TRADE LIBERALIZATION AND ASM PROLIFERATION IN AFRICA: THE GHANAIAN CASE Isaac Haruna Ziaba Ph.D. Candidate London School of Economics and Political Science
Outline of Presentation • Rationale/Motivation • Research Question • Free-market theory and its critics • The role of ASM trade liberalization? • Conclusion
Rationale/Motivation ASM: “a labour intensive economic activity with few entry barriers” and which may involve “the use of simple tools” (Hilson, 2011; OECD, 2016) or may be mechanized. • In Ghana, 1 million operatives estimated (Hilson and McQuilken, 2014) • 3 million livelihoods dependent on ASM (Ibid) Yet ASM is tagged as a ‘menace’ in the public realm. Why? “…if our river bodies are drying up [and] our landscape is being desecrated…we have a responsibility to say ‘no, we can’t allow this to go on for our own common survival and that of those to come” President Akufo-Addo
Rationale/Motivation • So far governments have made failed attempts to clampdown on the sector ü NPP’s Operation Flush-out: 2006/2007 ü NDC’s Operation Halt – 2013 ü NPP’s Operation Vanguard – 2017-date NB: ASM share of total gold production in 2018 is 43%
Research Question Why does ASM proliferate amidst repressive policies?
Free-market theory and its critics The Free-market argument Adams Smith (1776). Friedrich Hayek (1944).
Free market theory and its critics The counter-argument John Maynard Keynes (1936) Karl Polanyi (1957)
Free-market theory and its critiques The analytical framework While free-market encourages individual economic enterprise and perhaps improves the general economic wellbeing of society, if unchecked, competition among individuals could be counterproductive leading to the destruction of man/woman and their environment.
The role of ASM trade liberalization? My Argument ASM proliferates largely because of the unregulated liberalized gold trade which spawns unhealthy competition among licensed gold exporters (LGEs) for ASM gold. NB: PMMC’s monopoly over gold trade from 1989 to 2005 Liberalization of the ASM market in 2006.
The role of ASM trade liberalization? The mechanisms • Through their buying agents, LGEs pre-finance ASM operatives while offering relatively higher prices for ASM gold. • These processes: ü Incentivize ASM operatives to access mineable lands illegally via the mediating role of chiefs and politicians. ü Encourage ASM operatives to bribe security officials responsible for enforcing the mineral laws. “We often shoot them with money gun” Interview with ASM operative in Obuasi
The role of ASM trade liberalization “While the Minerals Commission issued licenses to (LGEs) to operate, it had no power to regulate their activities. So, these private purchasing companies were pre-financing the activities of ASM and they were also buying gold at a higher price than the PMMC was doing.” Interview with a former Minister of Lands and Natural Resources “We pre-finance ‘galamseyers’ and we care less about how they source their gold. But I think that once traceability is introduced, no illegal miner can survive” Asuahene, AA Minerals Chief Executive “It is better to promote environmental and social protection against the private economic interests of LGEs” Ibid Focus group interviews with ASM operatives in Obuasi confirmed the above statements.
The role of ASM trade liberalization Two-decade's gold production figures (2000 – 2018) 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ASM LSM TOTAL GOLD PRODUCTION
The role of ASM trade liberalization Disaggregated time-series data on quantity of gold purchased (oz) 500000 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 2010 2011 2012 2013 2014 2015 PMMC Guldrest Resources Company ltd AA Minerals
Conclusion Theoretical implication • The market is not self-regulating Policy implication • Traceability mechanism in the ASM gold value chain
Conclusion Implication for Future Research • Comparative study on the link between LGEs and ASM spate required. • Why do governments ban ASM production without banning ASM trade?
THANK YOU
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