This recent interest has been driven among other things by the drafting of a new mining code. Modelled explicitly on the Ghanaian code, [1] Mali’s 1999 code illustrates what we have defined as the third generation of African mining codes. However, because the foremost objective of the recent transformation of the country’s mining legislation has been to attract foreign investment to this industry, certain questions remain unanswered, notably with regard to the redefinition of the role to be played by industry and its contribution to public revenues, which, at least in principle, should enable the state to carry out certain social functions. In this section, we seek to show that, as in the case of Ghana, Madagascar, and Tanzania the transformation of the state’s role in the mining industry through mining code reform is not necessarily compatible with meeting the development challenges that present themselves in Mali.
This hypothesis will be demonstrated in three steps, namely through the analysis of certain of the economic, social, and, lastly, environmental implications of the new Malian mining code.
Why a New Code? 
Mali’s Gold Industry
In a manner similar to most African countries, Mali introduced numerous structural adjustment measures in the mid-1980s and throughout the 1990s in an attempt to reform its economy in accordance with the advice of major international donors.
However, the results achieved over two decades of adjustment are, according to the international financial institutions (IFIs), quite limited. The IFIs, as well as the large bilateral agencies, are unanimous in their view that only the initial phases of adjustment were successfully completed, even though “the major macroeconomic balances were restored, debt controlled, the economy liberalised and the business environment reformed”. [2] These organisations go on to point out that the efforts made by the government of Mali were inadequate : “Although the structural adjustment efforts helped Mali to turn its back on a closed and highly controlled system and become one of the most open and most liberal economies in the CFAF zone, there was little change in the economic structure”. [3]
Given this conclusion, Mali decided to continue liberalising its economy, and it would appear that the special champion of this trend has been the gold industry. Since 1999, the industry has supplanted cotton as the most important of the country’s export products, notably because the cotton industry suffered a crisis of such severity that production plummeted by 47 % in 2000-2001. [4] This West African country, the 16th largest gold producer on earth, is currently the continent’s fourth largest producer after South Africa, Ghana, and Zimbabwe, and is very close behind the latter country. Although Mali’s subsoil contains an abundant variety of mineral resources, gold is by far the most important, if not the only resource generating activity in the country’s mining industry. [5]
The gold industry, which created more than 2,240 jobs in 1998, [6] is experiencing an exceptionally high growth rate, reaching 210 % in 1997. [7] Mali’s gold production, all of which is exported, is making a major contribution to the improved trade balance, accounting for 39 % of the country’s export revenues.
If Mali’s gold production has more than doubled since 1995, [8] this expansion has undoubtedly resulted from the growing presence of foreign mining interests. The country’s three main mines are controlled by companies managed by international consortia made up notably of interests from South Africa (Randgold) and Canada (Iamgold), as well as the International Financial Corporation, in addition to the government of Mali. [9] It should be noted that this interest in Malian gold is in part explained by the fact that operating costs in Mali are exceptionally low, especially at the Morila Mine, where the operating cost is between $130 and $150 per ounce, whereas the world cost for the comparable period was between $230 and $250. [10]
The presence of foreign mining interests in Mali is likely to increase significantly in the coming years. It is estimated that about $55 million has been spent over the last ten years in exploration in the country, despite high energy costs and lack of infrastructure. [11] Twenty-eight companies were granted exploration leases in 1998 at a time when the country’s gold reserves were estimated at over 800 tonnes. [12] In principle, Mali’s annual production is expected to rise from 23.7 tonnes in 1999 to more than 40 tonnes by 2004. [13] These impressive projections are explained by the recent discovery of the Morila Mine, whose reserves are estimated at approximately 170 tonnes of gold. [14]
However, the recent drop in world gold prices, which were at their lowest level in 23 years, [15] resulted in a decline in investment and a slackening of exploration activities in the country. This downturn is likely to delay exploitation of the Kodiéran, Loulo, Ségala, Tabakoto, and Kalana mines. [16] The fact is that just as for the mining industry as a whole, gold mining is highly capital-intensive, risky, and has a limited life. For example, the feasibility studies for these mines were carried out before the fall in prices, on a $330 per ounce basis, whereas prices ranged between $270 and $290 per ounce in 2002. [17] Furthermore, it is estimated that gold production costs will fall by $20 per ounce by 2006 as mining increases in Third World countries. These numbers show how competitive the gold industry is, and above all, “the need for gold producers to keep shaving costs as the dollar gold price continues to fall”. [18]
The Introduction of a New Mining Code
Given the economic potential in this sector, international financial institutions strongly encouraged the government of Mali to reform its industry in order to make it more attractive to foreign investors. In 1991, Mali significantly liberalised its mining code with the assistance of the International Development Association. Before that date, gold production in Mali was small-scale and represented only about three tonnes per year. [19] The first major mining code after the country’s independence was put forward in 1963, replacing the (much amended) government order of 1899 imposed by metropolitan France on her colonies in West Africa. [20] But in the context of the wave of liberalisation supported by the World Bank in particular, Mali decided in 1991 to amend its mining code once more [21] . Support for these reforms was also forthcoming from the World Trade Organisation (WTO), which has pointed out that the Malian mining industry has been revived by the adoption of this new code, which offers guarantees and various tax and customs advantages. [22]
However, mirroring the Ghanaian reforms and the enthusiastic reaction of foreign companies to them, in 1999 Mali again amended its mining code to make it more attractive and provide greater incentives. [23] According to Ibrahima Kantao, Mali’s director of mining and geology, the new code would enable the country to attract more foreign investors, thus making Mali “one of the major poles of African gold trade”. [24]
Following discussion of a number of preliminary versions, Mali’s new code was adopted in September 1999, integrating the various policies advocated in the mining policy document, including: “clarity, transparency, State participation, stable fiscal and customs regimes, equity, incentives for reinvestment, environmental protection, competitiveness, jobs, etc.” [25] Last, the new code was aimed at “substantially increasing the share of mining products in the GDP by fostering private investment in the sector”. [26]
As pointed out by Modibo Coulibaly, the country’s national director of geology and mining, in addition to these changes :
The primary purpose of the mining policy adopted by the government in November 1998 is to substantially increase the contribution of mineral products to GDP. The strategy for implementation of this policy was to assign the private sector the role and mission of assuming the business risks by contributing the financial, material and human resources required to develop the mining industry, in a simple, clear and transparent framework; the State will focus on the fundamental functions of establishing basic infrastructures, creating an environment conducive to investment, promoting the industry, etc. [27]
The proposed changes in the state’s role in this key area of Mali’s economy are directly in line with the policies advocated by the World Bank, which, it may be recalled, encouraged the state to relinquish its role of “owner/operator of mining interests” and assume the role of “regulator/administrator”. [28] This approach explains the current privatiation of the Kalana Gold Mine, the Loulo gold mining companies (SOMILO), the Syama S.A. Mining Corporation, and the recent winding up of the national mineral exploration and exporting corporation (SONAREM), which specialised in mineral exploration and mining. [29]
The Government of Mali and the New Mining Code - Some Questions
The introduction of a new code and the resulting changes in the government’s role raise certain issues regarding the current and future capacity of the government of Mali to pursue development objectives and, more basically, to guarantee its citizens’ fundamental rights. It now seems clear that the gold industry represents and will represent, for at least the next ten years, one of the largest sources of government revenue. The question is whether the new mining code will provide the government with an adequate share of resources to permit it to pursue development objectives without hampering foreign private investment in the sector, and without attracting criticism from international financial institutions. In order to briefly explore these thorny issues, we propose to address three related aspects of the new legislation: the economic, the social and, last, the environmental implications of the Malian mining code.
Certain Economic Implications of the 1999 Mining Code
In addition to its undeniable contribution to international trade, mining is a significant source of revenue for the government of Mali. In this regard, the Canadian company SOGEMA, which received a contract from the Canadian International Development Agency (CIDA) to carry out an internal revenue mobilisation project (PAMORI), points out that after 20 years of adjustment, Mali can allow itself to increase its tax revenues, which in 1997 were among the lowest in sub-Saharan Africa. [30] Also according to SOGEMA, the macroeconomic stabilisation effort tended to prefer cuts in public spending over increases in tax revenues for the purpose of reducing the budget deficit: “Thus, the trend was to achieve a balanced budget in a downward rather than upward direction, i.e., by cutting services that were already inadequate”. [31] These policies dramatically weakened the country’s government services to such an extent that, “the decline in public spending was close to reaching a floor beyond which availability of public goods in Mali was likely to collapse”. [32] Given this situation, an increase in revenues has become one of the country’s prime objectives. While the same report targets the investment portfolios of Malians, 80 % of whom “pay practically no direct income taxes”, there is no reference to the opportunity available to the government of Mali to benefit from the unprecedented expansion of the mining industry. Still according to SOGEMA, higher entry taxes (customs duties) are out of the question because of the regional integration process in which Mali is participating, and because of market globalisation, which is proceeding hand in hand with a world-wide decline in customs tariffs. [33]
Thus, despite recognition of the urgent need to replenish the public treasury, the government of Mali has increased the number of tax exemption measures in order to attract foreign mining companies. And in line with the recommendations concerning the reform of mining codes set out by the World Bank, the new Malian code increases measures to attract even more private investment.
In parallel with its withdrawal from its role as operator in the mining industry in order to assume that of regulator (i.e., promote private investment), the government of Mali guarantees the security of mineral titles. In this regard it should be pointed out, however, that the document Review of Legal and Fiscal Frameworks for Exploration and Mining criticises the fact that Mali does not grant exclusive prospecting rights, or priority for exploration licences covering the region in which interest is expressed. [34]
Furthermore, survey rights in Mali are not transferable, although mining permits are assignable and transferable. As in the case of Tanzania, Mali “provides a special right for the purpose of conducting a feasibility study after the exploration phase”. [35]
According to the same document, one of the most important factors for investors during the exploration phase is the right to proceed from exploration to mining (continuity of tenure), and this is recognised by Mali’s mining code. [36]
As regards annual surface area fees, Mali offers an “escalating annual fee per surface area”, which apparently enables the country to attract foreign investment that is not affected, once mining starts, by charges considered too high by a mining operation in its early stages. [37] It should also be pointed out that mining companies are entitled to free conversion and free transfer of profits and funds resulting from exploitation of the mine.
More specifically, mining companies operating in Mali are subject to the following taxes : [38]
Income Tax : 35 % ;
Dividend Tax : 12.5-18 % ;
Royalty : 3 % special tax on mineral products ;
Import Duty : 5-10 % UEMOA common external tariff ;
Export Duty : none ;
Value Added Tax : exemption for the first three years of production ;
Tax holiday : none ;
Exchange Control : none ;
External Account : allowed ;
Tax Stability : yes, but the length is not specified ;
Government Equity : up to 20 %.
In summary, the Malian Ministry of Finance states that during the exploration phase, “certified companies pay only some royalties related to private exploration of public property. They are also exempt from paying turnover taxes (T.V.A. and T.P.S) which might unduly burden the cost of exploration operations”. [39]
The attempt to attract private investment underlying the above quotation is supported by a perusal of the list of exemptions provided by the government of Mali to mining companies during the first three accounting periods of production or mining.
Such companies are exempt from : [40]
Income Tax on professional earnings ;
Income Tax on property income and tax on property in mortmain ;
Registration and Stamp Duties ;
Value Added Tax and Service Delivery Tax ;
Income Tax on investment income ;
Contribution on patents ;
Tax on insurance policies.
Although the government of Mali has lauded the potential of the gold industry for increasing government revenues, a 1997 study shows that the gold industry’s contribution to national GDP “is not as large as other estimates have suggested”. [41] While the explanatory factors are no doubt multiple and complex, it is interesting to note, however, that in 1998, according to Report on Business Magazine, the Canadian mining company present in Mali, Iamgold, ranked third among companies whose revenues had increased most in Canada. The company’s revenues totalled $63.6 million, up 393.1% over five years. Of these revenues, $8.7 million represented profits. [42]
The paradox in which the government of Mali finds itself is important, since the government is no longer able to assume its role with respect to supplying services because of lack of revenues, even though, according to the prevailing argument, only foreign investment will increase government revenues through economic growth. Moreover, as will be seen below, present trends have also entailed far-reaching socio-economic and environmental implications. Ironically, and revealing of the strength of current pressures to liberalise still further, in spite of the wide-ranging concessions with revenue implications of the 1999 Malian mining code noted above, there exists “concern on the part of certain elected officials who felt that it provided less of an incentive than the former provision”. [43]
Certain Socio-economic Implications of the 1999 Mining Code
One of the major problems of industrial-scale gold mining in Mali is undoubtedly the infringement by new industrial operators on the sites of traditional small-scale operators, and thus on their revenues. This has arisen because most gold-washing sites were transferred to the companies, since the government of Mali does not recognise land usufruct rights. It should be pointed out that it is in small-scale industry that Malian operators, both male and female, have historically been involved. In this regard, a report contrasting the impact of small-scale mining and industrial mining concluded: “The direct employment effects of the large-scale sector are limited”. [44]
In addition, Malian-owned projects remain restricted in scale, since Malians are unable to sustain the large investments required by the industrial sector. Indeed, in December 2001, only 55 of the 143 mining titles in effect were owned by Malian companies. [45]
A study by Claudie Gosselin of the North-South Institute identifies some economic and social issues relating to the operation of the Sadiola Mine close to the city of Kayes :
Population movements: Two villages (Sadiola and Farabagouta), representing about 1,100 people, were moved to allow operation of the mine. The standards associated with this mandatory displacement were those of the World Bank. According to the report, the local population had no property titles and no right to financial compensation from the government of Mali for the expropriation. [46] In addition, the population of Sadiola village has increased threefold since the start of mining operations in the region. This huge population increase is said to have been accompanied by a spread of cases of AIDS and all STDs, “which rose to the highest rate in the region”. [47]
Regional development: On this topic, the study finds that: “The mine has apparently had a limited economic impact on the Kayes region. Development of educational and health infrastructures benefited only the Sadiola region”. It would appear that few Kayes merchants had the opportunity to supply the mine and its city with materials, which are usually transported by Senegalese carriers. Furthermore, the report points out that the road between Kayes and Sadiola was built to meet the needs of the mining company rather than local populations.Finally, “the tax revenues and dividend income collected by the government of Mali ... seemed to remain in Bamako”. [48]
Company social fund: To avoid social disruption at the time of the closure of the mine, which is anticipated in 2004, SEMOS is currently working on a gold washing project which should provide up to 300 jobs.
Certain Environmental Implications of the 1999 Mining Code
From an environmental point of view, the gold industry raises major ecological issues, particularly with regard to the risk of deforestation and the destruction of wildlife through mining operations; the relocation of those populations affected by the opening up of new fields; soil destruction and erosion through drilling; pollution of subterranean and surface water by chemicals discharged by the operating companies(cyanide, lead, mercury, etc.); air pollution through release of smoke and dust ; large-scale disappearance of wildlife due to blasting in quarries, and the effects of dust on the forest. [49]
At least in theory, the introduction of the new Malian mining code should enable the government to cope more effectively with these environmental risks. In fact, Article 80, relating to environmental protection, states that any application for a mining licence or permit must now be accompanied by an environmental impact study, and approval of the feasibility study is subject to acceptance of the environmental impact study. The administration responsible for mines and the environment is responsible for verifying whether operators comply with the environmental requirements.
According to the World Bank, Mali enjoys extensive and customised environmental protection through its Environmental Action Plan. While there is no doubt that the new code is stricter in terms of environmental protection, there remains the thorny issue of the government of Mali’s capacity to enforce, strengthen, and evaluate the related requirements. When questioned about the measures contemplated in Mali to deal with the environmental problems associated with mining operations, Modibo Coulibaly, national director of geology and mining, responded as follows: “A multidisciplinary team regularly conducts missions to monitor environmental problems on operating sites. And for its self-monitoring requirements each mine has its own environmental team. So far, we have not noted any major environmental problems”. [50]
In fact, as in most countries in sub-Saharan Africa, it would appear that the government of Mali does not have the financial and institutionalcapacity to enforce its own environmental requirements. Mali is no exception as regards the reluctance of governments to introduce strict environmental legislation for fear of dissuading foreign investors. Indeed, this situation is confirmed by Soulemayne Dembele in the Bulletin de liaison du Comité de Coordination des Actions des ONG au Mali:
Environmental problems were taken into account during the negotiation of agreements with the operating companies, throughestablishmentofenvironmental restoration plans : however, it must be acknowledged that implementation of genuine environmental restoration and protection programs remains fairly half-hearted . [51]
A field investigation by Claudie Gosselin in 2000 at the Sadiola Mine confirmed the comments of Soulemayne Dembele in some respects. Although the operators of this open pit mine, which uses highly toxic chemicals such as cyanide and hydrochloric acid during the production cycle, say that they have implemented a highly sophisticated safety system to monitor use of these products, the study refers to a Canadian working in the area who “told us he had seen empty cyanide drums for sale at the Kayes market”; these are used to carry water. [52] In addition, the same study mentions a witness who stated that “large areas of land were stripped of forest during the exploration phase and were never replanted - this happened in a region affected by desertification”. [53]
Conclusion
The introduction of the new Malian mining code raises many questions. We have noted that Mali has recently enjoyed unprecedented growth in its mining sector and especially in its gold industry. Whereas in most other gold-producing countries some mines are being closed as a result of the gold crisis, Mali is bucking the general trend in a spectacular manner, as illustrated by the announcement of the opening of the Morila Mine, whose gold reserves are the envy of many gold producers.
Despite the exponential growth of its gold industry, the paradox is that Mali’s economic, social, and environmental situation remains extremely alarming. After 20 years of reform, Mali is still one of the ten poorest countries on earth, and government services have been perilously limited by structural adjustment measures.
Given this situation, as we have seen, the government of Mali introduced a new mining code in 1999 with the central goal of attracting foreign investment into the industry. There is no doubt that the new code is in conformity with the recommendations recently issued by the World Bank. The government of Mali offers foreign companies a wide range of economic incentives, supported by undeniable tax exemptions.
At the same time, however, the problem of the near failure of public services provided by the government of Mali remains totally unresolved - a situation confirmed by the observations of Canadian contractors carrying out structural adjustment measures in Mali. It is therefore of key importance to draw attention to the paradoxical situation of the Malian government, which, because it is starved for revenues, has been inclined to adopt the dogma that its fundamental role is to promote foreign investment, even at the expense of abandoning its own development role - that of ensuring the minimal conditions necessary for the social and economic development of its population.
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