Factors Affecting Gold Supply: The Case of Ethiopia
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Date
2018-10
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Addis Ababa University
Abstract
Artisanal and Small-Scale gold mining is largely linked to poverty-driven activity and a source
of foreign exchange and government revenue. In Ethiopia, the sector employed a large number of people
supporting approximately 1.2 million while the average share of the sector to GDP and total export
during the last 15 years was limited to 0.4% and 8% respectively. Ethiopia has had no its fair share of
benefits the artisanal and Small-Scale gold mining brings by way of direct revenue generation and
foreign exchange creation. The country has been losing, potentially, millions of dollars through
smuggling of gold every year. Supply of gold to the formal market was significantly declined. Therefore,
the objective of the study was to analyze the effects of factors affecting artisanal and small scale gold
supply and forward possible solutions that can improve the contribution of the sector. Notable factors
(problems) are linked with global gold price fluctuation, expansion of local and cross boarder
smuggling, administrative problems reflected in the gold supply chain as well as impediments related to
policies and taxes including environmental dilapidation in gold mining sits in Ethiopia. In general, the
performance of the sector was significantly deteriorated due to the combined effects of these deterring
factors.
A combination of quantitative and qualitative methods was used to analyze the study variables. The
target population consisted of 934 artisanal gold miners, dealer, and cooperatives registered and
operating in four regions in Ethiopia specifically, Oromiya, Tigray, Benishangul, SNNPR and Gmbella.
Random sampling technique was applied to select 100 gold suppliers, senior managers and experts in
the field. Out of 100 questionnaires 88 were completed and returned by respondents. Homogenous
sampling technique was applied as the target groups are equally well aware of the ASG mining sector.
Secondary data was collected from study report, publications, research outputs, proclamations and
policy documents related to artisanal and small scale mining. The effects of the factors were examined
by using 15 years panel data collected on foreign exchange earned from artisanal and small-scale gold
mining sector. Secondary data were analyzed by using multiple linear regression model for one
dependent variable (gold supply) and five independent variables. The empirical result shows
international gold price fluctuation, local gold price, incentive to gold suppliers have positive and
significant relationship with the performance of the sector while contraband trade and lower gold
purchase threshold policy have negative relationship. Based on the result of the study, it is recommended
that contraband trade should be controlled, appropriate gold product recording, tracking and
monitoring be in placed, formalization of artisanal gold miners, technical and financial support for
artisanal gold miners and attention should be given for environmental protection.
Description
A Thesis submitted to Addis Ababa University in Partial Fulfillment of the Requirements for the
Degree of Executive Master of Business Administration (EMBA)
Keywords
Artisanal and small Scale Mining, Environmental sustainability, Gold purchase centers