Home » Gold Rush in Burkina Faso: Junta Hikes Royalties Amid Production Slump

Gold Rush in Burkina Faso: Junta Hikes Royalties Amid Production Slump

The West African nation seeks to boost its revenues from gold exports as it faces a severe security and political crisis.

by Motoni Olodun

Burkina Faso, one of Africa’s largest gold producers, has revised its mining code to increase the royalties it collects from mining companies in times of high gold prices. The move comes as the country faces a severe security and political crisis that has hampered its gold output and economy.

According to a decree seen by Bloomberg, the military government that seized power in September 2023 has raised the minimum royalty rate for gold spot price above $1,500 an ounce to 6% from 5%. The rate will rise to 6.5% for spots higher than $1,700 to $2,000 and further to 7% for spots above $2,000. The new rates apply to all existing and new contracts, regardless of the stability clauses that regulate the state’s stake in mining operations.

The decree follows a sharp decline in gold production in Burkina Faso, which dropped 13% to 58.2 tons in 2022, according to government data. At least five mines closed down amid deteriorating security conditions and two military coups that year. Islamist armed groups allied to Al-Qaeda and the Islamic State have intensified their attacks on civilians and military targets in 10 of the country’s 13 regions, displacing nearly 2 million people and creating a humanitarian emergency.

The security situation has also sparked anti-government protests and political instability, leading to two successive coups in less than nine months. The first coup, in January 2022, was led by Lt.-Col. Paul Henri Damiba, who overthrew President Roch Marc Christian Kaboré, who was re-elected in 2020. Damiba developed a comprehensive strategy to deal with the insurgency, which included political dialogue, negotiation, and demobilization of combatants. However, his efforts failed to stem the violence, and Capt ousted him. Ibrahim Traoré in September 2022. Traoré has pledged to hold elections by February 2024 and to restore control over territories lost to the militants.

The coups have also triggered a geopolitical transition in the region, as growing anti-French sentiments combined with political uncertainty led to the breakup of the French-led regional counter-terrorism alliance, known as Operation Barkhane. France announced in June 2022 that it would end its military presence in the Sahel after eight years and withdraw most of its 5,100 troops. In its place, Russia has increased its influence and involvement in Mali and Burkina Faso, deploying its private military company, the Wagner Group, which has been accused of committing human rights violations and fueling ethnic tensions.

The new mining code is seen as an attempt by the junta to boost its revenues and legitimacy amid the crisis. Burkina Faso relies heavily on gold exports, which account for about 70% of its foreign exchange earnings and 12% of its gross domestic product (GDP). The country hosts several major mining companies, including Endeavour Mining, Iamgold Corp., and Nord Gold SE. A spokesperson for Endeavour Mining, Burkina Faso’s largest gold producer, declined to comment on the new code.

The new code could also affect the local mining communities affected by environmental degradation, social conflicts, and human rights abuses linked to mining activities. The code introduces a monthly payment of 1% of companies’ turnover to a designated fund for local mining communities. However, it is unclear how this fund will be managed and distributed and whether it will benefit the most vulnerable and marginalized groups.

The new code will likely face resistance and challenges from the mining industry, which has already expressed concerns about the security situation and the political uncertainty in Burkina Faso. The code could also discourage new investments and exploration activities in the country’s rich mineral resources. However, some analysts argue that the code could also create an opportunity for dialogue and cooperation between the government and the mining sector, as well as between the mining sector and civil society, to address the root causes of the crisis and promote sustainable development.

Source: GhanaWeb


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