Promoting the economic progress of Ethiopia thereby meeting the challenges from which citizens are suffering has become a matter of great concern to all interested in coming up with real change. It is clear that the industrial specialization has narrowed the minerals sector down to major companies for primary fabrication and subsequent metal purification stages.
Taking this into account, The Ethiopian Herald conducted an interview with Daniel Demena, an economist graduated from Addis Ababa University, to have a piece of information about minerals and their contribution to the economic aspect.
He said, “The key non-fuel minerals in terms of value of total production include gold, opal, gem and the likes in Ethiopia. These commodities account for a big share of the value of mineral output in the country. They play vital role in making the nation industrialized.”
To meet this enormous demand for mineral resources is the business of a vast regional, continental and even international mineral industry. The primary mineral industry is concerned with the search for and mining of various minerals, their recovery from the ore by means of a wide range of concentrating and purifying processes that develop a product suitable for secondary fabricating processes, he said.
Embarking on certain regional states with good mineral potential and geological inference, the country has focused on some of the minerals which have contained good mineral value, depending on the mineral and the area in which they are found, he added.
The Ministry of Mines (MoM) recently announced that the construction of three gold mining factories is progressing swiftly, with the goal of generating approximately 800 million USD from the sector this fiscal year.
Speaking to the Ethiopian Press Agency (EPA), MoM State Minister Million Mathewos stated that Ethiopia is intensifying efforts to explore and harness its vast mineral and construction resources. He indicated that the three gold mining factories are expected to become operational within the next 18 months.
Once completed, these projects will boost the country’s gold production by an additional 10 tons annually, significantly contributing to mineral exports and increasing foreign currency earnings. The factories are located in Benishangul Gumuz, Gambela, and Tigray states, with the largest facility in Kurmuk Distrcit, Benishangul-Gumuz State, projected to produce about nine tons of gold per year.
Given the sector’s critical role as one of Ethiopia’s top economic pillars, the government is prioritizing its development. The nation earned 420 million USD from mineral exports in the previous fiscal year, and the ministry is working tirelessly to surpass this target in the current year.
As to Daniel, the mining and purification stages are characterized by large capital investments and an increasing trend to minimizing the labor input. Most new production is being generated from projects demanding high cost and immense capital investment.
“The oligopolistic nature of the industry is also evident in the large degree of foreign control, particularly of the extractive and purification stages. This stems from two basic reasons. The first, and now less important, is the traditional development of mining ventures and undeveloped territories where some operational control has been retained to the present day,” he added.
Daniel further stated that it is clear then that the mineral industry is profitable, although not excessively so, and that it is essentially international. Many places in Ethiopia have a high mineral endowment but assessment of potential is, in general, patchy and superficial. Hence, it has to seek to develop its mineral resources and has to well know what should the objectives of such development be?
Undoubtedly, the minerals sector could fit into the economic development pattern of the country and contribute significantly to economic growth. Most commonly the initial objectives of the sector have to be quite modest: the generation of foreign exchange through exports, and the provision of opportunities for acquiring technical and managerial skills through rather limited employment.
Yes, he said the minerals sector should provide inputs into the economy, thereby stimulating forward integration into the fabricating process and backward integration into service and manufacturing industries. The ability to provide such linkages is determined in large measure by domestic demand, the availability of domestic capital and know-how, and corporate policies.
If capitalizes well on its mineral resources, Ethiopia can be cited as examples of economies with major mineral export sectors but has so far gained negligible benefits out of the development of its minerals, he opined.
Domestic policies that encourage mineral resource development are also attacked for leading to a premature depletion of potential resources and for creating an imbalance in the economy.
He further stated that development of the minerals sector demands the input of capital and technical and managerial expertise, and the exploitation of markets. In Ethiopia, state and private enterprises have attempted to operate without the help of companies specializing in these areas; unfortunately, their performance record has in general ranged from highly unsuccessful to moderately successful, and has been characterized by low expenditures on exploration and low rates of growth.
He said, “Ethiopia’s efforts have been stepped up in seeking substitute commodities and in developing new recovery technologies to treat low-grade materials and to increase recycling. Furthermore, new approaches to securing sources of supply are being developed which depart radically from the traditional pattern of total corporate control of the exploration, investment, and marketing functions.”
Inefficient exploitation, failure to process minerals in the country, inadequate opportunities for nationals to acquire managerial skills, insufficient job creation owing to unduly advanced technology, insufficient reinvestment of profits into exploration and expansion of minerals, and overly conservative disclosure of ore reserves and resource potential are also the core challenges giving the sector hard time, he underscored.
Clearly, he stated mineral output cannot keep on doubling indefinitely, at an ever accelerating rate, but this is scarcely necessary with the increasing emphasis on greater husbanding of the minerals in circulation, and the balance between a push toward substitution and a push toward more sophisticated recovery processes for extracting minerals from low-grade concentrations or from hither to inaccessible areas on the ocean floor or under ice caps.
The minerals’ sector poses some unique obstacles and challenges. But it may offer significant economic development impetus to Ethiopia. The challenge is not only to encourage the growth of the mineral sector in the country but to assess the potential for mineral production.
“We find the mining boom exerts a significant effect on the manufacturing employment in mineral-resource owning nation, but benefits the employment in services. Because the increase in mining employment is sizable in a mining boom, the overall employment in the country has shown a small growth,” he added.
True, he said a comprehensive understanding of the role of mineral resources needs an insight into labor market. This is particularly important for a transition economy where the mineral resources are quickly depleting and the employment problems are increasingly prominent.
The resources of our interest are the non-renewable resources in general, such as minerals and fuels, since they have been regarded as the point source of the resource curse, he said.
Realizing the potential for mining to contribute to development in Ethiopia where it takes place is arguably one of the greatest priorities facing the mining and minerals sector. Mining should bring extensive economic benefits. This is particularly important for poor countries like Ethiopia that lack alternative sources of development and are otherwise unattractive to foreign investors.
The opportunities include hard-currency earnings in the nation where they are scarce, increased government revenues, jobs, improved education and skills development, and the development of infrastructure such as roads, electricity, and telecommunications. Although the nation would benefit greatly from minerals extraction, for a number of reasons it has not yet garnered bounties as it deserves so far.
The ability to manage mineral wealth effectively has lagged behind the ability to attract mineral investment, too. A key challenge now to develop policy frameworks to ensure that mineral wealth is captured and creates lasting benefits for local communities and the broader population. This framework must recognize that production from a specific mineral deposit has a finite life span and it is vital that there is something to show for it in the form of improved stocks of other forms of capital.
If managed effectively, however, the minerals’ sector has the potential to play an important role in national and local economic development. At the local level, it should contribute to the development of skills and local businesses. Meanwhile, the economy as a whole can be stimulated as minerals’ companies forge multiple outward linkages – backwards to industries that supply goods and services, or forwards to industries that process mineral outputs, he elaborated.
As to Daniel, mining is one of the key sectors that drive the Ethiopian economy. For mining companies to stay on top of the business, it is important that it continuously meet the customer needs and wants through strategic marketing.
“The sector is one of the major key contributors to foreign currency in Ethiopia and it ascertains that it satisfies and meets the customer demands profitably. The producers and service providers in the mining sector can stay in business on condition that there is exchange occurring between the customer and the supplier.”
Generally, the government and investors must feel there is something that might be of value to citizens. The mining sector has various aspects which include mining, means for preventing illegally traded minerals and take appropriate measures to cure the wound. To this effect, the combined effort of all is worth considering.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD WEDNESDAY 2 OCTOBER 2024
