Governance is central to artisanal mining formalization.

Estelle Levin, a globally recognized expert on artisanal mining, defines formalization as ‘the transition toward organized and professionalized systems of production in and through which responsible business conduct and sustainable development are more feasible and desirable, and thus more likely.' 

The words ‘organized’, ‘professionalized’ and ‘responsible’ that are included in the definition all point to governance being essential for effective formalization in the sector.  

There are different aspects of governance that need to be considered when discussing the formalization of artisanal mining.  At the core of the work are miners themselves, of course, where coops, associations or companies that are governed in fit for purpose ways support sustainable business gains.  Looking past, miners are stakeholders that miners interact with on a direct basis – large mining companies, Indigenous nations, governments, suppliers and customers – all of whom need to define governance protocols for how they interact with ASM.  At the broadest level, downstream value chain participants, ultimately end customers and end users, as well as investors, need to consider how to govern interactions with artisanal mining.

The purpose of this article is to outline the diverse governance domains that affect the ability to formalize artisanal miners, given the fundamental goal of formalization of transitioning toward stable predictable equitable business relationships.

Artisanal miners – governance starts at the ground

Although 85%+ of artisanal miners are informal, with 45 million miners operating in over 80 countries there are many examples of successful formalization where coops, associations or companies are created, structures that become the basis for fostering and sustaining gains on the dignity and productivity of work that formalization delivers.

Remembering that artisanal miners are business persons at the core, structures that are set up require the full suite of capabilities that any other business requires – being able to buy, sell, negotiate, interact with diverse stakeholders, account and most fundamentally, to make decisions that are intended to increase value.  These business practices are, of course underpinned by governance protocols – the definition of clear roles, authorities, and communications protocols, which become the basis for operations over time.

Fit-for-purpose capacity development goes hand in hand with defining structures and roles, given the twin disciplines of structuring and staffing for success that are both needed for effective governance to take hold.  Aligning capacity with roles that coop, associations or companies require takes the same discipline for ASM-related structures as it does for any kind of business structures.  Roles need to be understood, capacity developed, and individuals who are responsible for different aspects of business need to be developed for success given the requirements of their role.  This means that capacity development goes well beyond a few hour or few-day courses on PPE or on mining practices, as specific individuals need to be adept across a broad spectrum of business skills.

As roles, capacity and governance protocols are put into place, a key requirement for ongoing success in a coop, company or association is to sustain newly implemented governance protocols.  Again, this is essentially the same as it is in any other kind of business.

Direct stakeholders – governance across the ecosystem

Artisanal miners interact directly with a variety of stakeholders, all of whom have their own governance protocols that impact whether relationships are setup for win/win value or for potential conflict.

ASM often shares land with large mining projects.  A mining major that ignores or chooses an adversarial position with these artisanal miners increases their conflict risk.  The opportunity for an LSM is collaborative productivity, starting with exploration and transitioning through operations.  Successful collaboration requires outreach that includes social teams, potential functional support of formalized artisanal miners, and functional interactions that may include procurement, HR and finance teams amongst others.  Large projects that govern ASM relationships toward collaboration based on a mentality of enhancing joint value gain potential business advantages as conflict risks are replaced with collaborative opportunities.  Defining and delivering fit-for-purpose governance that fosters these gains can be challenging for large companies that are not comfortable with relatively informal relationships.  Thinking through how to get past potential organisational resistance as governance protocols are defined is key to setting up long-term success.

Artisanal miners may be members of neighbouring communities or Indigenous nations whose lands they work on.  Suppliers, who sell food, shelter, clothing and equipment to miners may be members of these nearby communities.  Formalization may shift what relationships look like, as stable predictable business relationships become a norm.  Broader sustainable development may benefit communities and their suppliers, requiring a rethink of what governance approaches make sense.

Direct customers of artisanal miners are likely intermediates, the first step that moves product from miners to refiners.  These may be larger mining projects who off-take supply, or pure intermediates who resell to refineries.  As with suppliers, shifting toward more stable business relationships can have governance implications.  One clear benefit of formalization is that coops, companies or associations are better equipped to shift their business from predatory intermediates toward responsible customers.

Legal frameworks that local, state and federal governments put into place, of course impact the practicality of formalization.  One extreme, treating artisanal miners as illegal, impedes formalization as well as broader development that the shift could catalyze.  The other extreme, treating ASM as legal while putting policies that encourage formalization through fair tax rates and other rules into place fosters benefits for miners and for neighboring communities.  Recognizing the importance of legal frameworks, assessing viability of formalization includes a strong focus on understanding the relevant legal environment and potentially advocating for changes that open the door for positive transformation.

Extended stakeholders – downstream governance

Minerals flow from miners to refiners, and from refiners to eventual end customers.  Gaps in responsible practices at the ground can impact reputations that are in downstream supply chains – no company wants to be associated with child labor or forced labor for instance.  The opportunity for downstream value chain participants is to encourage formalization so that business relationships not only secure supply, but in the broader sense they catalyze positive shifts in outcomes for miners to refiners in ways that make mutual sense.  Reputation risks can be transitioned to reputational opportunities through apt focus.  Validation that responsible practices are in place also requires traceability of minerals, something that is often lacking in complex mineral value chains.  An opportunity for downstream companies is to focus efforts on validation development in ways that enhance their transparency while supporting sustained gains in values from the ground through to their operations.

In summary

Formalization of artisanal mining improves outcomes on the dignity and productivity of work.  There are many aspects involved in formalization, a fundamental one being governance, which comes into play for miners themselves, and then for many different stakeholders that they interact with locally and across downstream value chains.  Understanding where governance comes into play is the first step toward either directly constructing robust governance at the ground or influencing what it looks like for key stakeholders that include governments, business partners, downstream value chain participants and the large scale mines that artisanal miners often share the land with.