHEREASPERCENTISALLOCATEDTOTHEFEDERALGOVERNMENT  4HE-INING/PERATIONS0ROCLAMATIONPROVIDESFOREXEMPTIONSFROMCUSTOMSANDDUTIESREGARDINGANY CONSUMABLES EQUIPMENT MACHINERYANDVEHICLESTHATANYHOLDEROFANEXPLORATIONLICENSEORHISCONTRACTOR MAYIMPORTTO%THIOPIAUSEFULFORTHEPURPOSEOFMININGOPERATIONSANDINACCORDANCEWITHTHEAPPROVED WORKPROGRAM!RT !LSO THEHOLDEROFSMALLORLARGESCALEMININGLICENSEMAYIMPORTFREEOFCUSTOM DUTIESCONSUMABLESREQUIREDTOSTARTANDSUSTAINCOMMERCIALPRODUCTIONFORTHElRSTTHREEMONTHS!RT    !CCORDINGTO!RTICLEOFTHE-INING/PERATIONS0ROCLAMATIONAND!RTICLE.INEOFTHE--! THE GOVERNMENTMAYACQUIREAFREEPARTICIPATIONINTERESTOFUPTO4HESAMEARTICLEPROVIDESTHATh!N ADDITIONALEQUITYPARTICIPATIONOFTHEGOVERNMENTMAYALSOBEPROVIDEDBYAGREEMENT WHICHSHALLSPECIFY THEPERCENTAGE TIMING lNANCING RESULTINGRIGHTSANDOBLIGATIONANDOTHERDETAILSOFSUCHPARTICIPATIONv 4HE0ROCLAMATIONTO!MENDTHE-INING/PERATIONS0ROCLAMATION TURNSGOVERNMENTPARTICIPATION INTERESTOFINALLLARGEANDSMALL SCALEMININGPROJECTSINTOMANDATORYWITHTHEPOSSIBILITYTONEGOTIATING ADDITIONALEQUITYPARTICIPATIONBYAGREEMENT STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 55  4HElSCALREGIMECONSIDERSAMINE QUARRYOROTHERPLACEFOREXPLOITATIONOFNATURALRESOURCESASAPERMANENT ESTABLISHMENTANDSUBJECTTOBUSINESSINCOMETAX WITHNON RESIDENTSBEINGTAXEDONTHEIR%THIOPIANSOURCED INCOME)NCOMETAXHOLIDAYSARENOTPROVIDEDFORTHEMININGSECTORALTHOUGHTHEYAREAPPLICABLETONEW MANUFACTURINGANDAGRO INDUSTRYINVESTMENTS ,OSSESFROMMININGOPERATIONSCANBECARRIEDFORWARDFOR YEARS WHICHBROADLYAGREESWITHTHELEVELFOR!FRICANCOUNTRIES  4HE$RAFT-INING)NCOME4AX0ROCLAMATIONOFINTRODUCESREGULATIONSTHATWOULDALLOWFORRINGFENCING EACHLICENSEASASEPARATETAXUNIT APROVISIONTHATDIDNOTEXISTINTHE-INING)NCOME4AX0ROCLAMATION NOAMENDED 4HEDRAFTALSOINTRODUCESDEDUCTIONSFORAMOUNTSDEPOSITEDINTOAFUNDFORMINE REHABILITATION WHERENOSUCHPROVISIONSEXISTEDINTHECURRENTTAXPROCLAMATION!LSO DRAFTPROCLAMATION ALLOWSFORMINISTERIALDISCRETIONFORGRANTINGTEMPORARYTAXRELIEF AGAINAPROVISIONABSENTINTHECURRENT PROCLAMATION Revenue  collection 8.2.   4HElSCALLINKAGESFROMTHEMININGSECTORMATERIALIZETHROUGHCORPORATEINCOMETAX PERSONALINCOMETAX OFTHEEMPLOYEES TARIFFSONEXPORTSANDIMPORTSANDTHROUGHROYALTIES !CCORDINGTODATAFROM-O&%$ ROYALTIESCOLLECTEDBYTHEFEDERALGOVERNMENTHAVEINCREASEDFROMABOUT53$ MILLIONINTOALMOST53$MILLIONIN2OYALTIESCOLLECTEDBYTHEREGIONALGOVERNMENTSHAVE INCREASEDFROMABOUT53$ INTO53$MILLIONIN4HE7ORLD"ANK ESTIMATES ROYALTYPAYMENTSTOACCOUNTFOROFTHEREVENUESTHATmOWTOTHESTATE WITHANOTHERCOMINGFROM EQUITYPARTICIPATION#ORPORATETAXESESTIMATEDTOACCOUNTFORNEARLYOFTHEmOWS4HEREMAININGPARTS DERIVEFROMTARIFFSANDPERSONALINCOMETAXES #URRENTROYALTYRATESIN%THIOPIAAREINLINEWITHOTHER!FRICANCOUNTRIES!NUMBEROFCOUNTRIESHAVEALREADYOR ARELOOKINGTOINCREASETAXATIONINTHEMININGSECTOR)N 3OUTH!FRICAINTRODUCEDAPROlTBASEDMINING ROYALTYOFTO WITHDIFFERENTRATESFORGOLDPRODUCERSRELATIVETOTHEINDUSTRIALSECTOR4ANZANIAAND .AMIBIAARESPECIlCALLYLOOKINGATINTRODUCINGEXCESSPROlTTAXESFORMININGCOMPANIES AND-OZAMBIQUE ISSEEKINGTOREVISEITSMININGCODETOENSUREHIGHERREVENUESFORTHEGOVERNMENT)N 'HANAINCREASED ITSMINERALROYALTYTAXFROMTO(OWEVER INOTHERCASES SUCHASTHATOF'UINEA ATTEMPTSHAVEBEEN MADETOREVISEMININGROYALTIESANDTAXATIONDOWNWARDSTOATTRACTINVESTMENT 7HILETHEROYALTYRATES THECORPORATETAXRATEANDTHEPERCENTAGEOFEQUITYPARTICIPATIONBYTHESTATEIN %THIOPIAISCOMPETITIVECOMPAREDTOMANYOTHER!FRICANCOUNTRIES THISALONEWILLNOTSERVETOATTRACTINVESTORS )NTERNATIONALCOMPANIESLOOKATTHE@EFFECTIVERATEOFTAXATIONIEWHENALLTHETAXESPAIDTOTHEGOVERNMENT SUCHASEXCISEDUTIES PROPERTYTAX VEHICLETAXETC ASADETERMINANTOFPLANNEDINVESTMENTS 'IVENTHEPAUCITYOFLARGESCALEMINING THEABILITYOFTHEFEDERALGOVERNMENTTOCOLLECTROYALTIESANDTAXES FROMLARGESCALEOPERATORSHASNOTBEENWELLTESTED4HEREAREINDICATIONSTHATTHE-O-MAYNOTHAVEALL THENECESSARYTECHNICALCAPACITIESTODOSOANDLIMITATIONSINTHISREGARDINCLUDETHEABILITYTOMONITORAND AUDITlNANCIALSTATEMENTSANDPRODUCTIONlGURES ANDASWELLASLIMITEDAVAILABILITYOFTHELEGALANDlNANCIAL SPECIALISTSNECESSARYTOSUPERVISETHECOLLECTIONOFROYALTYPAYMENTS!SACONSEQUENCE INPRACTICE THE CONTRIBUTIONOFTHEMININGSECTORTODOMESTICTAXREVENUEMAYBEMORELIMITEDTHANOURESTIMATESINDICATE CF3ECTION  Transparency  initiatives  in  the  extractive  sector   8.3.   !STHE%THIOPIANGOVERNMENTPLANSFORTHEMININGSECTORTOGROWINSIZEANDIMPORTANCEOVERTHENEXTDECADES  THEREISACONCOMITANTWISHTOADDRESSISSUESRELATEDTOPOSSIBLECORRUPTIONANDTHEMISMANAGEMENTOF REVENUESFROMNATURALRESOURCES!PARTFROMTHEMININGSECTOR THEOILANDGASSECTORAREALSOSEENTOHAVE STRONGPOSSIBILITIESFORGROWTH)NTHISCONTEXT THESTATEEMBARKEDONAPROCESSTOJOINTHE%)4)IN WITH %)4)CANDIDACYSTATUSAWARDEDIN-ARCH 4HECURRENT%)4)CANDIDACYSTATUSANDEFFORTSTOACHIEVE COMPLIANCEWILLENHANCETHEPROlLEANDTHECREDIBILITYOFTHECOUNTRY ANDMAYASSISTINATTRACTINGFOREIGN INVESTMENTSINTHEEXTRACTIVESECTORS 4HEGOVERNMENTLAUNCHEDITSCOMMITMENTTOTHE%)4)PROCESSWITHTHE-INISTRYOF-INESDELEGATEDTOLEAD THECANDIDACYANDCOMPLIANCEPROCESS!N%THIOPIAN%)4).ATIONALSTEERINGCOMMITTEEWASCONSTITUTED  COMPRISINGOFGOVERNMENTOFlCIALS CIVILSOCIETYREPRESENTATIVESANDPRIVATECOMPANIES4HECOMMITTEE FOCUSEDONDESIGNINGFRAMEWORKSFORENGAGEMENTANDOTHERIMPLEMENTATIONISSUES3TAKEHOLDERENGAGEMENT  INCLUDINGFOUREXTENSIVEWORKSHOPSANDTRAININGSESSIONS BOTHWITHMININGCOMPANIESANDCIVILSOCIETY ORGANIZATIONS HAVEBEENCARRIEDOUTBETWEENANDASPARTOFTHE-O-SINITIATIVETOPROMOTE TRANSPARENCY 56 FINAL  REPORT "YTHEENDOF EXTRACTIVECOMPANIESHAVEJOINEDTHEINITIATIVE INCLUDINGGOLDANDPOTASHPRODUCERS  ASWELLASTHOSEFORINDUSTRIALMINERALS SALTANDMARBLE/FTHESE COMPANIESWEREINCLUDEDINTHElRST INCOMEPAYMENTRECONCILIATIONREPORT BASEDONlGURES WITHREPORTEDREVENUESOF53$ MILLION EXPECTEDTOBEPUBLISHEDINEARLY!CANDIDATUREASSESSMENTFOR%THIOPIAWASRELEASEDBY THE%)4)ONTH&EBRUARY ANDCANDIDACYSTATUSWASAWARDEDIN-ARCHOFTHESAMEYEAR 4HEMAJORHURDLEFORTHEGRANTINGOFCANDIDACYSTATUSHADBEENTHECIVILSOCIETYLEGISLATIONPARTICULARLYTHE CLAUSELIMITINGFOREIGNFUNDINGTOFORORGANIZATIONSINVOLVEDINADVOCACY#ONCERNSHADBEENRAISED THATTHELEGISLATIONDOESNOTALLOWFORTHECIVILSOCIETYGROUPSTOBESUFlCIENTLYINDEPENDENTANDTHEREFORE MEANINGFULLYPARTICIPATEINTHEPROCESS4HEGOVERNMENTHASSUCCESSFULLYARGUEDTHATTHELEGISLATIONISNOT MEANTTORESTRICTTHEOPERATIONSOFCHARITIESANDCIVILSOCIETYORGANIZATIONS BUTTOOFFERAFRAMEWORKFORTHEIR OPERATIONSTHATDIDNOTEXISTINTHELEGISLATIONBEFORE4HEYFURTHERARGUEDTHATTHELEGISLATIONISSETUPTOALLOW CHARITIESANDSOCIETIESTOENGAGEININCOMEGENERATINGACTIVITIES CREATETRANSPARENCYANDACCOUNTABILITY OFTHEIRACTIVITIESANDALLOWACLEARLYDElNEDRELATIONSHIPTOEXISTBETWEENTHE3TATEANDTHEORGANIZATIONS 4HEGOALNOWSHOULDBETOCONTINUEPURSUINGMULTI STAKEHOLDERENGAGEMENT ANDENSURETHEINVOLVEMENT OFCIVILSOCIETYORGANISATIONSINTHEEXTRACTIVESECTOR ASTHISISLIKELYTOREMAINTHEKEYISSUEFORACHIEVING COMPLIANCESTATUS 4HECONTENTOFMININGINVESTMENTRELATEDCONTRACTSARENOTMADEPUBLICIN%THIOPIA4HEREAREFURTHERMORE NOSIGNSTHATSUCHINFORMATIONWILLBEMADEPUBLICINTHEFUTUREINTHEWAYTHATISCURRENTLYCONSIDERED INCOUNTRIESSUCHAS,IBERIA 3IERRA,EONEAND'UINEA 4HEREASONSMAYBERELATEDTOAWISHTOMAINTAIN INVESTORCONlDENTIALITY(OWEVER STATEMENTSMADEBYGOVERNMENTOFlCIALSALSOIMPLYTHATTHISAPPROACH MAYALSOBEASSOCIATEDWITHAPREFERENCETOREGULATECONDITIONSINLAWSANDREGULATIONS RATHERTHANTODO SOINSEPARATECONTRACTAGREEMENTWITHINVESTORS %THIOPIAISALSOASIGNATORYTOTHE7ORLD"ANKS)NTERNATIONAL#ONVENTIONON3ETTLEMENTOF)NVESTMENT$ISPUTES BETWEENTHE3TATESAND.ATIONALSOF/THER3TATES ASWELLASBEINGAMEMBEROFTHE-ULTILATERAL)NVESTMENT 'UARANTEE!GENCY3UCHAGREEMENTSAREINDICATIVEOFTHEWILLINGNESSOFTHEGOVERNMENTTOBESUBJECTTO INTERNATIONALARBITRATIONANDSTANDARDS4HEREHASBEENNOSPECIlCMININGSECTORDISPUTETHATHASREQUIRED INTERNATIONALARBITRATIONATTHISTIME Recommendations 8.4.   )NDESIGNINGlSCALPOLICYINTHEMININGSECTOR ANYGOVERNMENTNEEDSlRSTTOSTRIVETOMAINTAINCONSISTENCY INITSAPPROACH ASTOOFREQUENTCHANGESINTAXATIONRATESANDREGULATIONSGOVERNINGPRIVATEINVESTMENTS WILLDISCOURAGEINVESTORS4HEOBJECTIVESHOULDBETOARRIVEATAPOLICYWHICHISSEENASFAIRBYALLPARTIES  ANDWHICHFURTHERISSTABLEANDMAYCONTINUETOFUNCTIONALSOINTHECASEOFA@WORLDCLASSMINEBEING DISCOVEREDANDCOMMISSIONED&URTHER WITHREGARDSTOEXPORTABLECOMMODITIESSUCHASGOLD THESEMAY HAVEAVOLATILEPRICECYCLEREQUIRINGREGULATORYEFFORTSTOPROTECTTHEDOMESTICECONOMYFROMSUCHVARIATIONS 3ECONDLY GOVERNMENTSSHOULDLOOKATTHEOVERALLREVENUESTHATITRECEIVESFROMTHEMININGSECTORANDNOT SOLELYATROYALTYRATESANDCORPORATEINCOMETAX)TISTHEEFFECTIVERATEOFTAXATION IETHERATEPAIDBYTHE MININGCOMPANYCOMBININGALLTAXATIONANDDEDUCTIONSTHATDETERMINESWHETHERTHESTATEISGETTINGA@FAIR SHAREFROMTHEEXTRACTIONOFITSNATURALRESOURCES!BENCHMARKINGSTUDYSHOULDBEUNDERTAKEN WHERETHE CURRENT%THIOPIANlSCALPOLICIESARECOMPAREDTOTHESITUATIONINNEIGHBOURINGCOUNTRIES ANDWITHRELEVANT COUNTRIESELSEWHERE 4HEREARENO@CORRECTSYSTEMSFORRESOURCEREVENUEALLOCATIONANDDIFFERENTSYSTEMSWILLBENElTDIFFERENT COUNTRIESCFBOXBELOW !RESOURCEREALLOCATIONPLANMAYTAKEINTOCONSIDERATIONTHELEVELOFREGIONAL DISPARITYWITHINACOUNTRY ASWELLASTHECAPACITYOFREGIONALANDSUB REGIONALGOVERNMENTSTOCOLLECTTAXES ANDROYALTIES ASWELLASABSORBTHEM ANDSPACEFORLOCALCOMMUNITIESMOSTIMPACTEDBYMININGOPERATIONS TOSHAREINTHEBENElTSOFMINING$IFFERENTOPTIONSAREAVAILABLETHATMAYNOTONLYINCLUDESHARINGREVENUES BETWEENTHEFEDERALGOVERNMENTANDTHEREGIONALSTATESWHERETHENATURALRESOURCESAREBEINGEXTRACTED BUT THATALSOCOVEROTHERNON RESOURCEPRODUCINGREGIONALSTATES4HELATTERMAYWELLlNDTHEIRREVENUESDECLINE INRELATIONTOTHERESOURCEPRODUCINGPROVINCEWHICHISGENERATINGRESOURCEREVENUESFORTHEMSELVES 4HE GOALOFACHIEVING(ORIZONTAL&ISCAL%QUALIZATIONISFORREVENUESHARINGTOFACILITATEFOREACHREGIONALSTATES GIVENITSOWNREVENUERAISINGCAPACITYANDEFlCIENCY TOPROVIDEASIMILARLEVELOFSERVICES STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 57 Box  4:  Fiscal  equalization  and  the  sharing  of  resource  revenues 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 OWNERCOMMUNITIESTODECIDEONPROJECTSTHATSHOULDBElNANCEDBYMININGRELATEDINCOMES SUCH 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. 7HENTHEMINERALSECTORHASGROWNCONSIDERABLY THEGOVERNMENTMAYCONSIDERESTABLISHINGASOVEREIGN WEALTHFUNDORAGENERATIONFUND WHEREPARTOFTHECOMMODITYREVENUESGENERATEDCANBESAVEDSERVING BOTHASACAPITALRESOURCEFORFUTUREGENERATIONSASWELLASLIMITINGTHEDETRIMENTALIMPACTh$UTCHDISEASEv 7HILEITMAYBEARGUEDTHATACOMPARATIVELY@POORCOUNTRYCANNOTAFFORDTOBANKREVENUESFORTHEFUTURE  ITMAYLIKEWISEBEARGUEDTHATTHISISAGOODMEASUREOFPROTECTIONOFFUNDSINAlNANCIALSYSTEMWHERE OPTIMALlSCALMANAGEMENTISNOTINPLACE!NINmOWOFRESOURCEREVENUESCANRESULTINALARGERCAPITAL POOLFORTHEBANKSTOLENDFROM)FTHECAPITALISMADEAVAILABLEFORMANUFACTURINGORBUSINESSESITCAN ADDTOTHEDOMESTICGROWTHOFTHEECONOMY(OWEVERIFSUCHOPPORTUNITIESARENOTADEQUATE THECAPITAL MAYINSTEADmOWINTOOTHERPARTSOFTHEECONOMY FOREXAMPLETHEPROPERTYMARKET ANDTHUSCREATINGA HOUSINGBUBBLEWITHINmATINGPRICES!SOVEREIGNWEALTHFUNDALLOWSFORPARTOFTHERESOURCEREVENUES THAT THEECONOMYCANNOTABSORB TOBELOCATEDININTERNATIONALASSETMARKETS FROMWHICHTHESTATEEARNSA RETURN4HESERETURNSCANBEUTILISEDINNATIONALBUDGETSOREARMARKEDFORDEVELOPMENTPROJECTSSUCHAS HEALTH EDUCATIONANDINFRASTRUCTURE!STHEABSORPTIVECAPACITYOFTHEECONOMYINCREASES MOREANDMORE OFTHEFUNDSCANTHENBEBROUGHTINTOTHEECONOMY'ENERATIONFUNDSAREINCREASINGLYBEINGDISCUSSEDIN RELATIONTOMINERALRESOURCEREVENUES WHILETHEYHAVEBEENMORECOMMONLYAPPLIEDWITHINTHEOILSECTOR 4HE.ORWEGIAN'OVERNMENT0ENSION&UNDFOREXAMPLE TAKESTHEPROCEEDSFROMTHEOILSECTORANDINVESTS THEMINASSETSACROSSTHEWORLD4HERETURNSFROMTHESEINVESTMENTSAREUSEDTOlLLTHENATIONALBUDGET DElCIT'HANAS2EVENUE-ANAGEMENT!CT WASENACTEDAYEARAFTEROILREVENUESBEGANTOmOWFROM ITS*UBILEE&IELDSIN4HE!CTCLEARLYOUTLINESTHEMECHANISMSFORTHECOLLECTIONANDDISTRIBUTIONOF THEPETROLEUMREVENUESTHATACCRUETOTHESTATE4HEBILLDIVIDESTHEREVENUESINTOA(ERITAGE&UNDANDA 3TABILISATION&UND4HELATTERISTOBEUSEDTOENSUREASTABLELEVELOFBUDGETARYSUPPORT INCLUDINGSPENDING ONINFRASTRUCTURE4HE-INISTRYOF&INANCEAND%CONOMIC0LANNINGISRESPONSIBLEFORINVESTINGTHEPROCEEDS  REmECTINGTHEIRROLEASTHE4REASURY4HE#ENTRAL"ANKOF'HANAISRESPONSIBLEFORMANAGINGTHEFUNDS 58 FINAL  REPORT 2ISKMANAGEMENT PARTICULARLYWHENMINERALEXPORTSARESUBJECTTOVOLATILEINTERNATIONALPRICES ISIMPORTANT /NEOFTHEMAJORVECTORSOFTHE@RESOURCECURSEISTHEIMPACTONSTATEBUDGETSFORDEVELOPINGCOUNTRIESINTHE FACEOFCOMMODITYPRICESLUMPS3OME,ATIN!MERICANCOUNTRIESDEVISEDCOUNTERCYCLICMONETARYPOLICIES  WHICHWEREPUTTOGOODEFFECTINFACEOFTHElNANCIALCRISIS TOCOUNTERTHEEFFECTSOFTHECOMMODITY PRICEmUCTUATIONS/THERCOUNTRIES SUCHAS-EXICOWITHITSOILPRODUCTION HAVEUSEDFORWARDCONTRACTSTO ENSUREADEQUATEFUTUREINCOMESFORTHEIREXPORTS 7ITHTHEGRANTINGOF%)4)CANDIDACYSTATUS THEEXTRACTIVESECTORISGOINGTOCOMEUNDERINCREASEDSCRUTINY ANDCOMMENTARYFROMAVARIETYOFINTERNATIONALACTORSANDORGANISATIONS1UESTIONSOFTRANSPARENCYIN LICENSING OPERATIONSOFTHE-O-ITSELFANDOFTAXESANDREVENUESARELIKELYTOINCREASE4HE-O-NEEDS TOPREPAREFORADDRESSINGNEWDEMANDFORSUCHINFORMATION ASWELLASFURTHERDEVELOPITSPUBLICRELATIONS CAPACITY'REATERTRANSPARENCYINTHEEXTRACTIVEINDUSTRYHASGAINEDPOLITICALMOMENTUMINRECENTYEARS  ANDEFFORTSTHATSHOWCASE%THIOPIASCOMMITMENTSTOSUCHANINITIATIVEWILLBEWELCOMEDBYINVESTORSAND CIVILSOCIETYORGANISATIONS'IVENTHE@RENTSEEKINGANDCORRUPTIONTHATISSOMETIMESASSOCIATEDWITHTHE EXTRACTIVESECTOR DISCLOSUREOFRESOURCEREVENUESALLOWSFORTHEDEVELOPMENTOFATRANSPARENTMININGSECTOR 3UCHINFORMATIONWILLALSOBEOFUSETOLOCALCOMMUNITIESWHOCANDETERMINETHEEXTENTOFBENElTSTHEY RECEIVEINRELATIONTOTHEMININGOPERATIONSINTHEIRREGIONS !NOTHERISSUERELATEDTORESOURCEREVENUESISTHEPOSSIBILITYOF$UTCHDISEASE WHICHREFERSTOTHEMARGINALISATION OFTHEDOMESTICMANUFACTURINGSECTOR WHENNATURALRESOURCESBECOMEADOMINANTEXPORT&OREXAMPLE IF %THIOPIAWASTODISCOVERALARGEGOLDDEPOSIT ANDGOLDDOMINATEDITSEXPORTREVENUES THE%THIOPIA"IRRIS LIKELYTOAPPRECIATEINVALUE7HILETHATWOULDINCREASETHEFOREIGNEXCHANGEEARNEDBYTHECOUNTRY ITCOULD HAVEADETRIMENTALEFFECTONITSAGRICULTURALEXPORTSASTHESEWOULDNOWBECOMEMOREEXPENSIVEINTHE INTERNATIONALMARKETS ASWELLASONTHEDOMESTICMANUFACTURINGSECTOR WHICHCOULDBECOMEUNCOMPETITIVE INTERNALLYANDINTERNATIONALLYASWAGESANDCOSTOFCAPITALWOULDRISE 4HEREFORE INTHEMEDIUMTERM AS MINERALEXPORTSPICKUP THE-INISTRYOF&INANCEAND%CONOMIC$EVELOPMENT INCOORDINATIONWITHTHE .ATIONAL"ANKOF%THIOPIA NEEDSTOPLANAHEADTODEVISETHEAPPROPRIATEMEASURESINITSMONETARYPOLICY 7HILEGENERATIONFUNDSANDlSCALEQUALISATIONMECHANISMSDISCUSSTHESAVINGANDDISTRIBUTIONMECHANISMS FORRESOURCEREVENUES THESPENDINGMECHANISMSFORSUCHREVENUESSHOULDALSOBETAKENINTOCONSIDERATION BYTHESTATE4HE7ORLD"ANK RECOMMENDSTHATMININGREVENUESTHATAREPLACEDINFOUNDATIONS  TRUSTSORFUNDS&4& BEmEXIBLEWITHINEACHCOUNTRYCONTEXT(OWEVER THEREARETHREECRITERIATHATCAN CONTRIBUTETOMAKINGDECISIONSONTHESPENDINGOFSUCHFUNDS A #OMPLEXITYSHOULDBEPROPORTIONATETOTHEFUNDINGANDCAPACITYOFTHEOPERATINGENVIRONMENT B #ONTEXTEXTENSIVESOCIALASSESSMENTTOBECARRIEDOUTTODElNEVISION BENElCIARIESANDPROJECTSTOBE SUPPORTEDBYTHE&4& AND C )NTEGRATIONWITHOTHERLOCALANDREGIONALDEVELOPMENTPLANS (UMANRESOURCESATTHE-INISTRYOF-INESNEEDTOBEDEVELOPEDFURTHERTOINCREASETHEIRCAPACITYTOAUDIT  MONITORANDCALCULATETHEREVENUESDUETOTHESTATE ASWELLASENSURINGTHATCOMPANIESMEETTHEIROTHER EXPENDITUREANDSPENDINGREQUIREMENTS7HILETHEMININGTAXCODESANDOTHERlSCALHEADSMAYBECLEARLY OUTLINEDINREGULATIONS THEIROPERATIONALIZATIONISHIGHLYIMPACTEDBYTHEABILITYOFGOVERNMENTPERSONNELTO INTERPRET UNDERSTANDANDENFORCE STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 59 ©  Yara  Dallol  BV 9.   MINERAL  LICENSING  MANAGEMENT Background 9.1.    4HEEXISTENCEOFAMODERNANDWELL FUNCTIONING-INING#ADASTREAND2EGISTRY3YSTEMISAKEYFEATUREFOR THEPROMOTIONOFINVESTMENTSINTHEMININGSECTOR0OTENTIALINVESTORS BOTHLOCALANDINTERNATIONALAREMUCH MORELIKELYTOINVESTINACOUNTRYWHERESUCHASYSTEMISFOUNDTOBEOFAHIGHQUALITYANDTRANSPARENT NATURE.OTONLYMUSTTHE-INING,AWITSELFGUARANTEETHISSECURITYBUTTHEADMINISTRATIONOFTHE,AWMUST BETRANSPARENT DECISIVEANDEFlCIENT&ORTHEINVESTOR THE-INING#ADASTRE3YSTEMISOFTENPERCEIVEDAS THESUBSTANCEOFTHE-INING,AWANDTHEREFOREEXTREMELYIMPORTANTTOFORMINGANOPINIONONSECURITYOF TENUREASWELLASONTHE'OVERNMENTSDESIRETOPROMOTEMINING&ORTHE3TATE ANEFlCIENT-INING#ADASTRE 3YSTEMADMINISTRATIONGUARANTEESTHATTHEINTENTIONSOFTHE-INING,AWARECARRIEDOUTINPRACTICEAND PROVIDESFEEDBACKTHATSHOULDINmUENCEPOLICYMAKING  %THIOPIARECENTLYBENElTTEDFROMA7ORLD"ANKFUNDEDPROJECTWHEREAMODERN FULLYCOMPUTERISEDMINING CADASTREWASDEVELOPEDANDCOMMISSIONED4HESYSTEMWASBASEDONTHEhlRSTCOME lRSTSERVEDvPROVISION OFTHE-INING0ROCLAMATIONANDITWASFURTHERINSTALLEDTOWORKBOTHATTHEFEDERALANDREGIONALLEVELS4HE SOFTWAREUSEDWAS&LEXI#ADASTRE ASOFTWAREWHICHISTAILORMADEFORMININGCADASTRERELATEDAPPLICATIONS AND WHICHISUSEDBYMANYGOVERNMENTSANDMULTINATIONALCOMPANIESAROUNDTHEWORLDCFSPATIALDIMENSION COZA 4HEPROJECTWASCOMPLETEDIN ATWHICHTIMETHESYSTEMWASFULLYFUNCTIONINGBUTSINCE ITHAS PARTLYFALLENINTODISUSE ANDDURINGPARTOF ITHASNOTBEENFUNCTIONING4HEREASONSFORTHEPARTIAL NON FUNCTIONINGOFTHEEXISTINGSYSTEMISPARTLYREPORTEDTOBEDUETOSOFTWAREPROBLEMS ANDTHEABSENCE OFABUDGETTOPERFORMNECESSARYUPDATESANDPERFORMhBUGlXESv ANDPARTLYDUETOTHEGOVERNMENTS CHANGEINPOLICIESWITHREGARDSTOHOWLICENCESFORMININGANDEXPLORATIONSHOULDBEAWARDED Administrative  procedures 9.2.    4HE-INERAL0ROCLAMATIONPROVIDESFORSIXTYPESOFLICENSES SUMMARIZEDINTHETABLEBELOW 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 EXCLUSIVE NON DOESNOTINVOLVE LICENSE WHICH ,ICENSE RENEWABLE GEOLOGICALWORK SHALLNOTEXCEED that  could   MONTHS DISTURBTHEEARTH SURFACE 60 FINAL  REPORT For  the  period   SPECIlEDINTHE %XCLUSIVERENEWABLE LICENSE WHICH %VIDENCEOFlNANCIAL TWICEIFAPPLICANTFULlLS SHALLNOTEXCEED ANDTECHNICALRESOURCES ALLCONDITIONS INCLUDING 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 LICENSE WHICH CANNOTBEDEVELOPED RIGHTTOHOLD SHALLNOTEXCEED IMMEDIATELYBECAUSE THEEXPLORATION THREEYEARS)T ADVERSEMARKET 2ETENTION LICENSEANDTO CANBERENEWED CONDITIONS OTHER ,ICENSE BEGRANTEDA ONCEFORTHE ECONOMICFACTORS OR 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 LICENSE WHICH RESOURCESANDTECHNICAL !CCORDINGTO!RTICLE CARRYOUTMINING SHALLNOTEXCEED ABILITYNOTCONTRAVENTION  C THELICENSING 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 TRANSFER SURRENDERAND   TERMINATIONOFMINING RIGHTS !PPROVALOFWORK For  the  period   PROGRAMMEAND%)! SPECIlEDINTHE )MPLICITLYTO ACCESSTOlNANCIAL LICENSE WHICH CARRYOUTMINING RESOURCESANDTECHNICAL SHALLNOTEXCEED ASDElNED ABILITYNOTCONTRAVENTION TENYEARS)TCAN 2IGHTSTOMARKETANDSELL 3MALL SCALE UNDERTHE WITHANYOBLIGATIONSOF BERENEWED MINERALSPRODUCED!RT -INING,ICENSE 0ROCLAMATION THEEXPLORATIONLICENSE IF FORYEARS   WITHTHERIGHTS ANY!RT /BLIGATION IFCONTINUED RECOGNISED TOCOMMENCEOPERATIONS ECONOMIC UNDER!RT WITHINONEYEARASFROM VIABILITYPROVED LICENSEBECOMESEFFECTIVE !RT  !RT  STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 61 For  the  period   )MPLICITLYTO SPECIlEDINTHE .OREQUIREMENTOF CARRYOUTMINING LICENSE WHICH lNANCIAL TECHNICALOR ASDElNED SHALLNOTEXCEED PROFESSIONALRESOURCES !RTISANAL UNDERTHE THREEYEARS)T /NLYGRANTEDTO%THIOPIAN %XCLUSIVE -INING,ICENSE 0ROCLAMATION CANBERENEWED CITIZENSOAGROUPOF WITHTHERIGHTS TWICEFORTREE PEOPLEREGISTEREDASA RECOGNISED YEARSEACH!RT COOPERATIVESOCIETY UNDER!RT    4HEISSUINGOFLICENSESISDONEBYEITHERTHEREGIONALSTATESORTHEFEDERALGOVERNMENT-INERAL,ICENSING !DMINISTRATION$IRECTORATE -O- 4HEFORMERAREMANDATEDTOISSUEA ARTISANALMININGLICENSESB TO DOMESTICINVESTORS RECONNAISSANCE EXPLORATIONANDRETENTIONLICENSESWITHRESPECTTOCONSTRUCTIONAND INDUSTRIALMINERALSC TODOMESTICINVESTORS SMALLSCALEMININGLICENSESFORINDUSTRIALMINERALSANDSMALL ANDLARGESCALEMININGLICENSESFORCONSTRUCTIONMINERALS4HEFEDERALGOVERNMENTISSUESRECONNAISSANCE  EXPLORATION RETENTIONANDMININGLICENSESOTHERTHANTHOSETOBEISSUEDBYREGIONALSTATES  !RTICLEOFTHE-INING/PERATIONS0ROCLAMATIONPROVIDESTHATLICENSEHOLDERSPAYANNUALLYINADVANCE SURFACERENTALSFORTHELICENSEAREA ANDFORTHEAREACOVEREDBYALEASETHISPRESUMABLEREFERSTOLEASES OFAREASOUTSIDETHELICENSEAREABUTREQUIREDFORTHEMININGOPERATIONS 4HEPAYMENTOFLICENSESISMADE TOTHERESPECTIVEAUTHORITIESRESPONSIBLEFORTHEGRANTINGOFTHELICENSESATTHEFEDERALANDREGIONALLEVELSOF ADMINISTRATION  $UETOALACKOFCAPACITYATTHEFEDERALOFlCETOHANDLEMINERALLICENSEAPPLICATIONS THEREWASAMORATORIUM ONTHEACCEPTANCEOFEXPLORATIONLICENSEAPPLICATIONSFOROVERAYEAR UPTOTHEBEGINNINGOF!LSO  DUETOALACKOFCAPACITY DURINGTHEFOCUSHASBEENENTIRELYONTHEEVALUATIONOFMININGLICENSEAND LICENSETRANSFERAPPLICATIONS ANDTHEREISALARGEBACKLOGWITHREGARDSTOEXPLORATIONLICENSES  4HECURRENTLYAPPLIEDPROCESSFORTHEASSESSMENTOFEXPLORATIONLICENSEAPPLICATIONSISTOGROUPANDEVALUATE THESEONAMONTHLYBASIS INACCORDANCEWITHTHEPROVISIONSOFTHE-INERAL,ICENSE!PPLICATION0ROCESSING $IRECTIVE 3ECTION PARAGRAPH )NPRACTICE THUS ATECHNICALCOMMITTEESELECTSTHESUCCESSFUL APPLICANTONTHEBASISOFCRITERIASETOUTINTHEDIRECTIVE  4HEREISANAPPARENTSCOPEFORBIASEDORCOMPROMISEDHANDLINGOFEXPLORATIONLICENSINGUNDERTHISLICENSING ADMINISTRATION ESPECIALLYASNORECEIPTISGIVENONTHESUBMISSIONOFAPPLICATIONS%VENWITHAPERFECTLY TRANSPARENTEVALUATIONOFAPPLICATIONS THESYSTEMSTILLIMPLIESTHATOBJECTIVECRITERIAFORSELECTINGONElRM EXIST ANDTHATTHECOMMITTEEHASADEQUATEINFORMATIONONlRMSANDEXPERTISETOAPPLYTHECRITERIA  4HEINTERVIEWSCARRIEDOUTAMONGGOVERNMENTOFlCERSCONSISTENTLYEMPHASIZEDTHEUSEOFTHISALTERNATIVE SYSTEMINPRACTICEBECAUSETHEGOVERNMENTINTENDSTODISCOURAGESPECULATIVEAPPLICATIONS4HEYALSO POINTEDATTHECRITICALCAPACITYCONSTRAINTSOFTHELICENSINGAUTHORITYTOASSESSAPPLICATIONSONTIME)NAFUTURE REFORMPROCESS THEMANAGEMENTATTHEMINERALLICENSINGOFlCEPOINTEDOUTTHATTHEYWOULDRATHERWORK ONADDRESSINGTHEINSTITUTIONALCONSTRAINTSFORTHEEFFECTIVEIMPLEMENTATIONOFTHISSYSTEMTHANSTREAMLINING THEPROCESSFORAPURELY@lRSTCOME lRSTSERVEDCRITERIA !LTERNATIVEMETHODSTODISCOURAGESPECULATIONCOULDINCLUDERAISINGAPPLICABLEFEESSEERECOMMENDATIONS BELOW ASTHECOSTSFORHOLDINGLANDFOREXPLORATIONAND ESPECIALLYFORMINING IN%THIOPIAARELOWINCOMPARISON WITHSOMENEIGHBOURINGCOUNTRIES ANDSELECTEDMININGNATIONS4ABLE )TISNOTEDTHATTHE%THIOPIAN APPROACHTOCHARGINGFORTHEREGISTRATIONOFAPPLICATIONS THATISPERPAGE APPEARSTOBEFAIRLYUNIQUE)TIS ALSONOTEDTHAT%THIOPIAISTHEONLYCOUNTRYTHATHASASPECIlCh,ICENSEFEEv 4ECHNICALANDlNANCIALCOMPLIANCEMONITORINGALSOFALLSUNDERTHEDUTIESOFTHELICENSINGANDADMINISTRATION DIRECTORATE-ONITORINGISNOTADEQUATEDUETOALACKOFCAPACITY ANDAHIGHNUMBEROFEXPLORATIONLICENSES APPARENTLYHAVEEXPIREDORSHOULDBEREVOKEDDUETONON COMPLIANCE BUTONLYVERYFEWHAVEBEENREVOKED &ROMTHEINTERVIEWSCARRIEDOUTWITH-O-STAFFWITHINTHISPROJECT -O-MAYALSOCHOSENOTTORELINQUISH GROUNDINCASESOFNON CONFORMANCEORWHERECOMPANIESHAVELEFTFOROTHERREASONS ASTHE3TATEMAYWISH TOTAKETHEAREAINQUESTIONTOBIDDING3TILL INOTHERCASES GEOGRAPHICALAREASARERESERVEDFORSTATEINTEREST ANDISTHUSNOTOPENFORAPPLICATIONS SUCHASINTHECASEOFTHE%THIO #HINESEJOINTVENTUREFORWHICHLARGE AREASOFSOUTHWESTERN%THIOPIAARERESERVED4OGETHERWITHTHEPROCESSFORTHEASSESSMENTOFEXPLORATION LICENSEAPPLICATIONSPARAGRAPHS ABOVE THISCREATESASYSTEMTHATISUNCLEARANDRATHERUNCERTAINFOR INVESTORS7HILETHEPOLICYFRAMEWORKENVISIONSTHEGOVERNMENTTOFACILITATE PROMOTEANDREGULATETHEMINERAL SECTOR THE-INING0ROCLAMATIONDOESPROVIDEFORANENTREPRENEURIALROLEFORTHEGOVERNMENTINMINING SEE#HAPTER PARAGRAPHS   ANDFORPOLICYANDLEGALPROVISIONSANDRELATEDDISCUSSIONS  62 FINAL  REPORT 4HECADASTRESYSTEM ATTHECENTRALLICENSINGOFlCE FORRECORDINGANDMANAGEMENTOFMINERALLICENSES HASNOTBEENWORKINGFORSOMETIME WHICHISREPORTEDTOBEDUETOALACKOFFUNDSFORSOFTWAREUPGRADING ANDTECHNICALSUPPORT4HEORIGINALINTENTIONATIMPLEMENTATIONWASFORASYSTEMWHERETHEFEDERALOFlCE ISCONNECTEDTOREGIONALOFlCES4HISWASNOTFULLYACHIEVED RESULTINGINARISKOFISSUEDLICENSESTOOVERLAP SPATIALLYAND WHICHEMPHASIZESTHENEEDTOCOORDINATETHEFUNCTIONINGOFREGIONALANDFEDERALOFlCES 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           "ASEDONTHEMININGREGULATIONS WHICHAREAPPLIEDTODAY,ICENSEFEESAREPERMININGBLOCKnMAXIMUMLICENSEAREAS  WHICHSIZESAREDElNEDINTHEREGULATIONS  #HARGEDPERPAGEOFTHELICENSEAPPLICATIONDOCUMENT  9EAR  THEREAFTERRENTSESCALATE  EAR  THEREAFTERRENTSESCALATE  'OLD KIMBERLITICDIAMONDSANDGEMSTONESOTHERMINERALSIS53$ KM STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 63 Recommendations 9.3.   )NTHESHORT TERM THE-O-MAYCONSIDEROUTSOURCINGORBRINGINGINEXPERTISETOSUPPORTTHEEVALUATIONOF THELARGENUMBEROFEXPLORATIONLICENSEAPPLICATIONSNOWPENDINGEVALUATION3UCHAMEASURECOULDBE COMBINEDWITHCAPACITYBUILDINGANDTRAININGOFSTAFF INPARTICULARINTHEAREASOFTECHNICALANDlNANCIAL EVALUATIONOFFEASIBILITYSTUDIES#ONCURRENTLY ASSISTANCECOULDBEPROVIDEDINTHEAREAOFCOMPLIANCE MONITORING 'RANTINGOFLICENSESOUTSIDETHELEGISLATEDPROCEDURESFORAPPLICATIONANDEVALUATIONISAPRIMARYDETERRENT TOINVESTMENTINTHEINDUSTRY4HEESTABLISHMENTOFRULESANDPROCEDURESFORDISCRETIONARYGRANTINGOF EXPLORATIONORMININGLICENSESMAYTHUSBECONSIDERED !LTERNATIVEMETHODSFORREDUCINGSPECULATION WHICHISGIVENASTHEMAINREASONFORTHEDISCRETIONARY EVALUATIONOFLICENSEAPPLICATIONS DOEXIST EG !MORERIGOROUSEXAMINATIONOFTHECRITERIAALREADYIN THELAWCONCERNINGTECHNICALANDlNANCIALCAPACITYFOREXPLORATION ANDSTRICTAPPLICATIONOFTHESETOEACH INDIVIDUALAPPLICATION 2AISINGFEESFORLICENSESANDHOLDINGGROUNDTOALEVELUNSUSTAINABLEEXCEPTBY lRMSSERIOUSLYCOMMITTEDTOINVESTMENTANDEXPLORATION)NTHISRESPECT ACOMPARATIVESTUDYOFTHECOSTS FORMINERALRIGHTSAPPLICATIONSANDTHECOSTSOFHOLDINGGROUNDISRECOMMENDED !PERMANENTSOLUTIONFORADEQUATEBUDGETSUPPORTFORTHEMININGCADASTRESYSTEMWOULDSUPPORTITS CONTINUOUSOPERATION3OFTWARESUPPORTANDMAINTENANCECONTRACTSARESTANDARDINALLCUSTOMISEDSOFTWARE IMPLEMENTATIONSANDADEQUATEBUDGETINGFORHARDWAREANDNETWORKMAINTENANCEISNECESSARY!FUNCTIONING CADASTRESYSTEM COMPRISINGSTAFFCAPACITY SOFTWARE HARDWARE NETWORKANDCOMMUNICATIONSSOLUTIONSAND )4SUPPORT ISCRITICALFORADEQUATEREGULATIONANDFAILUREOFTHESYSTEMCANHAVEMAJORNEGATIVEIMPACTSON INVESTORCONlDENCE TRANSPARENCYINLICENSING -O-WORKLOAD AND ULTIMATELY INACHIEVINGSECTORGROWTH TARGETS&ORINCREASEDACCESSTOINTERESTEDPARTIESINVESTORS NON COREAUTHORITIES CIVILSOCIETYETC THE CADASTRECOULDBEPUBLISHEDONLINEANDUPDATEDONAFREQUENTBASISINREALTIMEORATLEASTDAILY  4HEREISANEEDTOCOORDINATETHEFUNCTIONINGOFTHECADASTREATFEDERALANDATREGIONALSTATESLEVEL)FTHERE ARESPATIALOVERLAPSINLICENSEAREAS BETWEENLICENSESGRANTEDATTHEREGIONALORSUB REGIONALLEVELS AND THOSEGRANTEDATTHE-O- THENPROCEDURESSHOULDBEMODIlEDSOTHATSUCHOVERLAPSAREIMPOSSIBLETO CREATE )NSOMEJURISDICTIONS THELICENSESFEESAREUSEDTOWARDSTHECOSTSOFTHECADASTREMAINTENANCE4HISMAYNOT POSSIBLEUNDERTHECURRENTINSTITUTIONALSET UPMINERALLICENSINGADMINBEINGPARTOFTHE-O-STRUCTURE  BUTTHEPOSSIBILITYFORTHISMAYBEINVESTIGATEDUNDERAREVISEDORGANIZATIONALSET UPSEE3ECTION  64 FINAL  REPORT ©  The  Swedish  Geological  AB  !24)3!.!,-).).'-!.!'%-%.4  !RTISANALANDSMALLSCALEMININGOPERATIONSEXISTINMANYDEVELOPINGCOUNTRIES4HISPARTOFTHEMINING SECTORHASBEENSTUDIEDRATHERINTENSELYINTHELASTCOUPLEOFDECADES ANDTHEREISANOVERALLAGREEMENTTHAT ALTHOUGHTHESETYPESOFACTIVITIESMAYBECOMEASOURCEFORTHEDEVELOPMENTOFLOCALENTREPRENEURSHIP AND OVERALLECONOMICDEVELOPMENT ITISALSOASECTORWHICHISASSOCIATEDWITHSIGNIlCANTNEGATIVEENVIRONMENTAL IMPACTS ANDOFTENWITHPOORSOCIALCONDITIONSCF&IGURE &URTHER !3-ISOFTENPERFORMEDINREMOTE AREASWHICHGOVERNMENTAGENCIESMAYHAVEDIFlCULTIESINACCESSING MAKINGSUPERVISIONANDCONTROLOFTHE SECTORASIGNIlCANTCHALLENGE  !RTISANALMINESITESGENERALLYSHAREANUMBEROFCHARACTERISTICS4HUS MININGISMAINLYBEINGDONEBYHAND USINGSIMPLETECHNOLOGYINTHEFORMOFSHOVELS PICKSANDWHEELBARROWS4HEOREACCESSEDISEXCAVATED FROMSURlCIALDEPOSITS4HEREISGENERALLYNEITHERDRILLINGEQUIPMENTNORANYEXPLOSIVESUSED ANDTHEREIS NOEARTHMOVINGMACHINERYEMPLOYED4HEACTIVITIESARESOMETIMES OREVENOFTEN CARRIEDOUTWITHOUTVALID PERMITSFORCONDUCTINGTHEACTIVITIESANDTHEREISALACKOFlNANCEFORDEVELOPMENT4HEKNOWLEDGEOFTHE GEOLOGYORDEPOSITSBEINGMINEDISLIMITED LEADINGTOANACTIVITYWITHAVERYSHORTPLANNINGHORIZON  4HEREHAVEBEENAGROWINGNUMBEROFINITIATIVESTAKENBYINSTITUTIONSSUCHASTHE7ORLD"ANK THE%$& THROUGH393-). ANDBILATERALDEVELOPMENTAGENCIES#O3UDE $ANIDA 3IDA $&!4$ETC CONCERNEDWITH SUPPORTINGANDBETTERORGANISINGTHE!3-SECTOR4HESEINITIATIVESHAVEBEENMETWITHVARYINGLEVELSOF SUCCESS%NCOURAGEMENTANDSUPPORTFORINFORMALMINERSTOFORMCOOPERATIVESORFORMALCOMPANIESHAVE INSOMECASESLEDTOCONSIDERABLEIMPROVEMENTSWITHREGARDSTOTHEABILITYOFTHEAUTHORITIESTOUNDERSTAND THESECTOR ANDTHUSTOSUPERVISEANDCONTROLIT#ONVERSELY THEREARENOPUBLISHEDEXAMPLESOFSUCCESSFUL ATTEMPTSTOPROVIDEMICROlNANCESCHEMESTOTHESECTOR ALTHOUGHEXAMPLESOFTOTALORPARTIALFAILURESARE GROWING0ROJECTSRELATEDTOBUILDINGTHECAPACITYOF!3-MINERSINTERMSOFTECHNICAL ECONOMICANDOR ENVIRONMENTALMANAGEMENTSKILLSHAVEOFTENBEENWELLRECEIVED ALTHOUGHLASTINGBENElTSREMAINDIFlCULT TOPROVE MINERS: Inadequate techniques Low recovery Inability to and productivity invest Figure  10.1.    Illustration  of  the  two  cycles   of  cause  and  effect  that   Low income commonly  affect  ASM  and  the   and savings authorities  which  attempt  to   Poor health and safety, control  them.  If  these  cycles   environmental damage are  not  broken,  they  often  lead   to  poor  environmental  and   AUTHORITIES: Inadequate operational social  performance. resources Inability to Insufficient control sector income Inability to collect taxes or royalties Poor health and safety, environmental damage, illegal operations  STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 65  /NGOINGCONmICTSBETWEEN!3-ANDLARGERSCALE FORMALMININGOPERATIONSHAVEBEENREPORTEDINMANY DEVELOPINGCOUNTRIESEG0APUA.EW'UINEA0.' 4ANZANIA :AMBIA 'HANA $2# %CUADORETC 4HE ISSUESAREGENERALLYNOTCLEARCUT OREASILYRESOLVED4HE!3-MINERSMAY INSOMECASES BETHEONESTHAT INITIALLYDISCOVEREDTHEMINE BUTINSOMECASES!3-MINERSMAYBEINFRINGINGONLEGALLYUNASSAILABLERIGHTS 4HEREHAVEBEENANUMBEROFATTEMPTSTOBROKERAGREEMENTSBETWEENLARGEROPERATIONSAND!3- AND THEREISAGROWINGLITERATUREONHOWSUCHAGREEMENTSCANBEPUTINPLACEEGTHE#!3-#OMM$EV)#--  PUBLICATIONh7ORKINGTOGETHERv (OWEVER INALLCASES THEPRESENCEOFANUNREGULATEDANDUNPREDICTABLE !3-SECTORATASITEORINACOUNTRYREPRESENTSASIGNIlCANTDISINCENTIVEFORINVESTMENTSMADEBYLARGER SCALEMININGOPERATORS  !RTISANALANDSMALL SCALEACTIVITIESFORMANIMPORTANTPARTOFTHE%THIOPIANMININGSECTOR-OST!3-ISCARRIED OUTINREMOTEAREAS ANDSINCEATLEASTASIGNIlCANTPARTOFTHESEACTIVITIESAREINFORMAL THESECTORREMAINS POORLYUNDERSTOOD)NLATERYEARS -O-HASBEENACTIVEINSTUDYINGANDSUPPORTINGTHESECTORANDTHEBODY OFKNOWLEDGEISGROWING&URTHER THE-O-HAS WITHTHESUPPORTOFTHE*APANESE3OCIAL$EVELOPMENT&UND *3$& ADMINISTEREDBYTHE7ORLD"ANK COMMISSIONEDANUMBEROFSTUDIESTHATWILLLEADTOANIMPROVED UNDERSTANDINGOFTHESECTOR(ENCE AREPORTONTHEBASELINESITUATIONINSELECTED!3-COMMUNITIESHAS RECENTLYBEENPUBLISHED3U$#!$EVELOPMENT#ONSULTANTS  ANDMOREWORKISTOBEDONE&URTHER  WITHINTHEPRESENTPROJECT3!-3 HALFADOZEN!3-SITESINSOUTHERNANDWESTERN%THIOPIAHAVEBEEN VISITEDANDSTUDIED  4HEMOSTIMPORTANTPRODUCTSMINEDTHROUGH!3-IN%THIOPIAINCLUDE INDECREASINGRELATIVEECONOMIC IMPORTANCEGOLD GEMSSAPPHIRE OPAL SALT TANTALUMANDDIMENSIONSTONE4HEPRODUCTIONOFTHESE COMMODITIESTHROUGH!3-ISSIGNIlCANT ANDISREPORTEDTOHAVEGROWNRAPIDLYINTHELASTFEWYEARS ESPECIALLY WITHREGARDSTOGOLDBUTALSOGEMS SPECIlCALLYOPAL)N THEPRODUCTIONFROM!3-WASREPORTEDTO BEMOREIMPORTANTTHANLARGE SCALEOPERATIONSFORMOSTMETALSANDMINERALSMINED ANDALSOINTERMSOF EMPLOYMENTGENERATION 10.1.  Governance  of  ASM  %THIOPIANLAWMAKESADISTINCTIONBETWEENARTISANALANDSMALLSCALEMINING4HUS ARTISANALMININGISDElNED ASBEINGNON MECHANISED ANDPERFORMEDUSINGRUDIMENTARYTOOL)NCONTRAST SMALLSCALEMINESITESARE ATLEASTPARTLYMECHANISED4HEREARESEPARATELEGALLICENSESAVAILABLETOARTISANALMININGANDSMALLSCALE MINING O !NARTISANALMININGLICENSEISAPPLIEDFORATTHE2EGIONAL-INING"UREAUS)TMAYBEGRANTEDONLYTO%THIOPIAN INDIVIDUALSORORGANISATIONSCOMMONLYCOOPERATIVES 4HELICENSEPROVIDESANEXCLUSIVERIGHTTOEXPLORE ANDMINEFORTHEMINERALSWITHINTHELICENSEAREA)TISVALIDFORYEARS ANDMAYNOTBERENEWED4HE ARTISANALLICENSEISCONCERNEDWITHOPERATORSTHATARENON MECHANIZEDANDTHATISWORKEDATADEPTHLESS THANMVERTICALDEPTH4HEREISNONEEDTOHAVEANYSPECIlEDlNANCIALRESOURCES TECHNICALCOMPETENCE  PROFESSIONALSKILLS ANDEXPERIENCETOACQUIREANARTISANALMININGLICENSE O !SMALLSCALEMININGLICENSEFORPRECIOUSANDSEMI PRECIOUSMINERALSISAPPLIEDFORATTHECENTRALLEVEL AND ISCONCERNEDWITHMININGOPERATIONWITHSPECIlEDMAXIMUMLEVELSOFRUN OFFMINEOREPRODUCTIONEGFOR GOLD PLATINUM SILVER ANDOTHERPRECIOUSANDSEMI PRECIOUSMINERALSTHATIS MOR TONS  4HISLICENSEISVALIDFORUPTOYEARSINITIALLYANDTHEREAFTERFORAFURTHERYEARSATATIME  4HEGOVERNMENTOF%THIOPIAISMAKINGCONSIDERABLEANDCONCERTEDEFFORTSTOPROMOTE FORMALISEANDIMPROVE THEORGANISATIONANDEFlCIENCYOF!3-ACTIVITIES7ITHINTHE-O- THE!RTISANAL-INING4RANSACTION #OORDINATING$IRECTORATEISCHARGEDWITHMONITORING REGULATINGANDPROVIDINGASSISTANCETOTHE3ECTOR WHEREASTHE%NVIRONMENTAND#OMMUNITY$EVELOPMENT$IRECTORATEMANAGESANDREGULATESENVIRONMENTAL ANDSOCIALISSUES4HEHOLDEROFANARTISANALLICENSEISOBLIGEDTOUNDERTAKEMININGOPERATIONSACCORDINGTO THEENVIRONMENTAL HEALTHANDSAFETYSTANDARDSPRESCRIBEDFORARTISANALMININGINTHERELEVANTLAWS!GAIN  ASMALLSCALEMININGOPERATOR ONTHEOTHERHAND FOLLOWSTHESAMELAWSASWOULDABIGOPERATION  !TTHEREGIONALSTATESLEVEL LICENSINGOFARTISANALMININGISMANAGEDBYTHE2EGIONAL-INING"UREAUS (ENCE COOPERATIVESORINDIVIDUALSTHATHOLDAN!RTISANALMININGLICENSESHOULDPAYAROYALTYTOTHE2EGIONAL -INING"UREAUBUTAREEXEMPTFROMOTHERTAXES!SMALLSCALEMININGOPERATORFOLLOWSTHESAMELAWSAS BIGOPERATIONSDO ANDSHOULDTHUSPERFORMAN%)!BEFORESTARTINGOPERATIONS ANDSUBMITYEARLYTECHNICAL ANDlNANCIALREPORTSTOTHEAUTHORITIES 4HE.ATIONAL"ANKISCHARGEDWITHBUYINGTHEGOLDPRODUCEDBYARTISANALMINERS ANDITISCHARGEDWITHDOING SOWITHAINCREMENTCOMPAREDTOTHEDAILY OFlCIALGOLDPRICEAROYALTYISPAYABLETOTHESTATE 4HIS GOLDBUYINGMECHANISMISRATHERUNIQUE ANDITHASRECEIVEDQUITEABITOFATTENTIONFROMOTHERCOUNTRIES ANDORGANISATIONSTHATARECONCERNEDWITH!3-MANAGEMENT(OWEVER ASDESCRIBEDBELOWPARAGRAPH  THESYSTEMISNOTFULLYEFFECTIVE 66 FINAL  REPORT +EYlNDINGS %THIOPIAHASALONGTRADITIONOFARTISANALGOLDANDGEMMINING4HESECTORREMAINSIMPORTANTAND-O-  ESTIMATESTHATATOTALOFABOUTMILLIONPEOPLEAREDIRECTLYENGAGEDIN!3-IN%THIOPIA ABOUTA THIRDOFWHICHARECONCERNEDWITHGOLDMINING(OWEVER ITNEEDSTOBEKEPTINMINDTHATITISDIFlCULTTO ESTIMATETHENUMBEROFARTISANALMINERS ANDTHATSUCHESTIMATESMUSTBEINTERPRETEDWITHSOMECAUTION 0ROBLEMSWITHPROVIDINGESTIMATESRELATETOTHEFACTTHATTHESEACTIVITIESARETOALARGEEXTENTINFORMALAND UNREGISTEREDTHETERRAINISOFTENDIFlCULTTOACCESSANDMANYMINERSARENOTFULL TIMEMINERS BUTCOMBINE 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.   )FACOUNTRYHASBOTHAFORMALANDANINFORMALGOLDSECTOR THENTHEDIFFERENCEBETWEENTHEOFlCIAL 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 BITMORETHANKG OZ IN TOINTHEEXCESSOF KILOS OZ IN 4HELATTERAMOUNTISREMARKABLYLARGE ANDWELLINEXCESSOFTHEGOLDPRODUCEDBY!3-MINERSINSUCH ESTABLISHEDGOLDMININGCOUNTRIESAS'HANAOR4ANZANIA&URTHER THElNDINGSOFTHEADMITTEDLY 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. STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 67 ASM  for  alluvial  gold  is  ongoing  in  waterways,  some   of  which  is  within  the  Nyota  project’s  license  area.   Individuals  or  teams  of  two  do  the  mining  and  in  all   there  may  be  up  to  500  active  miners;  none  of  these  are   organized  in  cooperatives  or  in  other  ways  licensed.  The   miners  are  mostly  young  men,  although  some  women   are  also  involved.  Miners  report  that  that  they  may  each   produce  up  to  4-­5  g  gold/month.  Some  of  the  gold  is   sold  to  licensed  traders,  but  most  appears  to  be  sold   THROUGHILLICITCHANNELS4HEREARECONmICTSWITHLOCAL FARMERS ANDSIGNIlCANTENVIRONMENTALIMPACTSINTHE form  of  riverbank  erosion  and  sedimentation.   Yubdo  Woreda  (Oromia  –  west) ©  The  Swedish  Geological  AB The  area  has  a  long  history  of  ASM,  mostly  for  alluvial   gold  but  also  to  lesser  extent,  platinum.  Miners  work  in   pairs,  and  almost  entirely  without  being  licensed;  one   cooperative  exists  but  it  is  dormant.  There  may  be  up  to   100  active  miners,  most  of  them  farmers  that  gain  an   EXTRAINCOMETHISWAY4HEGOLDISTOASIGNIlCANTEXTENT sold  outside  the  formal  and  controlled  channels. Nejo  Woreda  (Oromia  –  west) This  area  also  has  a  history  of  ASM,  targeting  alluvial   gold.  There  are  three  licensed  cooperatives  in  the  area,   but  these  were  inactive  in  late  2013.  There  may  be  up   to  700  miners,  and  reportedly  they  produce  up  to  some   4-­5  g  gold/month  each.  The  gold  is  to  a  large  extent  sold   ©  The  Swedish  Geological  AB through  illicit  channels.  Environmental  and  social  issues   OFNOTEINCLUDECHILDLABOUR LANDCONmICTWITHFARMERS and  erosion  and  sedimentation  in  rivers. Menge  Woreda  (Benshangul-­Gumuz) Most  woredas  in  the  region  have  ASM  activity,  and   the  majority  is  alluvial  gold  mining.  There  are  some   74  associations  in  the  region,  as  well  as  56  licensed   traders.  Associations  mainly  produce  the  artisanal  gold,   but  there  are  also  individual  artisanal  miners  who  also   play  important  roles  in  gold  production.  Women  appear   to  take  a  greater  part  in  the  activities  here,  compared   to  elsewhere  in  Ethiopia.  There  is  a  shortage  of  water,   as  the  rivers  dry  up  in  the  dry  season.  During  this   period,  soil  is  brought  to  house  to  be  washed  using  the   domestic  supply. ©  The  Swedish  Geological  AB 4HEPRODUCTIVITYOF!3-GOLDMINERSVARIES(OWEVER INTHEMAINLYPLACERBASEDGOLDDEPOSITSOFWESTERN %THIOPIA SURVEYSSUGGESTTHATONAVERAGE ONEMINERPRODUCESSOMEnGGOLDPERMONTH DEPENDING UPONWHETHERTHEMININGISCONDUCTEDPART ORFULLTIME!TTHESITEINSOUTHERN/ROMIA$OLOVIA WHICHIS REPORTEDLYTHELARGEST!3-COOPERATIVEINTHATREGION WHEREPRIMARYOREISBEINGEXPLOITED AWELLORGANISED COOPERATIVEOPERATIONWITHSOMEMEMBERS ISPRODUCINGSOMEnGGOLDMONTH WHICHTRANSLATES TOABOUTnGGOLDPERMEMBERANDMONTH)FTHESEPRODUCTIONlGURESAREREPRESENTATIVEOFTHE!3- SECTORASAWHOLE THENTHISWOULDIMPLYTHATTHEREPORTED!3-PRODUCTIONOFGOLDDURING  KILOSOR OZ REQUIREWELLINEXCESSOFONEMILLIONINDIVIDUALMINERS ORALTERNATIVELYTHEEXISTENCEOF MORETHAN COOPERATIVESOFTHESIZEOFTHE$OLOVIACOOPERATIVE 68 FINAL  REPORT 4HESMUGGLINGANDILLICITSALESOFGOLDTONON LICENSEDBUYERSISREPORTEDTOBERATHERWIDESPREAD AND THISHASOCCURREDINSPITEOFTHEGOVERNMENTPOLICYOFPAYINGAPREMIUMOVERTHEDAILYGOLDPRICE4HE REASONSBEHINDTHESEILLICITSALESINCLUDEAWISHTOAVOIDPAYINGROYALTY ANDABELIEFTHATTHEPRICE PAIDBYTHEILLICITTRADERSISHIGHERTHANTHOSEBEINGPAIDBYTHEGOVERNMENT4HESElNDINGSARENOTINLINE WITHTHEPREVAILINGBELIEFTHATTHEGOLDBUYINGMECHANISMTHATISINPLACEISEFFECTIVE WHICHINTURNSUGGESTS THATFURTHERSTUDIESAREREQUIRED !3-ACTIVITIESREQUIREWATER ANDTHEYARETHEREFOREOCCURRINGNEARWATERSOURCES7ITHREGARDSTOALLUVIAL GOLD THESOURCEISGENERALLYARIVERORSTREAM!T$OLOVIA WHEREMININGOFPRIMARYOREISCONDUCTED THE MATERIALISBROUGHTTOANEARBYRIVERFORPROCESSING!SALLPROCESSINGACTIVITIESAREDEPENDENTONWATERAND ASTHEREAREUSUALLYNOFACILITIESFORPUMPINGWATER THISDEPENDENCYONWATERISCRUCIALANDISLIMITINGTHE RESOURCESTHATMAYBEUTILISEDBY!3-MINERS 4HEUSEOFMANUALUNSKILLEDLABOURINCOMBINATIONWITHPRIMITIVETECHNOLOGIES LEADSTOARISKYWORK ENVIRONMENT3ERIOUSACCIDENTSARETHEREFORECOMMONPLACE&URTHER THETYPEOFWORKTHATISDONEISIN SOMECASESSEENTOBESUITABLEFORTHEUNDER AGED ANDTHEREAREREPORTSOFCHILDLABOUR !CCESSTOSAFEDRINKINGWATERISSCARCEINMANYOFTHE!3-MININGAREAS&URTHER THELIMITEDAVAILABILITY OFSAFEWATERPLACESASEVERESTRAINONTHEMINERS ANDPARTICULARLYONTHEWOMENWHOARERESPONSIBLEFOR FETCHINGWATERFORHOUSEHOLDANDINPLACES ESPECIALLYIN"ENISHANGUL 'UMUZ ALSOFORTHEWASHINGOFORE !3-ISCAUSINGSIGNIlCANTENVIRONMENTALIMPACTSINTHEAREASWHERETHEYOCCUR4HEMAINIMPACTSRELATE TOINCREASEDSUSPENDEDSEDIMENTSLOADINGANDTURBIDITYINRIVERS ASTHEEXTRACTIONOFMATERIALFROMHILLSIDES ANDRIVERBANKSISCAUSINGEROSIONANDASSOCIATEDSILTINGOFRIVERS3IMILARLY THEWASHINGOFOREISOFTENDONE INRIVERS ORNEXTTOTHEM LEADINGTOGREATERTURBIDITYINDOWNSTREAMRIVERSANDSTREAMS3U$#!$EVELOPMENT #ONSULTANTS NOTESSIGNIlCANTDEFORESTATIONINSOMEMININGAREAS ESPECIALLYINTHE"ENISHANGUL 'UMUZREGION4HEUSEOFMERCURYIS HOWEVER NOTWIDESPREAD WHICHISFROMANENVIRONMENTALPOINTOF VIEWVERYPOSITIVE&URTHER THEENVIRONMENTALIMPACTSARE INGENERAL NOTSUCHTHATTHEYSPREADMUCH BEYONDTHESPECIlCAREASWHEREMININGISBEINGCONDUCTED 4HEREARECASESOF!3-ACTIVITIESINTERFERINGORINFRINGINGONLARGERSCALEMINESANDPROJECTS3UCHPROBLEMS EXISTINTHE.YOTALICENSEAREA TOSOMEEXTENTAT,EGA$EMBI ANDTHEYAREREPORTEDTOBESEVEREATTHE STATEOWNED!DOLAMINE)NTHELATTERCASE THISFACTISSAIDTOBECONTRIBUTINGTOTHEDIFlCULTYOFPRIVATISING THEOPERATION!T,EGA$EMBI ITISREPORTEDTHATINVASIONSBY!3-ONMINEPROPERTYOCCURFROMTIMETO TIMEBUTTHATTHELOCALWOREDAADMINISTRATIONISEFFECTIVEINMANAGINGANDCONTROLLINGTHISPROBLEM WITHTHE RESULTTHATTHISISNOTCONSIDEREDBYTHEMINETOBEAMAJORPROBLEM !3-SITESAREUSUALLYSITUATEDINREMOTEAREASWHEREACCESSTOROADSISLIMITEDANDELECTRICITYDOESNOTEXIST  3U$#!$EVELOPMENT#ONSULTANTS NOTESTHATTHESITUATIONISSEVEREINREMOTEPARTSOF"ENISHANGUL 'UMUZREGION WHEREMININGISCOMPARATIVELYMOREIMPORTANTASASOURCEOFINCOME PROVIDINGOPPORTUNITIES FORTHOSEWHOAREWITHOUTOTHERSOURCESOFINCOME 3U$#!$EVELOPMENT#ONSULTANTS NOTESTHATCROPFARMINGISTHEMOSTIMPORTANTALTERNATIVELIVELIHOODS FORMOSTMINERS FOLLOWEDBYLIVESTOCKREARING,ANDCOMPETITIONBETWEENMININGANDAGRICULTUREISAN ISSUEINSOMEPLACES ALTHOUGHSURVEYSINDICATETHATACCESSTOLANDFORMININGINMOSTAREASISNOTAGREAT DIFlCULTY EXCEPTINSOMEPARTSOF/ROMIAWHERELANDUSECONmICTISMORECOMMONPLACE 3U$#!$EVELOPMENT#ONSULTANTS NOTESTHATTHEREISNOETHNICGROUPTHATDOMINATESINTHEMINING INDUSTRYMINERSBACKGROUNDVARYFROMREGIONTOREGION-IGRATIONBYMINERSWITHINTHECOUNTRYISSUBSTANTIAL INPLACES )NMININGAREAS THEMALEPOPULATIONWIDELYEXCEEDSTHATOFFEMALETHEREARETHREETIMESMOREMALES ENGAGEDINMININGTHANFEMALES3U$#!$EVELOPMENT#ONSULTANTS REPORTSTHATWOMENENGAGEMENTS INMININGAREMORESIGNIlCANTIN"ENISHANGUL 'UMUZAND4IGRAY WHEREAS ITISALMOSTNEGLIGIBLEINOTHER REGIONS3URVEYSSUGGESTTHATONAVERAGEINMINING AMANEARNSNEARLYTWICEOFWHATISBEINGEARNEDBYA WOMAN 3ETTLEMENTSTHATHAVEDEVELOPEDAROUNDESTABLISHED!3-SITESREPRESENTOPPORTUNITIESFORDEVELOPMENT AND INCOMEGENERATION!TTHESAMETIME THESESITESOFTENBECOMEBURDENEDWITHLESSDESIRABLECHARACTERISTICS  SUCHASTHESPREADOFDISEASEINCLUDING()6!)$3 DRUGABUSEANDSOCIALCONmICTSBETWEENLOCALSAND MINERSORMINEWORKERSWHOMAYBEFROMOTHERAREASOFTHECOUNTRY4HELATTER MIGRATIONTOGOLDMINING AREASWASSEENREPORTEDATTHE$OLOVIASITESEEBOX AND3U$#!$EVELOPMENT#ONSULTANTS REPORT ITTOALSOBERATHERCOMMONPLACEIN"ENISHANGUL 'UMUZ STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 69 Gemstones 4HEMOSTIMPORTANTGEMINTERMSOFVALUEISOPAL WHICHISMAINLYBEINGMINEDATONELOCALITYINTHE.ORTH 7OLLO:ONE NORTHEASTOF!DDIS!BABA/PALFROMTHISLOCALITYISOFMUCHHIGHERQUALITYTHANTHOSEOFOTHER AREASIN%THIOPIAANDTHESOCALLEDh7OLLO/PALvHASGAINEDPOPULARITYINTHEWIDERGLOBALMARKETSSINCE -OSTOFTHEOTHERTYPESOFGEMSMINEDAREFOUNDININTHESOUTHOFTHECOUNTRY 4HE-O-ESTIMATESTHATTHEREWEREABOUT PEOPLEINASSOCIATIONSINVOLVEDINGEMSTONEPRODUCTION IN!DDIS&ORTUNEREPORTSTHATTHEREARE ARTISANGEMSTONEMINERSANDOVEREXPORTERSIN Ethiopia-INERSSELLTHEIRSTONESTOBROKERSWHOINTURNWILLHAVETHEMVALUEDBYTHE-O-4HECAPACITY OF-O-TOPERFORMAMARKETVALUATIONOFTHESESTONESIS HOWEVER NOTYETWELLDEVELOPED !SOF.OVEMBERTHE-INISTRYOF-INESISNOTACCEPTINGLICENSEAPPLICATIONSFORGEMSTONES)TISTOO EARLYTOASSESSHOWTHISWILLAFFECTTHECURRENTARTISANALMININGCOMMUNITIES /PALPRODUCTIONINCREASEDFROMJUSTKGINTO KGBY WITHPRODUCTIONlGURES BEINGMUCHHIGHERTHANTHETARGETSSETINTHE'404ABLE  Table  10.1    Opal  production  over  the  last  six  years  (source:  Ministry  of  Mines).        0RODUCTION            KG '40TARGET           KG 3CALINGUPOFPRODUCTIONFOROPALISLIMITEDBYTHETECHNICALITIESOFPRODUCTIONTHEYARESUITEDTOARTISANAL ANDSMALLSCALEMINING!USTRALIA WHICHISCURRENTLYTHELARGESTGLOBALSUPPLIEROFOPALSTONESESTIMATEDTO ACCOUNTFORAROUNDOFTHEGLOBALMARKET PRODUCESSTONESTHROUGHARTISANALMININGASWELLASSMALL SCALEPRODUCTION/PEN CUTOPERATIONSCANBEUSEDTOEXPANDTHESCALEOFOPERATIONS BUTDOESREQUIRE MACHINERYINTHEFORMOFBULLDOZERS TOREMOVETHEOVERBURDEN #REATINGGREATERVALUEFROMTHEROUGHSTONESHASBEENRECOGNIZEDBYTHE3TATEANDEFFORTSHAVEBEENMADE TOENCOURAGEVALUEADDITIONACTIVITIESIN%THIOPIA7ITHTHISINMIND THE-INISTRYOF-INESANNOUNCEDABAN ONEXPORTSOFROUGHOPALSIN*ANUARY TOCOMEINTOFORCEIN*UNEOFTHESAMEYEAR4HEBANWASNOT ACTUALLYIMPOSEDANDHADBEENDISCARDEDBYTHEENDOF #URRENTLYTHEREARENOPOLISHEDOPALPRODUCERSINTHECOUNTRY)NDIANlRMS)NDIABEINGTHELARGESTDESTINATION FOR%THIOPIANOPALEXPORTS HAVESHOWNINTERESTINSETTINGUPPOLISHINGPLANTSWITHINTHECOUNTRY THESE INVESTMENTPLANSAREATAFEASIBILITYSTAGEATTHETIMEOFWRITINGOFTHISREPORT,OCALPRODUCERSHAVEALSO SHOWNINTERESTINSETTINGUPPOLISHINGFACILITIESEQUIPMENTCANCOSTBETWEEN TO "RTO  53$ 'EMSTONEPOLISHINGlRMSAREUSUALLYSMALLTOMEDIUMSIZEDBETWEENTOPEOPLE AND ARENOTENERGYINTENSIVE4HEMAJORREQUIREMENTISOFSKILLEDGEMSTONECUTTERSANDPOLISHERS7HILETHE ADDITIONINVALUEBYMOVINGFROMROUGHTOPOLISHEDSTONESCANBEHIGH THISISDEPENDENTONSKILLEDCUTTING ANDPOLISHINGTECHNIQUES %XPORTREVENUESFROMOPALSHAVEBEENINCREASINGOVERTHEPASTFEWYEARS WITHTHEOPALSSOLDTHROUGH LICENSEDEXPORTERS%XPORTERSAREREQUIREDTOREPATRIATE53$ KGFORlRSTGRADEROUGHSTONES 53$ KGFORSECONDGRADEAND53$KGFORTHIRDGRADEOPALS4HE-INISTRYOF-INESISENTITLEDTOREVISE THEREPATRIATEDAMOUNT INCONSIDERATIONWITHINTERNATIONALPRICES&ORPOLISHEDOPAL EXPORTERSAREREQUIRED TOREPATRIATE53$ KG4HEREAREINDICATIONSTHATOPALSARENOTALWAYSSOLDTHROUGHLICENSEDAGENTS /PALSHAVEBEENASIGNIlCANTSOURCEOFFOREIGNEXCHANGE ACCOUNTINGFOROVEROFTHEPRECIOUSSTONE EXPORTREVENUESEARNEDIN53$MILLION AND53$MILLION 4HELARGESTDESTINATION FORUNWORKEDSTONESWAS)NDIA WHILETHE53WASTHEMAINDESTINATIONFORPOLISHEDSTONES 4HEPOTENTIALFORTHEOPALSECTORIN%THIOPIATOCONTRIBUTETOWARDSFOREIGNEXCHANGEEARNINGS DOMESTIC REVENUEANDEMPLOYMENTWITHINTHECOUNTRYISDEPENDENTONTHEABILITYOFTHE3TATETOMOVETHESECTOR TOWARDVALUEADDITION!USTRALIAAND)NDIANEXPORTSOFUNWORKEDPRECIOUSSTONESINCLUDINGMORETHANJUST OPAL WEREVALUEDAT53$MILLIONAND53$MILLIONRESPECTIVELY WITHlNISHEDSTONESAT53$MILLION AND53$BILLIONRESPECTIVELYIN  HTTPADDISFORTUNENETARTICLESROUGH CUT BAN U TURN IN BID TO BOOST MINING REVENUE 70 FINAL  REPORT 4HEGEMSTONESECTORISMAINLYARTISANALMINERSWITHLIMITEDTONOABILITYTOGENERATEBACKWARDLINKAGES  WITHSOMEPOSSIBILITYOFVALUEADDITION4HEGOVERNMENTHASMADEPOLICYOVERTURESTOWARDSDEVELOPINGA GEMSTONEPOLISHINGSECTORWHICHWILLCONTRIBUTETOJOBCREATIONANDSECONDARYINCOMEGENERATION BUTTHIS LINKAGEWILLBELIMITED0OLISHINGUNITSAREUSUALLYMEDIUMTOSMALLSCALElRMSANDTHUSTHENUMBEROF JOBSCREATEDISLIMITEDFROMTOINEACHlRM&ORTHEGEMSTONESECTORTOMAKELARGERCONTRIBUTIONSTO THEECONOMYTHESECTORREQUIRESACOMPREHENSIVESTRATEGICASSESSMENT WHEREVALUECHAINSFROMROUGH STONES TOHIGHVALUEADDITIONSUCHASJEWELRY CANBEMAPPED&OREXAMPLE INTHEDIAMONDVALUECHAIN  IFROUGHGEMSTONESARETAKENTOHAVEAVALUEOF CUTTINGANDPOLISHINGCANTAKETHEVALUEUPTO  JEWELRYMANUFACTURINGTOANDMARKETINGANDRETAILTO4HUSlSCALLINKAGESCANBETHEBIGGESTGAIN MADEBYTHECOUNTRYFROMTHEGEMSTONESECTOR 7HILETHEREISPOTENTIALWITHINTHEOPALSECTOR GIVENTHECURRENTCIRCUMSTANCES THEOVERALLCONTRIBUTION TOWARDSTODOMESTICREVENUEWILLBELIMITED GIVENTHATBOTHOPALMININGANDPOLISHINGOPERATIONSTENDTO BESMALLSCALE!RTISANALOPALPRODUCTIONISEXPECTEDTOCONTINUEAROUND KGMARKINTHENEARFUTURE $EPENDENTONTHESUCCESSINPOLISHINGlRMSBEINGSETUP POLISHEDSTONEPRODUCTIONCANEXPECTTOBE AROUNDTOKG&URTHERMORE SKILLSFORPOLISHINGANDCUTTINGARENOTLOCALIZEDATTHISTIME'IVENTHAT INVESTMENTSINPOLISHINGFACILITIESARESTILLATAFEASIBILITYSTAGE ITISNOTPOSSIBLETOASSESSTHECONSTRAINTS THATMAYEMERGEINTHESECTORATTHISTIME 10.3.  Recommendations !RTISANALMININGACTIVITIESAREDRIVENBYTHEOPPORTUNITYTHATTHEPRECIOUSMINERALSPROVIDE BUTALSOBY POVERTY ANDTHELACKOFOTHERECONOMICPOSSIBILITIES4HUS THEACTIVITIESWILLCONTINUETOEXISTASLONGAS THEREISALACKOFALTERNATIVELIVELIHOODS4HISSUGGESTSTHATTHEONLYWAYTOINTHELONGERTERMAVOIDTHE ENVIRONMENTAL SOCIALANDHUMANHEALTHPROBLEMSTHATAREINTIMATELYASSOCIATEDWITHTHISTYPEOFACTIVITYIS TOENSUREANOVERALLPOSITIVEECONOMICDEVELOPMENTOFTHE%THIOPIANECONOMY )NTHEMEANTIME PROBLEMSCAUSEDBY!3-PERSIST ANDTHEREISANURGENTNEEDTOMITIGATE MANAGETHEM !TTHESAMETIME !3-ACTIVITIESAREINHERENTLYDIFlCULTTOCONTROL!TPRESENT NORELIABLEDATAEXISTSON THENUMBEROFMINERS INCOMESANDBENElTSTOTHELOCALECONOMY ANDTHESERIOUSNESSOFTHEIRASSOCIATED ENVIRONMENTALIMPACTS%STIMATESOFTHENUMBEROFPEOPLEINVOLVEDIN!3-AREUNRELIABLE ANDARENOTAN ADEQUATEBASISFORMAKINGPOLICYANDMANAGEMENTDECISIONS7ITHOUTGOODBASELINEDATA EFFORTSTOMANAGE ENVIRONMENTALIMPACTSAREUNLIKELYTOBESUCCESSFUL4HElRSTPRIORITYISTHEREFORETOCARRYOUTAPROPER CENSUSANDBASELINESTUDYTOASSESSTHESITUATION3UCHSTUDIESWOULDNEEDTOBEFOLLOWEDUPREGULARLYTO PROVIDEAGOODENOUGHBASISFORMANAGEMENTDECISIONS 'OVERNMENTEFFORTSTOENCOURAGEINDIVIDUALMINERTOCOMETOGETHERTOFORMMININGASSOCIATIONS ANDTHENTO JOINTLYAPPLYFORMININGCERTIlCATESHASMETWITHSOMESUCCESS%NCOURAGEMENTTOFORMMININGCOOPERATIVES SHOULDBEASSOCIATEDWITHTHEPROVISIONOFTRAININGONTECHNICAL lNANCIALANDENVIRONMENTALISSUES4HIS MAYTHENLEADTOASITUATIONWHERETHEREISABETTERANDCLOSERRELATIONSHIPBETWEENGOVERNMENTOFlCIALS ANDMINERS ANDWHERETHEN-O-STAFFCANBETTERINmUENCETHEBEHAVIOURANDPERFORMANCEOFINDIVIDUAL MINERS)TISTHEREFORERECOMMENDEDTHATSUCHEFFORTSAREPROMOTED!SPECIALEFFORTCOULDBESPENTON TRAININGMINERSTOBECOMEMOREENVIRONMENTALLYAWAREANDRESPONSIBLE(OWEVER ONENEEDSTOBEMINDFUL OFTHEFACTTHATSUPPLYINGINDIVIDUALSANDORASSOCIATIONSWITHTECHNICALSKILLSANDCAPACITY MAYLEADTO INCREASEDMECHANISATIONANDTOENVIRONMENTALIMPACTSBECOMINGMORESEVERE %FFORTSTOSUPPORT!3-MUSTBEACCOMPANIEDWITHASTRENGTHENEDCOMMITMENTANDCAPACITYBYTHE AUTHORITIESTOSUPERVISE CONTROLANDENFORCEEXISTINGLAWSANDREGULATIONS)TISOFSPECIALIMPORTANCETHAT CASESWHERE!3-ACTIVITIESAREINTERFERINGWITHLARGE ANDFORTHEWHOLECOUNTRYIMPORTANTPROJECT AREWELL MANAGEDANDCONTROLLED)FTHATISNOTACHIEVED %THIOPIARISKSBECOMINGLESSATTRACTIVEASADESTINATIONFOR MININGRELATEDINVESTMENTS!TTHESAMETIME ITISVITALTHATWHATEVERMEASURESARETAKENTOCONTROLSUCH PROBLEMS THATTHEBASICHUMANRIGHTSOFTHE!3-MINERSAREPROTECTED ANDTHATATTEMPTSAREMADETO lNDALTERNATIVELIVELIHOODSFORTHOSEWHOMAYHAVELOSTOPPORTUNITIESWITHINTHE!3-SECTOR 'EMSTONEMARKETSARELIMITEDMAINLYTOJEWELRYANDORNAMENTDEMAND4HE7OLLO/PALHASRECEIVEDGOOD PUBLICITYINTHEGEMSTONEMARKETSSOFAR ANDCOULDBEFURTHERDEVELOPEDASABRANDNAME)NORDERTO COMPETEINTHEINTERNATIONALMARKETACOMPREHENSIVESTRATEGY NOTJUSTTOWARDSENCOURAGINGVALUEADDITION WITHINTHECOUNTRY BUTALSOTOWARDSBRANDING MARKETINGANDPROMOTIONNEEDSTOBEUNDERTAKEN &URTHERRECOMMENDATIONSTOREALIZETHEFULLPOTENTIALOFTHEOPALSECTORINCLUDECOMMISSIONINGAFULLSTRATEGIC ASSESSMENTOFTHEPRODUCTIONPOTENTIALANDCAPABILITIESWITHINTHECOUNTRY STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 71 ©  Allana  Potash  Afar  Plc.  %.6)2/.-%.4!,!.$3/#)/%#/./-)#-!.!'%-%.4 11.1.  Legislation  and  regulation  4HEREARENOCOMPREHENSIVELEGALINSTRUMENTSFORMANAGINGENVIRONMENTALANDSOCIALASPECTSANDTHOSETHAT EXISTHAVELITTLEINWAYOFDETAILEDPROVISIONS4HEKEYINSTRUMENTFORENVIRONMENTALANDSOCIALMANAGEMENT ISTHE%)!0ROCLAMATION.O4HE%)!PROCLAMATIONISAFRAMEWORKLAWTHATREQUIREREGULATIONS ANDORDIRECTIVESTOGIVEBETTEREFFECTTOTHEPROCLAMATION NONEOFWHICHEXISTS4HUS THEREIS TOACERTAIN EXTENT ALACKOFLEGALBASISFORTHEPROPERENFORCEMENTOFTHE%)!0ROCLAMATION4HE%NVIRONMENTALAND #OMMUNITY$EVELOPMENT$IRECTORATEOF-O-ISRESPONSIBLEFORTHEENFORCEMENTOFTHE%)!0ROCLAMATION FORMINERALSECTORPROJECTSANDTHECAPACITYOFTHEDIRECTORATEISDISCUSSEDIN3ECTION PARAGRAPH  4HE-INING0ROCLAMATION INCLUDESBRIEFPROVISIONSONTHEREQUIREMENTFOR%)!S THENEEDFORAPPROVAL OFTHE%)!FROMTHERELEVANTAUTHORITY THEALLOCATIONOFFUNDSTOCOVERREHABILITATIONCOSTS ANDTHEALLOCATION OFFUNDSFORCOMMUNITYDEVELOPMENT  4HE-ODEL-INING!GREEMENT--!ALSODESCRIBEDIN3ECTION ESTABLISHESSIMILARPROVISIONSTOTHE -INING0ROCLAMATION BUTTHESEAREOFSUCHGENERALNATURETHATTHEYAPPEARDIFlCULTTOENFORCE4HE--! 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'UIDELINEFOR-INERALAND0ETROLEUM/PERATION0ROJECTS BUTTHESEDONOTPRESCRIBEPROCEDURESIN DETAIL)TISTHECONSULTANTSIMPRESSIONTHATTHEAUTHORITIESGENERALLYREGARDACOMPANYSPRESENTATIONOFA PROJECTTONEARBYAFFECTEDCOMMUNITIES ANDTHEINCORPORATIONOFMEETINGMINUTESINTHE%)! TOBESUFlCIENT INTERMSOFHAVINGCOMPLETEDASTAKEHOLDERCONSULTATION  )NDUSTRIAL%MISSION3TANDARDS AND'UIDELINE!MBIENT%NVIRONMENT3TANDARDSFOR%THIOPIA  WEREISSUEDINRESPONSETOTHE%NVIRONMENTAL0OLLUTION#ONTROL0ROCLAMATION 4HESESTANDARDSCOULD BEUSEDFORREGULATION ANDESPECIALLYTHE'UIDELINE!MBIENT%NVIRONMENT3TANDARDSARECONCISE ANDREFER TOTHEIMPORTANCEOFENVIRONMENTALBACKGROUNDDATA ANDINCLUDEINFORMATIONONFOREXAMPLEENVIRONMENTAL SAMPLINGTHATCOULDBEUSEFULTOINCLUDEINGUIDELINEDOCUMENTSCFBELOW   !CCESSTOLANDFORMININGISBASEDONTHEFACTTHATTHE3TATEOWNSALLLANDANDTHATCOMPENSATIONFORPROPERTY ISPROVIDEDTOLANDHOLDERSIFPRIORITYISGIVENTOMININGPROJECTS4HE#ONSTITUTIONSPECIlESTHATTHERIGHTTO OWNERSHIPOFLAND ASWELLASOFALLNATURALRESOURCES ISEXCLUSIVELYVESTEDINTHE3TATEANDINTHEPEOPLESOF %THIOPIAANDLANDSHALLNOTBESUBJECTTOSALEOROTHERMEANSOFEXCHANGE)TFURTHERACKNOWLEDGESTHERIGHT OFPEASANTSTOOBTAINLANDWITHOUTPAYMENTANDTOBEPROTECTEDAGAINSTEVICTIONFROMTHEIRPOSSESSION AS WELLASTHERIGHTOFPASTORALISTSTOhFREELANDFORGRAZINGANDCULTIVATIONASWELLASTHERIGHTNOTTOBEDISPLACED FROMTHEIROWNLANDSv  !SAGENERALRULE ALLLANDIN%THIOPIAISAVAILABLEFORMININGOPERATIONSEXCEPTFORTYPICALLIMITATIONSASLAND RESERVEDFORCEMETERIES RELIGIOUS CULTURALANDHISTORICALSITES INFRASTRUCTURE NATIONALPARKSANDNATURAL 72 FINAL  REPORT HABITATS VILLAGES WATERRESERVOIRSANDDAMSSITES ETC4HE'OVERNMENTCAN HOWEVER RESERVEANYLAND 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  Table  11.1    Categories  of  wildlife  conservation  areas  in  Ethiopia. Type Purpose Management 4OCONSERVEWILDLIFEANDASSOCIATED NATURALRESOURCESTOPRESERVETHESCENIC 7ILDLIFE$EVELOPMENTAND#ONSERVATION .ATIONALPARK ANDSCIENTIlCVALUEOFTHEAREAWHICH !UTHORITYANDSOMEBYREGIONAL MAYINCLUDELAKESANDOTHERAQUATIC GOVERNMENTS AREAS 4OCONSERVEONEORMORESPECIESOF 7ILDLIFE$EVELOPMENTAND#ONSERVATION 7ILDLIFESANCTUARY WILDLIFETHATREQUIRESHIGHCONSERVATION !UTHORITYANDSOMEBYREGIONAL PRIORITY GOVERNMENTS 4OCONSERVEWILDLIFEWHEREINDIGENOUS 7ILDLIFERESERVE LOCALCOMMUNITIESAREALLOWEDTOLIVE 2EGIONALGOVERNMENTS TOGETHERWITHANDCONSERVETHEWILDLIFE !CCORDINGTOTHE2EGULATIONTO0ROVIDEFOR7ILDLIFE$EVELOPMENT #ONSERVATIONAND5TILIZATION.O  ARTICLEH EXPLORATIONANDMININGAREEXPLICITLYPROHIBITEDWITHIN.ATIONALPARKS WILDLIFESANCTUARIES ANDWILDLIFERESERVES(OWEVER ARTICLEF PROVIDESFOR@MININGANDOTHERDEVELOPMENTACTIVITIESTOBE UNDERTAKEN@INACCORDANCEWITHWILDLIFEDEVELOPMENT PROTECTIONANDUTILIZATIONACTIVITIES&URTHERMORE AS MENTIONEDABOVE THE-INING0ROCLAMATIONPROVIDESFORTHE'OVERNMENTTOOPENANYPROTECTEDOR RESERVEDAREAFOREXPLORATIONANDMININGWHENCONSIDEREDTOBEOFNATIONALINTERESTSEEFURTHERPARAGRAPH   &ORESTDEVELOPMENTCONSERVATIONANDUTILIZATIONISPROVIDEDFORTHROUGH0ROCLAMATION.O!RTICLE  DElNESA@PROTECTEDFORESTASAFORESTTOBECONSERVEDANDDEVELOPEDFREEFROMHUMANORANIMAL INTERFERENCEFORTHEPURPOSEOFWATERSHADEMANAGEMENTANDTHECONSERVATIONOFGENETICRESOURCES  BIODIVERSITYANDTHEENVIRONMENTINGENERAL ASWELLASFORTHEPURPOSEOFTRAININGANDRESEARCH %VENTHOUGH@PROTECTEDFORESTISDElNED !RTICLE STATESTHATFORESTSINGENERALANDNOTONLY@PROTECTED FORESTS SHALLBEPROTECTEDFROMMININGACTIVITIES AMONGOTHERTHINGS!RTICLE   FURTHERPROVIDES FORPROHIBITIONAGAINSTTHECUTTINGOFTREES REMOVALOFNATURALRESOURCES ETC WHICHINESSENCEPROHIBITS EXPLORATIONANDMININGACTIVITIES4HEFOLLOWINGARTICLE HOWEVER DElNESMININGASONEOFTHEACTIVITIESTHAT CANBEUNDERTAKENAFTERAPPROVALFROMTHE-INISTRYOF!GRICULTUREAND2URAL$EVELOPMENT !SINTHECASE OFWILDLIFEPROTECTION THE-INING0ROCLAMATIONINANYCASEPROVIDESFORTHE'OVERNMENTTOAPPROVE EXPLORATIONANDMININGINANYRESERVEDAREAIFITISCONSIDEREDTOBEOFNATIONALINTEREST !SDESCRIBEDIN#HAPTER THE%NVIRONMENTALAND#OMMUNITY$EVELOPMENT$IRECTORATEOF-O-ISRESPONSIBLE FORSUPERVISING CONTROLLINGANDCOMPLIANCEMONITORINGOFTHE%)!PROCESS(OWEVER THEDIRECTORATECURRENTLY LACKSSTAFFWITHEXTENSIVEEXPERIENCEANDSUFlCIENTQUALIlCATIONSINTHElELDSREQUIREDMININGENVIRONMENT  SOCIOECONOMICS COMMUNITYDEVELOPMENTAND/(3  !DDITIONALTOOLSANDORGUIDELINESTHATSUPPORTENVIRONMENTALANDSOCIALMANAGEMENTOFTHESECTORISLIMITED TOTHREEGUIDELINESI %NVIRONMENTAL)MPACT!SSESSMENT0ROCEDURAL'UIDELINE nDESCRIBINGTHE%)! PROCESS ROLESANDRESPONSIBILITIES ANDLISTSDIFFERENTTYPESOFPROJECTSREQUIRINGAN%)!II 4HE'UIDELINES 3ERIES$OCUMENTSFOR2EVIEWING%NVIRONMENTAL)MPACT3TUDY2EPORTS nAIMEDTOASSISTSECTORAL AUTHORITIESINASSESSING%)!S AND4HE%)!'UIDELINEFOR-INERALAND0ETROLEUM/PERATION0ROJECTS  nAIMEDTOASSISTINVESTORS!LLGUIDELINESARESTILLINDRAFTFORM7HILETHElRSTGUIDELINEPROVIDESUSEFUL INFORMATIONONTHE%)!PROCESS THELATTERTWOARESTILL@WORKINGDOCUMENTSTHATNEEDIMPROVEMENTBOTHIN STRUCTURETOMAKETHEDOCUMENTSMOREEASILYACCESSIBLEFORTHEREADER ANDINCONTENTDETAILSTOMAKETHEM COMPLETEANDUPDATED4HEMODESTQUALITYOFTHETWOLATTERGUIDELINESMAYSUGGESTATALACKOFCAPACITY ANDEXPERIENCEINTHEAREAOFMINERALSECTORENVIRONMENTALANDSOCIALMANAGEMENT STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 73 11.2.  Environmental  and  social  baseline 4HEMAJORGEOGRAPHICFEATURESOF%THIOPIAARETHEMASSIVEHIGHLANDCOMPLEXINTHECENTRALPARTS THE'REAT 2IFT6ALLEYDIVIDINGTHEHIGHLANDS ANDTHESURROUNDINGLOWLANDS4HE2IFT6ALLEYBISECTSCENTRAL%THIOPIA INTOTHENORTHWESTERNANDSOUTHEASTERNHIGHLANDPLATEAUS&IGURE WHICHARECHARACTERISEDBYRUGGED MOUNTAINSREACHINGABOVE MASL ANDDEEPVALLEYS4HEHIGHLANDSARETHEMAJORCATCHMENTAREAS FORTHEMAJORRIVERS INCLUDINGFOREXAMPLE!BAY"LUE.ILE AND!WASH4HENORTHERNPARTOFTHE2IFT6ALLEY IN%THIOPIABROADENSTOWARDSTHENORTHEASTWHERETHETOPOGRAPHICALLYLOWESTPOINTAT MISFOUNDINTHE $ANAKILDEPRESSION 4HEMAINCATCHMENTAREASFORlVEMAJORTRANSBOUNDARYRIVERSARELOCATEDIN%THIOPIATHE.ILEmOWINGINTO 3UDAN THE-AREBOR'ASH CONSTITUTINGPARTOFTHEBORDERTO%RITREAANDmOWINGINTO%RITREA THE!WASH mOWINGINTO$JIBOUTIANDTHE*UBAAND3HEBELEBOTHmOWINGINTO3OMALIA Figure  11.1.  Topographic  map  of  Ethiopia  (source:  Wikipedia  Commons). 4HEDIVERSETOPOGRAPHICFEATURESOF%THIOPIAANDTHESEASONALMOVEMENTOFTHE)NTER TROPICALCONVERGENCE ZONE)#4: PRODUCEWIDEVARIATIONSINCLIMATEASWELLASINTHEDISTRIBUTIONOFNATURALVEGETATIONANDSOIL CONDITIONS7HILETHEAVERAGEANNUALRAINFALLISRATHERHIGHATAROUNDMM THEREAREEXTREMEVARIATIONS SPATIALLYANDBETWEENDIFFERENTYEARS WITHSIGNIlCANTDROUGHTANDmOODEVENTSOCCURRINGEVERY YEARS 7ORLD"ANK  !VERAGEANNUALRAINFALLVARIESFROMMMINNORTHEASTANDEASTERNPARTSTOMM INTHECENTRALHIGHLANDSANDTHERAINFALLISHIGHLYSEASONABLEWITHMOSTRAINFALLINGINASINGLEANDSHORT SEASON OFTENPRODUCINGHIGH INTENSITYSTORMS 4HERUGGEDTOPOGRAPHYOFLARGEPARTSOF%THIOPIAANDITSLONGHISTORYOFHUMANIMPACT COUPLEDWITHTHE EXTREMEVARIATIONSINRAINFALL HAVERESULTEDINSIGNIlCANTIMPACTONTHENATURAL@BACKGROUNDENVIRONMENT (UMANACTIVITIESHAVELEDTOSIGNIlCANTDEFORESTATIONHISTORICALLY THEFORESTCOVEROF%THIOPIAISBELIEVEDTO HAVEBEENABOUTWHILEABOUTOFTHECOUNTRYISNOWCOVEREDBYFOREST2EUSING  HAVE SHOWNTHATINTHES NATURALHIGHFORESTCOVEREDONLYOFTHECOUNTRYANDTHISISNOWREDUCEDTO  OFWHICHTHEDOMINANTPARTISCONlNEDTOTHE.ATIONAL0RIORITY&OREST!REASSEEBELOW  )NORDERTOENSURESOMELEVELOFFORESTRESOURCESCONSERVATION INCLUDINGGENETICRESOURCESANDBIODIVERSITY  .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%THIOPIA VOLUMES  4HEREAREANUMBEROF7ILDLIFE#ONSERVATION!REASIN%THIOPIA!SMENTIONEDIN3ECTION NATIONAL PARKS WILDLIFESANCTUARIES WILDLIFERESERVESAND.0&!S&IGURE AREPROTECTEDFROMEXPLORATIONAND MININGBYLAW WHILETHE'OVERNMENTMAYMAKEEXEMPTIONS#OMMUNITYCONSERVATIONAREASWHERELOCAL COMMUNITIESMAYUTILIZEWILDLIFERESOURCES ANDCONTROLLEDHUNTINGAREAS&IGURE DONOTCARRYTHE SAMELEVELOFPROTECTION.ATIONALPARKSWEREESTABLISHEDMAINLYTOPROTECTmAGSHIPSPECIES EG7ALIAIBEX  -OUNTAIN.YALAANDTHE%THIOPIANWOLF3IMILARLY THEWILDLIFESANCTUARIESWEREMEANTTOPROTECTTHREATENED SPECIESSUCHAS3WAYNES(ARTEBEESTANDANELEPHANTSUBSPECIES"ABILE%LEPHANT3ANCTUARY 4HEFAUNA DIVERSITYOF%THIOPIAHASNOTBEENSYSTEMATICALLYDOCUMENTED(OWEVER VARIOUSSTUDIESSHOWTHATTHEREARE ATLEASTSPECIESOFMAMMALS OFWHICHSPECIESAREENDEMIC "IRDLIFE)NTERNATIONALHASRECOGNISED)MPORTANT"IRD!REAS)"! IN%THIOPIABYUSINGBIRDSASINDICATORS FORBIODIVERSITYCONSERVATION)NCONTRASTTO.0&!SAND7ILDLIFE#ONSERVATION!REAS )"!SDONOTCARRYANY ENVIRONMENTALPROTECTIONBYLAW UNLESSTHEYFALLWITHINWILDLIFEORFORESTPROTECTEDAREAS-OST)"!SARE LOCATEDOUTSIDETHE0ROTEROZOICAREASWHEREANYFUTURELARGE SCALEMININGISEXPECTEDTOOCCUR%THIOPIA HASAHIGHDIVERSITYOFBIRDOVERSPECIES ANDTHIRTY ONESPECIESHAVEBEENIDENTIlEDTOBEOFGLOBAL CONSERVATIONCONCERNWWWBIRDLIFEINTERNATIONALORG  7ETLANDSAREIMPORTANTASAFRESHWATERRESOURCE BECAUSETHEIRBIODIVERSITY ANDASTHEYFUNCTIONASNATURES OWN@WATERTREATMENTPLANT7ETLANDSAREOFTENTHREATENED ANDTHISISTHECASEALSOIN%THIOPIA PRIMARILY DUETOINCREASEDHUMANPRESSUREAROUNDTHEWETLANDSANDINTHEIRCATCHMENTAREAS(ILLMANAND!BEBE  ESTIMATETHATWETLANDSCOVEROFTHETOTALLANDMASSOF%THIOPIA ANDMANY)"!SAREINTHE WETLANDAREAS4HEWETLANDSALMOSTEXCLUSIVELYOCCUROUTSIDETHE0ROTEROZOICTERRAINS BUTMANYWETLANDS ARELOCATEDINTHE2IFT6ALLEYWHEREMININGOFINDUSTRIALMINERALSOCCURINSOMEPLACES 36°E 40°E 44°E 48°E ERITREA R E D Kefta  Shiraro 14°N   S 14°N YEMEN E A Shire  lowlands Dessa'a  forest SUDAN Simen  Mountains Lake  A shenge Legend Hugumburda Alatish Important  Bird  Areas Mille  Serdo G U L F   O F Proterozoic  terrains ADEN DJIBOUTI License  Areas Protected  Areas Yangudi  Rassa Awi Community  Conservation  Areas Gewane Conservation  Areas 10°N 10°N Controled  Hunting  Areas Sanctuary Wildlife  Reserve Babile  Elephant  Sanctuary 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 UGANDA 36°E 40°E 44°E 48°E 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. STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 75 36°E 40°E 44°E 48°E ERITREA Legend 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 UGANDA 36°E 40°E 44°E 48°E 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&IGURE MOSTWILDLIFECONSERVATIONAREASAND)"!SARELOCATEDOUTSIDETHE0ROTEROZOIC TERRAINS WHICHARETHEMOSTPROSPECTIVEFORMINERALSANDTHUSTHEMOSTLIKELYTOBEIMPACTEDBYEXPLORATION ANDMININGACTIVITIESINTHEFUTURE(OWEVER THEREARECASESWHENCONSERVATIONANDEXPLORATIONLICENSE AREASOVERLAP ASEXEMPLIlEDBELOW7HEREASTHISMAYBEDUEACASE SPECIlCDECISIONSBYTHE'OVERNMENT WHEREMININGHASBEENGIVENPRIORITYOVERCONSERVATIONINTERESTSCFPARAGRAPHANDABOVE INTERVIEWS CARRIEDOUTWITHINTHISPROJECTINDICATETHATITMAYINSOMECASESBEDUEALACKOFSPATIALINFORMATIONON CONSERVATIONAREASATTHE-INERAL,ICENSINGAND!DMINISTRATION$IRECTORATE4HEDIRECTORATEISNOWWORKING ONINTEGRATINGTHISINFORMATIONINTOTHEMININGCADASTRESYSTEM   !HANDFULLICENSESINTHENORTHFALLINSIDETHEREMNANTDRYAFROMONTANEFORESTS ANDINPARTICULARWITHIN THE$ESSAAAND(UGUMBRDA.0&!S WHICHAREHOMETOKEYBIODIVERSITYPLANTSPECIESANDECOLOGICAL PROCESSESTHATAREVITALTOTHELIVELIHOODOFLOCALCOMMUNITIES)N THEREWASALSOEXPLORATIONLICENSES ISSUEDACROSSLARGEAREASOFTHE+EFTA3HIRARO.ATIONAL0ARKINTHEFARNORTHEAST&IGURE    )NTHEWESTERN0ROTEROZOICTERRAINS SOMELICENSESFALLINSIDETHE-ETU 'ORE 4EPI.0&! WHICHHOUSESFOR EXAMPLETHEGENEPOOLSOFTHEWILD%THIOPIA!RABICACOFFEE4HIS.0&!ISWITHINTHE4RANSITIONAL2AINFOREST ECOSYSTEM&IGURE WHICHCONSTITUTESONLYOFTHEECOSYSTEMSVEGETATIONTYPESOF%THIOPIA   )NTHESOUTHERN0ROTEROZOICTERRAIN THEMOIST!FROMONTANEFORESTISREMNANTINNATUREANDCOVERSONLY ASMALLPORTIONOFTHEHIGHLANDS3IMILARLY THEDRY!FROMONTANEFORESTSAREFRAGMENTEDINNATUREAND THREATENEDBYHUMANIMPACT3OMELICENSEAREASFALLINSIDE.0&!SEG!RERO !NFERARAAND-ANKUBSA 7ELENSOFORESTS WHICHAREALSOHOUSE)"!SWITHENDEMICANDRAREBIRDSPECIES3OMELICENSESALSO COINCIDEWITHWILDLIFESANCTUARIESEG9ABELLO    )NTHENORTHEASTERNPARTOFTHE2IFT6ALLEY SOMELICENSEAREASFALLINSIDEWILDLIFERESERVEEG-ILLE3ERDO  4HEGEOLOGICALLYMOSTPROSPECTIVEAREASARE INTHEMAIN NOTSITUATEDINTHEMOSTDENSELYPOPULATEDPARTS OFTHEHIGHLANDS WHICHIMPLIESLESSENEDRISKSFORSERIOUSCONmICTOVERLANDWITHOTHERPRODUCTIVESECTORS CF&IGUREAND4ABLE 4HEAREASMOSTLIKELYTOBEIMPACTEDBYFUTUREMININGLEDDEVELOPMENT ARETHESETHATAREGEOLOGICALLYMOSTPROSPECTIVEnTHATISINAREASWITH0ROTEROZOICAGEGEOLOGYnINTHE NORTH WEST ANDSOUTHIN"ENISHANGUL 'UMUZ 4IGRAYNORTHWESTERNPARTS ANDTHEWESTERNANDSOUTHERN 76 FINAL  REPORT PARTSOF/ROMIA7EST7OLLEGAZONEAND'UJIZONE 4HESEAREASARECOMPARATIVELYSPARSELYPOPULATED (OWEVER SOMEPARTSOFESPECIALLY4IGRAY ANDSOUTHERN/ROMIAREPRESENTAREASWHEREHIGHPOPULATION AND PROSPECTIVEGEOLOGYINTERSECT /VERALL DEMOGRAPHICANDHEALTHRELATEDINDICATORSSHOWTHATTHEAREASWITHPROSPECTIVEGEOLOGYARE AREASTHATARELESSURBANISED ANDLESSWELLDEVELOPEDCOMPAREDTOTHENATIONALAVERAGE4HESEAREAS AREEXPERIENCINGRAPIDPOPULATIONGROWTHANDAREASSOCIATEDWITHRATHERPERILOUSHEALTHSTATUSAMONGTHE POPULATION4ABLE "ENISHANGUL 'UMUZISTHECOMPARATIVELYLEASTDEVELOPEDAREAAMONGTHETHREE GEOLOGICALLYPROSPECTIVEAREAS %THIOPIAISAVERYDIVERSECOUNTRY WITHMANYCULTURESANDLANGUAGESEXISTINGSIDEBYSIDE3OMEOFTHESE COMMUNITIESARELESSNUMEROUS ANDMAYBEMOREVULNERABLETOIMPACTSFROMMININGDEVELOPMENTSWHICH MAY IFNOTMANAGEDCAREFULLY ENDUPNEGATIVELYIMPACTINGONAVARIETYOFSOCIOCULTURALASPECTS)N4IGRAY  NEARLYALLRURALINHABITANTSARE4IGRAYANS3IMILARLY IN/ROMIA MOSTRURALDWELLERSARE/ROMO ALTHOUGHIN THESEAREASTHEREISALSOASIZEABLE!MHARICMINORITYPRESENT#ONVERSELY RURAL"ENISHANGUL 'UMUZISMORE DIVERSEWITHTHEMOSTSIZEABLECOMMUNITIESBEING"ERTA 'UMUZ !MHARA /ROMOAND 3HINASHA )NHABITANTSIN"ENISHANGUL 'UMUZ /ROMIAAND4IGRAYAREMOSTLYFARMERSAND TOAMINOREXTENT PASTORALISTS )N"ENISHANGUL 'UMUZREGION OVERPERCENTOFTHEPOPULATIONISRELIANTONSUBSISTENCEAGRICULTURE  PRODUCINGGRAIN VEGETABLES FRUITSANDROOTCROPS,IVESTOCKREARINGISCOMPARATIVELYLESSCOMMONANDWHEN ITOCCURS ITISOFTENDONEBYMIGRANTSETTLERSFROM!MHARAAND/ROMIAREGIONS!3-ACTIVITIESOCCUR AND THESEAREMAINLYPERFORMEDBYFARMERSWHOENGAGEINMININGDURINGTHEIRIDLETIMEORLANDLESSYOUTHSAND MARGINALIZEDSECTIONSOFTHELOCALCOMMUNITIES)NMOSTWOREDASOF"ENISHANGUL 'UMUZ MIGRANTMINERS FROMOTHERREGIONSAREALSOPRESENT Figure  11.5.    Map  showing  areas  of  prospective  geology  (Proterozoic)  as  well  as  mines  and  how  these  relate  to  areas  of  high   population  density. STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 77 Table  11.2    Summary  of  some  demographic,  social  and  health  related  indicators  in  the  areas  of  Ethiopia  that  are  most   prospective  for  mine  development  (Census  data,  2007) 5NDERYRS Fertility  rate   Region Population RURAL LITERACY morbidity     "ENISHANGUL 'UMUZ       /ROMIA         7EST7OLLEGA:ONE        'UJI:ONE       4IGRAYREGION         .74IGRAYZONE      National  total     40   )N/ROMIAREGIONALSTATE SOMEPERCENTOFTHETOTALPOPULATIONDEPENDSONTHEAGRICULTURALSECTOR AND ALMOSTALLOFTHISISINTHEFORMOFSUBSISTENCEAGRICULTURE4HEMAJORCROPSARECEREALSTEFF WHEAT MAIZE  BARLEYANDSORGHUM VEGETABLESANDFRUITS)NTHE7EST7OLLEGAZONETHEREISALSOSOMELIVESTOCKREARING  ANDALSOCOFFEEPRODUCTION)NTHE!DOLLA7OREDAANDINTHE'UJIZONETHEREARESOME!3-GOLDMINERS WHOMAINLYCOMEFROMOTHERREGIONS )N4IGRAYREGIONALSTATE SOMEOFTHEPOPULATIONISENGAGEDINSMALLHOLDERAGRICULTURALACTIVITIES MAINLY PRODUCINGCROPSLIKETEFF WHEATANDBARLEYBUTALSOOTHERCROPSSUCHASBEANS LENTILS ONIONS ANDPOTATOES 11.3.  Potential  impacts  from  mining 4HE%THIOPIANMININGSECTORISBYNUMBEROFOPERATIONSASWELLASOUTPUTDOMINATEDBYARTISANALANDSMALL SCALEOPERATIONS(OWEVER THECURRENTPOLICYDIRECTIONAIMSATPROMOTINGPRIVATEINVESTMENTSANDINTHISWAY ALSODEVELOPLARGERSCALEOPERATIONS)TISWELLKNOWNTHATMININGACTIVITIESMAYBEASSOCIATEDWITHNEGATIVE ENVIRONMENTALANDSOCIALIMPACTS)NTERNATIONALLY SUCHISSUESAREBEINGTAKENMOREANDMORESERIOUSLY  ANDITISGENERALLYFELTTHATTHELONGERTERMVIABILITYOFTHEWHOLEMININGSECTORRESTSINREACHINGASITUATION WHEREMININGISPERFORMEDINANENVIRONMENTALANDSOCIALLYRESPONSIBLEMANNER4HEIMPLEMENTATIONOFTHE MINERALPOLICYREQUIRESASOUNDUNDERSTANDINGOFTHEPRESENTANDFUTUREIMPACTSOFMININGDEVELOPMENT ONTHEENVIRONMENTANDSOCIETYCFBOXBELOW Box  7:  Environmental  and  Social  Impacts  Related  to  Mining IMPACT  SOURCE  OR  REASON )NEFlCIENTUSEOFNATURALRESOURCES Incomplete  recovery  of  ore  reserves  in  mine  or   Poor  mine  plans deposit Inferior   beneficiation   methods   and/or   poor   Poor   recovery   of   metals/minerals   in   the   optimization  of  processes BENElCIATIONPROCESS Poor  management  and  work  routines   Overconsumption  of  water  and  energy 2.    Effects  on  landscape  and  morphology Visual  and  aesthetic  effects;  change  in  land  form Excavation  of  open  pit  mines Land  use  in  competition  with  other  utilisation Establishment  of  industrial  areas  for  ore  dressing Destruction  of  natural  habitat Design  of  tailings  dams  and  waste  rock  dumps Land  subsidence Underground  mining Land/soil  erosion;  changes  in  river  regime  due   Haulage  road  construction TOSILTATIONANDmOWMODIlCATION Rehabilitation  after  closure Abandoned   equipment,   plants,   buildings,   excavations 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 )MPACTSONAQUATICLIFE mORAANDMICROFAUNA 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 $ElCIENTMATERIALSHANDLING STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 79 12.  Socio-­economic  impacts Impact   on   local   population’s   physical   and   3TART UPOFLARGE SCALEPROJECTSINREMOTEAREAS economic  living  conditions OFLITTLEPREVIOUSCONTACTWITHMAJORINDUSTRIAL Impact  on  local  culture  and  social  organization   operations 3OCIALTURMOILDUETOINmUXOFSETTLERSBOOM #LOSUREANDLOSSOFJOBOPPORTUNITIES conditions) 13.  Occupational  safety  and  health )NTOXICATIONBYINHALATIONCYANIDE MERCURY  &UGITIVEEMISSIONSWITHINTHEPLANT OTHERTOXICMATERIAL (ANDLINGOFCHEMICALS RESIDUESANDPRODUCTS )NTOXICATIONBYPOLLUTEDWATER %XPLOSIVESHANDLING Silicosis ,ACKOFADEQUATEEQUIPMENT SOUNDROUTINES Gamma  radiation  and  radon   ANDSATISFACTORYSAFETYCONTROL %XPOSURETOHEAT NOISE VIBRATION Unsanitary  living  conditions 0HYSICALINJURIESDUETOACCIDENTS Key  environmental  management  considerations 7HILEMANYOFTHEISSUESTHATNEEDTOBEMANAGEDSEEBOXABOVE AREMOREORLESSGENERICTOLARGESCALE MINING POTENTIALIMPACTSALSODIFFERGREATLYBETWEENDIFFERENTTYPESOFMINESANDALSOBETWEENDIFFERENT NATURALANDHUMANENVIRONMENTS&OR%THIOPIA ANYNEWMINESWITHINTHENEXT ARELIKELYTOBEFOR GOLDANDBASEMETALSMINES#HAPTERAND 4HESETYPESOFMINESCOMMONLYPRODUCELARGEAMOUNTS OFWASTEROCKANDTAILINGSMATERIAL ANDGOLDANDBASEMETALORESARESOMETIMESASSOCIATEDWITHMETALS ORMETALLOIDSTHATMAYBETOXICTOHUMANSANDNATURE SUCHAS#U 0B !S #DETC&URTHERMORE THESE ORESOFTENCARRYPYRITE AKEYCOMPONENTINTHEFORMATIONOF!CID-INE$RAINAGE!-$ 4HUS WATERAND TAILINGSDAMSMANAGEMENTARELIKELYTOBEOFKEYIMPORTANCEINFUTUREMININGENVIRONMENTALMANAGEMENT IN%THIOPIA 7ATERMANAGEMENTISOFTENAKEYISSUEINMININGASCOMPROMISINGWATERQUANTITYANDQUALITYMAYHAVE EFFECTSFARDOWNSTREAMOFTHEOPERATION7ATERMANAGEMENTIN%THIOPIAISOFKEYCONCERNASITISAHIGHLY VARIABLEANDOFTENSCARCERESOURCE AS%THIOPIANCATCHMENTSARETHEMAJORSOURCEFORSEVERALTRANSBOUNDARY RIVERS ANDASSILTINGOFWATERCOURSESISALREADYAPROBLEMINMANYPARTSOF%THIOPIADUETOTHEDEFORESTRATION ANDTOPSOILLOSS)NPARTICULAR PARTSOFTHESOUTHERNANDNORTHERN0ROTEROZOICTERRAINSARELOCATEDINDROUGHT PRONEAREASTHATALSOHAVEMUCHHIGHERINTERANNUALVARIATIONINRAINFALLAMOUNT$EMEKE   %THIOPIAHASANUMBEROFPLANTANDMAMMALENDEMICSPECIES WHILEAREASRESERVEDFORBIODIVERSITY CONSERVATIONARERATHERLIMITED ANDTHESEAREASARENOTFULLYPROTECTEDFROMINDUSTRIALDEVELOPMENTBYTHE LAW%VENIFMININGCOMMONLYIMPACTSRATHERSMALLAREAS INCLUDINGASSOCIATEDINFRASTRUCTURE 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OFVERYPOORQUALITYWITHISSUESRANGINGFROMKEYPARTSSIMPLYMISSINGORTEXTSECTIONSBEINGUNRELATEDTO HEADINGS TO%)!SWITHAREASONABLYGOODBASELINEDESCRIPTIONBUTBEINGLOWONHARDDATAFACTSANDWITH MITIGATIONMEASURESANDMONITORINGPROCEDURESHAVINGASERIOUSLACKOFDETAIL 80 FINAL  REPORT 0OTENTIALFORLANDUSECONmICTSRELATEDTOMINING !LLLANDISCONTROLLEDBYTHE3TATE ANDRESETTLEMENTTOMAKEROOMFORAMININGOROTHERTYPE PROJECTCAN OCCURIFADEQUATECOMPENSATIONISMADE4HESEFACTSPROVIDEAGOODPLATFORMFORRESOLVINGLANDUSECONmICTS THATTYPICALLYOCCURDURINGEXPLORATIONANDMINEDEVELOPMENT2ECENTEXPERIENCESRELATEDTOTHE4ULU+API  AND!LLANAPOTASHPROJECTSSUGGESTTHATLANDUSECONmICTSMAYBEADDRESSEDCONSTRUCTIVELYTHROUGH AND WITHSOMESUCCESS BYUSINGOF)&#GUIDELINESONRESETTLEMENTANDCOMPENSATION WHILECLEARLYTHISISA VERYSENSITIVEANDCRUCIALISSUETHATNEEDSTOBECONSIDEREDFURTHERINFUTUREPROGRAMSANDPROJECTS4HISIS EXEMPLIlEDBYTHE,EGA$EMBIOPERATIONS WHICHAREHAVINGSIGNIlCANTPROBLEMSINBEINGALLOWEDTOACCESS LANDADJACENTTOTHEMINE THATISNOWUSEDBYFARMERSCOFFEE 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. Local  community  development ,EGISLATIONISINPLACETHATREQUIRESHOLDERSOFMINELICENSESTOENGAGEINCOMMUNITYDEVELOPMENT4HERE AREALSOREQUIREMENTSTHATSUCHPLANSSHOULDBEELABORATEDINCONSULTATIONWITHTHECOMMUNITYANDWITH LOCALAUTHORITIES ANDISSUESTHATMAYBEINCLUDEDINSUCHPROGRAMMESINCLUDEHEALTH EDUCATIONANDWATER FACILITIES4HUS WHILSTCOMMUNITYDEVELOPMENTISMANDATORYTHELEVEL ORDETAILS ARENOTDElNED3TATEMENTS MADEININTERVIEWSWITHOPERATORS-IDROC !LLANAAND.YOTA SUGGESTTHATTHECOMPANIESTHEMSELVES AS APARTOFTHEIR#32RELATEDAMBITIONS AREDECIDINGONTHELEVELOFAMBITION ANDWHATSHOULDBEINCLUDED INSUCHCOMMUNITYPROGRAMS4HUS THEREEXISTAMPLESCOPETOBETTERINCLUDEANDDElNETHEACTIONSTOBE TAKENBYAMINEOPERATORINTHEREQUIRED--! 7ITHREGARDSTO#32RELATEDEFFORTSTAKENBYMININGCOMPANIES A$&!4$lNANCEDSTUDYPERFORMEDBY 3YNERGY'LOBAL#ONSULTING CONCLUDESTHATTHENEWINVESTORS.YOTAAND!LLANAHAVEBEENUSING )&#GUIDELINESTOENSURETHATCOMMUNITYRELATEDISSUESAREMANAGEDINAPROPERWAY4HESAMESTUDY RECOMMENDSTHATTHESE)&#GUIDELINESMAYBEUSEDASMINIMUMREQUIREMENTSFORHOWMININGCOMPANIES SHOULDBEHAVEIN%THIOPIA 11.4.  Recommendations 4HEBENElTSOFMININGLEDDEVELOPMENTMAY IFWELLMANAGED BENElTTHEWHOLENATION.EGATIVEIMPACTS  HOWEVER RISKBEINGEXPERIENCEDINTHEAREASWHEREMININGISACTUALLYISOCCURRING%FFORTSARENEEDEDTO ENSURETHATSUCHIMPACTSAREMITIGATED MANAGEDANDORCOMPENSATED 4HEOVERALLGOALFORANENVIRONMENTALLYANDSOCIALLYSOUNDINDUSTRYMAYBEEXPRESSEDASTHEEFFECTIVE UTILISATIONOFACOUNTRYSRAWMATERIALSANDMANUFACTURINGRESOURCESFORTHEBENElTOFITSPOPULATION WITHOUT CAUSINGHARMTOHUMANHEALTHORDAMAGINGBIOLOGICALDIVERSITYANDECOLOGICALSTABILITY)TISTHERESPONSIBILITY OFGOVERNMENTSTOFULlLTHISGOALBYTRANSFORMINGVISIONINTOPOLICIESANDPRACTICALACTION*USTASTHEMINING INDUSTRYREPRESENTSMERELYONESEGMENTOFACOUNTRYSECONOMY PUBLICENVIRONMENTALANDSOCIALADMINISTRATION OFTHEMININGSECTORISUSUALLYAWELL INTEGRATEDELEMENTINAMUCHWIDERNATIONALENVIRONMENTALAGENDA 3UCHADMINISTRATIONIMPLIESESTABLISHINGPOLICIES LEGISLATIONANDENFORCEMENTPROCEDURES ACOMPLEXTASK COMBININGAVARIETYOFISSUESANDACTIONS WHICHJOINTLYCOULDBECALLEDA.ATIONAL%NVIRONMENTALAND3OCIAL -ANAGEMENT3YSTEMCFBOXBELOW %THIOPIAMAYCONSIDERREVIEWINGALLTHEELEMENTSOFSUCHASYSTEM KEYASPECTSAREDISCUSSEDBELOW STRATEGIC  ASSESSMENT  OF  THE  ETHIOPIAN  MINERAL  SECTOR 81 Box  9:  Key  elements  of  a  National  Environmental  and  Social  Management  System 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.   %NACTMENTOFSPECIlCLAWSANDREGULATIONS SUCHASINCLUDINGTHEINTRODUCTIONOFCOMPLEMENTARY legal  and  economic  instruments. Standards   Establishment  of  goals  for  environmental  quality  of  different  ecosystems,  related  to  both  pollutants   and  the  protection  of  nature.     $ElNITIONOFBASELINECONDITIONS   3ETTINGOFSTANDARDSFORINDUSTRIALEMISSIONSTOAIR EFmUENTSTOWATERBODY ANDDISCHARGEOFSOLID material.   Public  environmental  institutions     Establishment  of  public  organisations  for  environmental  and  social  management  and  law  enforcement.   Building  of  human  capacity  for  environmental  and  social  management.     Introduction  of  work  standards  and  procedures  for  an  effective  public  environmental  management. Tools  and  procedures  in  public  environmental  and  social  management   The  introduction  of  the  concept  of  environmental  impact  assessment.   Establishment  of  auditing,  inspection  and  reporting  as  tools  in  environmental  supervision.   Guidelines  for  consultation  and  public  participation. Industry-­oriented  initiatives   Introduction  of  procedures  and  incentives  for  environmental  and  social  development  and  self-­ control  within  industry. Environmental  communication  and  training   Promotion  of  environmental  knowledge  and  information,  and  the  encouragement  of  public   participation  in  environmental  matters. 82 FINAL  REPORT #ONSIDERINGTHEFACTTHATENVIRONMENTALANDSOCIALMANAGEMENTOFTHEMINERALSECTORISREGULATEDONLY THROUGHTHE%)!0ROCLAMATION THEADVANTAGESANDDISADVANTAGESOFASYSTEMTHATISHIGHLYREGULATEDOR LITTLEREGULATEDMAYBECONSIDERED)TISPROPOSEDTHATENVIRONMENTALPROVISIONSREVIEWEDANDTHEDRAFTING OFENVIRONMENTALANDSOCIALREGULATIONSSPECIlCTOMINERALSECTORENVIRONMENTALPROTECTIONISCONSIDERED )NMANYCOUNTRIES SPECIlCMINERALSECTORREGULATIONSEXISTFOREXAMPLEFORREHABILITATIONANDMINECLOSURE  INTERNALANDEXTERNALAUDITS /(3 ETC)NAMOREREGULATEDREGIME THEREWOULDBELESSNEEDFORNEGOTIATIONS WITHCOMPANIESINDETERMININGTHESOCIALANDENVIRONMENTALCONDITIONSTHATSHOULDPREVAILINANYCERTAIN PROJECTORMINEIN%THIOPIA 4HETHREESETSOF%)! RELATEDGUIDELINESCOULDBENElTFROMREVISIONANDSTREAMLINING4HECURRENT%)! 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