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Can gold save Burkina Faso?

September 28, 2009

Is the soaring gold price a ticket to a better life for struggling freelance miners in Burkina Faso?The impoverished West African country is trying to revive its gold mining industry, spurred by the global financial crisis and the need to reduce the economy’s dependence on cotton.Near the village of Mogen in northeastern Burkina Faso, artisanal miners are engaged in a dangerous hunt for gold in hand-dug pits.Landslips kill miners almost every year, although mostly during the rainy season. When it’s dry, children help sift the soil in search of the nuggets that pay for food and school fees.On a good day, a miner will unearth around five milligrams of gold, which earns about $10. But often they come up empty.Jeremi Nacanabo, who helps run an association of informal gold miners, told Reuters Africa Journal: “We don’t have the technology to take out the gold. Right now we’re working in a traditional way, which creates enormous problems and causes many accidents.”But gold mining in Burkina Faso is experiencing a revival after a halt in the late 1990s caused by poor management and inadequate capital.Analysts say poor prices for cotton, the country’s main export, have rekindled interest in mining. The financial crisis is tempting investors to buy low-risk assets such as gold, which is now selling for about $1,000 per ounce.Burkina Faso revised its mining codes in 2003 to attract foreign investors with tax breaks.The goal is to join the ranks of Africa’s top producers — South Africa, Ghana and Mali — within the next three years.In the dusty northeast of the country, the Taparko-Somita mine, which is run by theCanadian-listed, Russian-controlled company High River Gold, is the first of four gold mines that have begun operating in the past two years.Together they produced 5.5 tonnes in 2008 and they are heading for more than that this year. The government takes a 10 percent free stake in each mine.Local miners, who once worked for themselves, are finding jobs with the mining companies. They earn a salary, work in safer conditions and are given training.But even with the recent gold rush, Burkina Faso is still struggling to revive its economy and provide basic services for its 13 million people.Of course everyone¬†can’t be part of the gold mining revival, but global demand for Burkina Faso’s natural resources could at least provide some trickle-down benefit for the economy.


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Gold can indeed help Burkina create jobs and earn much needed foreign exchange at a time cotton prices are declining and farmers lose interest in that commodity (due to the strong CFA franc, subsidized cotton elsewhere, etc..).Gold remains, however, just a commodity (and non-renewable) and it would be a mistake for Burkina to bank too much on it. In addition to managing its foreign exchange reserves in an efficient manner (and maybe setting up a fund for future generations), Burkina would need to restructure its economy and move towards sectors other than commodities. As not everybody can be employed in the gold sector, the state would need to redistribute the windfalls. To do so, more transparency is required to ensure that the best decisions are made in the interest of the country. This is, of course, linked to the seemingly stable political situation. Indeed, after 22 years of Blaise Compaoré and CDP, maybe it is time for a change. StrategiCo.,, specialises in risk analysis in Africa.


Dear Ms.Boka, altough it is obvious that gold is not the only answer for Burkina Faso, it is certain that it will generate cashflow for the country of Burkina Faso that will help the government to invest in other important areas of development.The government has a 10% interest in the producing gold mines of Burkina Faso. Currently there are four mines in Burkina Faso with an expected output of more then 400.000 ounces in 2009.Against current average production costs and the current goldprice which is at an all time high, our calculations are that the royalties for Burkina Faso for 2009 would be over 200 million us dollars.


I think the government of Burkina Faso should look into the taxes that foreigners pay so that a lot more of investors can come in and invest in the country.

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