FOR OFFICIAL USE ONLY
Report No: PAD2783 Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF EUR 35.7 MILLION (US$40.0 MILLION EQUIVALENT)
TO THE Public Disclosure Authorized REPUBLIC OF MALI
FOR THE
MALI GOVERNANCE OF MINING SECTOR
May 30, 2019
Public Disclosure Authorized
Energy and Extractives Global Practice Africa Region
Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective April 30, 2019)
Currency Unit = Euros (EUR) EUR 0.89190153 = US$1
FISCAL YEAR January 1 - December 31
Regional Vice President: Hafez Ghanem Country Director: Soukeyna Kane Senior Global Practice Director: Riccardo Puliti Practice Manager: Christopher Gilbert Sheldon Task Team Leaders: Mamadou Barry, Tahirou Kalam
ABBREVIATIONS AND ACRONYMS
AEITF Africa Extractive Industry Trust Fund ASM Artisanal and Small-Scale Mining AWPB Annual Work Plan and Budget CERC Contingency Emergency Response Component CPF Country Partnership Framework CREDD Cadre Stratégique pour la Relance Economique et le Développement Durable du Mali (Mali Strategic Framework for Economic Recovery and Sustainable Development) CFAF CFA Franc (currency of member countries of the African Finance Community) DA Designated Account DAF-MM Direction Administrative et Financière du Ministère des Mines (Administration and Finance Directorate, Ministry of Mines) DGI Direction Générale des Impôts (General Directorate of Taxation) EI Extractive Industry EITI Extractive Industries Transparency Initiative FCV Fragility, Conflict, and Violence FDI Foreign Direct Investment FM Finance Management FY Fiscal Year GBV Gender-based Violence GDP Gross Domestic Product GEMS Geo-enabling Method for Monitoring and Supervision GPN General Procurement Notice GRM Grievance Redress Mechanism GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (German Corporation for International Cooperation) IBM Iterative Beneficiary Monitoring IFC International Finance Corporation IFR Interim Financial Report IPF Investment Project Financing M&E Monitoring and Evaluation MFD Maximizing Finance for Development NGO Non-governmental Organization NPF New Procurement Framework OECD Organisation for Economic Co-operation and Development PAAR Projet d'Amélioration de l'Accessibilité Rurale (Rural Mobility and Connectivity Project) PAGIE Projet d’Appui à la Gouvernance des Industries Extractives (Extractive Industries Governance Support Project) PCU Project Coordination Unit PDO Project Development Objective PIM Project Implementation Manual PIU Project Implementation Unit PPA Project Preparation Advance PPSD Project Procurement Strategy for Development PSC Project Steering Committee
SCD Systematic Country Diagnostic SESA Strategic Environmental and Social Assessment SMEs Small and Medium Enterprises SPN Specific Procurement Notice STEP Systematic Tracking of Exchanges in Procurement SYSCOHADA Systéme Comptable OHADA (OHADA Accounting System) TA Technical Assistance UN United Nations VfM Value for Money WB World Bank
The World Bank Mali Governance of Mining Sector (P164242)
TABLE OF CONTENTS
DATASHEET ...... 1 I. STRATEGIC CONTEXT ...... 7 A. Country Context ...... 7 B. Sectoral and Institutional Context ...... 11 C. Relevance to Higher Level Objectives ...... 17 II. PROJECT DESCRIPTION ...... 19 A. Project Development Objective (PDO) ...... 19 B. Project Components ...... 19 C. Project Cost and Financing ...... 23 D. Project Beneficiaries ...... 23 E. Value Chain ...... 23 F. Theory of Change ...... 24 G. Rationale for World Bank Involvement and Role of Partners ...... 26 H. Lessons Learned and Reflected in the Project Design ...... 26 III. IMPLEMENTATION ARRANGEMENTS ...... 27 A. Institutional and Implementation Arrangements ...... 27 B. Results Monitoring and Evaluation Arrangements ...... 28 C. Sustainability ...... 31 IV. PROJECT APPRAISAL SUMMARY ...... 31 A. Technical, Economic and Financial Analysis...... 31 B. Fiduciary ...... 32 C. Safeguards ...... 34 D. Grievance Redress Mechanisms ...... 35 E. Climate Change Co-Benefits and Migration ...... 35 V. KEY RISKS ...... 35 VI. RESULTS FRAMEWORK AND MONITORING ...... 38 ANNEX 1: Implementation Arrangements and Support Plan ...... 45 ANNEX 2: Sector Context and Detailed Project Description ...... 56 ANNEX 3: Map ...... 68
The World Bank Mali Governance of Mining Sector (P164242)
DATASHEET
BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name
Mali Mali Governance of Mining Sector
Project ID Financing Instrument Environmental Assessment Category
Investment Project P164242 B-Partial Assessment Financing
Financing & Implementation Modalities
[ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [✓] Fragile State(s) [ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)
[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country
[ ] Project-Based Guarantee [✓] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster
[ ] Alternate Procurement Arrangements (APA)
Expected Approval Date Expected Closing Date
20-Jun-2019 30-Jun-2024
Bank/IFC Collaboration
No
Proposed Development Objective(s)
The objective is to strengthen the capacity of the mining sector to contribute to Mali’s medium-term growth and sustainable development objectives.
Components
Component Name Cost (US$, millions)
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The World Bank Mali Governance of Mining Sector (P164242)
Component A: Creating conditions for growth and diversification of the mineral sector 19.00
Component B: Strengthening Revenue Transparency and Governance 3.10
Component C: Maximizing the Local Development Impact of Mining 12.40
Component D: Contingency Emergency Response 0.00
Component E: Project Coordination 5.50
Organizations
Borrower: Republic of Mali Implementing Agency: Ministere des Mines et du Pétrole
PROJECT FINANCING DATA (US$, Millions)
SUMMARY-NewFin1
Total Project Cost 40.00
Total Financing 40.00
of which IBRD/IDA 40.00
Financing Gap 0.00
DETAILS-NewFinEnh1
World Bank Group Financing
International Development Association (IDA) 40.00
IDA Credit 40.00
IDA Resources (in US$, Millions)
Credit Amount Grant Amount Guarantee Amount Total Amount National PBA 40.00 0.00 0.00 40.00
Total 40.00 0.00 0.00 40.00
Expected Disbursements (in US$, Millions)
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WB Fiscal Year 2019 2020 2021 2022 2023 2024
Annual 0.00 1.97 3.06 5.39 9.08 20.50
Cumulative 0.00 1.97 5.03 10.42 19.50 40.00
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas Energy & Extractives Governance
Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks
Gender Tag
Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of Yes country gaps identified through SCD and CPF b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or Yes men's empowerment c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance ⚫ High
2. Macroeconomic ⚫ Substantial
3. Sector Strategies and Policies ⚫ Moderate
4. Technical Design of Project or Program ⚫ Moderate
5. Institutional Capacity for Implementation and Sustainability ⚫ High
6. Fiduciary ⚫ High
7. Environment and Social ⚫ Moderate
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The World Bank Mali Governance of Mining Sector (P164242)
8. Stakeholders ⚫ High
9. Other ⚫ High
10. Overall ⚫ High
COMPLIANCE
Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No
Does the project require any waivers of Bank policies? [ ] Yes [✓] No
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 ✔
Performance Standards for Private Sector Activities OP/BP 4.03 ✔
Natural Habitats OP/BP 4.04 ✔
Forests OP/BP 4.36 ✔
Pest Management OP 4.09 ✔
Physical Cultural Resources OP/BP 4.11 ✔
Indigenous Peoples OP/BP 4.10 ✔
Involuntary Resettlement OP/BP 4.12 ✔
Safety of Dams OP/BP 4.37 ✔
Projects on International Waterways OP/BP 7.50 ✔
Projects in Disputed Areas OP/BP 7.60 ✔
Legal Covenants
Sections and Description The Recipient shall not later than three (3) months after the Effective Date, prepare, in accordance with terms of reference acceptable to the Association, a Project implementation manual, containing detailed arrangements and procedures for: (i) institutional coordination and day-to-day execution of the Project; (ii) Project budgeting, disbursement and financial management; (iii) procurement; (iv) monitoring, evaluation, reporting and
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communication; and (v) such other administrative, financial, technical and organizational arrangements and procedures including grievance redress mechanism as shall be required for purposes of implementation of the Project.
Sections and Description The Recipient, through the PCU, shall not later than three (3) months after the Effective Date, install and thereafter maintain throughout the Project implementation period, an accounting software for the Project acceptable to the Association.
Sections and Description The Recipient shall, not later than six (6) months after the Effective Date recruit, and thereafter maintain throughout the Project implementation period, an external auditor for the Project with experience, qualifications and on terms of reference acceptable to the Association.
Sections and Description The Recipient shall, not later than one (1) month after the Effective Date, prepare a Strategic Environmental and Social Assessment (“SESA”) of the Recipient’s mining sector under terms of reference and in a manner satisfactory to the Association, and, thereafter, adopt and publicly disclose said SESA, in a manner satisfactory to the Association. In the process of developing said SESA, the Recipient shall ensure adequate stakeholder engagement and consultations on the draft SESA, in a manner satisfactory to the Association.
Sections and Description In order to ensure proper and efficient implementation of the Project, the Recipient shall not later than six (6) months after the Effective Date, establish and thereafter maintain, at all times during Project implementation, a Project Coordination Unit, within the MMP, with a mandate, staffing and other resources satisfactory to the Association. To this end, the Project Coordination Unit (“PCU”) shall : (i) be composed of qualified and competent staff in adequate numbers; including a Project coordinator, extractive industries specialist, technical specialists, a procurement specialist, a financial management specialist, a monitoring and evaluation specialist, an accountant, an internal auditor, a social safeguards specialist and an environmental safeguards specialist; and (iii) responsible for day to day Project coordination and implementation.
Sections and Description To ensure proper and effective oversight of the Project, the Recipient shall, not later than one (1) month after the Effective Date, establish, and thereafter maintain, throughout the Project implementation period, a steering committee with composition, mandate and resources satisfactory to the Association, to be chaired by the MMP and composed of representatives of key ministries and stakeholders including the private sector to be responsible for providing overall guidance and strategic support to the Project, including, inter alia, endorsing the proposed Annual Work Plan and Budget for the Project (the “Steering Committee”).
Sections and Description The Recipient shall maintain the Interim Project Implementation Unit, with composition, terms of reference and resources satisfactory to the Association, until such time as the PCU shall be established and operational in accordance with the provisions of Section I.A.2 of this Schedule 2, but in any case, not later than [6 months after the Effective Date], whereupon the PCU shall take over from the Interim PIU all of the responsibilities performed by the latter with respect to the implementation of the Project.
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Conditions
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I. STRATEGIC CONTEXT
A. Country Context
1. Mali is a vast landlocked country affected by fragility, conflict, and violence (FCV). Formerly, the land of several precolonial empires, for centuries, its northern city of Timbuktu has been a key regional trading center and center of Islamic culture. Modern day Mali is a low-income country with a non- diversified economy that is vulnerable to commodity price fluctuations and climate change. Mali’s population is estimated at 19 million (2018), with a high average growth rate of around 3 percent per year and a median age of 16 years. The population is expected to reach 35 million in 2035. With a gross domestic product (GDP) per capita of around US$763 in 2017, Mali remains a poor country. Its human capital development is constrained by a low adult literacy rate (33.07 percent) with a large gender disparity (while the literacy rate for men is 45.07 percent, for women, it is as low as 22.2 percent). In 2017, Mali ranked 154 out of 157 countries in the United Nations (UN) human capital index. Mali is also one of the 19 most fragile countries in the world where development results are affected by FCV. The key drivers of fragility are economic uncertainty, poor governance, security, and crime. Economic fragility is mainly due to the lack of economic opportunities, while security and crime-related fragility stems from multiple and complex interrelated factors that have led to the emergence of radicalized insurgent groups competing for control of power in the northern regions of Mali. Governance-related fragility results from incomplete decentralization and insufficient social accountability, which eventually undermined the authority of the state in some areas, particularly in the north. In 2015, a peace agreement was signed by the Government and two armed groups were deployed to end the conflict in the north of the country. The peace agreement has created the minimum conditions for the Malian authorities to address the challenges of poverty reduction, including in the north. However, implementation remains challenging, as the security situation in North Mali remains volatile. In addition, intercommunal violence has erupted in the center of Mali and risks spreading to other regions.
2. Mali’s fragility was exacerbated by the 2012 crisis and its aftermath. For the first time, the territorial integrity of Mali was threatened, raising concerns about the country’s internal capacity to cope with challenges to ensure physical security of its population. The conflict was not an isolated event. It was rather the result of pent-up frustrations and unresolved problems dating back to the early days of independence. The crisis demonstrated that one of the main challenges for Mali lies in nation building and political governance. The restoration of people's confidence in the public administration is one of the major issues. The conflict has wiped out much of the progress made in the previous decade. Once the conflict erupted, 36 percent of the total population of the north fled to the south of Mali and to neighboring countries. The conflict reduced human mobility, hindered access to markets, and undermined investor confidence. The Malian economy suffered through a near collapse of the tourism industry and a virtual withdrawal of donor support. Even after the signing of the peace agreement, the northern half and central areas of the country continue to face significantly security challenges, including terrorist attacks and inter-community tensions.
3. The multidimensional crisis has had a considerable impact on the country's economic fragility, but the mining sector helped to mitigate the impact. Although mining could contribute to the dynamics of conflict and therefore exacerbate fragility, it played a mitigating role during the 2012 crisis. Unlike similar situations in the Democratic Republic of Congo, Sierra Leone, and Liberia, non-state actors did not
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take control of the sector or use its revenues to fuel the conflict. This is partly because Mali has a solid mining tradition and mining is well-integrated in the communities. While mining is not a major contributor to GDP, it is a key driver of growth through foreign direct investment (FDI), exports, and local purchases. During the crisis, mining played a mitigating role when the drop of economic activity was partly offset by a strong performance of gold mining (+7.5 percent).1 Mineral production also helped to mitigate the decline in the secondary (manufacturing) sector and more significantly contributed to avoiding a recession.2 Real GDP growth reached 4.9 percent in 2018 slightly below 5.4 percent in 2017 and is expected to remain at the 5 percent level in the medium term, in line with Mali's past performance and long-term potential. The economic structure has not changed much since the 1990s, but mining has the potential to make a greater contribution to GDP and to reduce extreme poverty (estimated to have declined from 46.3 percent in 2015 to 42.7 percent in 2017).
4. Mining has become a key factor in Mali’s economic resilience. Mali has historically relied on mining as a driver of economic growth. The country’s global reputation for gold mining dates to 1433, when Malian Emperor Kankou Musa famously brought down world gold prices by flooding the Middle East with Malian gold on his way to pilgrimage to Mecca. Since these ancient times, mining continues to be a source of alternative livelihood for many Malians. For instance, artisanal and small-scale mining (ASM) is second only to agriculture in terms of employment. It provides an occupation for about 400,000 people who support an estimated 2.2 million dependents, most of whom are young people.3 Industrial- scale mining did not start until the 1970s when the donor-funded large exploration program led to the discovery of new deposits. As a result, the Kalana gold mine was developed in southwestern Mali with technical assistance (TA) from the then Soviet Union. During the following decade, exploration programs using soil geochemistry funded by the UN led to the discovery of several gold deposits and the subsequent development of the Syama gold mine. In the 1990s, exploration activities intensified, and new world class gold mines were discovered. During this period, seven gold deposits were discovered, including three in the southern part of the country (Syama, Morila, and Kalana) and four in the west of the country (Sadiola, Yatela, Loulo, and Tabakoto). To strengthen economic resilience, in 1994, the Government adopted a strategy aimed at developing the mining sector with a view to offset or reduce the country’s dependence on rain-fed agriculture. The implementation of this strategy enabled Mali’s economy to achieve remarkable resilience. Owing in part to the sustained growth of the mining sector, Mali achieved economic resilience in the face of adverse shocks, recurring droughts, and protracted conflict which led to the 2012 economic and political crisis. In 2018, the Government updated the mining policy with a focus on diversifying and integrating mining production into the economy as a factor of sustainable development. Figure 1 shows how mining contributed to strengthening Mali’s resilience by playing a counter-cyclical role throughout the years of conflict. The graphs show that mining softened the conflict-driven shocks by offsetting decline in key sectors with strong mining export earnings and fiscal performance, and robust employment.
1 Mali Economic Update, January 2013. 2 Socioeconomic and Fiscal Impact of Large-Scale Gold Mining in Mali – WP S 7467. 3 G. Hilson: Artisanal Small Scale Mining and Agriculture, Exploring their Links in Sub-Saharan Africa. IIED, 2016.
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Figure 1. Mining Contribution to Economic Resilience of Mali
Source: Graphs prepared in 2018 from data compiled by the Ministry of Mines and Petroleum.
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5. Mining also has the potential to contribute to peace consolidation and stability by stimulating local development and shared growth around mining districts. The decentralization process in Mali, initiated in the late 1990s, resulted in establishment of autonomous local authorities (703 communes, 56 counties, and 10 regions as well as the District of Bamako) with specific responsibilities related to the provision of public services, particularly in health, education, and water management. In the early days of decentralization, local authorities became responsible for managing the civil registry, administrative affairs including archives and budget, and sanitation. In 2002, additional responsibilities were transferred in the areas of health, education, and water management. In 2017, responsibility for managing ASM was transferred to local authorities. Pursuant to the Algiers Peace Agreement of May 15, 2015, local governments are responsible for their own economic, social, and cultural development programs through the management of their own resources, which are mainly made up of resources transferred by the Central Government. One of the main resources available to communities around mining areas is the local business tax known as the patente. By law, the patente is distributed according to the following allocation ratio: 60 percent to municipalities, 25 percent to cercles (counties), and 15 percent to regions (provinces). These receipts are paid to the public treasury through the decentralized regional unit of the General Directorate of Taxation (Direction Générale des Impôts, DGI) for the benefit of the eligible communities. Although they represent only between 2.3 percent and 2.5 percent of total mining revenues, patentes from mining companies are a significant source of income for mining communities. Table 1 presents the magnitude of payments made by large-scale mining companies to local communities within mining districts. According to the 2018 Extractive Industries Transparency Initiative (EITI) report covering fiscal year 2016, the payments made by the mining companies in the form of patentes grew from about CFA Franc (CFAF) 4.1 billion (about US$7.5 million) in 2015 to CFAF 5.2 billion in 2016 (about US$9.5 million). These amounts were paid to the mining communities of Kayes, Kénieba, Sikasso, Bougouni, Kadiolo, and Yanfolila where they were used to finance local development projects. There are 15 mining communities currently receiving and managing local business taxes (see Table 2).
Table 1. Local Contributions Paid by Large-Scale Mining Companies in 2015 (in CFAF)
Business License Corporate Company Locality Road Taxes Total Tax (Patente) Contributions
YATELA SA Sadiola 290,303,390 29,030,340 14,515,169 333,848,899 SEMOS SA Sadiola 457,794,400 45,779,440 22,889,725 526,463,565 BME SARL Sadiola 4,619,880 461,990 230,993 5,312,863 LTA MALI SA Sadiola 55,386,708 5,538,670 2,769,336 63,694,714 BLY MALI SA Sadiola 86,208,035 8,620,800 4,310,402 99,139,237 SOMILO SA Loulo 1,062,798,122 106,279,813 53,139,906 1,222,217,841 SEMICO SA Tabacoto 275,445,893 27,544,589 13,772,295 316,762,777 GOUNKOTO SA Kenieba 490,705,563 49,070,556 24,535,278 564,311,397 GMS Tabacoto 2,637,355 263,735 131,868 3,032,958 Total 2,725,899,346 272,589,933 136,294,972 3,134,784,251 Source: Ministry of Mines and Petroleum.
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Table 2. List of Mining Communities Receiving and Managing Mining Business Taxes N° Community Mine Mining company County Region 1 Sadiola Sadiola SEMOS SA Kayes Kayes 2 Yatéla YATELA SA Kayes Kayes 3 Sitakily Kofi SEMICO SA Kéniéba Kayes 4 Sitakily Segala SEMICO SA Kéniéba Kayes 5 Sitakily Loulo SOMILO SA Kéniéba Kayes 6 Kéniéba Gounkoto GOUNKOTO SA Kéniéba Kayes 7 Kéniéba Fekola FEKOLA SA Kéniéba Kayes 8 Sanso Morila MORILA SA Bougouni Sikasso 9 Domba 10 Gouandiaka Kalana SOMIKA SA Yanfolila Sikasso 11 Gouandiaka Kodiéran WASSOUL’OR SA Yanfolila Sikasso 12 Séré Moussa ani Samou Komana SOCIETE MINIERE DE KOMANA Yanfolila Sikasso (SMK SA) 13 Finkolo Ganadougou Nampala NAMPALA SA Sikasso Sikasso 14 N’Tjikouna 15 Fourou Syama SOMISY SA Kadiolo Sikasso Source: Ministry of Mines and Petroleum, 2018.
B. Sectoral and Institutional Context Economic Potential 6. Basic geological work undertaken to date confirms that Mali has promising mineral potential. Regional geological surveys have identified significant potential for a diversified resource base. These include, for example, lithium (in Bougouni), kaolin (in Gao), bauxite (resources of 120 million metric tons in Sitadina, Kita, and Kenieba), iron ore (resources of 1360 million metric tons in areas such as Kita, Kénieba, and Diamou), and other minerals. Table 3 summarizes the known mineral potential of Mali.
7. In view of its potential, the mining sector could be a growth driver in Mali. The mining sector has the potential to make a significant contribution to the sustainable development objectives of the Government and, for this reason, is a priority area for policy support by the Government. Mining sector revenues already contribute about 7 percent to the GDP, 30 percent to tax revenues, and 70 percent to export earnings. The updated mining policy of 2018 aims to diversify and integrate mining production into the economy as a factor of sustainable development, as well as to meet the challenges of governance, transparency, and protection of the environment. The new mining policy also aims to establish an enabling environment for private sector development through: • Strengthening knowledge and mapping of the mining and geological potential of Mali's subsoil; • Developing learning and training in the mining and oil fields (mining school); • Supporting the institutional framework for mining contract negotiation and strengthening the independent monitoring of the sector better; and • Strengthening partnerships between mining companies and the Malian private sector.
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Table 3. Mali’s Mineral Potential (metric tons) Mineral Estimated Resources Gold 800 Phosphates 20 million (Tilemsi) Limestone 40 million (Bafoulabé, Hombori) Salt 53 million (Taoudéni) Bauxite 1.2 billion (Kayes, and West of Bamako) Iron 2 billion (Kayes) Manganese 10 million (Ansongo) Bituminous shale 10 billion Marble 60 million Lignite Prospects discovered in the Gao region Gypsum 405,000 Uranium 5,000 of d’U3O6 and 200 of U3O2 at 0.085% Lead-zinc 1.7 million Source: Ministry of Mines and Petroleum, 2018.
8. Mining-led growth is a key part of the Strategy Paper for Growth and Poverty Reduction for 2019–2023, known as the ‘Strategic Framework for the Economic Recovery and Sustainable Development of Mali’ (Cadre Stratégique pour la Relance Economique et le Développement Durable du Mali, CREDD). Through CREDD, the Government has defined sustainability goals achievable by 2030, based on the potential and resilience of the country to maintain a growth trajectory focused on inclusive development, and reducing poverty and inequalities in a peaceful and united Mali. Therefore, the Government intends to leverage the mining sector as a catalyst for inclusive multisectoral growth toward the objective of achieving emerging country status for Mali. A well-performing and sustainable extractive sector is expected to address the financing needs of the Government, the creation of economic links with other sectors, the reduction of economic volatility, and the creation of jobs, especially for the youth. To this end, the Government's objectives for the mining sector within the new CREDD are (a) to ensure the diversity of mineral discoveries by deepening the knowledge of the geological potential through acquisition of new geoscientific data; (b) to create an enabling environment for investment into expanding current gold production as new development of minerals outside the gold sector; (c) to promote the sustainable development of small-scale mining for gold and industrial minerals; (d) to strengthen Government capacity to manage the sector; and (e) to improve the governance of extractive industry (EI) revenues. The Government also intends to leverage the FDI potential of the mining sector for maximizing finance for development (MFD) and stimulating public-private partnerships to develop social infrastructure around mining communities through operationalization of initiatives such as the ‘Power of the Mine’.4 In addition to this, the Government is seeking to retain existing investment in operating mines, but also attract new investment.
Sector Challenges and Constraints
9. Despite its promising outlook, the performance of the mining sector has been below its potential. As Figure 2 shows, the industrial gold production trend has been nearly flat since 2008, while
4 See Banerjee, Sudeshna Ghosh, Zayra Romo, Gary McMahon, Perrine Toledano, Peter Robinson, and Ines Perez Arroyo. 2015. The Power of the Mine: A Transformative Opportunity for Sub-Saharan Africa. World Bank.
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the contribution of mining to GDP has been declining in view of the slow pace of developing new mines. With the depletion of mineral reserves and price volatility, the challenge faced by Mali is to strengthen the ability of the mining sector to serve as a buffer during economic shocks or political crises. This can be achieved by creating a conducive environment for investment toward the expansion of current operations, attracting new FDI in exploration within and outside the gold-bearing greenstone belt, and promoting links to achieve mining-led broad-based growth around mining communities. For the country’s significant mining potential to be realized, Mali needs to grow and diversify mineral production, improve sector governance, and stimulate mining-led broad-based growth. Over the years, the World Bank has supported Mali in making the most out of its mining sector (see Section H), but there are still several challenges ahead. First, the major mines which fueled production growth in Mali are nearing their depletion point: the Morila mine is scheduled to be closed down in 2020 after nearly 20 years of operation; the Yatela mine has already been depleted and is in care maintenance; the Sadiola mine is nearing depletion after 20 years of operation, but its life could be extended by another 10 years if new proposed investment goes forward.
Figure 2. Evidence of Nearly Flat Industrial Gold Production and Declining GDP Contribution Trends
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Source: Prepared in 2018 from data provided by the Ministry of Mines and Petroleum.
10. Insufficient geoscientific data limit efforts to promote new investment opportunities. Mali’s geoscientific database includes about 80 survey and aerial maps at 1/200,000 scale, and about 50 maps at scales varying from 1/1,500,000 to 1/500,000. The Directorate of Geology has a data center with a limited number of electronically archived documents. This inventory of data is inadequate for a country with a total land area of 1,241,000 km2, one-third of which is covered by desert. The subsoil of large and potentially mineral-rich areas of the country remain to be surveyed. While most geological work is focused on gold-bearing formations within the Birimian greenstone belt, the sedimentary basin, which is critical to the diversification of the mineral potential outside the gold sector, is yet to be explored. In addition, the available geological data needs to be properly organized, synthesized, and made readily available to potential investors. Mali’s geological coverage is also incomplete. Thus, mineral production has focused on well-known gold-bearing formations, leading to rapid growth in gold production. However, in 2010, industrial gold production decreased to a low point of 42 metric tons, but has been in a recovery path since 2012, reaching 50 metric tons in 2017 and 60 metric tons in 2018. In addition, there is an estimated production of 20 metric tons of gold from ASM, bringing the total output to about 70 metric tons a year. The diversification of mineral production through the development of non-gold resources would stimulate sector growth and mitigate volatility arising from heavy reliance on gold production. The National Geology and Mines Department (in the Ministry of Mines and Petroleum) lacks modern geological and mining information systems to set up geoscientific databases and effectively promote the country’s mineral resources by producing basis geological maps of prospective areas.
11. The slow pace of investment in exploration and mining development is affecting the sector’s growth through depletion of known resources and a push toward marginal resources with high costs of production. Mali has about 23,000 km2 of greenstone belt formations which are known to host significant mineralization in other parts of the world. For instance, Mali has been able to develop only 13 gold deposits of which 11 are in production so far, which is well below its potential. By comparison, five times as many mines were developed in the Abitibi region of Western Quebec, Canada, over a similar stretch of greenstone belt. Due to limited knowledge of the geological potential of the greenstone belt of Mali, FDI
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into the mining sector has been relatively low compared to Ghana which hosts the same geological formations. Annual FDI averaged about US$34 million between 2011 and 2017, dipping to US$14 million in 2014, but recovering vigorously in 2015 and 2016.5 These figures compare to an average annual mining FDI of US$1 billion for Ghana during 2012–2017.6
12. Inadequate institutional capacity severely limits the Government’s ability to properly manage the sector. The management of the mining sector is shared among seven entities: President’s Office, Prime Minister’s Office, Ministry of Mines and Petroleum, Ministry of Finance, Mali Investment Promotion Agency, Chamber of Mines, and Mali EITI Secretariat. These entities not only suffer from low capacity, their efficiency is further diminished because of duplication of efforts and institutional conflicts. Low capacity is limiting the Government’s ability to maximize revenues from mining. Moreover, the lack of a unified voice on the position of the Government with respect to key mining policy and fiscal issues is straining relationships with investors and increasing risk perceptions about regulatory stability.
13. The economic potential of ASM is constrained by informality, as well as environmental and social risks. While ASM is often associated with significant social, safety, health, and environmental risks, it also offers a potential upside as an alternative source of employment and livelihoods in rural areas, particularly for the youth. ASM is a traditional, often informal, village-based activity with significant potential for rural employment. It is currently focused on extracting—by manual or semi-mechanized methods—the gold contained in the primary alluvial and mountainside deposits. Manual mining and panning of gold employ an estimated 400,000 people, including migrants from neighboring countries, women, and the youth. ASM is theoretically regulated by the mining law, but ASM workers often operate in the informal sector and rarely follow the regulations. The modus operandi is often inefficient and environmentally destructive. In addition, revenues generated from the activity follow informal channels to avoid paying taxes. Sometimes ASM workers encroach mining concessions held by large-scale industrial investors, creating the possibility of tensions and conflict with mining companies. Most ASM workers are young people living in neighboring communities. There are also children working on mine sites, some of whom are of school age.
14. Weak resource governance prevents maximum value realization from the mining sector. Mali has been implementing the EITI since 2007. In May 2017, the International EITI Board agreed that Mali has made significant progress in implementing the 2016 EITI Standard, but found several weaknesses which must be addressed to improve resource governance including (a) the governance of the multi- stakeholder group; (b) the granting and management of licenses; (c) the completeness and reliability of the data; (d) the disclosure of subnational transfers; (e) the systematic disclosure of data by Government entities actively involved in EITI reporting; and (f) the inclusion of ASM activities in EITI reports. At the local level, mining revenues generated from the patente are predominantly used to fund the running costs of local government instead of prioritizing delivery of social services. Moreover, not all funds received by the Central Government are transferred to local communities. For instance, the 2018 EITI report includes a significant discrepancy of CFAF 328 million (about US$650,000) between the disclosure of mining companies and those made by the central tax authorities. These governance lapses often affect the global
5 Data from Banque Centrale des Etats de l’Afrique de l’Ouest, Direction nationale pour le Mali. 6 Ministry of Lands and Natural Resources, Ghana.
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ranking of Mali with respect to resource governance. In the 2017 Resource Governance Index,7 Mali ranked 35 out of 81 countries and had a score of 53 out of 100. It was ranked among countries where inadequate governance limited the society’s benefits from mining. Although Mali had a good resource revenue management score (70 out of 100), it scored poorly in terms of the quality of the enabling environment (42 out of 100) which in turn, affected the value realization score (48 out of 100). Mali’s poor resource governance ranking reflects the weakness or absence of policies and regulations which promote mineral-induced, broad-based, and shared growth.
Gender Analysis
15. Women represent half of the artisanal mining workforce, but they face significant historical and cultural constraints to empowerment. In Mali, an estimated 50 percent of artisanal miners are women. However, gender gaps are acutely pronounced in the mining-related economic activities as well as at the household level in mining communities. As identified in the 2015 World Bank Systematic Country Diagnostic (SCD) for Mali (Report No. 94191-ML), women face considerable social, economic, and institutional barriers. On the 2017 Global Gender Gap Index, Mali ranks 139 out of 144 countries listed, and 126 on economic participation and opportunity.8 UN Women estimated that more than 35 percent of Malian women are victims of sexual violence at least once in their lives.9 With limited voice and power of action, little control over household income and restricted access to means of production, women are therefore marginalized into less-profitable activities and an environment that prevent them from being vocal about their disadvantageous situations.10
16. When engaging in economic activities in ASM communities, women are relegated to low-pay occupations: supply of goods in the mines, upkeep of children, and up to 90 percent of the panning of alluvial gold. Many women work as temporary helpers for different groups of miners, mainly in the crushing and washing of waste rock, or for cooking and cleaning. The remuneration for this work is often low and poorly defined. Very often women are paid in kind (waste rock rather than gold), and while working side by side with men on gold digging, cultural tradition dictates that women turn over all gold to their husbands, who remain the sole owners of family assets. Although women are legally entitled to acquire artisanal mining rights, women face stiff competition as well as cultural barriers in trying to become mine title holders. Some activities in the value chain, such as direct extraction from pits, are off- limit to women due to cultural and religious beliefs. Women who choose to earn a living from mining often must combine their work with household chores and child care. As a result, children are uprooted from the normal setting and brought up around mine sites where they are exposed to risks of accident and disease.
17. In the meantime, as important stakeholders in poverty reduction and community well-being, women’s contribution to social capital, which features elements of social organizations, networks, norms,
7 Natural Resource Institute: 2017 Resource Governance Index. https://resourcegovernance.org/sites/default/files/documents/2017-resource-governance-index.pdf. 8 World Economic Forum. 2017. The Global Gender Gap Report 2017. Geneva, Switzerland: World Economic Forum. 9 Gologo, Habibatou. 2019. 16 Days of Activism against GBV. World Bank. 10 World Bank. 2015. Mali SCD. Washington, DC: World Bank.
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and trust, is a crucial aspect in artisanal mining communities in Mali.11 Assessment on Malian women’s economic situation has shown that women require attention to the specificities of their income- generating activities, need support for women’s organizations, and wish for more access to more types of productive activities to gain autonomous management of their own business.12 In the mining sector, women have organized themselves into women miners’ associations to advocate gender-sensitive policies and enhance capacity building and economic empowerment of their members.
18. Gender action. The proposed project will address specific gender gaps existing in mining communities by (a) supporting inclusion and participatory decision making in mining revenue management (through women-only focus groups in Component B); (b) empowering women to gain the knowledge and assistance needed for effective participation in ASM (through targeted economic empowerment activities and training in Subcomponent C3); and (c) raising awareness in conflict resolution and gender-based violence (GBV) against women (by working closely with women in mining association in Subcomponent C3). The gender dimension will also be reflected in the support of local procurement initiatives by setting a target of 25 percent women’s participation.
19. Monitoring and evaluation (M&E). The Results Framework includes mechanisms to monitor the project’s gender impact and to facilitate gender-disaggregated analysis. For example, the project will report on, among other indicators, the number of women-only focus groups, percentage of women- owned or women-led small and medium enterprises (SMEs) participated in local procurement initiatives, as well as number of new women-owned or women-led SMEs set up after capacity-building activities on an annual basis.
C. Relevance to Higher Level Objectives
20. The Government of Mali is seeking to leverage the mining sector to achieve the objectives of the poverty reduction strategy outlined in CREDD. The project is consistent with the successive policy statements of the Government which set out growth targets for priority sectors with a view to achieve shared growth through private investment. These include the 1994 Government vision toward transforming the mining sector as a key source of growth, the Mining Policy Statement of 1998, the Mining Development Plan of 2005, the Africa Mining Vision of 2009, the Mining Sector Diversification Strategy of 2011, and the mining policy of 2018. Mining is also a key objective in the first phase of CREDD (2016– 2018), and in the second phase (2019–2023). This second phase aims to leverage mining to attain the following strategic objectives: (a) consolidation of democracy and improvement of governance; (b) restoration of peace and security and strengthening of living together; (c) inclusive growth and structural transformation of the economy; (d) environmental protection and resilience to climate change and (e) human capital development. Overall, CREDD aims to reduce the incidence of poverty from 44.9 percent in 2017 to 40 percent in 2023. Mining is one of the key sectors expected to enable Mali to achieve the objectives of the new CREDD. The project supports the Specific Objective 3.3.1 of CREDD which emphasizes (a) strengthening knowledge of geological potential with the view to diversify mineral
11 Hinton, Jennifer., Marcello M. Veiga, and Christian Beinhoff. 2003 “Chapter 11: Women and Artisanal Mining: Gender Roles and the Road Ahead.” In The Socio-Economic Impacts of ASM in Developing Countries. Edited by G. Hilson. Netherlands: A.A. Balkema, Swets Publishers. 12 African Development Bank, Islamic Development Bank, the United Nations, and the World Bank. 2016. Assessing Recovery and Development Priorities in Mali’s Conflict-Affected Regions. Washington, DC: World Bank.
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production; (b) developing institutional capacity to manage the sector; (c) improving sector policies and regulations; and (d) leveraging the mining sector to stimulate local economic and social development.
21. The proposed project is also in line with the 2015 SCD and the FY16–FY19 Country Partnership Framework (CPF) for Mali (Report No. 94005-ML). The current CPF is fully aligned with findings of the SCD, both of which underline that transformation requires substantially improved human capital, contained demographic growth, and reduced gender inequalities. By implementing planned activities, the proposed project specifically contributes to the following CPF areas of focus: (a) improving governance (management of EI revenues at the local and central levels); (b) creating economic opportunities (for both men and women through development of links with large-scale mining and through rationalizing small- scale and artisanal mining); and (c) building resilience (capacity building, local content development, and mining export diversification).
22. The proposed project incorporates the objectives of MFD. This is achieved through support of activities aimed at improving Mali’s attractiveness for new FDI into development of new mines and related infrastructure. At the local level, MFD is facilitated by facilitating multi-stakeholder partnerships aimed at maximizing the development impact of mining around communities living near large-scale operations. The multi-stakeholder partnerships will involve local communities, the Central Government, mining companies, and civil society working together to improve living conditions in mining villages by facilitating infrastructure links with large-scale mining operations. The project will also support the Government to prepare a framework for leveraging clean energy (solar power) investments from mining operations to improve energy access for local communities.
23. The proposed project considered the World Bank Group’s Gender Strategy for FY16–FY23 (World Bank Group Gender Equality, Poverty Reduction, and Inclusive Growth). The Gender Strategy focuses on four objectives, including (a) improving human endowments; (b) removing constraints for more and better jobs; (c) removing barriers to ownership and control of productive assets; and (d) enhancing women’s voice and agency and engaging men and boys. Traditionally, women are closely involved in the value chain of mining sector, especially ASM. Through the implementation of planned activities, the proposed project will support economic empowerment of women by providing livelihood trainings and enhance women’s voice and agency by supporting identified women in mining associations.
24. The proposed project is aligned with corporate requirements on gender-sensitive actions, citizen engagement, human capital engagement, and contributes to the World Bank’s twin goals of ending extreme poverty and promoting shared prosperity. Through carefully designed project components (Components B and C), the project seeks to promote women’s greater participation in the extractives value chain, encourage gender-balanced citizen participation in the decision-making process at the community level, and remove financial barriers for small business owners to access the market. In addition, the proposed project recognizes that local citizens play a key role in advocating and making public institutions more transparent, accountable, and effective, especially when it comes to mining revenue management. Therefore, the proposed project will strengthen consultative processes at both national and local levels and implement a platform to inform and give citizens an opportunity to engage and provide feedback on extractives revenue management, tax, public treasury, and so on. Public forums will be held for information dissemination when needed. Finally, while the proposed project will not contribute directly to the climate co-benefits, environmentally friendly mining activities and clean energy access will be promoted throughout project implementation.
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25. The proposed project will complement other World Bank initiatives, thus enhancing its impact. The proposed project will complement the Mali Deployment of State Resources for Better Service Delivery (P164561) which focuses on tackling institutional reforms that are critical to operationalize the decentralization agenda and empower the local government to better manage available resources for local development. Thus, the two projects will collaborate in strengthening governance at the local level by fostering more transparency, social accountability, and participatory mechanisms. While the Deployment of State Resources project will focus on enhancing the administrative capacity of local governments to foster better planning and use of overall resources, as well as enhance the accountability framework, the proposed project will complement those activities with a specific focus on extractive revenues. Annex 2 presents some additional information on synergies between the decentralization project and the proposed project. As part of its TA activities aimed at facilitating community-driven multi- stakeholder partnerships, the project will also coordinate with the Mali Rural Electrification Hybrid System Project (P131084).
II. PROJECT DESCRIPTION
A. Project Development Objective (PDO)
PDO Statement
26. The PDO is to strengthen the capacity of the mining sector to contribute to Mali’s medium-term growth and sustainable development objectives.
PDO Level Indicators 27. The PDO-level indicators are the following: • Share of high-potential sheets covered by airborne or ground geophysical survey (percentage). • Mining policy and regulatory framework attractiveness for sustainable investments (Fraser Institute Mining Investment Attractiveness Index) (number). • Satisfactory Institutional effectiveness rating (yes/no). • Resource governance index (percentage). • Proportion of women in mining supported by the project (percentage). • Number of ASM cooperatives established and supported under the project (number).
B. Project Components
28. The project will strengthen the contribution of the mining sector to the Government’s medium- term growth objectives by emphasizing growth and diversification of mineral production, improved governance and extractive revenues, and mining-induced local economic development. To this end, the project’s activities focus on (a) creating conditions for growth and diversification of the mineral sector; (b) strengthening revenue transparency and governance; and (c) maximizing the local development impact of mining. The proposed project components are described in the following paragraphs.
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Component A: Creating conditions for growth and diversification of the mineral sector (US$19.00 million equivalent)
29. This component aims to build the Government’s institutional capacity for sustainable management of the mineral sector. Activities proposed for support under this component are described under three subcomponents.
30. Subcomponent A1: Improving geological coverage to support mining growth and diversification (US$14.00 million). This subcomponent aims to improve geological knowledge to promote new gold potential and attract investment into non-gold minerals with a view to diversifying mineral production. It will support (a) detailed geological mapping (ground geophysical survey) and associated capacity building of prospective areas on a more detailed scale at 1/50,000 covering 14 topographic sheets, and targeted geological ground works in 20 areas designated as ASM corridors; (b) regional geological mapping (airborne geophysical survey) at 1/200,000 scale covering 16 sheets of high-potential localities: Kayes / Bakel, Kankossa, Yelimane, Sandare, Bafoulabe, Bafing-Makana, Nioro, Diema, Kita, Sirakoro, Kolokani, Banamba, Dioila, Koutiala, and Sikasso; and (c) design and implementation of geodata-use protocols to ensure transparency and efficiency of end uses for data.
31. Subcomponent A2: Updating the policy and regulatory framework in support of mining diversification (US$1.0 million). This subcomponent will support consulting services aimed at (a) updating the mining policies and regulations to encourage exploration investment outside the gold sector; (b) drafting specific environmental, social, health, and safety regulations for mining, and mine closure policies; and (c) preparing a policy and regulatory framework for ASM, including social regulations and guidelines on gender and child labor.
32. Subcomponent A3: Strengthening institutional arrangements and capacity for efficient management of the mineral sector (US$4.0 million). The activities under this subcomponent support (a) organizational structuring to improve regulatory management of the sector (including establishment of the ASM Unit and Inter-ministerial Mining Unit, and strengthening inspection and mineral sector promotion functions) and (b) institutional capacity building of the senior ministry staff and the established Inter-ministerial Mining Unit on contract negotiations (including financial and economic modeling, review of technical and feasibility reports, updating model agreements for specific commodities, and developing negotiation strategies) and contract monitoring (including training for inspections of operations, technical, environmental, and financial audits, and market trend monitoring).
Component B: Strengthening revenue transparency and governance (US$3.10 million equivalent)
33. This component aims to leverage and complement World Bank-funded and donor-funded governance enhancement projects to improve extractive revenue transparency at the national and local levels, and to build the capacity of local governments to manage revenues from EIs as well as other revenues received pursuant to the Agreement of Peace and Reconciliation signed in 2015 to transfer of up to 30 percent of budget revenues to local governments. The project will complement World Bank support for strengthening fiscal management in local governments (with a focus on the mining districts) for better service delivery by strengthening transparency, traceability, and accountability of mining revenues. It will also coordinate with, and leverage the activities of, donor interventions for mining governance in Mali. These include (a) Organization for Economic Co-operation and Development (OECD)
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supply chain due diligence implementation support consisting of capacity building and advice on implementation of the OECD guidance in the mining sector, and development of a network of tripartite risk monitoring units in mineral producing areas; (b) the Extractive Sector Governance Enhancement Project (project No. 2014.1512.3) funded by German Corporation for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit, GIZ) which supports improving tax collection and supervision in the extractive sector, enhancing transparency and the role of civil society in reform processes in the extractive sector, and establishing a sectoral database to improve accountability; and (c) Canada-funded Extractive Sector Monitoring Project (Projet d’Amélioration de la Surveillance de l’Industrie extractive en Afrique francophone subsaharienne) which focuses on building the capacity of the Public Auditor’s Office (Contrôle Général des Services Publics du Mali) and other relevant stakeholders to monitor EIs. In view of the concurrent support provided by these governance projects, the scope of this component is limited to two subcomponents.
34. Subcomponent B1: Improving extractive revenue transparency (US$1.60 million). This subcomponent will support the EITI-Mali Secretariat through consulting, outreach activities, and studies aimed at improving sector governance through (a) enhancing the disclosure mechanism for subnational transfers to reinforce revenue reconciliation activities at the level of three local authorities in Mali (region, circle, and commune); (b) developing and implementing a mining sector beneficial ownership road map; and (c) integrating ASM sector data into EITI reports to improve transparency of revenues from artisanal mining.
35. Subcomponent B2: Promoting social accountability and direct citizen engagement (US$1.50 million). This subcomponent emphasizes provision of support to the EITI-Mali Secretariat to strengthen social accountability and participatory decision making about revenue management by (a) funding the technical feasibility study and the implementation of the integration of EI data into a digital platform encompassing all data on the extractive sector (tax data, public treasures, customs, and so) and (b) supporting the cost of promoting public awareness of extractive revenue data through debates on the governance and transparency of social payments, corporate social responsibility, and other contextual data related to the extractive sector (dissemination of EITI information on a large scale, translation of data into computer graphics and the local language, production of skits, organization of events around the EITI process, communication tools, and animation of EITI clubs in the universities). Feedback received from public consultations and debates will be incorporated in the next Mali EITI report, as well as the mining sector beneficial ownership road map to be developed and implemented under the scope of this proposed project.
Component C: Maximizing the local development impact of mining (US$12.40 million equivalent)
36. This component focuses on upstream TA to pilot links between ongoing private and public initiatives with a view to maximize the economic impact of mining and to ensure that benefits are widely shared. It emphasizes (a) supporting the rationalization of small-scale mining, an activity which has the potential to benefit directly 400,000 people and an estimated 2.2 million dependents; (b) leveraging private mining investments in clean energy to improve access to energy in rural areas (for instance facilitating the use of solar power investments in mining to improve energy access for an estimated 15,000 people around mining operations) and supporting economic empowerment of women, who represent 50 percent of the ASM workforce. Therefore, the subcomponents as detailed in the following paragraphs will be supported.
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37. Subcomponent C1: Promoting responsible development of small-scale and artisanal mining (US$6.00 million). Rationalization and formalization of ASM could pave the way for the emergence of a class of local mining entrepreneurs who are fully integrated into the economy. This could also provide a viable alternative for youth employment. The key activities include building the capacity of the Ministry of Mines and Petroleum to (a) provide technical (geological and mining) advisory services to promote orderly and responsible ASM development (delineate ASM corridors and design sustainable mine plans, organize and register ASM actors, establish chain of custody and responsible supply chains, issue ASM authorizations, and monitor activities); (b) acquire and set up demonstration units to train miners and demonstrate acceptable ASM practices; and (c) conduct ASM environmental monitoring, including regular measuring of water pollution in ASM areas, diagnosis/mapping of water pollution, preparation of mitigation guidelines, and establishing an alert system for potential large-scale ASM pollution.
38. Subcomponent C2: Maximizing mining-led local development (US$3.00 million). This component will support carrying out a program of activities aimed at assisting the Government to maximize mining-led local development including (a) strengthening select local entities’ capacity to manage mining revenues through the piloting of participatory mechanisms for budget allocation and investment planning; (b) providing TA designed to maximize local development derived from mining activities (excluding any implementation and/or infrastructure investments); and (c) developing a strategic framework to leverage solar power investments plans and improve local communities’ access to clean energy access in mining areas.
39. Subcomponent C3: Economic empowerment of women and youth in mining (US$3.40 million), To address gender gaps in Mali’s ASM sector and youth unemployment, this subcomponent will support economic empowerment of women and youth in artisanal mining by (a) supporting two women miners associations, namely the Mali Women Miners’ Association (Association des Femmes Minières du Mali, (AFEMINE) and the Mali Women Miners’ Federation (Fédération des Femmes Minières du Mali, FEMINA) to be trainers of their members in non-mining occupations in which women have a comparative advantage (for instance collection, cutting, polishing, and crafting of semi-precious stones for jewelry or art); (b) training mining youth groups in non-mining occupations as alternative livelihoods (such as reclamation, restoration, and conversion of previously mined ASM sites into vegetable farming cooperatives); and (c) supporting the outreach activities of organizations involved in awareness-raising and prevention of resource conflicts at the community level and GBV in mining areas.
Component D: Contingency emergency response (US$0.00)
40. The objective of this component is to provide support for immediate response to an eligible crisis or emergency. The contingency is triggered in the event of a natural or manmade crisis that has caused or is likely to imminently cause a major adverse economic and/or social impact to Mali. Eligible crisis or emergency may include an epidemy (such as an Ebola crisis) or a climate-related natural disaster. The component allocates US$0 funding, but if an emergency is triggered, funding may be reallocated to the component from other components.
Component E: Project coordination (US$5.50 million)
41. The objective of this component is to strengthen the Government’s capacity for coordination and management of the project. This component focuses on support of (a) project management and
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coordination; (b) training, advisory services, and knowledge exchange; (c) fiduciary management; (d) safeguard management; and (e) M&E.
42. The proposed credit includes a Project Preparation Advance (PPA) Facility of US$1.5 million to support the initial project preparation and management, procurement of office equipment, and safeguards related studies, including the preparation of the Strategic Environmental and Social Assessment (SESA).
C. Project Cost and Financing Table 4. Project Component and Activities Components and Activities IDA Funding Component A: Creating conditions for growth and diversification of the mineral sector $ 19.00 A1. Improving geologic coverage to support mining growth and diversification $ 14.00 A2. Updating the policy and regulatory framework in support of mining diversification $ 1.00 A3. Strengthening institutional arrangements and capacity for efficient management of mineral sector $ 4.00 Component B: Strengthening revenue transparency and governance $ 3.10 B1. Improving extractive revenue transparency $ 1.60 B2. Promoting social accountability and citizen engagement $ 1.50 Component C: Maximizing the local development impact of mining $ 12.40 C1. Promoting responsible development of small-scale and artisanal mining $ 6.00 C2. Maximizing mining-led local development $ 3.00 C3. Economic empowerment of women and youth in mining $ 3.40 Component D: Contingency emergency response $ - Component E: Project Coordination $ 4.00 Project Preperartion Facility $ 1.50 Total $ 40.00
D. Project Beneficiaries
43. The new vision of the Government of Mali is to leverage the mining sector to achieve social, economic, and environmentally sustainable growth for all Malians, and for the population around mining operations. The project contributes to this objective by creating the conditions for mining-induced growth and prosperity for both men and women. Therefore, direct project beneficiaries include Government agencies directly supported by the project (Ministry of Mines and Petroleum, Ministry of Finance, Ministry of Local Development, Ministry of Environment, Ministry of Energy, and EITI-Mali Secretariat), the industry associations (Chamber of Mines, small-scale miners’ associations, and women miners’ associations), the local SMEs (through local content development), and civil society. Indirect beneficiaries are the Malian people and the communities hosting mining operations, as well as the investment community considering long-term involvement in Mali because of improved investment climate and institutional capacity.
E. Value Chain
44. Figure 3 illustrates the five links of the EI value-chain. The first link involves Subcomponents A1 and A2 dealing with improved access to resources through availability of geodata and enabling conditions (attractive policy, institutional, legal, and regulatory frameworks). The second link is associated with Subcomponent A3 which focuses on improved institutional capacity to manage the mining sector (better
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technical capacity of personnel, upgrade of cadaster systems, establishment of inspection units, and a Mining Coordination Unit). The third link relates to Subcomponent B1 (improvement in both revenue transparency and efficient tax administration) and the fourth link is associated with Subcomponent B2 which aims at achieving inclusive growth through improved social accountability. The fifth link relates to Component C which focuses on shared growth (spreading the benefits of mining development).
Figure 3. Project Results Chain
F. Theory of Change
45. The project aims to address the three main challenges identified that impede a better contribution of the mining sector to local development in mining areas and overall economic development in Mali, namely (a) insufficient access and management of mineral resources; (b) lack of governance and transparency of the EI revenues; and (c) suboptimal local links reducing the potential economic impact of mining. The interventions for the proposed project were designed around achieving results in these three main areas.
46. To achieve the goal of maximizing the contribution of the mining sector to local and national economies, the following outcomes must be achieved: (a) improving the enabling environment for private investment in sustainable large-scale mining development; (b) improving the governance of mining sector revenues by strengthening social accountability and establishing systems and tools for creation and use of EI data for tracking how revenues are deployed; and (c) encouraging the formalization and sustainable development of ASM as a means of boosting local entrepreneurship and employment in mining.
47. Figure 4 illustrates why and how the activities of the project will lead to a series of changes which will collectively produce the ultimate outcome of a mining sector which makes a significant contribution to Mali’s long-term goal of sustainable, inclusive, and shared growth.
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Figure 4. Theory of Change
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G. Rationale for World Bank Involvement and Role of Partners
48. The World Bank provided support to the sector for the first time with a mining TA project in 1995 (Mining Capacity, P001756). In the intervening period, Mali benefited from support to the EITI. In 2015, the World Bank re-engaged in Mali’s mining sector with a two-year trust fund operation (Mali: Legal and Technical Negotiation Support, P149445). In addition to these prior engagements in Mali, the World Bank also brings regional and global experience in assisting countries to improve the governance and socioeconomic performance of their mining sector. The World Bank’s most recent support laid the groundwork for the long-term support proposed by this project and included (a) an assessment of technical, financial, and legal performance of all mining operations in Mali; (b) capacity building in contract negotiation, and recommendations to provide better oversight of contracts and the regulatory framework; (c) preparation of a draft mining code; and (d) outline of an action plan for the formalization of ASM. The value added of the World Bank rests on using its previous sector engagement to inform the design of this project, building on key achievements and drawing lessons of implementation performance.
49. This proposed project was selected for IDA funding because of the high potential of the mining sector to become an engine for growth, to generate new employment opportunities for youth through local procurement and ASM, and to be a catalyst for citizen engagement and demand for good governance. More importantly, the expected revenues from a revitalized mining sector can create budget space for financing the Government’s poverty reduction agenda. The project will leverage activities of existing World Bank-funded projects and coordinate with donor-funded programs to expand the scope of planned activities. The proposed project will benefit from and complement the World Bank’s Building a More Efficient Fiscal Decentralization System in Mali Project (P164707), where both projects together could achieve better mining revenue management and investment in local areas, transparency and accountability, and participation of citizens. In addition, the project could leverage the work of the International Finance Corporation (IFC) in solar energy to implement the ‘Power of the Mine’ approach. Other projects which offer opportunities for collaboration include Natural Resources Management in a Changing Climate in Mali (P145799) and the Guinea Third Village Community Support Project (P156422).
50. Development partners have played and continue to play an important role in the development of Mali’s mining sector. Mining development in Mali has been mostly supported by donor-funded programs, including France (1972–1989), Belgium (1984–1987), UN Development Programme (1971–1992), and European Development Bank (2000–2007). External collaboration opportunities exist with donor-funded mining governance projects, notably the GIZ-funded Extractive Industries Governance Support Project (total cost of EUR 6 million from January 2017 to December 2019) and Global Affairs Canada (GAC) Extractive Industries Monitoring Project for Francophone Africa (total cost of CAD 18 million for countries, starting in January 2017 for five years). Annex 2 presents some additional information regarding synergies among the various mining governance initiatives funded by donors.
H. Lessons Learned and Reflected in the Project Design
51. From a technical standpoint, the project design reflects lessons learned from World Bank- supported mineral sector reforms using the EI value chain approach. The value chain recognizes the need for holistic approach and the role of improved governance to achieve the expected benefits of mining
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development. As a result, the project is structured as a mining governance operation with emphasis on improving sector governance, revenue transparency and allocation, and social accountability.
52. From an implementation standpoint, this project draws lessons learned from the Implementation Completion and Results Report of the World Bank-supported Mining Capacity Project P001756 (1995), and the Support to the Legal and Technical Negotiation Support Africa Extractive Industry Trust Fund (AEITF) Grant P149445 (2015). These two operations have shown that client ownership and implementation capacity are key to project success. In terms of client ownership, political uncertainties and frequent changes of ministers and implementing teams have resulted in shifting priorities and implementation delays. The design of the project reflects intense consultation with the Government, alignment with the growth objectives of CREDD, and involvement and buy-in by the Ministry of Finance. The project will initially use the model of implementation arrangements of the AEITF Grant (Mali: Legal and Technical Negotiation Support, P149445) during the project preparation phase. Under this arrangement, fiduciary management was outsourced to an already established Project Coordination Unit (PCU) with solid experience in managing World Bank-funded projects. However, while this arrangement facilitated project implementation, the coordination between the PCU and the technical staff of the Ministry of Mines and Petroleum and the transfer of skills was poor. Therefore, this project will establish a dedicated PCU within the Ministry of Mines and Petroleum to strengthen overall coordination and build project management capacity.
III. IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements
53. During the first six months after effectiveness, the project will be supported by an existing PCU with over 15 years of experience with World Bank-funded projects. This PCU, called Rural Mobility and Connectivity Project (Projet d'Amélioration de l'Accessibilité Rurale, PAAR, P160505) is a well-established PCU with a successful track record of managing World Bank-funded projects. During the preparatory phase and up to six months after effectiveness, the project will be implemented by a technical unit within the Ministry of Mines and Petroleum, with PAAR providing oversight and fiduciary management. The PAAR will assist in setting up a fully functioning PCU at the Ministry of Mines and Petroleum through competitive hiring, on-boarding, and training of key PCU staff, including a project coordinator, a procurement specialist, a financial management (FM) specialist, an environmental specialist, a social development specialist, and an M&E specialist.
54. Once established and operational under the responsibility of the Ministry of Mines and Petroleum, the new PCU, which will be established not later than six months after the project effectiveness, will take over from PAAR and manage the project on a day-to-day basis. It will be responsible for all fiduciary aspects of the project including procurement, disbursement, accounting, financial reporting, and M&E of the project, and ensuring audits of the project account. It will prepare biannual reports recording the progress of the project. The new PCU will operate under the guidance of a Project Steering Committee (PSC) at the ministerial level, which is assisted by an Inter-ministerial Technical Commission (designated by the minister to advise the PSC). The PSC, to be chaired by the minister of mines and petroleum or the secretary general of the ministry, will review and approve the annual work programs and the budget of the project. The PSC members will include officials of the
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Ministry of Mines and Petroleum, the Ministry of Environment, Sanitation, and Sustainable Development, the Ministry of Finance, the Ministry of Local Development, the Ministry of Energy, and the industry associations (Chamber of Mines, Small-scale Miners Associations, and Women Miners Associations); the EITI-Mali Secretariat; and civil society. The PCU will be responsible for preparing project documents based on relevant contributions by all institutions involved in project implementation.
55. The activities of the PCU will be supplemented by close supervision of the World Bank through quarterly missions and daily oversight by a locally based co-task team leader. A midterm review will take place no later than three years of implementation with the objective of assessing progress to date and if necessary to redirect the project by integrating additional lessons learned and realities on the ground. The project account will be audited annually by an independent auditor acceptable to IDA and should be submitted to IDA no later than six months after the closing of the fiscal year in Mali (that is, June 30).
56. The PPA facility of US$1.5 million will be used to support the implementation arrangements, including setting up the PCU and undertaking preparatory activities and studies. More specifically, PPA funds will be primarily used for (a) preparatory studies to inform project design, baseline studies, and preparation of safeguard instruments (including SESA); (b) fund implementation of PPA activities, including the costs of a technical implementation unit and a fiduciary management agency; and (c) prepare the Project Implementation Manual (PIM); and (d) support of pilot projects and proof of concepts for innovative activities to be supported under the project.
57. The PIM will be prepared and adopted within three months following project effectiveness. The PIM will be a compendium of procedures for implementing the project. It details the organizational and technical procedures that govern the project, including FM, procurement, and social and environmental safeguards procedures and the Grievance Redress Mechanism (GRM). A separate administrative, FM, and procurement manual as well as a specific manual for managing the contingency emergency response component (CERC) will be prepared.
B. Results Monitoring and Evaluation Arrangements
58. The PCU will include a specialized staff to fulfill its M&E responsibilities. The M&E function will be guided by an M&E framework, a Results Framework, and monitoring matrix to track inputs, outputs, and outcomes as well as key performance indicators and milestones. Gender-disaggregated data and safeguard performance will be closely monitored. The M&E process will involve data collection and reporting, production of periodic activity reports, and biannual reviews. The activities of the PCU will be supplemented by close implementation support of the World Bank through quarterly missions and daily oversight by a liaison consultant.
59. The implementation and results of this project will be monitored through a variety of instruments. These will include (a) regular field visits by project beneficiary staff (Ministry of Mines and Petroleum, Secretariat of EITI, Ministry of Finances, and so on); (b) oversight of the PSC; (c) annual operational audits that will produce timely information on the compliance of all stakeholders with the procedures and responsibilities outlined in the PIM and M&E plan; and (d) possibly the use of local non-governmental organizations (NGOs) in the communities that staff are not able to reach due to insecurity. A variety of smart approaches will be used by leveraging digital technologies to facilitate project implementation and
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enhance M&E such as geo-enabled cartographic representation of project activities and mobile-based iterative beneficiary monitoring (IBM) mechanisms. These are described in the following paragraphs.
Geo-enabling Method for Monitoring and Supervision
60. The project will incorporate the Geo-enabling Method for Monitoring and Supervision (GEMS) developed by the World Bank FCV Group to establish a remote supervision system for operations and improve the capacity of clients to conduct accountable and well-structured M&E. The PCU will be accountable for integrating GEMS into the project, as part of its responsibility for the overall project implementation management functions, including M&E and safeguards.
61. The GEMS platform enables project teams to use open source tools for in-field collection of structured digital data that automatically feeds into a centralized M&E system. The integrated data can include any kind of indicators, based on tailor-made forms; photos, audio, and videos; time and date stamps; and global positioning system coordinates that allow for automated geo-mapping of the information.
62. The platform automatizes production of geo-tagged M&E reports and interactive maps, providing transparent information on physical execution of investments, strengthening fiduciary and safeguards oversight, and increasing the capacity to monitor and supervise projects implemented in distant areas. Using these tools systematically allows operations to enhance the transparency and accuracy of M&E and increase the accountability. As such, it provides the Government and the World Bank with a platform for remote supervision, real-time safeguards monitoring, and investments mapping. The project team will participate in a three-day hands-on training on GEMS with two main aims: (a) building M&E capacity among World Bank and project staff to use the GEMS methodology independently and sustainably, customized to their specific project needs and (b) implementing the method systematically across the project implementation geographic scope, to allow for real-time supervision and coordination of operations through a centralized platform that places all projects on an interactive map. After the training, each participant should have acquired the necessary skills to use the tools and methods independently for the benefit of the portfolio’s M&E system and supervision needs. Moreover, the Government and the World Bank will have access to a central digital platform for monitoring the project’s implementation in near real time.
63. The cost factors of GEMS comprise the trainings for the PCU (central and provincial levels), smartphones for data collection (low-cost Android devices), and field data collection costs during Government supervision of project implementation (transport to municipalities). No costs are incurred for the information and communication technology data platforms including for accounts, mobile apps, and server space.
Iterative Beneficiary Monitoring Approach
64. The project will integrate the IBM approach to monitor implementation progress. IBM has been developed to help project managers ensure that projects are implemented the way they are intended. The first IBM activities were executed in the wake of the 2013/14 conflict in northern Mali. In response to this crisis, the World Bank implemented a number of emergency projects which could only be supervised with great difficulty due to the security situation. IBM was designed as an approach to complement field
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supervision, while at the same time reducing field presence by World Bank staff. IBM is suited for conflict areas.
65. The approach is demand-driven, produces short reports, and is focused on diagnosing specific barriers to effective implementation. IBM results have improved project implementation practices and gender equity; it has the potential to strengthen project implementation. IBM complements supervision missions and project M&E by offering an agile, problem-oriented feedback loop, that draws from a randomly selected sample of project beneficiaries and which permits project management to adjust implementation activities ‘on the fly.’ The approach provides feedback to project teams through multiple rounds of smaller-scale data collection that allows project teams to identify implementation issues early and take corrective action. IBM collects data directly from beneficiaries but keeps data collection efforts to a minimum by relying on fewer research questions and smaller samples than standard project M&E.
66. Data, once collected, is used to prepare short reports that draw attention to a limited number of pertinent issues. Data may be collected directly from beneficiaries, using face-to-face interviews, but very often, IBM relies on mobile phone interviews because they are less expensive and avoid travel. Often samples are not very large because small samples may suffice to uncover problems, as well as short questionnaires to keep data collection concise. Small samples still yield relevant information because in most instances, the objective is to identify whether a project is being implemented in the correct manner and to pinpoint specific, actionable issues. In this sense, IBM is different from evaluation tools aiming to assess the size of the impact of an intervention.
Figure 5. IBM Approach
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C. Sustainability
67. Project sustainability depends on Client ownership and commitment, policy and institutional continuity, and political stability. The Government has demonstrated commitment and ownership by linking the project to the long-term objectives of CREDD. The project is not narrowly focused on the mining sector, but it designed to enable the Government to boost sector revenues over the long term to finance the objectives of CREDD.
68. Policy and institutional continuity remain a challenge because the main beneficiary and implementing entity, the Ministry of Mines and Petroleum, is notorious for changes of ministers, which often takes place with changes of staffing and direction. Sustainability will be achieved by closely associating the Ministry of Finance during the design and implementation of the project, and by supporting the establishment of a permanent inter-ministerial Mining Coordination Unit to advise the Government on sector policy matters. The project includes a significant amount of capacity-building effort aimed at developing the capacity of the mining coordination group and the PCU to design and implement the reforms after the project closes.
69. Political stability will be enhanced by this project through addressing grievances about mining sector revenue transparency and allocation, by improving social accountability, and by creating peace dividends (increased local contribution of mining sector through local economic development, mainstreaming of mining revenues into local budgetary processes, and rationalizing ASM).
IV. PROJECT APPRAISAL SUMMARY
A. Technical, Economic and Financial Analysis
70. The project is a TA project where policy outcomes and project impacts are not easily quantifiable based on traditional economic or financial analysis. However, a qualitative review of sector outlook indicates a positive potential return from investment in sector reforms. Mali has currently 13 operating mines, four projects under construction, five projects in advanced feasibility, 10 projects in development phase, and about 100 projects in exploration. Sector reforms could accelerate the transformation rate from a mine prospect to a mining operation. Already, mining contributes 70 percent to exports, 30 percent to fiscal revenues, 14 percent to employment, and 7 percent to GDP. According to Government predictions, the contribution to fiscal revenues is expected to top 20 percent after 2018. Moreover, the decrease in mineral production to about 45 metric tons is expected to be more than compensated by the opening of new mines.
71. In anticipation of the potential economic and social benefits, the Government expects to invest about US$15 million per year in the mining sector to generate a 5 percent sector annual sector growth. This project, with its support of geological survey and institutional capacity building, could result in a higher level of sector growth. Direct returns to the Government will be in the form of fiscal benefits which accrue from (a) increase in revenues from the growth of large-scale mining production; (b) increase in revenues from formalized small-scale mining operations; and (c) increase in household income from improved small-scale mining practices. A secondary effect of the project would be an increase of rural employment and incomes through better performance of small-scale mining, and the broadening of the
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tax base as local procurement stimulates the creation of jobs and small businesses as local suppliers of goods and services to large-scale mining operations.
B. Fiduciary
Financial Management
72. The preliminary assessment of the Ministry of Mines and Petroleum was conducted in July 2018. The objective of the assessment was to determine whether the ministry has acceptable FM arrangements in place to ensure that the project funds will be used only for intended purposes, with due attention to considerations of economy and efficiency. The assessment complied with the World Bank Directive Financial Management Manual for World Bank Investment Project Financing (IPF) operation effective March 1, 2010 and as last revised on February 10, 2017.
73. The preliminary assessment of the Ministry of Mines and Petroleum concluded that the current FM arrangements based on national FM procedures and as applied by the Directorate of Finance of the Ministry of Mines and Petroleum is not adequate to handle the project activities following World Bank procedures. The national system would not ensure (a) acceptable tracking of the use of the project resources to ensure use for the purposes intended in an efficient and economical manner; (b) correct and complete recording of all transactions and balances related to the project; (c) preparation of accurate, reliable, and timely project’s financial reports; and (d) the project financial statements and operations will be subjected to acceptable auditing arrangements. In addition, the Directorate of Administration and Finance at the Ministry of Mines (Direction Administrative et Financière du Ministère des Mines, DAF-MM) does not have a manual of procedures and would not have the dedicated time to handle properly the project activities and would rely on the PCU for PAAR.
74. The overall fiduciary risk rating is assessed as Substantial and mitigation measures proposed (see Table 5) will strengthen the internal control environment and maintain the timeliness and reliability of information produced by the PCU of the Ministry of Mines and Petroleum (MMP), once established. A detailed FM assessment plan can be found in Annex 1.
Table 5. FM Action Plan Deadline and Action Responsible Party Conditionality (after effectiveness) 1. Elaborate PIM including fiduciary procedures PCU Three (3) months 2. Recruit an FM specialist with qualifications and PCU Six (6) months experience satisfactory for IDA competitive basis 3. Recruit an accountant PCU Six (6) months 4. Purchase and install an accounting software PCU Three (3) months 5. Recruit an external auditor PCU Six (6) months
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Procurement
75. The Recipient will carry out procurement for the proposed project in accordance with the World Bank’s ‘Procurement Regulations for IPF Borrowers’ (Procurement Regulations) dated July 2016 and revised in November 2017 and August 2018 under the ‘New Procurement Framework (NPF)’, and the ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants,’ dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. All procuring entities as well as bidders and service providers, that is, suppliers, contractors, and consultants shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraph 3.32 and Annex IV of the Procurement Regulations.
76. All goods and non-consulting services will be procured in accordance with the requirements set forth or referred to in Section VI - Approved Methods: Goods, Works and Non-Consulting Services of the Procurement Regulations. Consulting services will be procured in accordance with the requirements set fort or referred to in Section VII - Approved Selection Methods: Consulting Services of the Procurement Regulations, the Project Procurement Strategy for Development (PPSD), and Procurement Plan, approved by the World Bank. The Procurement Plan, including its updates, shall include for each contract: (a) a brief description of the activities/contracts; (b) selection methods to be applied; (c) cost estimates; (d) time schedules; (e) the World Bank’s review requirements; and (f) any other relevant procurement information. The Procurement Plan covering the first 18 months of the project implementation has been prepared and approved. Any update of the Procurement Plan will be submitted for the World Bank’s approval. The Recipient shall use the World Bank’s online Systematic Tracking of Exchanges in Procurement (STEP) as a procurement planning and tracking tool to prepare, clear, and update its Procurement Plans and conduct all procurement transactions.
Requirements and Actions for National Open Competitive Procurement
77. When procurement is done on the national market, as agreed in the Procurement Plan, the country’s own procurement procedures may be used with the requirements set forth or referred to in paragraphs 5.3 to 5.6 related to National Procurement Procedures. For Mali, the requirements for national open competitive procurement are presented in Annex 1 (Procurement Description and Institutional Arrangements).
Project Procurement Strategy for Development (PPSD)
78. The Recipient (with the assistance of World Bank staff) has prepared the PPSD which describes how procurement activities will support project operations for the achievement of the PDO and deliver Value for Money (VfM). The procurement strategy will be linked to the project implementation strategy at country, regional, and international levels ensuring proper sequencing of the activities. It will consider institutional arrangements for procurement; roles and responsibilities; thresholds, procurement methods, and prior review; and the requirements for carrying out procurement. It also will include a detailed assessment and description of Ministry of Mines and Petroleum Directorate in charge of procurement and government capacities for carrying out procurement and managing contract implementation, within an acceptable governance structure and accountability framework. Other issues considered will include the behaviors, trends and capabilities of the market (that is, market analysis) to respond to the Procurement Plan. The strategy includes a summary on: Procurement Risk, Mitigation
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Action Plan, Market Analysis, Procurement Approaches. The PPSD (including the Procurement Plan) has been reviewed and accepted by the World Bank. A detailed procurement description and institutional arrangements can be found in Annex 1.
C. Safeguards
Environmental Safeguards
79. Environmental category. The project is rated Category B. No investments with physical footprints are expected, but the project involves TA activities which may eventually lead to mining development. As a precautionary measure, the project includes the preparation of a SESA in its preparatory stage to inform the design of activities and incorporate social and environmental mitigation measures. The project also incorporates activities which enhance environmental protection for small-scale mining. These include under Subcomponent A1 the support to ASM through targeted geological ground works in the designated ASM corridors to generate geological information to improve mine development, sampling, and testing of mineral resources in a way that reduces land degradation and deforestation. Direct support to artisanal mining in a controlled area to introduce and demonstrate mercury-free technology on a pilot basis. Under Subcomponent A2, the project will support among other activities: (a) the preparation of specific environmental, social, health, and safety regulations for mining, and mine closure policies; (b) design of an environmental management framework for mining and petroleum; (c) the preparation of a policy and regulatory framework for ASM, including social regulations and guidelines on gender and child labor; and (d) water pollution management in ASM areas.
80. Environmental safeguards policies. The activities of the project would trigger OP 4.01 Environmental Assessment, as the project will support the Government in the preparation of a SESA as a project outcome.
81. Environmental and social safeguard institutional arrangement. Given the Ministry of Mines and Petroleum’s limited capacity in dealing with World Bank environmental and social safeguards, a full-time environmental safeguard specialist and a full-time social development specialist are included in the staffing of the PCU.
Social Safeguards
82. This project has no physical footprint and is unlikely to induce involuntary resettlement or adverse impacts on local community livelihoods. This implies that the potential environmental and social impacts are expected to be minimal. In view of the significant social risk profile of artisanal mining, however, the Borrower will take steps to consult diverse groups of stakeholders and address pertinent gender issues that are relevant to the project. The World Bank’s requirement on gender tag encourages projects to assess and contribute to closing gender gaps in terms of access to opportunities, resources, and assets, employment, capacities, vulnerability to violence and sexual exploitation, and so on. Given the importance of gender issues in the mining sector in Mali, this project will provide training that is gender sensitive and there will be a gender balance in participation. Special attention will be paid to GBV and child exploitation issues around mining areas. As part of the SESA, this project will undertake a social assessment focused on gender and child labor to explore deeper gender and child labor constraints as well as the specific project approach to ensure that these issues are mainstreamed into the planning and
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implementation process. The SESA will also establish key indicators for monitoring. The project will identify key stakeholders during preparation and consult with relevant NGOs, community-based organizations, and local women and youth organizations.
D. Grievance Redress Mechanisms
83. Communities and individuals who believe that they are adversely affected by a WB supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.
E. Climate Change Co-Benefits and Migration
84. The project cannot be assigned climate co-benefits. However, it intends to mitigate and adapt to climate change as follows:
• Subcomponent A1: Improving geological coverage to support mining growth and diversification. There is a potential for assigning adaptation co-benefits, if improving geological knowledge will help identify areas vulnerable to climate-risks, thus improving the resilience of such areas.
• Subcomponent A2: Updating the policy and regulatory framework in support of mining diversification. There is a potential for assigning mitigation co-benefits for preparation of environmental regulations for mining through support to national, regional, or local policy aimed at preventing deforestation or reducing greenhouse gas emissions from mining activities.
• Subcomponent C2: Maximizing mining-led local development. There is a potential for assigning mitigation co-benefits for developing power infrastructure links through identification and assessment of opportunities for mine and power integration focused on clean energy (solar power).
V. KEY RISKS
85. The overall risk of the project is high, given that some of the risks can affect the achievement of the PDO. All High and substantial Risks are discussed in the following paragraphs.
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86. Political and governance risks (High). These include risk of political reversal toward economic and political liberalization, political capture of EI revenues, civil disturbance, and general instability. They are mitigated by the strong popular demand for democratic governance, transparency, and accountability of EI revenues. The project will use EITI-Mali as a platform for promoting social accountability and revenue transparency. The parallel project on fiscal decentralization will provide additional support to strengthen the delivery of services. The high rating in this category arises in part from high political economy risks. The aftermath of the 2012 crisis has brought focus on the potential role of mining as a driver of conflict and corruption. Mali global corruption rank, which stood at 96th place in 2008, rapidly deteriorated to 127th in 2013 and remained at 122nd place in 2017. The corruption index hovers around 30, reaching a high of 35 in 2015, reflecting increased incidence of petty corruption, but also corruption of state actors in public procurement, in the settlement of commercial disputes. Political economy risks are greater for ASM, which is prone to political capture and conflict and terrorism financing. Since the beginning of the Malian crisis of 2012, the Liptako Gourma gold mining region comprising Mali, Burkina Faso, and Niger has seen the rise of non-state armed groups, terrorism, and lawlessness. Gold mining has the potential to influence the dynamics of conflict by providing a source of financing. However, the preliminary analysis based on field observation and recent studies (OECD financial flows study and Mali political economy analysis by the Norwegian Ministry of Foreign Affairs) indicates that the hot spots of industrial and artisanal mining of gold (Kayes, Koulikoro, and Sikasso), do not currently show signs of control of gold sites by non-state armed groups. However, there is anecdotal evidence that artisanal gold mining sites are beginning to spring around Kidal and Tessalit where groups affiliated to terrorist organizations are known to operate. Political economy risks are mitigated by the fiduciary controls of the project and the limited geographical coverage to low-risk of involvement of non-state actors.
87. Macroeconomic risk (Substantial). External shocks may preclude the Government from sustaining its financial commitments under the project. For instance, the volatility of commodity markets may result in macroeconomic shocks. For instance, gold prices respond closely to changes in world economic activity, interest rates, inflation, and political stability. Gold traded at less than US$40 per ounce in 1971, reaching US$630 in 1980, but falling to around US$250 in 2000. Around 2002, gold prices started an ascension which culminated in 2011 with a high of around US$1,900, only to fall back to around US$1,000 in 2016. This risk is mitigated by the positive outlook for mining in the medium and long term and the potential increase in fiscal revenues.
88. Institutional capacity for implementation and sustainability risks (High). Central and local government authorities do not have the human resources needed to implement the project. To mitigate the risk, the project will support a fully equipped and staffed PCU, and support training and staff development for implementing entities.
89. Fiduciary risks (High). This rating is due to (a) the country’s overall public FM risk level and (b) the lack of recent fiduciary experience of the Ministry of Mines and Petroleum with World Bank-funded projects. Even though the ministry benefited for two years in 2015 with a two-year trust fund operation (Mali: Support to the Legal and Technical Negotiation Support AEITF Grant No: TF017214), previously, all the fiduciary activities were managed by the Mali Energy Support Project. The project will provide a remedy to this situation by setting up a dedicated PCU staffed with experienced fiduciary experts (FM and procurement), and by supporting a twinning arrangement between the new PCU and a PCU with a proven track record of success in managing World Bank-funded projects in Mali.
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90. Environmental and social risks (Moderate). The moderate rating is justified by the fact that this project supports only TA activities with no discernible physical footprint. The environmental risks are therefore minimal. The project also includes mitigation measures (promoting responsible development of ASM, mining-led local development, economic empowerment of women and youth in mining, support of outreach and prevention of resource conflicts) for social risks arising from (a) land disputes among artisanal miners; (b) tensions between artisanal miners and industrial mining companies over access to resources; and (c) civil disturbance and community unrest in the form of protests led by locals, especially women and youth, over poor environmental degradation and inadequate investments in social services despite benefits made from the mining resources. ASM is now managed at the community level, and local authorities often mediate disputes to arrive at a mutually acceptable solution. Other sources of tension include the resistance to the seasonal ban on ASM (during wet periods of June-September) and cross- border land disputes. The Malian Government now imposes a temporary ban on small-scale mining during the wet season following many deaths from the collapse of gold shafts and tunnels. Resistance to the ban sometimes results in clashes with the authorities, but with ASM management at the community level, the risk is moderate. Cross-border community conflicts are also frequent in artisanal mining, particularly around the border between Guinea and Mali where disputes have arisen among neighboring ASM communities. The project has included support for community awareness and conflict prevention in its design.
91. Stakeholder risks (High). The rating is due to the complexity of the mining sector, the diverging views and interests of key stakeholders, the risks of tensions between mining companies and local or central governments, and between communities competing for the same mining grounds. The project mitigates this risk by adopting a consultative approach throughout project implementation, by supporting outreach and awareness as well as conflict prevention.
92. Other: Security risks (High): insurgency and terrorism could increase security risks and affect project implementation. These risks are mitigated by the location of mining zones in Kayes and Sikasso, which are relatively safe areas. These regions have been relatively spared from the terrorist threat that hangs over the country. Crime is the highest threat, mainly robbery and carjacking, and risks increase as one moves closer to the mining areas and borders with the neighboring countries. The project team will make regular assessment of the situation on the ground with both local and central authorities and World Bank Security experts and take proactive measures under the project as deemed necessary.
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VI. RESULTS FRAMEWORK AND MONITORING
Results Framework COUNTRY: Mali Mali Governance of Mining Sector
Project Development Objectives(s) The objective is to strengthen the capacity of the mining sector to contribute to Mali’s medium-term growth and sustainable development objectives.
Project Development Objective Indicators
RESULT_FRAME_T BL_PDO Indicator Name DLI Baseline End Target
Create the conditions for growth and diversification of the minieral sector
Share of high-potential sheets covered by airborne or groung 25.00 40.00 geophysical survey (Percentage)
Mining policy and regulatory framework attractiveness for 50.40 60.00 sustainable investments (Fraser Institute Index) (Number)
Satisfactory institutional effectiveness rating (Yes/No) No Yes
Resource Governance Index (Number) 53.00 75.00
Proportion of women in mining supported by the project 0.00 30.00 (Percentage)
Number of artisanal mining cooperatives established and 0.00 200.00 supported by the project (Number)
PDO Table SPACE
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Intermediate Results Indicators by Components
RESULT_FRAME_T BL_IO Indicator Name DLI Baseline End Target
Component A: Creating the Conditions for Growth and Diversification of the Mineral Sector Geological attractiveness for investment (available number of area maps surveyed at scale of 1:200 000 for mining investment 80.00 130.00 promotion) (Number) Regulatory capacity (average processing time of mining title 180.00 30.00 application) (Days) Average number of annual health, safety, environmnetal and social compliance inspections for each active mining operation 1.00 4.00 (Number) Establishment and operationalization of Inter-Ministerial Mine Coordination Unit (Yes/No) No Yes Component B: Strengthening Revenue Transparency and Gocvernance Number of mining localities with completed strategic development plans that integrate mining EI revenues (Number) 0.00 6.00 Establishment of an online platform for EI revenue data integration and monitoring at local and central levels (Yes/No) No Yes Representation of women in community-based management 10.00 30.00 committees (Percentage) Annual publication of compliant EITI reports incorporating ASM No Yes revenue and disaggregated local revenue (Yes/No) Consultation and debates on the governance and transparency diligently documented and publicly disclosed (Number) 0.00 5.00 Feedback received from public consultations and debates have been incorporated in the upcoming Mali EITI report, as well as No Yes the mining sector beneficial ownership road map (Yes/No) Component C: Maximizing the Local Development Impact of Mining Number of registered and active ASM cooperatives, SMEs or 100.00 400.00 associations as a result of the project formalization initiatives
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RESULT_FRAME_T BL_IO Indicator Name DLI Baseline End Target
(Number) Number of women supported through associations to establish and operate value-added industries (Percentage) 0.00 500.00 Number of mining companies signing on to multi-stakeholder 0.00 3.00 initiatives for power and mining integration (Number) Number of women supported to participate in alternative 0.00 300.00 livelihood activities (Number)
IO Table SPACE
UL Table SPACE
Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Extent of knowledge of Directorate Geological Survey Share of high-potential sheets covered by Once PCU, Ministry of Mines mineral potential hosted by of Geology Reports and Maps airborne or groung geophysical survey greenstone belts This indicator measures the Annual Mining policy and regulatory framework adequacy of the regulatory Fraser Monitoring Survey Annual PCU, Task Team attractiveness for sustainable investments framework for sustainable Institute Report online
(Fraser Institute Index) investment in exploration Survey and mining development Independent annual Third party assessment of the overall institutional Interviews and review Satisfactory institutional effectiveness effectiveness of the Ministry Annual PCU's M&E team effectiveness of activity reports rating of Mines and Petroleum assessment based on evaluation of
progress toward reaching
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the outcomes of the Results Framework and on results of customer satisfaction survey. This index is published annually by the Natural Resource Governance Institute. It measures the quality of resource Natural governance in 81 countries. Annual Resource Resource Task Team and PCU, It is the product of 89 Annual Governance Index Resource Governance Index Governance Ministry of Mines country assessments (eight Report Institute countries were assessed in
two sectors), compiled by 150 researchers, using almost 10,000 supporting documents to answer 149 questions. Project Extent of support for Project activity Proportion of women in mining supported Annual Annual PCU, Ministry of Mines women empowerment in report/work plan by the project Report the mining sector
PCU, Collection of project M&E Team of PCU, Number of artisanal mining cooperatives Extent of project support for Annual Chamber of activity reports Ministry of Mines established and supported by the project formalization of ASM Mines
ME PDO Table SPACE
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The World Bank Mali Governance of Mining Sector (P164242)
Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Direction Geological attractiveness for investment Access to geological Nationale (available number of area maps surveyed information for investors de la at scale of 1:200 000 for mining interested in exploration Geologie investment promotion)
Ministry of This indicator measures Mines, Compilation of reports Regulatory capacity (average processing government's efficiency in Annual National from the PCU, Ministry of Mines time of mining title application) providing access to mineral Directorate mining cadaster resources of Mines
Average number of annual health, safety, Inspection reports from This indicator measures the Ministry of environmnetal and social compliance annualy the newly created Mine Ministry of Mines government's capacity to Mines inspections for each active mining Inspectprate Office monitor mining operations operation This indicators measures the Verification of government's capacity to Ministry of establishment of Establishment and operationalization of Once Ministry of Mines formulate policies and Mines functioning ASM and Inter-Ministerial Mine Coordination Unit negotiate mining local content units agreements Ministry of Decentralizat Ministry of Mines, Number of mining localities with Annual ion and Local Compilation of reports Ministry of completed strategic development plans Government Decentralization that integrate mining EI revenues reports
Establishment of an online platform for EI Annual Ministry of Meeting registration PCU, M&E Team revenue data integration and monitoring Mines, PCU and minutes
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at local and central levels
This indicator measures the extent of women's voice local village Representation of women in community- Annual Survey PCU of Ministry of Mines and accountability in committees based management committees extractive revenue management Annual publication of compliant EITI Indicator of transparency of EITI Annual EITI Reconciliation Task Team and PCU of Annual reports incorporating ASM revenue and mining revenues received at Report Reports Ministry of Mines disaggregated local revenue local and central levels Consultation and debates related to the governance and transparency of social payments, corporate social PCU, Project Consultation and Consultation and debates on the responsibility, and other Annual Annual debate meeting PCU governance and transparency diligently contextual data related to Report minutes and reports. documented and publicly disclosed the extractive sector need to be well documented and publicly disclosed with full access to citizens. Feedback received from public consultations and PCU; Project debates will be incorporated Feedback received from public Annual in the next Mali EITI report, Review of Mali EITI consultations and debates have been Report; Mali as well as the mining sector Once Report and Project PCU; M&E Team incorporated in the upcoming Mali EITI EITI beneficial ownership road Documentation report, as well as the mining sector Secretariat; map to be developed and beneficial ownership road map EITI Report implemented under the
scope of this proposed project. Number of registered and active ASM Annual Ministry of Compilation of reports Ministry of Mines cooperatives, SMEs or associations as a Mines, ASM
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result of the project formalization Unit initiatives Ministry of Number of women supported through Extent of project support of Mines, Capacity building Twice PCU, M&E Team associations to establish and operate economic empowerment of Ministry of completion reports value-added industries women Labor, PCU
Extent of operationalization Project Number of mining companies signing on Ministry of Mines, of the Power of the Mine Once completion PCU, M&E Team to multi-stakeholder initiatives for power ANADER Initiative to improve energy report and mining integration access in rural areas Number of women supported to Extent of project support of Twice PCU PCU's annual report Ministry of Mines participate in alternative livelihood economic empowerment of
activities women ME IO Table SPACE
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ANNEX 1: Implementation Arrangements and Support Plan
COUNTRY: Mali Mali Governance of Mining Sector
1. The Recipient will carry out procurement under the project in accordance with the World Bank’s ‘Procurement Regulations for IPF Borrowers’ (Procurement Regulations) dated July 2016 and revised in November 2017 and August 2018 under the NPF and the ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants,’ dated October 15, 2006, and revised in January 2011 and as of July 1, 2016, and other provisions stipulated in the Financing Agreement.
2. All procuring entities, as well as bidders and service providers, that is, suppliers, contractors, and consultants, shall observe the highest standard of ethics during the procurement and execution of contracts financed under the project in accordance with paragraph 3.32 and Annex IV of the Procurement Regulations.
3. The Recipient shall prepare and submit to the World Bank, a General Procurement Notice (GPN) and the World Bank will arrange for publication of the GPN in UN Development Business online and on the World Bank’s external website. The Recipient must also publish it in at least one national newspaper.
4. The Recipient shall publish the Specific Procurement Notices (SPNs) for all goods, non-consulting services, and the requests for expressions of interest on their free-access websites, if available, and in at least one newspaper of national circulation in the borrower’s country, and in the official gazette. For open international procurement selection of consultants using an international short list, the Recipient shall also publish the SPNs in UN Development Business online and, if possible, in an international newspaper of wide circulation. The World Bank arranges for the simultaneous publication of the SPNs on its external website.
Financial Management Arrangement
5. The preliminary assessment of the Ministry of Mines and Petroleum has been conducted on July 2018. The objective of the assessment was to determine whether the Ministry has acceptable FM arrangements in place to ensure that the project funds will be used only for intended purposes, with due attention to considerations of economy and efficiency. The assessment complied with the World Bank Directive Financial Management Manual for World IPF operation effective March 1, 2010 and as last revised on February 10, 2017.
6. The preliminary assessment of the Ministry of Mines and Petroleum concluded that the current FM arrangements based on national FM procedures and applied by the Directorate of Finance of the Ministry of Mines and Petroleum is not adequate to handle the project activities following World Bank procedures. The national system would not ensure (a) acceptable tracking of the use of the project to ensure that they are channelized to the purposes intended efficiently and economically; (b) correct and complete recording of all transactions and balances related to the project; (c) preparation of accurate, reliable, and timely project’s financial reports; and (d) the project financial statements and operations will
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be subjected to acceptable auditing arrangements. In addition, the DAF-MM does not have a manual of procedures and would not have the dedicated time to handle the project activities appropriately.
7. The PCU, called PAAR is anchored in the Ministry of Infrastructure and will provide fiduciary support and training to the new PCU being established under Ministry of Mines and Petroleum. This PCU/PARR will also assist the Ministry of Mines and Petroleum before project staff recruitment.
8. The overall Financial Management risk rating is assessed as Substantial and mitigation measures proposed (see Table 1.1) will strengthen the internal control environment and maintain the continuous timeliness and reliability of information produced by the PCU and an adequate segregation of duties.
Table 1.1. FM Action Plan Deadline and Action Responsible Party Conditionality (after effectiveness) 1. Elaborate PIM including fiduciary procedures PCU Three (3) months 2. Recruit an FM specialist with qualifications and PCU Six (6) months experience satisfactory for IDA competitive basis 3. Recruit an accountant PCU Six (6) months 4. Purchase and install an accounting software PCU Three (3) months 5. Recruit an external auditor PCU Six (6) months
9. Internal control system. The internal control system comprises (a) a steering committee to oversee the project activities and (b) a PIM including a section on administrative, financial, procurement and accounting procedures, which will be adopted three months after project effectiveness. and an internal audit function to carry out ex post reviews and to evaluate the performance of the overall internal control system.
10. Planning and budgeting. The PCU will prepare a detailed annual work plan and budget (AWPB), which needs to be approved by the PSC. The PCU will submit the approved AWPB to the World Bank, no later than November 30, before the year when the work plan should be implemented.
11. Accounting. The Système Comptable OHADA (OHADA Accounting System, SYSCOHADA), assigned accounting system in West African Francophone countries, will be applicable. The accounting software will be customized to host the bookkeeping of project.
12. Financial reporting. Every quarter, the PCU will submit an interim financial report (IFR) to the World Bank within 45 days after the end of the calendar semester period. The IFRs should provide sufficient pertinent information for a reader to establish whether (a) funds disbursed to the project are being used for the purpose intended; (b) project implementation is on track; and (c) budgeted costs will not be exceeded. The PCU will use the IFR format of the ongoing IDA funded projects.
13. The report may include the following:
• An introductory narrative discussion of project developments and progress during the period, to provide context to (or other explanations of) the financial information reported
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• A Sources and Uses of Funds Statement, both cumulatively and for the period covered by the report, showing separately funds, provided under the project (IDA, borrower, and recipients)
• A Uses of Funds by Components Statement, cumulatively and for the period covered by the report
• The designated account (DA) reconciliation, including bank statements and general ledger of the bank account
• Explanation of variances between the actual and planned activities and budget
14. The PCU will prepare annual financial statements for the project, which will comply with SYSCOHADA and World Bank requirements. Annual financial statements may comprise the following:
• Project presentation and project developments and progress during the year, to provide context to (or other explanations of) the financial information reported
• A Statement of Sources and Uses of Funds which recognizes all cash receipts, cash payments, and cash balances
• A Statement of Commitments
• Accounting policies adopted and explanatory notes
• A Management Assertion that project funds have been expended for the intended purposes as specified in the relevant financing agreements
15. Auditing. The PCU will submit audited project financial statements satisfactory to the World Bank every year within six months after closure of the fiscal year. A single opinion on the audited project financial statements in compliance with International Federation of Accountant will be required. In addition, a Management Letter will be required, containing auditor observations and comments, and recommendations for improvement in accounting records, systems, controls, and compliance with financial covenants in the Financial Agreement.
16. The PCU will recruit a technical competent and independent auditor acceptable to the World Bank within five months after the project effective date. The recruitment for the external audit of the financial statements of the project should be done through terms of reference agreed by IDA.
Table 1.2. Audit Reports Audit Report Due Date The Project audit reports (audit report and • Not later than June 30 (Year N) if effectiveness management letter) has occurred before June 30 (Year N-1). • Not later than June 30 (N+1) if effectiveness has occurred after June 30, (N-1)
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17. Disclosure of the audited financial statements. In line with the access to information policy, the project will comply with the World Bank disclosure policy of audit reports (for example, to make publicly available, in a manner acceptable to the World Bank; promptly after receipt of all final financial audit reports, the World Bank will also make the reports available to the public.
Disbursements Arrangements
18. Disbursements under the project will be carried out in accordance with the provisions of the Disbursement Guidelines for IPF dated February 2017, the Disbursement and Financial Information Letter, and the Financing Agreement.
19. The project will finance 100 percent of eligible expenditures inclusive of taxes. A new CFA francs- denominated DA will be opened in a commercial bank under terms and conditions acceptable to IDA. An initial advance up to the ceiling of the DA will be made and subsequent disbursements will be made against submission of statements of expenditures (SOE) reporting on the use of the initial/previous advance. The option to disburse against submission of quarterly unaudited IFR (also known as report- based disbursements) could be considered, as soon as the project meets the criteria. The other methods of disbursing the funds (reimbursement, direct payment, and special commitment) will also be available to the project. The minimum value of applications for these methods is 20 percent of the DA ceiling. The project will sign and submit withdrawal applications electronically using the eDisbursement module accessible from the World Bank’s Client Connection website.
Figure 1.1. Funds Flow Chart IDA
Replenishments Direct payments Withdrawal applications
DA managed by the PCU (commercial bank)
Payments Supporting documents
Contractors, suppliers, and services providers
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Table 1.3. Eligible Expenditures
Category Amount of the Credit Percentage of Allocated (expressed in Expenditures to be EUR) Financed (inclusive of Taxes) (1) Goods, non-consulting services, and consulting 34,400,000 100% services, Operating Costs, and Training for the Project
(2) Refund of Preparation Advance 1,300,000 Amount payable pursuant to Section 2.07 (a) of the General Conditions
(3) Emergency Expenditures under Part D of the 0 100% Project
TOTAL AMOUNT ???
Implementation Support Plan
20. Based on the outcome of the FM risk assessment, the following implementation support plan as in Table 1.4 is proposed. The objective of the implementation support plan is to ensure that the project maintains a satisfactory FM system throughout its life.
Table 1.4. FM Implementation Support Plan FM Activity Frequency Desk reviews IFR review Semester Audit report review of the program Annually Review of other relevant information such as interim internal Continuous as they become available control systems reports On-site visits Review of overall operation of the FM system (implementation Twice in the year support mission) Monitoring of actions taken on issues highlighted in audit reports, As needed auditors’ Management Letters, internal audits, and other reports Transaction reviews As needed Capacity-building support FM training sessions During implementation and as and when needed
Governance
21. The risk of irregularities and corruption within the project activities is Substantial given the country context and health sector performance. In addition, the lack of appropriate or effective oversight
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mechanisms could jeopardize project implementation. A strong fiduciary arrangement has been designed and established to mitigate these risks; some measures to improve transparency such as providing information on the project status (publication of the project and project audited financial statements on its website); and recruitment of a dedicated FM officer familiar with World Bank FM procedures, and an internal auditor.
Institutional Arrangements for Procurement
22. The PCU will be responsible for the project for procurement planning and management. The PCU coordinator will be responsible for decision making during the procurement process.
23. Filing and record keeping. The Procurement Procedures Manual will set out detailed procedures for maintaining and providing readily available access to project procurement records, in compliance with the Financing Agreement. An archiving room will be available and the PCU will assign one person responsible for maintaining the records. A logbook of the contracts with a unique numbering system shall be maintained.
24. Signed contracts as in the logbook shall be reflected in the commitment control system of the Recipient’s accounting system or books of accounts as commitments whose payments should be updated with reference made to the payment voucher. This will put in place a complete record system whereby the contracts and related payments can be corroborated.
25. PPSD. As part of the preparation of the project, the Recipient has prepared its PPSD, which describes how fit-for-purpose procurement activities will support project operations for the achievement of PDOs and deliver VfM. The procurement strategy is linked to the project implementation strategy at the country, regional, and international levels, ensuring proper sequencing of the activities. It considers institutional arrangements for procurement; roles and responsibilities; thresholds, procurement methods, and prior review; and the requirements for carrying out procurement. It also includes a detailed assessment and description of the Direction of Finance and Material of the Ministry of Mines and Petroleum and Government capacities for carrying out procurement and managing contract implementation, within an acceptable governance structure and accountability framework. Other issues considered include behaviors, trends, and capabilities of the market (that is, market analysis) to inform the Procurement Plan. In view of the relatively small local market for consulting services, special arrangements such as direct contracting, use of state-owned enterprises, third-party monitors, local NGOs, force accounts, use of civil servants, results-based arrangements, need for prequalification, if any, are considered and addressed.
26. The recruitment of civil servants as individual consultants or as part of the team of consulting firms will abide by the provisions of paragraph 3.23 (d) of the Procurement Regulations.
27. Procurement Plan. The Recipient has prepared a detailed 18-month Procurement Plan. The Procurement Plan will be updated in agreement with the World Bank team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
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28. The PCU will carry out procurement to implement the project as explained in the following paragraphs. It will procure goods, or services for the project as included in the Procurement Plan and agreed with the World Bank. The scope of procurement will be described in the PPSD.
29. Training, workshops, study tours, and conferences. Training activities would comprise workshops and training, based on individual needs, as well as group requirements, on-the-job training, and hiring consultants for developing training materials and conducting training. Selection of consultants for training services follows the requirements for selection of consultants as previously explained. All training and workshop activities (other than consulting services) would be carried out on the basis of approved annual work plans/training plans that would identify the general framework of training activities for the year, including (a) the type of training or workshop; (b) the personnel to be trained; (c) the institutions that would conduct the training and reason for selection of this particular institution; (d) the justification for the training, that is, how it would lead to effective performance and implementation of the project and/or sector; (e) the duration of the proposed training; and (f) the cost estimate of the training. Report by the trainees, including completion certificate/diploma upon completion of training, shall be provided to the project coordinator and will be kept as parts of the records, and will be shared with the World Bank if required.
30. Detailed training and workshop terms of reference providing the nature of training/workshop, number of trainees/participants, duration, staff months, timing, and estimated cost will be submitted to IDA for review and approval before initiating the process. The selection methods will derive from the activity requirement, schedule, and circumstance. After the training, the beneficiaries will be requested to submit a brief report indicating what skill or skills have been acquired and how these skills will contribute to enhancing their performance and attaining the project objective.
31. Operational cost. Operational costs financed by the project would be incremental expenses, including office supplies, vehicles operation and maintenance costs, maintenance of equipment, communication costs, rental expenses, utility expenses, consumables, transport and accommodation, per diem, supervision costs, and salaries of locally contracted support staff. Such service needs will be procured using the procurement procedures specified in the PIM accepted and approved by the World Bank.
32. Procurement Manual. Procurement arrangements, roles and responsibilities, methods, and requirements for carrying out procurement shall be elaborated in detail in the Procurement Manual, which will be a section of the PIM. The PIM shall be prepared by the Recipient and agreed with the World Bank not later than three months from the effectiveness date.
33. Procurement methods. The Recipient will use the procurement methods and market approach in accordance with the Procurement Regulations.
34. Open National Market Approach is a competitive bidding procedure normally used for public procurement in the country of the Recipient and may be used to procure goods, works, or non-consultant services provided it meets the requirements of paragraphs 5.3 to 5.6 of the Procurement Regulations (see Table 1.5).
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Table 1.5. Requirements and Actions for National Open Competitive Procurement No. Requirements Actions 1 Open advertising of the procurement opportunity at the The advertising must be extended to all national level. contracts through the inclusion of all contracts in the Procurement Plan and its publication. 2 The procurement is open to eligible firms from any None. country. 3 The request for bids/request for proposals will require Reinforce the related provisions (Public that bidders/proposers submitting bids/proposals Procurement Code Art. 29/Code of ethics present signed acceptance at the time of bidding to be and professional conduct in Public incorporated in any resulting contracts, confirming Procurement [Article 8, 11, 12, 13, 28, 38, application of, and compliance with, the World Bank’s 39, 40, 41, 42, 44, and 47]) by considering Anti-Corruption Guidelines, including without limitation the aspects related to the World Bank’s Anti- to the World Bank’s right to sanction and the World Corruption Guidelines (including without Bank’s inspection and audit. limitation, the World Bank’s right to sanction and the World Bank’s inspection and audit rights). Introduce a template of this acceptance in the bidding documents. A World Bank- approved template will be provided. 4 Contracts with appropriate allocation of responsibilities, Update and consider the required new risks, and liabilities. elements (to strengthen environmental and social performance, health, and safety). 5 Publication of contract award information. The advertising must be extended to all contracts (the field of application of the public procurement code). 6 Rights for the World Bank to review procurement The requirement must be included in the documents and activities. bidding documents to grant rights to the World Bank to review procurement documentation and activities. The Legal Agreement may also allow this provision. 7 An effective complaints mechanism. None. 8 Maintenance of records of the procurement process. The requirement must be included in the bidding documents and in the Legal Agreement. The PCU must spell out the practical modalities and the appropriate documentation to archive in the procurement manual of procedures.
35. The thresholds for specific market approaches and procurement methods and the World Bank’s prior review requirements are also provided in Table 1.6.
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Table 1.6. Thresholds for Procurement Methods and Prior Review for High Risk Contract (C) Contracts Subject to Expenditure No. Value Thresholda Procurement Method Prior Review (eq. Category (eq. US$) US$) 1 Goods, IT, and non- C ≥ 3,000,000 Open Competition ≥ 1,500,000 consulting services International Market Approach and Direct Contracting 100,000 < C < Open Competition All contracts at or 3,000,000 National Market above US$3 million Approach are subject to international advertising and use of the bidding documents agreed with the World Bank C ≤ 100,000 Request for Quotation None 2 National short list for C < 200,000 For consulting services None selection of consultant firms C ≤ 400,000 For engineering and None construction supervision
3 International short C ≥ 200,000 For consulting services ≥ 500,000 list for selection of consultant firms C > 400,000 For engineering and ≥ 500,000 construction supervision 4 Selection of All values All approaches ≥ 200,000 individual consultants 5 Direct Contracting All values As agreed in the Procurement Plan 6 Training, workshops, All values Based on approved and study tours AWPB Note: a. These thresholds are for the purposes of the initial Procurement Plan for the first 18 months. The thresholds will be revised periodically based on reassessment of risks. All contracts not subject to prior review will be post reviewed.
36. Procurement risk rating. The project procurement risk before the mitigation measures is High. The risk can be reduced to a residual rating of Moderate upon consideration of successful implementation of the mitigation measures contained in the action plan for strengthening procurement capacity provided in Table 1.7.
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Table 1.7. Action Plan for Strengthening Procurement Capacity By No. Key Risks Mitigation Actions By When Whom 1 Absence of experienced Hire a procurement specialist PIU No later than six procurement staff for the proficient in the World Bank months after Credit new Project procurement procedures and a effectiveness Implementation Unit procurement assistant dedicated to (PIU) the projects of the PIU, on a competitive basis 2 Lack of a Procurement Develop a PIM of procedures with a PIU No later than three Procedures Manual section on procurement detailing all months after Credit based on ‘World Bank applicable procedures, instructions, effectiveness Procurement Regulations and guidance for handling for IPF Borrowers’ procurement, the standard bidding documents, and other standard procurement documents to be used. The PIM will outline the interaction between the project stakeholders responsible for procurement 3 Low contract The PIM will include description of PIU No later than three management capacity administrative procedures for contract months after management effectiveness 4 Lack of a dedicated Provide adequate space and PIU No later than six archiving room with a equipment for the procurement months after the trained staff for its archive and set up an adequate filling beginning of project management system for project records to ensure implementation easy retrieval of information/data according to World Bank requirements for archiving Designate or recruit an officer to be responsible for data management
37. Procurement supervision. In addition to the prior review and implementation support mission carried out by the World Bank, it is recommended that at least two missions be carried out each year, with one visit to the field to carry out post review of procurement actions.
38. Post-review procurement. Post reviews can be conducted either by World Bank staff or consultants hired by the World Bank. They may also be carried out by third parties such as supreme audit institutions, procurement regulatory authorities, consultancy firms, NGOs, and others, according to procedures acceptable to the World Bank to ascertain compliance with procurement procedures as defined in the legal documents. The procurement post reviews should cover at least 10 percent of contracts across the World Bank portfolio that have not been prior reviewed in a financial year. The sampling is risk-based and considers (a) the project procurement risk rating (with the riskier project having a larger sample) and (b) the contract risk rating, to ensure that riskier contracts constitute a higher proportion of the sample. Post reviews contribute to the overall procurement performance rating of the project based on the rating of the post procurement review and provide a basis for updating the project procurement risk and the risk mitigation plan.
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39. Oversight and monitoring arrangements for procurement. The PIM will define the project’s internal organization and its implementation procedures. It will include, among other things, all relevant procedures for calling for bids, selecting consultants, and awarding contracts. The project monitoring arrangements for procurement will be specified. Detailed procurement documentation (namely, the PPSD) may be referenced as such and retained in the project files. The detailed 18-month Procurement Plan has been reviewed and agreed and will be uploaded to the World Bank website.
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ANNEX 2: Sector Context and Detailed Project Description Project Context
1. In 2015, the World Bank re-engaged in Mali’s mining sector after 10 years of absence. The re- engagement consisted of a two-year trust fund operation (MALI: Support to the Legal and Technical Negotiation Support AEITF Grant No: TF017214). This operation achieved the following outcomes: (a) an assessment of technical, financial, and legal performance of all mining operations in Mali; (b) capacity building in contract negotiation and recommendations to provide better oversight of contracts and the regulatory framework; (c) preparation of a draft mining code; and (d) outline of an action plan for the formalization of small-scale and artisanal mining. These results prompted a dialogue for longer-term support and laid the groundwork for the current project. The value added of the World Bank rests on using its previous sector engagement to inform the design of this project, build on key achievements, and draw lessons of implementation performance.
Sector Context
A. Economic Potential
2. The mining sector is a significant segment of the economy, contributing about 7 percent to the GDP, 30 percent to tax revenues, and 70 percent to export earnings. Mining production (mostly gold), has more than doubled in the past 10 years to an average of 50 metric tons per year. In addition, there is an estimated production of 20 metric tons of gold from ASM, bring total production to about 70 metric tons a year. In addition to gold, there is a significant economic potential for a host of minerals, including iron ore, bauxite, phosphate, and lead-zinc (Table 2.1). The untapped resources of gold alone are estimated at 800 metric tons, and this amount could be significantly increased with new exploration. Gold has long overtaken cotton as the country’s main export and plays a significant role in the trade balance and fiscal revenues of Mali.
Table 2.1. Mali’s Mineral Potential Mineral Resources (metric tons)
Mineral Estimated Resources Gold 800 Phosphates 20 million (Tilemsi) Limestone 40 million (Bafoulabé, Hombori) Salt 53 million (Taoudéni) Bauxite 1.2 billion (Kayes, and West of Bamako) Fer 2 billion (Kayes) Manganese 10 million (Ansongo) Bituminous shale 10 billion Marble 60 million metric tons Lignite Prospects discovered in the Gao region Gypsum 405,000
Uranium 5,000 of d’U3O6 and 200 of U3O2 at 0.085% Lead-zinc 1.7 million Source: Ministry of Mines and Petroleum, 2018.
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3. There are currently about 12 producing mines, mostly in the regions of Sikasso and Kayes (Figure 2.1). All the major mines operate a joint venture in which the Government holds about 20 percent ownership interest.
Figure 2.1. Reserves and Production from Major Operating Mines in 2017
Source: Ministry of Mines and Petroleum, National Directorate of Mines and Geology, 2018
4. Mining contribution to export earnings, fiscal revenue, and industrial employment rose to the highest levels since 2008, as the country was dealing with a new rebellion and a looming food crisis. Economic activities remained resiliently strong due to mining-induced activities fueled an economic recovery which started in 2014. After real GDP growth averaged 6.5 percent in 2014–15, it slowed down to 5.8 percent in 2016 and 5.5 percent in 2017 due to underperformance of the agriculture sector and a significant drop in gold prices. Gold prices have since recovered and real GDP growth is expected be around 5 percent in 2018 and 4.9 percent in 2019, with a positive outlook. However, growth performance remains subject to significant risks, including (a) political governance and the uncertainty arising from the electoral cycle in July 2018; (b) the growing security challenges (in spite of the Peace Agreement security risks are no longer limited to northern Mali) which weigh heavily on budgetary resources (security spending increased to 14.9 percent of 2015 budget, a level at which it is expected to stay for the years to come); (c) external shocks ( downside risks associated with volatility of cotton and gold prices); and (d) disruptions arising from climate change. The incidence of these factors on the poverty rate is significant. For instance, the economic slowdown following the security and political crises of 2012–13 led to a 2.6
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percentage point rise in the extreme poverty rate—to 50.4 percent in 2013—compared to 2011. Nonetheless, exceptional agricultural output growth since 2014 coupled with a resilient mining sector and an expanding tertiary sector led to strong GDP per capita growth and a decline in the poverty rate to 43.1 percent in 2017, based on the international poverty line (US$1.9 purchasing power parity).
5. In 2017, Mali accounted for 17 percent of the new gold mining projects in Africa, the second largest share of projects in pre-production or near production stages. Figure 2.2 shows the estimated resources and grades of mining projects currently under development which could reverse the declining share of mining contribution to the GDP. Mali has made significant progress in improving the investment attractiveness of its mining sector. Its investment attractiveness index in the Frazer Institute survey of investor perceptions rose from 54.68 in 2013 to 70.74 in 2017.
6. In 2018, Mali globally ranked among the top tier of countries and was only surpassed by Ghana in Africa. Mali’s scores are lower for policy climate, institutional capacity to enforce existing regulations (including environmental regulations), geological database, legal system, taxation regime, quality of infrastructure, community development conditions, political instability, and security challenges.
Figure 2.2. Mining Projects under Development as of January 2018
Source: Ministry of Mines and Petroleum, National Directorate of Mines and Geology, 2018.
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B. Challenges and constraints
7. Mali’s mining sector is not growing to its fullest potential. Major mines which fuel production growth in Mali are nearing their depletion point (the Morila mine is scheduled to be closed down in 2019 after nearly 20 years of operation; the Yatela mine has already been depleted; the Sadiola mine is nearing depletion after 20 years of operation, but its life could be extended by another 10 years if the new proposed investment goes forward). As Figure 2.3 shows, industrial gold production has been flat, while the mining contribution to GDP has been declining in view of the slow pace of developing new mines. With ageing mines and price volatility, the challenge faced by Mali is to strengthen the ability of the mining sector to serve as a buffer during economic shocks or political crises.
Figure 2.3.: Evidence of Flat Gold Production and Declining Share of GDP
Source: Data from statistics office, Ministry of Mines and Petroleum, 2018.
8. Inadequate institutional capacity. The management of the mining sector is shared among seven entities: President’s Office, Prime Minister’s Office, Ministry of Mines and Petroleum, Ministry of Finance,
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Mali Investment Promotion Agency, Chamber of Mines, and National EITI Secretariat. These entities not only suffer from low capacity, but their efficiency is further diminished because of duplication of efforts and sometimes institutional conflicts. The lack of a unified voice on the position of the Government with respect to key mining policy and fiscal issues is straining relationships with investors and increasing risk perceptions about regulatory stability. The Government is seeking to address capacity gaps by establishing a permanent technical committee on mining which will advise the Government during negotiation with mining companies and on matters relating to mining and fiscal policy.
9. Lack of reliable geoscientific data to promote the sector. The National Geology and Mines Department lacks modern geological and mining information systems to set up geoscientific databases and effectively promote the country’s mineral resources by producing basis geological maps of prospective areas. The geoscientific database includes about 80 survey and aerial maps at 1/200,000 scale, and about 50 maps at scales varying from 1/1,500,000 to 1/500,000. The department has a data center with a limited number of electronically archived documents. This inventory of data is not enough for a country with a total land area of 1,241,000 km2, one-third of which is covered by desert. To ensure efficiency, geological surveys have focused on the Birimian greenstones which occur in the southwest and west over 23,000 km2. These rock formations host all known gold deposits in Mali, but they remain underexplored. For instance, Mali, currently has nine operating mines on its greenstone formations. A similar geologic formation with a slightly larger area (about 31,000 km2) in Abitibi, Canada, hosted over 40 gold mines when it was better explored. On the other hand, the focus on Birimian greenstones has led to over-dependence on gold and an increased vulnerability to the volatility of gold prices. The dearth of new gold discoveries is affecting the sector through depletion of known resources and a push toward marginal resources with high costs of production. The Government makes an annual budgetary allocation of about CFAF 100 million (about US$20,000) to keep up with the mining sector’s information needs, but this budget is well below the investment needed to survey high potential areas for new deposits. Geoscientific surveys can serve two purposes: first, they could expand gold discoveries in the high- potential geologic formations known as the Birimian belt, and second, they could contribute to diversification of mineral production by focusing on the non-gold potential of the country.
10. Deteriorating investment climate. Mali has had several high-profile tax disputes arising from the acute need to raise additional tax revenue to address financial difficulties arising from political instability and ongoing insurgency in the northern part of the country. The taxation arrangements for key miners are governed by the provisions of mining conventions with provisions for no new tax commitment and guaranteed fiscal stability. In 2008, fiscal pressures led the Government to challenge the fiscal stability arrangements and assess new taxes to raise revenue from Randgold (now Barrick), the country’s major gold producer. In 2011, a similar effort to raise revenues resulted in assessments of FY08, FY09, and FY11 with addition of new categories of unpaid taxes and assessment of penalties of over CFAF 40 billion. These assessments were contested, and the case was eventually brought to international arbitration, but the ruling was against Mali.
11. Uncontrolled growth of illegal ASM. ASM is a traditional, often informal, village-based activity with significant potential for rural employment. It is currently focused on extracting by manual or semi- mechanized methods for the gold contained in the primary, alluvial, and mountainside deposits. Manual mining and panning of gold occupy hundreds of thousands of people, including nationals and migrants from neighboring countries. ASM workers rarely follow the requirements of the mining law and are not registered. Sometimes they encroach mining concessions held by large-scale investors, creating the
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possibility of tensions. Most of them are young people living in neighboring communities in mining areas. There are also children, some of whom are of school age. The activity is often associated with significant social, safety, health, and environmental problems and risks. ASM sites do not follow safety norms and are especially dangerous because of the proliferation of sexually transmitted diseases, such as HIV AIDS. Each year, this subsector is marred by accidents resulting in serious injuries and fatalities. Consequently, the Government has taken the decision to temporarily outlaw the activity during the rainy season, which is the busiest and most dangerous time of the year. The conditions are made worse by frequent accidents such as landslides in pits during the rainy season; unsafe handling and using dangerous chemicals (mercury, cyanide, acids, and so on); land degradation; deforestation due to excessive logging; and destruction of habitat. In addition, uncontrolled ASM sites exacerbate security risks by facilitating illegal sales of weapons, organized crime, and money laundering. The other concerns about ASM include the encroachment and uncontrolled occupation of the concessions granted to large-scale mining companies.
12. Poor economic links with the mining sector. Despite an industrial mining history spanning three decades, the Malian mining sector remains poorly integrated in the national economy. Mining operations often operate as isolated enclaves and incorporate poor forward, backward, and lateral links with the rest of the economy. Local economic links, in particular, are badly developed. There is currently an opportunity to facilitate the development of mining-led clean energy access by focusing on solar power investment plans in four mines: the Loulo-Gounkoto mining complex (Kayes region) with a planned capacity of 24 MW, the Fékola mine (Kayes region) with a capacity yet to be defined, the Nampala mine (Sikasso region) with a capacity of 21 MW, and the Syama Mine (Sikasso area) with a capacity yet to defined.
13. Governance challenges stand in the way of leveraging mining revenues for shared prosperity. Malians have been disenchanted by the allure of gold, and most believe that gold does not shine for all. The management of mining revenues occurs in a deteriorating governance environment. Irrespective of the indicator selected (government effectiveness, Country Policy and Institutional Assessment, and so on), Mali’s governance ranking has been deteriorating. The poor performance cannot only be explained by security developments in the north. Declining scores for the control of corruption and government effectiveness point to more widespread problems. Poor generic governance indicators have led to poor performance on the Doing Business indicator, as well as a deterioration in the public-sector environment (increased corruption, rent seeking in the public sector, poor performance of the Government in delivering basic services, slowed decentralization process, revenue collection, and management and public discontent). An indication of the governance challenge is the slow progress of decentralization and local governance reform, a priority for the Government since the start of the third republic in 1991. Some formal authority was decentralized in a relatively bottom-up process in the 1990s, but consolidation of decentralized governance has lagged, especially in the areas of local autonomy, fiscal transfers, and downward accountability. Decentralization in Mali has been in the Government’s agenda for the last two decades. It was because of a major political and strategic governance consensus, resulting both from the 1991 National Conference and the country’s commitment to local development. This vision is enshrined in the 1992 Constitution and was reflected in an arsenal of legislative and regulatory instruments and the existence of 761 subnational entities, including 703 communes, 49 circles or districts, eight regions, and the Bamako District. Subnational governments are financed through a combination of own revenues (taxes and user charges), conditional and unconditional transfers from the Central Government. Despite some progress in the administrative and financial empowerment of local authorities, they are still to a large extent under the authority of the Central Government regarding resources, and even acts and decisions related to their respective territories.
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14. Inadequate social accountability. There is an opportunity to use mining revenues to fuel local development, but the participatory processes are inadequate. Due to its high capital intensity, the mining sector contributes more than half of the total local business license taxes in Mali. Artisanal quarry and mining activities are also taxed under special local provisions. These resources can be harnessed and properly managed to stimulate local economic development around mineral provinces. In accordance with Law No. 00-044 of July 17, 2000, determining the fiscal resources of municipalities, circles, and regions, mining operations (whether large scale or artisanal) are subject to the payment of local business taxes (called the patente) which are distributed as follows: 60 percent for the municipality, 25 percent for the circle, and 15 percent for the region. The amount of the tax on the artisanal exploitation of gold and quarries is distributed as follows: 80 percent for the commune, 15 percent for the circle, and 5 percent for the region. Mining operations also pays local taxes on vehicles. These taxes vary according to vehicle capacity and generated 6.5 percent of local tax revenue in 2013. The amount of the sticker on vehicles, excluding heavy machinery intended exclusively for mining operations, is shared as follows: 60 percent for the commune, 25 percent for the circle, and 15 percent for the region. The mining code also contains obligations for mining companies to invest in local community development. In Article 125 of the code, mining operators and their subcontractors must ensure accommodation of workers on the site under acceptable conditions, contribute to local health and education, and community infrastructure. In some instances, mining companies work with locals to set up Local Development Committees which include village leaders, mine company representatives, provincial authorities, and socioeconomic groups (youth, women, and hunters). These committees are supported by Steering Committees which use a consultative approach to identify priorities and propose local investment projects.
15. Inefficient management of local mining revenues. The Algiers Agreement for Peace and Reconciliation already commits the Government to transfer 30 percent of Government tax revenue to the subnational jurisdictions under an equalization system by 2018. The transfer is achieved in part through local taxes on business activities. In general, Malian local authorities have a low rate of revenue collection and therefore a low level of self-financing capacity. Therefore, the transfers and subsidies from the Government represent the main source of revenue to support current and especially investment expenditures. The most important component of the local business taxes is the business license tax (the patente) which represents about 85 percent of local revenue in Mali. The business license tax is applicable to all professional occupations, regardless of the scale of their activity. It consists of a fixed fee (depending on the nature and location of the activity) and a proportional fee which is set at 10 percent of the rental value of the business premises, machinery, and various tangible assets. The local contributions of large- scale mining companies in 2015 are presented in Table 2.2. Business license taxes represented 86.96 percent of the total, followed by corporate contributions (8.70 percent) and road taxes (4.35 percent). The management of these local revenues is governed by law (Law No 2012-007 of 07 February 2012) and follows a budgetary process which prioritizes investment spending and operational expenses. However, because the law does not clearly define what is considered investment, local authorities often prioritize funding operating expenses over investing in social infrastructure. For instance, most of the local budget is allocated toward the purchase of office equipment, vehicles, spare parts for maintenance, and renovation and rehabilitation work using questionable procurement methods which result in highly inflated prices. Such inefficient management of these public resources derived from mining at the local levels has been the source of public discontent and a perception that the sector is not contributing to poverty reduction.
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16. In summary, the mining sector suffers from a specific set of governance challenges, including (a) lack of information about how mining revenues are distributed and used; (b) lack of information about the conditions under which the EI operates, particularly the negotiations of conventions; (c) insufficient participation of civil society in planning activities at the local level related to the use of extractive revenues; (d) lack of incentives for the DGI to collect extractive revenues as it does not figure as a measure of its performance; (e) lack of accurate information on the collected amounts of extractive revenues, more particularly local authorities have little possibility of determining the actual level of revenues they should be receiving and some discrepancies have been noted among different agencies with respect to the amount of patente collected; (e) the underutilization of inspections, technical, environmental, and financial oversight mechanisms; and finally (f) lack of information on the use of extractive revenues at the local level.
Table 2.2. Local Contributions Paid by Large-scale Mining Companies in 2015 (in CFAF)
Business License Tax Corporate Company Locality Road Taxes Total (Patente) Contributions
YATELA SA Sadiola 290,303,390 29,030,340 14,515,169 333,848,899 SEMOS SA Sadiola 457,794,400 45,779,440 22,889,725 526,463,565 BME SARL Sadiola 4,619,880 461,990 230,993 5,312,863 LTA MALI SA Sadiola 55,386,708 5,538,670 2,769,336 63,694,714 BLY MALI SA Sadiola 86,208,035 8,620,800 4,310,402 99,139,237 SOMILO SA Loulo 1,062,798,122 106,279,813 53,139,906 1,222,217,841 SEMICO SA Tabacoto 275,445,893 27,544,589 13,772,295 316,762,777 GOUNKOTO SA Kenieba 490,705,563 49,070,556 24,535,278 564,311,397 GMS Tabacoto 2,637,355 263,735 131,868 3,032,958 Total 2,725,899,346 272,589,933 136,294,972 3,134,784,251 Source: Ministry of Mines and Petroleum, 2018.
17. Barriers to women empowerment. In Mali, an estimated 50 percent of artisanal miners are women. However, women are relegated to low-pay occupations: supply of goods in the mines, upkeep of children, and up to 90 percent of the panning of alluvial gold. Many women work as temporary helpers for different groups of miners, mainly in the crushing and washing of waste rock, or for cooking and cleaning. The remuneration for this work is often low and poorly defined. Very often women are paid in kind (waste rock rather than gold). Although women are legally entitled to acquire artisanal mining rights, women face stiff competition as well as cultural barriers in trying to become mine title holders. Some activities in the value chain, such as direct extraction from pits, are off-limit to women due to cultural and religious beliefs. Women who choose to earn a living from mining often must combine their work with household chores and child care. As a result, children are uprooted from the normal setting and brought up around mine sites where they are exposed to risks of accident and disease. The project will introduce a gender dimension by (a) supporting inclusion and participatory decision making in mining revenue
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management; (b) empowering women to effectively participate in the ASM value chain through training and demonstration of value addition activities; and (c) supporting GBV prevention and awareness in ASM communities.
C. Mining-led Local Economic Development Pilot
18. The project will pilot local development by bringing together independent initiatives from the private sector, the Government, and the World Bank to maximize the development impact of mining for local communities. The piloting will involve a multi-stakeholder partnership between local district authorities, village community, Central Government, and mining companies. The project will support only upstream TA to facilitate the establishment of pilots and provide capacity building. There will be three pilots throughout the life of the project.
19. The focus of the first pilot is the Djidian Kenieba village located in the west of Kayes region. It is one of 20 villages of the Sikakily commune. It covers a surface area of 5.5 km2 with 9,495 inhabitants. The population is largely young with women representing 48.40 percent. The main economic activity in the village is artisanal and small-scale mining. A few other activities are centered around small commerce. The village does not have any socioeconomic infrastructure except for some dirt roads. It has no drainage trenches and no electrical connection. In the more developed areas, there are a few commercial infrastructures, a few private spaces in front of houses, and a few potable water taps. This group constitutes the center of Djidian Kenieba. In the south of the village, there is a well-structured camp constructed by the mine for its employees. Figure 2.4 shows the proposed local development planning to be facilitated under the multi-stakeholder partnership.
20. In this pilot and the other yet-to-be-defined pilots, the project will facilitate multi-stakeholder partnerships for local economic development. This project will support only upstream TA to establish multi-stakeholder partnerships for mining-induced local development at the pilots by funding village planning studies and baseline surveys, CSO services to organize village communities, the costs of government oversight of the pilots, and training. To the extent relevant, terms of references for studies will include environmental and social considerations and incorporate recommendations from SESA, when completed. The pilots will have two focus areas:
• TA for the rationalizing artisanal mining, which focusses on organizing and training miners to conduct safe, responsible, and environmentally sound ASM in identified and geologically assessed ASM corridors or within a concession area in which mineral resources are already assessed and the data made available to the community by a large-scale mining company. In these assessed areas, the project will support TA to support the oversight function of the ASM Unit.
• Facilitation of community development, which involves rural electrification based on clean energy capacity made available by a large-scale mining company. The project will closely coordinate with the Mali Rural Electrification Hybrid System Project (P131084), which has a mandate to implement rural mini-grids around mining communities through mini-grid extension and densification, development of off-grid lighting markets, and energy efficiency. Therefore, all physical work related to community development will be undertaken by the Mali Rural Electrification Hybrid System Project as part of its rural electrification program,
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consistent with its World Bank-approved safeguard instruments and the corporate social responsibility initiative of private mining companies, consistent with its own safeguard policies and IFC performance standards.
21. The decision-making body in the multi-stakeholder partnership will be a Steering Committee chaired by the prefect. Members of the committee include the mayor and his deputies, the village chief and his advisers, the youth and women representatives, technical services, the faith representatives, the ASM union representatives, and the mining company. An extensive public consultation and disclosure process will be undertaken to inform the community about the pilots. Areas limits (old and new) will be published in newspapers according to legal requirements.
Figure 2.4. Local Economic Development Planning to Be Facilitated in the Djidian-Kéniéba Village
Existing Village Restructured Village Source: Barrick, Gold and Ministry of Mines and Petroleum, 2018.
D. Project Cost and Funding
22. The project cost included a PPA request, which has been approved by the World Bank and counter-signed by the Government. The PPA funds the establishment of a PCU, the preparation of PIM as well as studies and activities aimed at informing the design of the project, as well as engagement of the private sector on partnership programs for local content, ASM development, and the operationalization of the Power of the Mine. The summary cost table is presented in Table 2.3. The figures in the summary table reflect also the parallel financing and synergies discussed in the Section E.
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Table 2.3. Detailed Project Cost Table (Including Estimated Contributions from Other Related Projects)
Total cost IDA Financing Parallel Financing Project Component GIZ EGPS Canada Other Bank Component A: Creating conditions for growth and diversification of the mineral sector $ 24.00 $ 19.00 $ 2.00 $ - $ 3.00 $ - A1. Improving geologic coverage to support mining growth and diversification $ 14.00 $ 14.00 $ - $ - $ - $ - -Capacity building for detailed geological mapping at 1/50,000 scale of prospective areas $ 4.00 $ 4.00 -Regional geological mapping at 1/200,000 scale for diversification of mineral potential $ 10.00 $ 10.00 -Design and implementation of geodata use protocols $ 0.20 $ 0.20 A2. Updating the policy and regulatory framework in support of mining diversification $ 1.00 $ 1.00 $ - $ - $ - $ - -Updating mining policies and regulations $ 0.25 $ 0.25 -Drafting environmental regulations and guidelines $ 0.20 $ 0.20 -Preparing specific ASM environmental policies $ 0.15 $ 0.15 A3. Strengthening institutional arrangements and capacity for efficient management of mineral sector $ 9.00 $ 4.00 $ 2.00 $ - $ 3.00 $ - -Instutional capacity for regulatory management of the sector $ 3.20 $ 3.20 -Capacity building for negotiations $ 0.40 $ 0.40 -Capacity building for sector monitoring $ 5.40 $ 0.40 $ 2.00 $ 3.00 Component B: Strengthening revenue transparency and governance $ 12.70 $ 3.10 $ 1.50 $ 2.00 $ 2.10 $ 4.00 B1. Improving extractive revenue transparency $ 10.20 $ 1.60 $ 1.50 $ 2.00 $ 2.10 $ 3.00 -Improving disclosure of subnational tranfers $ 3.60 $ 1.00 $ 0.50 $ 1.00 $ 1.10 -Implementing beneficiary ownership road map $ 1.10 $ 0.10 $ 1.00 -Integrating ASM data into EITI reporting $ 5.50 $ 0.50 $ 1.00 $ 1.00 $ 3.00 B2. Promoting social accountability and citizen engagement $ 2.50 $ 1.50 $ - $ - $ - $ 1.00 -Public awareness to promoting social accountability at national and local levels $ 2.00 $ 1.00 $ 1.00 -Improving EI revenues data access through online integration $ 0.50 $ 0.50 Component C: Maximizing the local development impact of mining $ 17.80 $ 12.40 $ 2.00 $ - $ 2.40 $ 1.00 C1. Promoting responsible development of small-scale and artisanal mining $ 6.00 $ 6.00 $ - $ - $ - $ - -Advisory services for delineating ASM block, Organizing and registering ASM actors, and monitoring $ 4.00 $ 4.00 -Acquiring, setting up, and operating demonstration units $ 3.00 $ 3.00 -ASM environmental management $ 0.30 $ 0.30 C2. Maximizing mining-led local development $ 6.00 $ 3.00 $ 2.00 $ - $ - $ 1.00 -Strengthening local capacity to manage mining revenues for development $ 2.50 $ 0.50 $ 1.00 $ 1.00 -Facilitating multi-stakeholder partnerships for mining-led local development $ 2.50 $ 1.50 $ 1.00 -Developing a framework for power and mining integration $ 1.00 $ 1.00 C3. Economic empowerment of women and youth in mining $ 6.80 $ 3.40 $ - $ - $ 2.40 $ - -Supporting women associations to train members in value addition activities $ 3.40 $ 2.00 $ 1.40 -Training mining youth to develop livelihood alternatives around ASM areas $ 1.00 $ 1.00 -Supporting prevention of GBV and resource conflicts $ 1.40 $ 0.40 $ - $ - $ 1.00 $ - Component D: Contingency emergency response $ - $ - $ - $ - $ - $ - Component E: Project Coordination $ 4.00 $ 4.00 $ - $ - $ - $ - -Project management and coordination $ 2.70 $ 2.20 $ 0.50 -Training and knowledge exchange $ 1.00 $ 1.00 -Fiduciary management $ 0.30 $ 0.30 -Safeguard management $ 0.50 $ 0.50 -Monitoring and Evaluation $ 0.30 $ 0.30 $ - $ - $ - $ - Project Preparation Facility $ 1.50 $ 1.50 Total $ 60.00 $ 40.00 $ 5.50 $ 2.00 $ 7.50 $ 5.00
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E. Synergies Between the Proposed Project and Other World Bank and Donor Initiatives
23. The proposed project will complement other World Bank initiatives, such as the fiscal decentralization project under preparation (Mali Deployment of State Resources for Better Service Delivery, P164561), as well as other donor-funded programs, particularly the project funded by GIZ, Extractive Industries Governance Support Project (Projet d’Appui à la Gouvernance des Industries Extractives, PAGIE). Table 2.4 is a summary of synergies between the proposed project and other World Bank and donor initiatives.
Table 2.4. Synergies between the Proposed Project and Other World Bank and Donor Initiatives Complementary Complementary Activity Activity Supported by the Component Activity Supported Supported by the Fiscal Proposed Project by PAGIE (GIZ) Decentralization (WB) Component A: Creating Optimizing the fiscal regime of √ conditions for growth and the mining sector diversification of the mineral Capacity building for contract √ sector negotiations Capacity building for sector √ monitoring Promoting investments in large √ mineral deposits Component B: Strengthening Support to EITI Secretariat √ revenue transparency and Establishing a platform for √ √ governance citizen’s engagement Ensuring women participation √ to address gender gap Tracking of extractive revenue √ √ spending in local budgets Establishing extractive revenue √ √ management procedures for local governments Supporting national and local √ √ institutional structures in their effort to reform and improve mining revenue collection and management Component C: Maximizing the Development of a strategic and √ local development impact of legal framework for local mining content Building the capacity of local √ enterprises Component E: Project Strengthen the Government’s √ √ coordination and training and capacity for coordination and project preparation facility management of the project
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ANNEX 3: Map
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