Society FAQs

Why is the gold mining industry important to developing countries?

Gold mining is vital to the fragile economies of many developing countries, which account for roughly two-thirds 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, that are the essential foundations of an economy.  For further information go to Society/ Overview.

What proportion of gold comes from developing countries?

Gold production is increasingly shifting to developing countries. If South Africa, whose production is on a long-term declining trend, is excluded, their output rose by more than 50% over the past decade. In contrast output from developed countries has fallen.

As a result of these trends, developing countries (including South Africa) accounted for 72% of global output in 2004. Most of this came from low-income or lower-middle-income countries which together accounted for two thirds of global output.

The strongest rise in output has been seen in Heavily Indebted Poor Countries (HIPCs) whose gold production rose by 84% between 1994 and 2004. Of the 38 HIPC countries, 14 are significant gold producers with lesser or minor production in at least a further 14 countries. There is potential for substantial additional production in several cases.

The rise in HIPCs' output has been paralleled by rising export dependence on gold. In 2003 gold accounted for 13% of goods (merchandise) exports of the 14 significant producers and 10% of their exports of goods and services. It accounted for nearly 8% of goods exports and over 6% of exports of goods and services for HIPCs as a whole. It is one of the most important exports for HIPCs as a group.

Gold is the leading export for Mali (59% of goods exports in 2003), Tanzania (44%), Ghana (32%), Guyana (26%) and the second most important for Guinea (23%).

What happens to mining communities when mining companies leave?

The ICMM and its member recognize the need to plan responsibly for mine closure, working with other interested parties throughout the lifespan of an operation and providing necessary assurance from the outset.

For further information go to:

Financial Assurance for Mine Closure and Reclamation

Is gold only used as a financial asset in sophisticated financial markets?

For men and women throughout the developing world, gold is still one of the most liquid and widely accepted forms of exchange, quite simply the most efficient store of value they possess.  Gold offers protection against a weak currency or high domestic inflation levels, which are prevalent and persistent problems in the developing world.  For further information go to Society/Developing Countries.

Hasn't it been shown that countries without natural resources - like many of those in East Asia - have been more successful economically than those with natural resources? 

Yes, some people argue this. And it is true that the performance of some countries in exploiting their mineral resources has been disappointing (although this is not generally the case with gold). But the research that appeared to demonstrate that exploiting natural resources is not a good route for developing countries has been challenged in a number of quarters.

Importantly it is based on only one period of history (1970 to 1990) and ignores the fuller historical record when there is clear evidence, starting with the UK at the time of the industrial revolution, that exploiting mineral resources helps development.  Gold mining was of major importance in the development of California and other parts of the American West, Australia and, of course, South Africa.

More recently countries such as Chile, Malaysia and Botswana have used mineral resources successfully to stimulate more general growth. We do not know all the answers but it seems that quality of governance is a key factor in ensuring that resources are exploited successfully.

How does mining impact the government revenue of countries where gold is mined?

Governments in developing countries tend to have narrow tax bases. Reducing budget deficits - often mandated under IMF (International Monetary Fund) sponsored relief programmes - while at the same time maintaining or increasing spending on health, education, infrastructure and poverty-reducing measures is often a key priority.

Broadening the domestic tax base by bringing other activities within the scope of taxation, while desirable, is often administratively impracticable. Additional revenue from mining royalties and taxes can therefore be particularly beneficial.  Occasionally governments take a direct stake in mining developments. This is the case for Mali, for example, where the government has 20% ownership of gold mines.

How do governments distribute the benefits from mining to local communities?

For information go to:

Extractive Industries Transparency Initiative

ICMM Resource Endowment Project

How do mining companies impact local employment?

Modern mining is not particularly labour intensive but it does create jobs and the number is often significant compared to the size of the local community. The jobs created are normally well paid by local standards, and provide considerable training. In addition it is common for one mining employee to support a number of family members.

Recognised practice in international mining companies is to use local labour as far as possible supplying training as appropriate.  Additional employment will be created through the local sourcing of supplies and services, including construction services. Again best practice in international mining companies now calls for as many supplies as possible to be sourced locally.

By spending their wages, employees in the mining company and in local suppliers will create additional employment through multiplier effects. The training given to employees will increase the level of skills in the community.

The Chamber of Mines in South Africa estimates that, while employment in the industry is just under 190,000, it probably supports around 2 million people in total.  Studies have indicated that each mining employee supports 7 to 10 people. In addition employment in supplier industries accounts for around one third of the number of mining employees and these employees' own dependents have to be added to the total. 

How does the gold mining industry ensure that local communities are protected?

International Finance Corporation's Environmental and Social Standards