Informality and formalisation in the artisanal and small-scale mining sector

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12 November 2014

Almost 15 to 20 per cent of the world's gold is produced informally by artisanal and small scale miners (ASM), along with 80 per cent of its sapphires and up to 20 per cent of all diamonds

ASM includes the criminal and the opportunistic, the warlord and the gang leader, the child, the woman, the man, the marginalised, exploited and subsistence. The sector has capital and skills, and extreme poverty and vulnerability — leading to deep social problems. This complexity makes it extremely hard for governments to regulate or 'formalise'.

Ancestral miners rush to find gold and platinum ore at a mine wall opened by medium-scale mining (Photo: Ronald de Hommel)

Social problems emerge because people who operate 'informally' – either criminally and in direct contravention of laws, or because laws are inadequate and don't include them – are bereft of the protections and guidance of the state and its advisors (including a wealth of local and global expertise from the World Bank, the UN, civil society, government foreign affairs and so on). 

The International Institute for Environment and Development and its partners have published two papers that talk directly to these challenges at the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development 10th Annual General Meeting in Geneva from 21-24 October.

Persistent informality leads to social harm

A case study on efforts to formalise artisanal and small scale mining in Colombia by Cristina Echavarria – published jointly by IIED and the Alliance for Responsible Mining in Colombia – highlights the persistence of informality in the sector. Currently 72 per cent of all mining operations in Colombia are artisanal and small scale, and 63 per cent are informal. This is despite formalisation efforts by successive governments over 26 years and 27 separate laws, amendments and policy plans.

In a worst case scenario, the social problems caused by an underrepresented ASM industry look like a pregnant woman with her four-year-old son hauling rocks (PDF) and being exposed to mercury fumes through the processing of gold from ore. Or a nine-year-old boy, slight enough to reach the deepest and darkest corners of a badly constructed tunnel, working in a space that is liable to collapse at any time. 

It also looks like a gang leader who migrates from site to site taking his team of workers, disturbing local communities, paying with subsistence levels of food, and using profits to trade guns, buy motorbikes and live a comfortable life.

Although overly simplistic, these stories nonetheless demonstrate the diversity in the sector and the social problems that persist due to informality. 

Where formalisation policies go wrong

So why are government formalisation polices failing to protect the most vulnerable? 

IIED's briefing on labour in ASM networks in the Philippines, published under the Shaping Sustainable Markets initiative in partnership with the University of Ghent's Conflict Research Group and the Alternate Forum for Research in Mindanao, highlights how formalisation efforts often focus on property-like mining claims – awarding licences to those who have some sort of mining title.

These inevitably end up benefitting the wealthy and excluding the most vulnerable, which in the Philippine case study, includes two thirds of the ASM workforce.

What role do big mining companies with ASM operating on their concession have to play in finding mutually beneficial solutions? Too often groups are dismissed as "illegal" because they haven't registered a mining claim. Working only with those who have a formal claim risks magnifying the problem.

Signs of success

Both governments and companies are making some progress. The Colombian government's most recent formalisation initiative creates a Formalisation Office within the Ministry of Mines, recognising that formalisation is a process and not a one-off action.

National 'dialogues' that aim to involve all stakeholders, have also collected local knowledge and perspectives so these can help inform policy. And evidence is emerging of successful operation contracts between large and small scale mining. 

In the Philippines, new laws aim to protect labourers. Financiers must secure IDs for diggers and in the future create labour contracts and provide basic health and social insurance. This provides some protection to part of the labour force, which is more reliable and disciplined, and increases fees and regulatory control to governments, who may then be able to tackle some of the ongoing social and environmental problems.

But above all, artisanal and small-scale mining needs an approach that recognises the sector's value and works with the reality of what is there rather than trying to stamp this industry out. The route to the 'right sort of formalisation' for artisanal mining is to listen and respond to local voices — people 'at the coal face' doing the dirty work of hauling, packing and processing minerals and ores we all end up using.

Abbi Buxton (abbi.buxton@iied.org) is a researcher with IIED's Sustainable Markets Group

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