Unravelling the nexus of illicit gold trade, protection rackets, and political settlement dynamics: Evidence from Burkina Faso

Abstract

A significant share of gold from artisanal and small-scale mining is produced informally or illegally. Most of this gold is traded outside official channels, resulting in illicit financial flows that deprive governments of much-needed revenue, and some of these flows are also used to finance armed conflict and launder money from other illicit activities. We apply a political economy lens to the analysis of illicit gold markets to study their intersection with state-building dynamics and political settlements, with a view to understanding the function these markets fulfil even though they seem highly dysfunctional from an institutionalist perspective. In Burkina Faso, we find that the modus operandi of the artisanal gold market has become a function of political competition, aided by well-meaning policy reforms. State-sponsored protection rackets enable and shape the illicit gold market, putting off-budget resources at the disposal of factions competing for political dominance. Drafting new legislation or building capacity for enforcement is unlikely to overcome the impasse. To rein in illicit financial flows, understanding the political-economy dynamics inherent in the functioning of illicit gold markets is critical for defining policy interventions responsive to the prevailing actor configuration.

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