Minister of Mines conveniently absent for parliamentary grilling
Colossal corruption, runaway illicit trade and contraband networks, a drastic fall in export performance, and negligence and inaction from federal authorities are brought to light in the latest report from the Office of the Federal Auditor General on the ailing Ethiopian mining sector.
Parliament convened on Wednesday to discuss the shocking findings of an audit of the sector and the Ministry of Mines. The session was nearly canceled as the absence of Habtamu Tegegn, minister of Mines, was perceived by MPs as intentional.
“The audit has discovered enormous gaps. How can we discuss it while the Minister is absent? The Minister is in the country, what agenda could be of higher priority for him than this audit report? The Minister swore an oath in front of this Parliament and took responsibility to discharge the Ministry’s duties. Who am I going to discuss these responsibilities with seeing as the Minister is unwilling to appear before Parliament?” inquired Yeshimebet Demissie (PhD), chair of the standing committee for Public Expenditure Administration and Control Affairs.
She grudgingly consented to resume the session in the presence of state ministers of Mines, the Auditor General, MPs, and officials from the ministries of Finance, Justice, and Planning, among others.
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MPs and officials from the Office of the Federal Auditor General (OFAG) expressed their perplexedness over the failure to develop a mining policy in the half-century since the Mines Ministry was established.
The lack of geological survey data for potential mining sites and the failure to conduct feasibility studies for sites that have already been identified were also points of contention during the session. Auditors said the oversight has made it practically impossible to audit the country’s mineral resources and mining activity.
For instance, local officials from Jiru, Wello, Keffa, Hadiya, Kembata Tembaro, Gofa, Illubabor, Harar, Shewa and many other localities report having requested the Ministry to conduct feasibility studies for coals reserves and other mineral assets only to be ignored.
The negligence means that prospective investors have no choice but to conduct their own surveys and feasibility studies from scratch.
“How can the Ministry attract investors and grant mining concessions without survey data and feasibility studies?” asked Getachew Lemma, an official at the Ministry of Planning and Development.
The Ministry has also failed to develop a mining market value chain strategy, which the audit report says has led to price distortions for Ethiopian minerals in domestic and international markets, as well as the proliferation of illicit mining and contraband trade.
“This is all because the Ministry refuses to regulate the sector. The Ministry signed a MoU with ECX two years ago to trade minerals on the ECX floor but has not launched this yet. The government’s huge plans for the sector’s contribution to development could not materialize. The country has lost significant income due to the Ministry’s failures,” stated Eyerusalem Lewi, a member of the standing committee.
MPs noted that the Ministry’s failure to support artisanal and small-scale mining companies has also contributed to the rise of illicit mining and contraband.
They accused the Ministry of not knowing how large-scale mining companies are licensed, whether they are operating in line with the terms of their licensing commitments, and even whether they are producing.
The Ministry has also failed to collect royalty fees, community development funds and other forms of government income from mining companies, according to the audit report.
It indicates that some mining firms, some which have been operational for more than 15 years, have been engaged in shipping minerals abroad under the guise of sample testing in laboratories abroad yet the Ministry did nothing.
Despite a regulation ratified several years ago, the Ministry has also failed to establish a Mining Council comprising experts to advise the Minister, according to the report.
It accuses the Ministry of failing to provide support to regional administrations in conducting feasibility studies and launching large-scale projects despite repeated requests to do so.
The audit found that although Ethiopia has long been a member of the Extractive Industries Transparency Initiative, the Ministry has neglected to establish and initiate a framework for sector transparency.
The Ministry has also failed to establish a mining sovereign wealth fund, which was supposed to mobilize resources from the mining sector and channel it to investments.
These and other findings included in the report prompted MPs to demand responses from Mines officials.
Million Matiwos and Mahamadrafi Abaraya, both state ministers for Mines, as well as Sofia Abdulkadir, a head of licensing and mineral administration at the Ministry, tried to deflect the questions with pledges to fill the gaps in the coming years.
However, the Chairwoman was having none of it.
“We are not here to discuss plans. We demand answers as to why each of the findings in the audit report have not been addressed. Unless you have a detailed response at that level, there is no need to continue,” said Yeshimebet, who represents her constituency in Debre Markos.
The Mines officials attempted to ease the pressure by referring to a “reform process” at the Ministry and efforts to organize mining expos to promote Ethiopian minerals.
The responses did little to quiet MPs, who openly blamed the Ministry and its officials for utterly disregarding the Auditor General’s findings for years, let alone working to improve the mining sector’s performance.
The Auditor General had presented a similar report on the Ministry’s shortcomings three years ago, but the findings were not sufficient to elicit a response from officials. Another report submitted to the Ministry last year, and indeed reports spanning the last four years, also went unheeded.
Abera Tadesse, deputy auditor general, further grilled the Ministry officials.
He disclosed that their mining policy has remained in the drafting stage for the last five years and noted the failure to conduct airborne geophysics studies.
Abera highlighted the lack of mining audits and the exponential rise of illicit mining and contraband trade. He attributed the Ministry’s practice of setting low prices for minerals to the flourishing of underground markets.
The lack of laws for marketing minerals, failure to adhere to international pricing systems, failure to collect royalty and licensing fees from 50 large-scale mining investments over the last two years, and the absence of data for profit tax collection from mining outfits also worry Abera.
He noted that illicit mining in Ethiopia is being funded through vast financial injections from abroad, while the Ministry has failed to collect mandatory fees for a Community Development Fund (CFD) from no less than 43 licensed companies.
“There is no uniform administration for the licensing and management of licensed mining companies. There is no revenue mobilization strategy for the sector,” said Abera.
“Why has the Ministry of Mines failed to discharge its duties and the very reasons for its establishment?” asked Zinaye Negash, a member of the standing committee.
One MP called for a re-evaluation of the Ministry’s institutional relevance.
“Is the Ministry on the right track? Is it contributing to Ethiopia’s development? I am very doubtful the Ministry will discharge any of its duties under the current circumstances,” said the MP. “If its officials were really working on the sector, they would not have run out of responses regarding the Auditor General’s findings for consecutive years.
The legislator noted that the lifespans of mining concessions are frequently extended despite the lack of visible progress.
“They have conducted exploration for more than 15 years. In reality they are extracting minerals under the guise of samples to be tested abroad. The samples are then termed as having no economic value. Why has a sample testing laboratory not been established in Ethiopia?” asked the MP.
Sumeya Desalew, another member of the standing committee, expressed concerns at the lawless conditions in Ethiopian mining.
“Ethiopia’s mining sector has become such that anyone can come and extract Ethiopian minerals. This is because the Ministry failed to curb the problems. The Ministry failed to design and implement workable policies and strategies in the mining sector. It failed to establish a mineral market value chain system. The Ministry created a system where anyone can exploit the minerals, while the public stands by and watches,” said Sumeya.
She blamed the Ministry for the deaths of 20 people in an accident in Wello’s Delanta opal mining site in February 2024.
“Whose hands is Ethiopia’s mining sector in now? Who is in control? It’s frightening. I can no longer expect any valid responses from Ministry officials. Parliament needs to make a firm decision,” said Sumeya.
State Minister Million claimed a lack of funding is hampering the Ministry’s ability to execute its plans.
However, an official from the Ministry of Finance was quick to shut that down.
“The [Mines] Ministry is constantly requesting and taking additional budgets, but it’s not doing its job. This cannot continue. We also tried several times to contact officials to answer for the audit findings to no avail,” said the Finance official.
The official was referring to, among other things, a request for USD 250 million to be used in the procurement of airborne geophysics survey equipment.
Million conceded that less than 43 percent of Ethiopia’s surface geology has been surveyed to date.
“Ethiopia has a surface of 1.15 million square kilometers. The Ministry alone cannot do the mining geophysics survey,” he told MPs.
A geologist and mining investor, however, indicated that the price for the appropriate equipment would not exceed half a million dollars.
“Unless the Ministry is planning to survey the surface of the moon,” said the expert.
He also expressed serious doubt over Million’s statement that such a survey would take longer than 10 years.
The State Minister told MPs that Ethiopia’s mining export revenues have improved over the first quarter of the fiscal year. However, legislators replied that any improvement is owed to the forex market liberalization and not the Ministry’s efforts.
Mineral exports have garnered less than 29 percent of what Ministry officials had targeted.
“I want the Ministry to focus on its duties and responsibilities. If it cannot conduct mining surveys, feasibility studies, prepare a mining policy, or properly manage the country’s mineral resources, what is the purpose of the Ministry?” asked Meseret Damte, federal auditor general.
MPs and officials alike blamed the Ministry’s unwillingness to conduct surveys and studies and failure to attract suitable investors for hindering the country from embarking on fertilizer, iron ore, gold, coal, and other mineral projects.
“Compared to the incomes Ethiopia should get from its huge mineral resource, what we are getting is very insignificant. What the Ministry is doing is very minimal. We do not even know what kind of minerals Ethiopia has, where and how much. How can you attract investors without knowing?” said the Auditor General.
Yeshimebet repeatedly asked why the Ministry has been unable to manage the country’s mineral resources.
“This institution was established to execute a huge responsibility, and to harness the country’s vast resources. But it is not discharging its duties, let alone making corrections and improving the sector. It hasn’t even managed a policy in fifty years but tries to produce a mining proclamation. How can a proclamation be ratified without a policy?” asked the Chairwoman.
“The Ministry, despite managing a liquid resource that can be easily looted, has no strong legal frameworks. The Ministry does not conduct follow up on the sector. How can a mining ministry that doesn’t do this lead the mining sector? What other job do you have?” she asked Ministry officials.
“The ministry does not have any technology that fits today’s mining progress globally. It can not deter contraband. Ethiopia can not even get the minimal portion of the revenues it deserves. The sector is not generating income for the nation. Minerals are sent out under the guise of exploration sample tests, but they never return. Companies have been doing this for years.”
She called the state of the mining sector under the Ministry “alarming and frightening.”
Parliament has granted the Ministry three weeks to prepare thorough written responses for each of the gaps identified in the audit report.
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