Defying an image smelted into human culture literally since the Neolithic era may seem like an exercise in futility, but new research is doing just that. A recent report from the World Gold Council revealed that the gold mining industry directly contributed $US83.1 billion to the global economy in 2013. Once the indirect economic impact was taken into account, this figures increased to $171.6 billion.
At least 1 million people were directly employed by the industry, with more than 3 million working in related supply and servicing sectors. More than 90% are local workers.
On the cynical side, we see more of our historical obsession with pouring human resources into an apparent extravagance, perhaps an updated statistic on the pharaoh’s employment of pyramid builders. But the WGC finds a great deal of public good in these numbers, noting that 70% of the value gold mining companies distribute takes the form of payments to local suppliers and employees.
“While there has been major progress in recent years in attempting to measure gold mining’s economic impacts, this has often been piecemeal or confined to a specific country,” Maxwell Stamp managing consultant and report author Andrew Britton said.
“The lack of information has held back constructive debate on how to make the most of the shared value that a responsible gold mining industry can create for host nations and communities. By building on previous research and identifying industry-wide trends, this work has made substantial progress in bridging the information gap.”
The WGC report builds on recent efforts by the Western Australian gold industry to redefine itself in government eyes as an indispensable social contributor. The Heart of Gold campaign successfully lobbied to remove recommended gold royalty increases from the state budget, arguing that the health of the industry was necessary to allow regional towns to grow.
The group said WA’s 29 gold mines contributed $A300 million a year in taxes and royalties, providing for the construction of roads, schools, hospitals, police stations and a critical economic support to the social and economic fabric of the state’s most remote communities. The success of Heart of Gold in stemming an over-exploitation of the industry suggests a growing awareness that the metal of exclusive prestige is in fact supporting sustainable socioeconomic development in a macro sense.
Out of the 30 top gold producing countries, the WGC report found that more than 60% had “substantial” socioeconomic development needs and that growth in the economic contribution of gold mining often coincided with a marked improvement in income status. Interestingly, the majority of government revenues from gold mining were derived from sources such as corporate and income tax, rather than from permits and royalties.
While Heart of Gold made a strong case for maintaining an economic driver in WA’s Goldfields region, the potential for gold to uplift communities is much greater in less prolific jurisdictions. The largest gold producing countries, including China, Russia, the US and Australia, account for more than 40% of global gold production yet the local gold industries contribute far less than 1% to each country’s national economy.
Papua New Guinea and Mali, by contrast, both produce less than half as much gold as Australia, but the yellow metal counts for more than 25% of the gross value added in each country’s GDP. In Mali, gold mining represents 76% of the national industrial sector.
The WGC says that the growth of gold mining in impoverished and resource-rich countries has been instrumental in breaking the vulnerabilities inherent in dependence on foreign aid. It demonstrated that over the last 10 years, growth in the value generated by gold mining in underdeveloped countries has outstripped the growth rate of direct economic contributions from more affluent nations. In Ghana, for example, official development assistance from the Organisation for Economic Cooperation and Development grew by more than 200% over 13 years, but the gross value added by Ghanaian gold mining grew by 1170%.
One of the keys to realising the value of gold is in development via modern, large-scale, well-managed and appropriately governed mining operations. Information on the community impacts of artisanal gold mining is only anecdotal, but largely associated with negative social, economic and environmental impacts.
Also, the endemic corruption in many developing countries complicates revenue management and therefor endangers the viability of continued foreign gold mining investment. Along with research such as the WGC’s analysis, this may be best tackled through a higher profile for multi-stakeholder programs such as the Extractives Industries Transparency Initiative.
EITI rules requiring third-party oversight for government mining payments have been implemented in gold-producing countries including Burkina Faso, Ivory Coast, Democratic Republic of Congo, Ghana, Guinea, Kyrgyzstan, Mali, Mongolia, Peru and Tanzania.
For investors, Heart of Gold, the WGC study and the EITI may signal the start of a positive evolution in the cultural meaning of the gold production industry.
As more enlightened governments recognise it as an asset of the proletariat, sector expansion becomes more sustainably bankable.
“Our findings highlight that commercial gold mining is a major source of income and driver of economic growth, playing an important role in supporting the sustainable socioeconomic development of host nations and communities,” Britton said.
“We hope it will help foster productive engagement between gold mining companies and the industry’s wider stakeholders.”
