Sinknesh Ejigu, minister of Mines (pictured)
After a request from the Prime Minster, the Ministry of Mines has hugely elevated its revenue target
By ELLENI ARAYA
The Ministry of Mines (MoM) has raised its export revenue target for the current fiscal year, from 777 million dollars to one billion dollars. The revision follows the Prime Minister’s request that federal offices dealing with export goods set higher revenue targets for the 2013/14 fiscal year. The aim is to offset the lag in export performance over the last two years.
Ethiopia’s export earnings during the 2012/13 fiscal year fell 30pc short of initial targets, amounting to just 2.8 billion dollars. The poor performance of the mining sector, the second largest source of export revenue, was accountable for 255 million dollars of this deficit.
The major reason, according to officials from the MoM, was the falling price of gold, which dropped from 68.78 dollars a gram, in August 2011, to 44.09 dollars in July 2013. Gold was expected to bring 98pc of the 848.3 million dollars expected from mineral resources.
This significant drop prompted the Ministry to issue a restrained target of 777 million dollars in revenue. But, Prime Minister Hailemariam Desalegn expressed his displeasure at the low targets set not only by the MoM, but also the Ministry of Industry, Ministry of Agriculture, Textile Industry Development Institute and its leather counterpart, in a meeting with several ministry officials and heads of federal institutions, two weeks ago.
More ambitious plans must be set, was the command. This led the MoM to make the revisions last week, in accordance with directions set by the export desk of the Prime Minister’s Office.
Shouldering the responsibility of earning an additional 223 million dollars in export revenue, the MoM has decided to increase its export volume projections for gold.
With its initial sober target of 777 million dollars, the Ministry was planning to export 18,600kg of gold (13,200kg from artisans and 5,400Kg from MIDROC Gold), earning 745.8 million dollars. The revised plan, however, raises total gold exports to 23,400kg, worth 937.8 million dollars, or 93.7pc of the total target revenue.
“If there is no improvement in the price of gold, our only hope is to increase production and export more,” an official from the Ministry told Fortune. “It falls on artisan miners to increase their production, as projections for MIDROC have not been changed.”
Artisans are now required to produce 18,000Kg of gold, worth 720 million dollars. This is 36.6pc more than projected in the initial conservative plan. This seems like a tall order, considering that artisans fell 36pc short of the 13,200kg target set for the 2012/13 fiscal year. This is identical to the Ministry’s initial target for artisans this fiscal year.
When international prices fall, artisans are less motivated to extract and sell their gold to the National Bank of Ethiopia (NBE) for export. This leads to a fall in export targets, according to Tariku Legesse, deputy head of the Oromia Regional State’s Water, Mining & Energy Bureau. Oromia, the largest gold exporter among the five gold producing regions in the country, only achieved 83pc of the 4,000Kg gold export target set for it last year.
International gold prices have shown no signs of recovery, prompting the MoM to calculate the current export revenue using a 40 dollars a gram rate for gold.
Artisans have been known to hold onto their gold production when prices are low, in order to sell at a later date. MIDROC has also waited to sell the gold it mined in June of last year, hoping to fetch a better price, according to the official. Although the Ministry can set targets and apply pressure, it cannot force producers to sell their gold.
“Progress could be made by providing artisans with better tools, creating awareness and encouraging them to sell their gold instead of using it. Inviting additional miners to the field could also help,” Tariku told Fortune.
Although he did not yet receive the revised target for the Oromia region, these are the kind of strategies he will try to implement once he takes on the assignment.
“It is a target set for us by the government, so we must plan for it and hope for the best,” a senior official from the MoM told Fortune.
In addition to the adjustments it has made for gold, the MoM has lifted its ban on the export of rough gemstones and raw tantalum, to fill the gap between its initial and revised plans. Through the export of 15tns of rough gemstones and 180tns of raw tantalum, it aims to earn five million and 25 million dollars, respectively.
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