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Why does the French government fight in Mali?

Published on 14 January 2013, by M. Tomazy.
Gold reaches 80% of Mali exports

According to Mali's Mining Minister, gold is y now representing 80.5 percent of the nation's export earnings. But even though gold prices are record high, Mali's low taxation rates leave the country with little earnings.

Mali's Mining Minister Abu Bakr Traoré this week presented the 2009 estimates of the increasingly important sector at a Bamako conference this week, revealing the growing dependence on the volatile sector. By 2009, Mali received 80.47 percent of its export earning from gold mining.

Gold mining has slowly grown in importance. Four years ago, gold represented 72 percent of Malian exports. During the last decade, gold production has reached over 50 tonnes yearly, out of which around 90 percent is produced in seven major industrial mines and the rest comes from artisanal production.

According to Minister Traoré, the major importance of the gold mining sector is in the wages paid out to Malian residents and citizens. The sector employs almost 8,000 persons, contributing with US$ 163 million (euro 133 million) in taxable wages.

But a report published by the International Monetary Fund (IMF) last month, looking into the taxation of Mali's mining sector, reveals that the country's major mineral riches only to a small degree benefit Malians. Mali's very low taxation level to a large degree follows IMF recommendations, aiming at attracting foreign investments.

Mali's current fiscal regime set for the gold mining sector consists of a mixed taxation system based on royalties, a profit tax and depletion allowance on profits. Following IMF recommendations, Mali's government decided to reduce the royalty rate applied to gold mining companies from 6 to 3 percent in order to encourage investment in this sector.

Mining firms further benefit from a five-year profit tax holiday after first investments, even in the highly profitable sector of gold mining. But by now, even the IMF paper acknowledges that "the state has not been able to collect its full share of revenues" due to this measure, and in fact recommends eliminating tax holidays granted to mining companies in Africa.

According to the IMF paper, in 2008 gold production in Mali was worth almost US$ 150 million. Applying a royalty rate of 3percent, the government would have raised US$ 4.5 million. If the government had applied the previous 6% rate it would have reached US$ 9 million.

Maria Victoria Garcia Ojeda from the European Network on Debt and Development (Eurodad) holds that even 6 percent is a too low royalty rate for a sector thus profitable as gold mining. "If the rate applied had been 12 percent, as considered in the report 'Golden profits on Ghana's expense', the revenue collected by the government in royalties would have been US$ 18 million in 2008," Ms Garcia holds.

While gold represents 80 percent of Mali's total exports, it accounts for only 8 percent of the country's GDP. "Mali's gold exports have more than tripled in the last decade yet its citizens have so far seen little benefit from mining revenues," Oxfam America holds. Also IMF paper recognises that the gold mining sector has a very limited positive spill-over to the Malian economy.

With such low royalties and low corporate profit tax plus a weak contribution to employment and a low added value, Ms Garcia asks the difficult question: "who is profiting from the exploitation of Mali's principal natural resource?" It is "certainly not the Malian people," she answers.
(What really happened) & (Afrol News)