An artisanal miner pans for gold in Senegal. (Photo by JOHN WESSELS/AFP via Getty Images)
Life in Kédougou in Senegal is a paradox: poverty in the land of gold.
Of the 17 tonnes of gold exported last year, more than half came from Kédougou’s Sabodala mine. Yet, in the same area, one barely gets the most basic of services.
“Gold exploitation leaves pollution for the population, but scarcely any benefits,” says Ahmad Dame Seck, the principal at Dindefelo school in Kédougou. He says his pupils graduate (or drop out) into unemployment and struggle in the informal sector, or migrate to Europe, despite the money-making machine in the area.
Endeavour Mining, the United Kingdom-based company that bought Sabodala mine in 2021, has earned at least $598 million from it since. In its latest financial statements, the company values the mine as an asset worth more than $2.5 billion.
Its other assets are mines in Côte d’Ivoire, Burkina Faso and Mali, which it values at nearly $3 billion.
Endeavour Mining keeps 90% of the profits from its Senegalese operations — sharing them with its shareholders, of course. The Senegalese government takes the remaining 10%.
Inequitable resource extraction deals are one reason Senegal struggles to raise enough revenue to run the country. When its coffers run dry, the government is driven to borrow from the international money markets. In a bitter irony, it often turns to the very same firms that are taking the lion’s share of the revenue from the country’s gold mining industry.
New analysis by The Continent shows that 40% of the shares in Endeavour Mining are owned by 17 investment firms that are also trading in Senegal’s sovereign bonds. The Senegalese government owes them more than $271 million.
When Senegal pays annual interests on those bonds — up to 7.75% depending on the bond note — the firms that are already taking much of the money from Senegalese gold earn from the country being cash-strapped.
This dynamic — lining pockets to borrow from them — repeats itself in many countries.
African states have issued dozens of international bonds, borrowing at least $84 billion from global investment firms such as BlackRock, Fidelity, HSBC and Schwab.
These firms also often own millions of dollars of shares in the multinational companies extracting local resources.
Private creditors’ loans, of which bonds are but one example, tend to be the harshest kind of national debt to accumulate. Interest rates are high, there are no grace periods and lenders listen only to the markets. When states default on interest payments, economic chaos ensues.
Zambia, Ghana and Ethiopia failed to pay interest on their bonds after the Covid pandemic and other economic shocks undercut the growth their borrowed money was projected to spur.
These defaults pushed their leaders to turn to the International Monetary Fund for bailouts, the requirements of which include hard-nosed economic policy changes such as floating national currencies and hiking taxes. The pain of some of these policy changes has driven citizens to the streets in protests that are sometimes fatal, and always costly to local economies.
Yet African governments have continued to dig deeper into this kind of debt.
According to data from the United Nations Trade and Development agency, African governments owed more than $777 billion to private creditors by the end of 2023. Private creditors now hold about 44% of Africa’s national foreign debt, compared with 30% in 2010.
It’s not an evenly distributed risk. Middle income countries are often ineligible for low-interest lending from institutions such as the World Bank and turn to the private creditors more often.
But enthusiasm for that risky path is not equal. In South Africa and Angola, private creditor loans make up 88% and 78% of national debt. In Algeria and Botswana, it’s negligible, even though their economic health is comparable.
In the long term, if the Senegalese government is luckier than Zambia, Ghana and Ethiopia have been, it will make enough money to diligently pay bond interests until its own resource sector meaningfully pays into the domestic coffers.
In the short term, however, the people profiting from that sector, and from those interest payments, are not your average Senegalese citizen.
This article first appeared in The Continent, the pan-African weekly newspaper produced in partnership with the Mail & Guardian. It’s designed to be read and shared on WhatsApp. Download your free copy here