Overview

Gold mining is vital to the fragile economies of many developing countries, which account for over 70% of global gold production.  In addition to generating export revenue in these countries, gold production provides royalty and tax income to their governments, technology transfer, worker training and the creation of a skilled workforce.

Gold mining can also bring substantial improvements in physical, social, legal and financial infrastructure. In many of these countries, gold mining is a foundation industry that often provides the critical mass for the development of electricity, water, road and rail transport in a region, factors that are the essential foundations of an economy.  This characteristic of the industry is particularly important in Africa where lack of infrastructure has been identified as one of the major hindrances to economic development.

Developing countries account for a rising share of global gold production. Their gold production rose by 21% between 1995 and 2005 and by over 50% if South Africa, is excluded.  A particularly strong rise in output was seen in Heavily Indebted Poor Countries (HIPCs), whose gold production rose by over 85% between 1995 and 2005. Of the 40 countries currently (October 2006) classified as HIPCs, 14 are significant gold producers with lesser or minor production in at least another 14 countries.

There is potential for substantial additional production in several HIPCs. The rise in HIPCs' output has been paralleled by rising export dependence on gold. A study carried out in 2005 found that in 2003, gold accounted for nearly 8% of goods exports of those countries then classified as HIPCs as a group and over 6% of exports of goods and services. It remains one of the most important exports for HIPCs.

The study found that gold was  the leading export for Mali (59% of goods exports ), Kyrgyzstan (around 45%), Tanzania (44%), Ghana (32%), Guyana (26%) and the second most important for Guinea (23%).

For the 27 HIPC countries that have reached decision or completion point (those that receive at least some debt relief under the HIPC initiative), gold exports in 2003 amounted to 87% of debt service payments.

Gold is equally important to other low-income countries that are not HIPCs. Among those considered by the World Bank to be severely or moderately indebted, the study found that gold was  the leading export for Papua New Guinea (36%), the second most important export for Mongolia (20%) and Zimbabwe (11%) and one of the two leading exports for Uzbekistan. Gold was also the leading export for both South Africa (13% of goods exports in 2003) and Peru (17%). 

Gold mining companies source supplies locally where possible and employ local labour where possible. Thus, even allowing for some necessary imports and for the remittance of profits and dividends, their impact on a developing country's balance of payments is strongly positive. Gold mining, and metals mining generally, is essentially free of the distorting subsidies applied by some developed countries to agricultural production.

Export revenue is not the only benefit gold mining brings to a developing country. It provides royalty and tax income to governments, technology transfer, skilled employment and training for local populations, together with further jobs through the multiplier effect. In one or two cases it has provided the foundation for a significant jewellery manufacturing industry.

Gold is often thought of as synonymous with wealth. Yet gold coins, bars and high-carat jewellery play a crucial role as a means of saving and defence against misfortune to many of the poor of the world. Similarly gold mining brings benefits to poorer nations. It will continue to have a role to play in fostering economic development.