Uganda ASM Gold Value Chain Case Study

immense flooding impact facility
During the rainy season, mining is almost impossible.

The Impact Facility invests in mining communities throughout Africa, Asia and South America with the goal of creating strong and resilient SMEs and offering sustainable livelihoods for the communities living in resource-rich areas – turning mineral wealth into local prosperity. All ASMOs that are part of the Impact Facility’s ‘Impact Escalator’ program commit to continuous improvement of their production practices in return for the provision of equipment as well as technical training & capacity building. As a third and final support pillar The Impact Facility wants to offer direct market access to the international market for responsibly mined gold.

Various of our downstream companies in the jewellery and electronics sector have voiced their interest in including ethical gold of verified ASM origin in their supply chains. These companies are willing to invest financially into developing a sustainable sourcing mechanism, providing them with the assurances needed to meet international best practice for supply chain due diligence. To find out if and how ASMOs could be linked directly to refiners in the Global North, and in how far the miners would benefit from such a system, a detailed value chain analysis of our project mines in Uganda has been conducted. The research report identifies all parties involved and provides insight into profit margins as well as costs and risks encountered by the ASMOs. 

This research has been commissioned by The Impact Facility and forms the final research project concluding my BSc in International Development, majoring in Sustainable Value Chains at Van-Hall-Larenstein University of Applied Sciences in Velp, the Netherlands. The results of the research have been informed by interviews with more than two dozen stakeholders, international expert and interested parties as well as a thorough analysis of existing literature. 

Understanding the needs of both upstream & downstream producers.

Figure 1 Distribution of value along the supply chain  (Barreto, et al., 2018)
Figure 1 Distribution of value along the supply chain (Barreto, et al., 2018)

The current gold value chain is informal and to a large extent illegal. Local traders buy gold at very low prices and are said to use adulterated scales and deceitful business practise. For this reason, the ASMOs travel directly to Kampala exposing themselves to the great risk of being robbed and potentially physically harmed. When selling in Kampala the mines receive a very high price for their gold, defying our initial assumption that the miners are in dire need for higher prices.

The research, however, showed that the miners should not (only) focus on their selling price, but much rather aim to increase production volumes and productivity. A lack of pumps, processing equipment, generators and more advanced tools make it impossible for the mines to run a profitable business.

The financial capital needed to invest into the much-needed equipment and technical expertise could be provided by downstream companies investing through The Impact Facility conditional on the miners’ commitment to sell their gold locally at a fair price point under transparent conditions.

The downstream, in return, is facing great scrutiny when sourcing ASM gold and requires a high level of assurances regarding the provenance of the gold and the conditions under which it was mined. Ultimately, companies need to be able to demonstrate that the gold used in their supply chains has not contributed to conflict and has also not harmed children, local communities or the environment or exploited workers in any way.

Figure 3 Illustration of Downstream & Upstream Needs & Challenges
Figure 3 Illustration of Downstream & Upstream Needs & Challenges

Introducing a value chain model for ethically produced ASM gold

The suggested solution builds on a rigorous ESG assessment system in line with The Impact Facility’s Basic ESG Criteria. Any ASMO that wants to engage with The Impact Facility has to demonstrate compliance with the minimum requirements for ethical production, which are aligned to the OECD Due Diligence Criteria, the LBMA’s sourcing guidelines regarding ASM gold and the RJC’s requirements for jewellery companies sourcing gold of ASM origin. The mines receive continuous support and training through one of our local implementation partners, building a relationship based on trust and open communication.

All data gathered will be safely stored on a blockchain-based information system provided, so that every batch of gold can be traced back to the individual ASMO, linked to a holistic and continuously updated ESG performance profile. Local buying followed be secure and insured transport up to the refinery ensure that the miners won’t have to expose themselves to the risk of travelling with thousands of dollars’ worth of gold in the future.

Electronic payments, real-time traceability and complete transparency for all actors involved lay the foundation for a sustainable, long-term supply relationship. The proposed system will be piloted during Q3 & Q4 of 2018, before being rolled out throughout our network of project mines in 2019 assuming the success of the pilot phase.

Please read the full report to learn more about the proposed solution and the underlying research and feel free to email me directly with any follow-up questions at david@impactfacility.com.

The impact facility staff