The benefits of legalising artisanal mining in South Africa

2 November 2017 (Last Updated November 2nd, 2017 09:51)

Miners have marched on the department of mineral resources in Pretoria, demanding the legalisation of small-scale mining in an effort to make it safer. But why is small-scale mining considered taboo by the government and could legalisation benefit both communities and the industry?

The benefits of legalising artisanal mining in South Africa
An estimated 10% of South Africa’s gold production comes from small-scale and artisanal mining. Credit: Courtesy of Knut-Erik Helle

Illegal mining in South Africa is a massive industry, mostly small-scale and artisanal in nature, it employs as many as 30,000 men, women and children. An estimated 10% of South Africa’s gold production comes from small-scale and artisanal mining (ASM), which is explicitly banned as current regulations outlaw any activities that take place without a permit, including both invasive and merely informal mining.

Due to its illegal status, ASM is a much as 90 times more dangerous than larger, formal operations. This is predominantly because it is entirely unregulated and miners often work secretly in abandoned mines under very dangerous conditions. In May, the bodies of 25 people thought to be illegal miners were recovered by the police from a disused Harmony Gold mine shaft near the town of Welkom. Hundreds of unofficial miners, often called zama-zamas – the Zulu word for ‘those who try to get something from nothing’ – die every year.

ASM has a bad reputation generally and one reason is the environmental damage associated with the practice. “Environmental damage is often a by-product of ASM, as miners commonly lack the resources, knowledge and/or the requirement to operate in an environmentally sensitive manner,” explains an ICMM report titled Working Together: How large-scale mining can engage with artisanal and small-scale miners. “Due to the informal nature of much ASM activity, regulators have little ability to influence environmental performance.”

Illegal mining has robbed South Africa of billions of rand. Gold amounting to as much as R7bn a year is smuggled out of the country to buyers in neighbour countries.

But the biggest challenge with ASM is its association with criminal activities. Whole syndicates often operate, taking advantage of workers – 70% of which are thought to be illegal immigrants – who get a pitiful share of the overall profits whilst middle men and buyers take the lion’s share. “Often the proceeds are used to fund other syndicated criminal activity, such as gun smuggling, human trafficking and human smuggling, or drugs,” according to a 2014 report by the Chamber of Mines.

Further dangers arise due to clashes of rival gangs. Since 2012, more than 300 miners have been killed in fights for the best mining areas, usually old mines abandoned by large companies.

In August, miners marched on the department of mineral resources (DMR) in Pretoria to demand change, claiming that the sector should be legalised to increase safety and boost the economy. But would that work?

Repeating requests to legalise ASM

This is not the first time that legalisation of ASM has been suggested in South Africa. Following the death of 75 illegal miners earlier this year, South Africa’s largest union, the Congress of South African Trade Unions said, “It is now obvious that focusing on criminalisation of the independent small-scale mining, where there are millions of unemployed people desperately looking for jobs is not the solution”.

“The federation is calling on the Chamber of Mines and government to explore the possibility of legalising and regulating the small-scale mining as a way of minimising dangers and also removing the criminal elements that send some of these desperate people underground,” it continued.

The cost of the licence application is the main barrier faced by ASM. To gain a licence through the DMR they must provide environmental assessments and feasibility studies, both of which cost great amounts to obtain and they must also pay a fee. These miners are usually those living on the poverty line and taking part in illegal mining as a last resort due to high levels of unemployment. The cost of fees is simply out of reach.

In order for legalised activities to become possible, the system would need to change. Permits would have to become affordable, bureaucracy streamlined, and a flexible approach taken to accommodate the many kinds of artisanal miners.

Regulating informal miners

Illegal mining has many drawbacks and no easy solutions; those who take part are often just as much victims of the industry as the country in which they operate. But, something must be done about the great loss of life that follows these illegal operations, the environmental damage and the criminal practices associated with it.

As ICMM COO Aidan Davy said: “Artisanal and small-scale mining is an important source of livelihood to many people who would otherwise live in poverty. However, too often it is associated with unsafe labour practices, widespread environmental degradation and criminality. Better regulation of the sector offers the prospect of addressing these challenges.”

Undoubtedly, changes would need to be put in place to ensure that artisanal mining could operate safely and to the benefit of the miners. Warren Beech, head of mining for South Africa for Hogan Lovells, believes legalisation is the only option. “I think it’s the right way forward, I think it’s the only solution,” he says. “The fact of the matter is that artisanal mining has become an important part of our society and our mining sector, it’s a reality that we have to acknowledge, and then try to move and work together to try and formalise it, legalise it, and provide structures for it to be conducted safely, in a healthy manner and with accepted structures.”

Proof of success

Illegal mining is not a problem specific to South Africa, where it has only become a significant issue in the last five-eight years. Globally, an estimated 25 million people are employed as ASM, and a further 150-170 million people indirectly reliant on it. How countries have tackled the problem varies from country to country, but several have already taken the path of legalisation.

Ghana is one such country, having legalised small-scale mining in 1989 with the Precious Minerals Marketing Corporation. Since then, ASM has contributed $460m to its economy, as miners can sell diamonds and gold to the government and pay small amounts of tax. This is generally seen to have been successful in many ways, and whilst miners are expected to purchase a licence, the industry is lightly regulated.

This system has provided a much safer environment for small-scale miners, but flaws remain, particularly concerning taxes. There is no differentiation between small and large-scale mines when it comes to royalty payments. As such, the Ghanaian Government currently estimates that it is losing out on as much as $138.8m annually, despite mining accounting for 19% of Ghana’s direct tax revenue. Tax reform is currently being looked into, to solve this problem and allow the sector to continue to grow.

Challenges of making a change

There would be challenges with legalisation of ASM, in order to make it work for the miners, the government and the country as a whole. At the beginning of the year, the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development produced IGF Guidance for Governments: Managing artisanal and small-scale mining. The report provided suggestions for government and industry to help artisanal and small-scale mining to contribute to sustainable economic and social develop. The three main aims of the report were the integration of informal ASM activities into the legal system, integrating into the formal economic system and a reduction of the social and environmental impacts of mining.

But to reach the point where guidelines are helpful may in itself be a challenge. “The starting point of the challenges is the fact that everybody disagrees whether it should be done or not,” says Beech. “Everybody needs to start working together, that’s the initial challenge, and then the second major challenge is resources, both human and financial resources within government, and the department of mineral resources. Those are the biggest two challenges.”

Despite the hurdles, there seem to be few alternatives to counter the increasing problem of ASM. “I don’t believe that there is another alternative [to legalisation],” says Beech. “We can either continue doing what we’re doing now, with the number of artisanal miners that are being killed regularly on a monthly basis growing, which is quite frightening. Or legalise it.”

With increasing pressure from international groups and the miners themselves, legalisation of ASM to protect people and ensure their fair contribution may start to gain traction with the DMR.