Majority Of Ethiopia’s Gold Ends Up In Informal Markets, Report Finds

‎‎Despite growing international demand and expanding trade ties, Ethiopia loses almost two-thirds of its gold production to informal and illegal channels, according to a study commissioned by the Embassy of India in Addis Ababa.

Titled ‘Export Opportunities for Potash, Precious and Semi-Precious Stones, Rare Earth Elements, Metals and Minerals from Ethiopia to India’the report warns that the thriving illicit gold trade seriously undermines Ethiopia’s foreign exchange earnings and weakens its position in the global export market.

The report, which was presented to officials at the Ministry of Mines earlier this month, indicates that up to 61 percent of gold—mostly extracted by artisanal miners—is either sold in informal local markets or smuggled out of the country, often via tourists and foreign travelers.

‎‎Experts have for long decried the illicit trade’s negative impact on the National Bank of Ethiopia (NBE), which purchases legally sourced gold for export. The leakage not only robs the central bank of much-needed hard currency but also erodes regulatory oversight in a high-value sector.

‎‎“Exporters often face a complex and time-consuming regulatory environment,” the report states. “Obtaining necessary permits and licenses can be a lengthy process. While licensing is done at the federal level by the Ministry, it becomes a challenge for many businesses to have it endorsed by regional and local authorities, who often have different interpretations of mining regulations.”

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The discrepancies in licensing are particularly evident in Tigray, where, a year ago, the regional interim administration suspended the issuing and renewal of all foreign mining investment licenses and concessions in light of disputes with the federal government.

At the time, no less than 27 federally licensed commercial mining firms, most of them backed by foreign investment, faced difficulty in returning to their sites, which they abandoned following the outbreak of war in late 2020.

The sites have reportedly been taken over by local miners.

A recent Ministry report indicated that artisanal miners in Tigray supplied 10 tons of gold to the central bank over the first nine months of a record-breaking financial year. The figure, which accounts for more than a third of the NBE’s gold supply during the period, also represents a staggering 40-fold increase in supply from Tigray.

Combined with mostly artisanal production in Oromia and Benishangul-Gumuz, the NBE received nearly 26 tons of gold over the first three quarters.

If the study’s findings hold true, it would stand to reason that another 60 tons of gold (valued at nearly USD six billion at current international prices) was simultaneously sold illegally in informal channels.

The report also notes that exporters face delays in customs clearance due to cumbersome procedures at the Ethiopian Customs Commission, further complicating formal trade efforts.

Limited and delayed access to foreign exchange, often making it difficult for exporters to receive payments for their goods, along with excessive amounts of red tape in documentation and licensing processes are further exacerbating the situation, according to the report.

‎While India has opened its market through the Foreign Trade Policy (FTP) 2023 to 2028, which came into effect on April 2023, Ethiopia has yet to capitalize on its mineral export potential including gold, sapphire, and opal—under the Duty-Free Trade Preference (DFTP) scheme, according to the report.

‎‎The DFTP initiative, launched during the 2008 India-Africa Forum Summit and operational since 2012, offers duty-free or preferential market access for 94 percent of Indian tariff lines.

‎Under the scheme, India provides duty free treatment to about 98 per cent of tariff lines to Ethiopia. Yet, the report observes that Ethiopian mineral exports to India remain “significantly underutilized” due to low awareness, weak institutional capacity for certification and quality control, and the absence of a consistent gemstone grading system.

‎‎Most exports also remain unprocessed, limiting value addition. Other challenges include transport bottlenecks, weak export readiness among small-scale miners, and fragmented supply chains.

‎‎If Ethiopia wants to benefit from India’s expanding demand, it must curb smuggling and formalize its artisanal gold sector, the report notes.

‎‎It further highlights that artisanal and small-scale mining (ASM) plays a critical role in rural livelihoods, poverty reduction, and foreign exchange earnings—employing over 1.26 million people and supporting more than 7.5 million. However, the sector remains plagued by inadequate infrastructure, exploitative market conditions, poor safety standards, and outdated mining technologies.

‎‎”The Ethiopian government, in partnership with development actors, has introduced licensing efforts, equipment provision, infrastructure development, and training to support the ASM sector.  However, data gaps persist—particularly in licensing, cooperative operations, and the socio-economic impact of artisanal mining,” It reads.

Conflict between artisanal miners and private firms is also common due to overlapping claims, weak enforcement, and poor delineation of mining areas, notes the report.

Female participation in the sector is declining, attributed to harsh working conditions and environmental degradation, which includes deforestation, soil erosion, and land degradation, according to the report.

‎The study recommends strengthening enforcement, improving regulatory clarity, enhancing institutional support, and promoting environmental sustainability to unlock the developmental potential of Ethiopia’s mining sector.

‎‎“The traditional knowledge of artisanal miners is well recognized,” the report notes. “It is time this was documented and integrated into modern technical training. If artisanal mining is brought under regulation, it will benefit miners immensely and help curb illegal practices.”