Ethiopia’s mining sector sits at a paradoxical crossroads. It has delivered record export revenues, yet struggles with governance conflicts, widespread informal extraction, and mounting environmental harm.
. . .
Ethiopia’s mining sector sits at a paradoxical crossroads. It has delivered record export revenues, yet struggles with governance conflicts, widespread informal extraction, and mounting environmental harm. The industry’s performance and regulatory framework reveal deep structural weaknesses that risk leaving local communities and investors worse off.
In the 2024‑25 fiscal year, Ethiopia’s mining exports generated USD 1.88 billion, led overwhelmingly by gold. That achievement marked a high point for a sector that has only recently begun to take shape as an export earner beyond coffee and agricultural commodities. Yet official figures mask the scale of informal activity that subverts formal markets and deprives the state of revenue.
Ethiopia’s formal mining activities contribute modestly to national output. According to international data, mining accounts for around 0.1 per cent of GDP and about 1 per cent of exports when measured under Extractive Industries Transparency Initiative classifications. Employment in the formal extractive sector stands at around 14 per cent of all extractive jobs.
The real scale of the industry is far larger in practice, especially in gold. Government data and independent studies show that the artisanal and small‑scale mining (ASM) sector employs more than 1.2 million people directly and supports as many as 7.5 million livelihoods in rural areas. Most of these miners work without formal licences, using rudimentary tools and minimal safety protections.
This duality creates a split economy. Licensed operators pay royalties and taxes, but informal miners capture much of the sector’s actual output. A report presented to the Ministry of Mines found that up to 61 per cent of gold production is sold on informal markets or smuggled out of the country, often bypassing the National Bank of Ethiopia’s export system.
Official gold export figures tell a striking story of decline and displacement by illicit trade. Between 2011‑12 and 2023‑24, gold exports fell from 12 metric tonnes to about 4.2 tonnes, even as informal production surged. Artisanal mining is now estimated to produce the bulk of Ethiopia’s gold outside state channels.
This shift has economic consequences. Informal channels undermine Ethiopia’s ability to capture foreign exchange. If the reported informal quantity from recent years were formalised, it could be equivalent to tens of millions of dollars that now escape government oversight.
At the centre of sectoral dysfunction is Ethiopia’s mining law. Critics at a recent Addis Ababa conference on inclusive mining governance argued that the Mining Operations Proclamation, drafted over 15 years ago, centralises power in Addis Ababa while stifling regional authority and community rights. That tension echoes broader political disputes over federalism and resource control.
The law vests licensing and revenue authority largely with federal institutions, inhibiting regional administrations from managing local mining income and enforcing environmental or social safeguards. Opposition officials highlight how regions that bear the environmental and social costs of mining see little of the financial benefits.
Disputes over legal interpretations and enforcement have encouraged informal operations and illicit trade. One consequence is that natural resources become sources of tension rather than prosperity.
In regions such as Tigray and Oromia, artisanal mining has become both an economic lifeline and a flashpoint for social conflict. Independent analysis has linked illicit gold extraction to violent clashes and smuggling networks that intersect with broader regional tensions. In Tigray, reports suggest that gold previously channelled through official government systems is now diverted through informal routes, with smuggling estimates far exceeding formal exports.
In addition to revenue losses, informal and unregulated mining poses serious public health risks. The use of mercury and cyanide in artisanal gold separation has been widely documented, with local communities reporting water contamination, loss of agricultural land fertility, livestock deaths, and health problems, including neurological disorders. In parts of north‑western Tigray, residents have protested chemical pollution only to face repression. allAfrica.com
Formal operations have also left scars. The Lega Dembi mine in Oromia, operated by the Midroc conglomerate, produces thousands of kilograms of gold and silver annually but has been described by rights monitors as one of the most polluted sites in Africa. Investigations have identified contamination by cyanide, arsenic, and mercury at levels harmful to human and animal health, contributing to birth defects, miscarriage,s and chronic illness.
These environmental consequences have fuelled local resistance and political discord. Efforts to renew operating permits have been met with community outrage, forcing regulatory reversals and highlighting the challenge of reconciling economic extraction with environmental protection.
Labour conditions in both formal and informal mining raise serious questions. ASM sites lack basic safety infrastructure, exposing workers to collapsing shafts, hazardous tools, and toxic substances. Independent research on small‑scale mining notes that injuries, long‑term health problems, and fatalities are common, yet many operations fall entirely outside the scope of labour inspections or safety regulations.
Formal firms also face criticism for poor community integration. In several regions, mining communities say local populations are excluded from employment opportunities, while mining profits flow to distant corporate centres.
Government officials have acknowledged the need for legal reform. Proposals include more balanced revenue‑sharing frameworks, codification of community rights, and clearer enforcement mechanisms for environmental standards. Discussions also emphasise dispute resolution systems to manage federal and regional conflicts.
Tax incentives and regulatory reviews are underway, with plans to adjust royalty rates and introduce duty exemptions to stimulate investment. Current royalties on precious minerals like gold range from 2 per cent to 7 per cent, with corporate tax at 25 per cent.
Yet industry observers caution that fiscal incentives alone will not resolve deep governance issues. Without clear legal protections for communities and robust enforcement, investment may continue to gravitate toward informal channels or be deterred by political risk.
Ethiopia’s mining sector stands on uneven ground. Export earnings and formal ambitions suggest potential, yet informality, regulatory contradictions, and environmental degradation reveal persistent fragility. Unless reforms bridge federal authority and regional rights, strengthen governance, and prioritise sustainable practices, mining will remain a driver of conflict as much as an engine of growth.
The challenge is to harness mineral wealth not simply for export figures but for broad‑based economic inclusion, environmental stewardship and accountable governance.
