Facts ‘n’ figures: The socio-economic benefits of gold mining

The following is an edited summary from the World Gold Council’s report The Social and Economic Impacts of Gold Mining. To see the full report please visit www.gold.org.

Gold-mining companies are a major source of income and economic growth, with an important role in sustainable socio-economic development. During 2013, gold-mining companies contributed over US$171.6 billion to the global economy through their production activities and expenditure on goods and services. This is more than the combined gross domestic product of Ecuador, Ghana and Tanzania, or close to half of the gross domestic product of countries such as South Africa and Denmark.

While negative social and environmental impacts from gold-mining activities is well known, the nature and distribution of the socio-economic impacts of gold mining at an industry level on host nations and communities is relatively poorly understood.

The value of gold mining is increasing

Responsibly undertaken, gold mining can make a positive impact on the economies of the countries in which gold mining takes place, and on the lives of the citizens of those countries. Amongst the top-30 gold producing countries, over 60% are low or lower-middle income countries with substantial socio-economic development needs. In eight of the top-30, gold-producing countries, the production and procurement activities of gold-mining companies generate over 10% of each country’s gross domestic product. For two of these countries, this figure rises to over 25% of gross domestic product.

Many of the countries that are significant gold producers are also impoverished countries and long-term recipients of development assistance from foreign government donors. Given that reliance on foreign aid is an inherently vulnerable position for any impoverished country, it is notable that the economic value directly and indirectly created by the gold-mining industry globally has exceeded the global total value of development assistance every year since 2010.

Perhaps more importantly, given cuts to aid budgets in many donor countries, the longer-term trend for the economic value created by the gold-mining industry is that of significant growth. The direct economic contribution of the gold-mining industry to the global economy, or gross value added (GVA), has increased almost sevenfold from 2000 to 2013. The world regions that have benefitted most from the value created by gold mining are Asia and Africa, which account for the largest shares of gold-mining GVA. Amongst several of the lower-income, gold-producing countries — such as Ghana and Mali — growth of the gold-mining industry means that gold-mining companies now create more value in the economy than is received from development-assistance programs. For Ghana and Mali this was not the case as recently as 2008.

Mining provides much more than royalties

Naturally, governments of gold-producing countries want to maximize the value that they receive from the mining companies that develop their resources. Much of the literature on this topic suggests that royalty rates on mineral extraction are the principal economic benefit for governments. However, analyzing gold-mining company expenditures reveals that far more value is distributed to host governments and the wider economy through other means.

By far the most significant means by which value flows from gold-mining companies to the economies of host countries is through payments to suppliers and contractors, and wages for employees. Together these two areas, usually taxed by governments, account for 70% of total expenditures by gold-mining companies. In terms of direct taxation, almost 60% of the payments that gold-mining companies make to host governments are for income and corporate taxes. Royalty rates, by contrast, account for an average 15% of direct taxation. Other taxes that can be almost as significant as royalty payments include import or fuel duties. For some mining companies fuel costs may account for up to 40% of total operating expenses, so such duties can be significant.

Creating jobs

Managing the expectations of host communities on the numbers of people that a mining operation will employ can be a challenge for companies, given the capital-intensive nature of gold mining. Globally, gold-mining companies directly employed over 1 million in 2013, with over 3 million more employed as a result of the industry’s procurement activities. Nonetheless, the gold-mining industry simply does not employ the same number of workers as other sectors, such as manufacturing. What it does do, however, is provide high-value employment.

Gold mine employees consistently earn more than the local average, and in less developed economies, considerably more. This is an important trend because in less developed economies each worker will usually support a higher number of dependants than in more developed economies. In Mali, a study found that each gold mine worker supported six dependants. In addition to receiving relatively high salaries, employees also benefit from the investments that companies make in skills development and training of their workforces.

Moreover, gold-mining companies are relatively successful at employing local people in their operations: in most regions over 90% of the employees at gold-mining operations are local workers. In comparison, 70% of the workforce in the oil and gas sector are local workers.

Like other segments of the extractive industries, gender diversity remains a challenge in the gold-mining industry, with companies reporting an average 10% of their workforce at mining operations being women. But there is evidence that despite their low numbers, women employed at gold-mining operations earn more than men on average, as a result of occupying higher-skilled positions.

Supporting local development

Securing the social licence to operate is a critical issue for the gold-mining industry. The value of a company’s assets below ground can only be realized if the social and political environment above ground enables production. In addition to being “the right thing to do,” the need to secure the social licence to operate means that gold-mining companies, in common with other extractives industries, often invest heavily in improving the socio-economic conditions of host communities. In many cases, gold-mining companies make targeted investments that focus on the same social or economic challenges that aid donors and national governments also seek to address.


Be the first to comment on "Facts ‘n’ figures: The socio-economic benefits of gold mining"

Leave a comment

Your email address will not be published.


By continuing to browse you agree to our use of cookies. To learn more, click more information

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.