Mali’s new mining law: an improvement, but fails artisanal miners

Mali’s long-awaited mining reforms are here. A mix of progressive and outdated measures, the code must pass parliamentary review before entering into law. We assess the significance of three aspects of the legislation.  

Ahamadou Mohamed Maiga's picture Brendan Schwartz's picture
Ahamadou Mohamed Maiga is an extractive and energy consultant working with IIED; Brendan Schwartz is senior researcher in IIED's Natural Resources research group
08 October 2019
Artisanal miners of Mali

Artisanal miners of Mali (Photo: MOISESFOCUS, Creative Commons via Wikimedia)

Despite lengthy preparations, many were surprised when Mali's new mining law passed by ordinance in August. The next stage is parliamentary review, where we expect additional revisions before a final version is agreed. This creates an opportunity to further strengthen its contents. 

The news agency Reuters immediately put out a report that focused on whether the new law is a "new instance of 'resource nationalism'". In fact, much of the content was informed by technocratic advice from the IMF and World Bank – not institutions typically associated with government-led attacks on global mining companies. 

But we’ll set aside the grand political economy debate to share our thoughts on the new law, concentrating on the areas covered by our policy recommendations from late last year: fiscal reforms, artisanal mining and local revenue management. 

Making more money 

Increasing revenue from mining is a major goal of the reform. In 2016, the government was able to capture just 24% (PDF, French language) of the value of gold exports in mining revenue, hindered by liberal tax exemptions, accelerated depreciation and lack of a mechanism to tax the 'super-profits' being made.

The new law responds to these challenges relatively well. We think the following inclusions are common-sense measures that will appreciably enhance Mali’s future ‘take’ and are unlikely to deter future investment in a significant manner:

  • Reducing the cut-rate corporate tax period from 15 to three years
  • Removing VAT exemptions during mining production 
  • Introducing a new windfall tax (although mechanics remain unclear until further regulations are passed), and
  • Capping ‘fiscal stabilisation’ (the period during which tax rules cannot change) at 10 years instead of running throughout the life of a mining project. 

However, 10 years does remain a generous timeframe for stabilisation. The IMF estimates that all active industrial mining projects in Mali have a payback period of well under 10 years (PDF), most under five. 

Some countries, Cameroon (PDF, French language) for example, are moving from fixed stabilisation periods to provisions that guarantee investors a minimum rate of return in their legislative reforms. This theoretically could produce fairer outcomes for companies and governments. But establishing real costs and calculating tax are art forms; Mali has bet on simplicity rather than risk tussling with mining firms over tax bills.

Mali’s reforms also contrast with the approach in the Democratic Republic of the Congo by expressly stating that the original fiscal terms of current mining projects will continue. Increased revenue may have to wait for new mines to begin production. 

But Mali may yet clash over tax with mining companies already working in the country. Stabilisation clauses in previous national mining laws could be interpreted as allowing for new tax regulations to be applied to existing mines. While immediately raising more mining revenue may tempt a cash-constrained government, Mali recently lost a tax dispute in international arbitration with a mining company and will be wary of provoking others. 

A negotiated solution, whereby the government and companies voluntarily agree to adapt the applicable fiscal rules to the evolving economic context, would be the best outcome to avoid protracted disputes.

What about artisanal miners?

It is estimated there are more than 200,000 artisanal gold miners in Mali, making it one of the largest sources of employment. 

Government would like to ‘formalise’ artisanal mining: controlling locations, levying taxes, reducing environmental impacts and child labour. But with artisans regularly displaced in favour of big investors, there is distrust of the government and little perceived benefit to compliance. 

We proposed that artisans receive exclusive rights to mine gold within a permit area, mirroring the rights granted to international companies. Artisans with full investor rights can be asked to assume similar social, environmental and fiscal responsibilities, proportional to their projects. 

Disappointingly, the new legislation instead provides a pathway for industrial mining companies to formalise the presence of artisans within their concessions (rather than displace them). This does not adequately respond to the wider, entrenched problem, but the parliamentary review can yet be used to boost the rights of Mali’s many artisanal miners. 

Funding local development

The new legislation establishes a mining fund for local development. The government will pay in 20% of the royalties it receives from gold production (currently set at 3% of the value of gold produced); mining companies will contribute 0.25% of turnover.

Recent data (PDF, French language) suggests the fund could take in around GBP£11.5 million annually – more than double the mining revenue currently allocated to local level. But this depends on existing mines agreeing to pay into the fund.

We are cautiously optimistic. Rural Mali badly needs investment; this fund could deliver many public services. The law also contains interesting transparency provisions; for example, the Ministry of Finance must publish detailed reports on the management of local mining funds within six months of the close of the financial year.

However, achieving balance between central and decentralised management will pose a challenge. The reforms require that central government committees implement the fund’s work; future regulations will detail their make-up and remit. 

There is still room to embed fairness in the development fund, if it is adapted to:

  • Devolve decision-making power to communities
  • Prevent elite capture of revenues, and
  • Keep operating costs low so that most of the money actually goes to local development. 

Finally, the law could benefit from a mechanism to spread payments to localities over many years, avoiding boom and bust cycles when mines close. 

Watch this space

Ultimately, Mali’s institutions will determine how reforms are implemented and translated into societal change. Mining’s role in the country’s socio-political journey will be interesting to follow in the coming years. 

About the author

Ahamadou Mohamed Maiga est consultant pour l'IIED dans le domaine des ressources extractives et des énergies.

Brendan Schwartz ([email protected]) est chercheur senior au sein du groupe de recherche sur les ressources naturelles de l'IIED.

Ahamadou Mohamed Maiga's picture Brendan Schwartz's picture