Artisanal and small-scale mining (ASM) activities have been a reality in Kenya for a very long time, acting as a significant source of employment in the communities surrounding mines. In fact, in 2015, an estimated 800,000 Kenyans were depended on the sector, which contributed 0.8% to the gross domestic product (GDP). Even so, robust evidence is still lacking to understand the current economic contribution of ASM in Kenya, how the sector is formally or informally coordinated, how many and which demographic groups are trapped in the poverty cycle, and who is benefitting from the sector in its current form.
ASM’s critical role in poverty reduction and rural development can be seen in regional initiatives such as Pact’s Mines to Markets (M2M), as well as the formation of CASM (Collaborative Group on Artisanal & Small-Scale Mining) by the World Bank. However, while the sector is perhaps better known for its high environmental costs, gender inequality, child labour, as well as poor health and safety records, little is known about its actual potential.
As a strategic response, Pact with support from the U.K. Department for International Development (DFID) via its East Africa Research Fund (EARF), and the Alliance for Responsible Mining (ARM) led a study to understand the economic contribution of small-scale mining in East Africa (Kenya, Rwanda and Uganda). The research also sought to document value chains and make targeted recommendations on how to improve the economic performance of the diverse sector. It shows various ways highlighted below, how the ASM sector contributes to the economy.
First, with a focus on Kenya (Taita Taveta and Migori Counties), the research shows that, the artisanal gold mining sector, considering other counties such as Siaya, Turkana etc., employs close to 40,000 people, whilst the gemstone sector countrywide employs around 30,000 miners. In Migori, mining is, by far, the main income-generating activity with men constituting 92% of the extraction workforce while women constitute 62% of the mineral processing (crushing, milling, sluicing, amalgamation) workforce.
Second, in Taita Taveta (Mwatate and Voi), both men and women find it easy to get engaged in mining because they earn more than those in agriculture. The number of miners in the extractive and processing sector is approximately 10,000, with women comprising only 15% of the ASM workforce. These 10,000 miners national market value of production amounts to KES 12 billion (USD 120 million).
Third, if miners’ and landowners’ share in Taita Taveta is assumed to have been spent locally on food and on locally sold consumer goods, then half of investors’ share can be assumed as local direct investment. Half of traders’ share can also be considered as spent locally. This means, the local economic contribution can therefore be estimated in roughly USD 80 million. Miners’ income spent in VAT-taxed goods in Taita Taveta contributes an estimated USD 1.6 million to the annual Kenyan national budget, which by far exceeds the total royalty revenues.
Notwithstanding these significant contributions, the study highlights challenges in the sector. As legal export of informally traded gold is not possible, artisanal and small-scale gold mining (ASGM) is exported informally, mainly to Uganda and then re-exported onwards to United Arab Emirates (UAE). The selling price in Kampala, the regional gold hub, is 98-99% of the London Bullion Marketing Association (LBMA) price. The Kenyan seller who exports the gold informally from Kenya, could, potentially repatriate up to this amount in Kenya. Whilst these exports may be informal, foreign currency through the gold sales abroad can flow into the Kenyan economy and contribute to its strengthening. Under this scenario, up to 99% of the value of the gold can return to Kenya and be injected into the economy.
Child labour and gender inequality exists in the ASM sector. But, to a lesser degree, appearing to be most pronounced in the informal sites. In as much as women miners express the ability to pay school fees as the most important benefit of their work in ASM, women in the ASM workforce yield only 11% of the revenue share despite comprising 38% of the total workforce. Women work in large numbers in many of the lowest paid jobs (e.g., crushing, earning KES 7,800 or USD 78 per month), and are largely excluded from lucrative work in mill operations (yielding approximately KES 156,000 or USD 1,560 per month).
In Migori, the extensive use of mercury in the production process is a significant environmental and occupational health and safety (OHS) issue. In Taita Taveta, the main environmental and health risks associated with ASM relate to poor conditions at mine camps and within the mine operation areas. The nature and severity of environmental and occupational risks in Taita Taveta’s mines is however, closely tied to water scarcity.
The research shows that, only a small part of Kenyan gemstone production is locally cut and then exported. The cutting industry in Kenya is small and cutting skills have been low for a long period of time, yet gemstones represent 66% of the official exports. Additionally, the current royalty rates and those proposed, as part of the draft mining regulations in Kenya, are higher than the current rates for gold or gemstones in neighbouring countries. Most artisanal mined gold and gemstones are sold informally. As a result, royalties and direct taxes are not levied, when, indirect taxes through workers or owner spending (VAT) or fuel consumption significantly contributes to the Kenyan budget.
To this end, for the Kenyan government to increase the mining sector’s contribution to GDP to 10% by 2030 through value addition and the implementation of recently approved Mining and Minerals Policy (2016), there is need for shifts in political will and the current legal reform process. Formalisation should be advanced in the ASM of gold and gemstones supply chain. Formalisation strategies must be integrated with legalisation strategies and targeted trainings should be provided to the sector’s diverse stakeholders. These will create an enabling environment to realise the development potential of the ASM sector and to address related risks.
As the main global source of Tsavorite, Taita Taveta County is uniquely positioned to establish a signature gemstone market with significant development potential through support to ASM. Achieving such an aim will require a complex, multi-faceted approach that demands the establishment of; a free trade zone market for gemstones, a strong gemstone cutting industry and a gemstones centre.
In the case of gold processing, measures are urgently needed to minimise, manage, and mitigate risks from mercury misuse, including gender-sensitive approaches. These include, suitable technical responses to minimise mercury use and improve its handling and management, including sensitisation campaigns, coupled with the introduction of retorts, more efficient gravity separation methods and waste containment systems.