Nairobi - Billions of dollars' worth of
gold is being smuggled out of Africa every year through the
United Arab Emirates in the Middle East – a gateway to markets
in Europe, the United States and beyond – a Reuters analysis has
found.
Customs data shows that the UAE imported $15.1 billion worth
of gold from Africa in 2016, more than any other country and up
from $1.3 billion in 2006. The total weight was 446 tonnes, in
varying degrees of purity – up from 67 tonnes in 2006.
Much of the gold was not recorded in the exports of African
states. Five trade economists interviewed by Reuters said this
indicates large amounts of gold are leaving Africa with no taxes
being paid to the states that produce them.
Previous reports and studies have highlighted the
black-market trade in gold mined by people, including children,
who have no ties to big business, and dig or pan for it with
little official oversight. No-one can put an exact figure on the
total value that is leaving Africa. But the Reuters analysis
gives an estimate of the scale.
Reuters assessed the volume of the illicit trade by
comparing total imports into the UAE with the exports declared
by African states. Industrial mining firms in Africa told
Reuters they did not send their gold to the UAE – indicating
that its gold imports from Africa come from other, informal
sources.
Informal methods of gold production, known in the industry
as "artisanal" or small-scale mining, are growing globally. They
have provided a livelihood to millions of Africans and help some
make more money than they could dream of from traditional
trades. But the methods leak chemicals into rocks, soil and
rivers. And African governments such as Ghana, Tanzania and
Zambia complain that gold is now being illegally produced and
smuggled out of their countries on a vast scale, sometimes by
criminal operations, and often at a high human and environmental
cost.
Artisanal miners sluice for gold by pouring water through gravel at an unlicensed mine near the city of Doropo, Ivory Coast. Picture: Luc Gnago/Reuters
Artisanal mining began as small-time ventures. But the
"romantic" era of individual mining has given way to
"large-scale and dangerous" operations run by foreign-controlled
criminal syndicates, Ghana's President Nana Akufo-Addo told a
mining conference in February. Ghana is Africa's second-largest
gold producer.
Not everyone in the chain is breaking the law. Miners, some
of them working legally, typically sell the gold to middlemen.
The middlemen either fly the gold out directly or trade it
across Africa's porous borders, obscuring its origins before
couriers carry it out of the continent, often in hand luggage.
For example, Democratic Republic of Congo (DRC) is a major
gold producer but one whose official exports amount to a
fraction of its estimated production: Most is smuggled into
neighbouring Uganda and Rwanda. "It is of course worrisome for
us but we have very little leverage to stop it," said Thierry
Boliki, director of the CEEC, the Congolese government body that
is meant to register, value and tax high-value minerals like
gold.
The customs data provided by governments to Comtrade, a
United Nations database, shows the UAE has been a prime
destination for gold from many African states for some years. In
2015, China – the world's biggest gold consumer – imported more
gold from Africa than the UAE. But during 2016, the latest year
for which data is available, the UAE imported almost double the
value taken by China. With African gold imports worth $8.5
billion that year, China came a distant second. Switzerland, the
world's gold refining hub, came third with $7.5 billion worth.
Most of the gold is traded in Dubai, home to the UAE's gold
industry.
AFRICA’S BIG GOLD PRODUCERS AND EXPORTERS
The UAE is the biggest destination for African gold. But Africa’s biggest exporting countries are not always the biggest gold producers, according to trade data. Graphic: Reuters
The UAE reported gold imports from 46 African countries for
2016. Of those countries, 25 did not provide Comtrade with data
on their gold exports to the UAE. But the UAE said it had
imported a total of $7.4 billion worth of gold from them.
In addition, the UAE imported much more gold from most of
the other 21 countries than those countries said they had
exported. In all, it said it imported gold worth $3.9 billion –
about 67 tonnes – more than those countries said they sent out.
"There is a lot of gold leaving Africa without being
captured in our records," said Frank Mugyenyi, a senior adviser
on industrial development at the African Union who set up the
organisation's minerals unit. "UAE is cashing in on the
unregulated environment in Africa."
The Dubai Customs Authority referred Reuters' queries to the
UAE foreign ministry, which did not respond. The UAE government
media office referred Reuters to the UAE federal customs
authority, which also did not respond.
Not all the discrepancies in the data analysed by Reuters
necessarily point to African-mined gold being smuggled out
through the UAE. Small differences could result from shipping
costs and taxes being declared differently, a time-lag between a
cargo leaving and arriving, or simply mistakes. And gold
analysts say some of the trade, especially from Egypt and Libya,
could include gold that has been recycled.
But in 11 cases, the per-kilo value that the UAE declared
importing is significantly higher than that recorded by the
exporting country. This, said Leonce Ndikumana, an economist who
has studied capital flows in Africa, is a "classic case of
export under-invoicing" to reduce taxes.
Matthew Salomon, an American economist who has researched
the use of trade statistics to identify illicit financial flows,
said the issue deserves scrutiny. "Persistent discrepancies in
the trade of particular goods and between particular countries
... can identify significant risks of illicit activity," he
said.
An artisanal miner climbs out of a gold mine with a bag of rocks broken off from inside the mining pit at the unlicensed mining site of Nsuaem Top in Ghana. Picture: Zohra Bensemra/Reuters
POLLUTION, CONFLICT AND BANDITS
Over the past decade, high demand for gold has made it
attractive for informal miners to use digging equipment and
toxic chemicals to boost the yield. Contaminated water is
returned to rivers, slowly poisoning the people who need the
water to live.
Small-scale miners have long used mercury – easy to buy at
around $10 for a thumb-sized vial – to extract flecks of gold
from ore, before sluicing it away. Mercury's toxic effects
include damage to kidneys, heart, liver, spleen and lungs, and
neurological disorders, such as tremors and muscle weakness.
Cyanide and nitric acid are also being used in the process,
according to researchers and miners in Ghana.
Industrial mining companies have also been responsible for
pollution, ranging from cyanide spills to respiratory problems
linked to dust produced by mining operations. But almost a dozen
states including DRC, Uganda, Chad, Niger, Ghana, Tanzania,
Zimbabwe, Malawi, Burkina Faso, Mali and Sudan have complained
in the past year about the harms of unauthorised mining.
Burkina Faso has banned small-scale mining in some areas
where al Qaeda-linked Islamists are active, and earlier this
month Nigeria's government suspended mining in the restive
northwestern state of Zamfara, saying intelligence reports
established what it called "a strong and glaring nexus" between
the activities of armed bandits and illicit miners.
Strong prices have fuelled the boom. Today, gold trades at
over $40,000 per kilo, which is below a peak from 2012 but still
four times the level of two decades ago.
Western investors want gold so they can diversify their
portfolios; India and China want it for jewellery. But most
Western companies – and the banks that finance them – avoid
handling non-industrial African gold directly. They are
unwilling to risk using metal that may have been mined to fund
conflict or that may have involved human rights abuses in, for
instance, DRC or Sudan. Various Uganda-based traders have been
sanctioned for handling gold smuggled out of DRC.
An artisanal gold miner holds a gold nugget at an unlicensed mine in Gaoua, Burkina Faso. Picture: Luc Gnago/Reuters
DESTINATION DUBAI
In other states, including the UAE, these concerns have been
less of a problem. Over the last decade, gold from Africa has
become increasingly important for Dubai. From 2006 to 2016, the
share of African gold in UAE's reported gold imports increased
from 18 percent to nearly 50 percent, Comtrade data showed.
The UAE's main commodity marketplace, the Dubai
Multi-Commodities Centre (DMCC), calls itself on its website
"your gateway to global trade." Trading in gold accounts for
nearly one-fifth of UAE's GDP.
However, no big industrial companies reached by Reuters –
including AngloGold Ashanti, Sibanye-Stillwater and Gold Fields
– say they send gold there. Reuters contacted 23 mining
companies with African operations, the smallest of which
produced around 2.5 tonnes in 2018: 21 of them said they did not
send metal to Dubai for refining, the other two did not respond.
While the big South African miners have local refining
capacity, the main reason others gave is that no UAE refineries
are accredited by the London Bullion Market Association (LBMA),
the standard-setter for the industry in Western markets.
The LBMA is "not comfortable dealing with the region"
because of concerns about weaknesses in customs, cash
transactions and hand-carried gold, its chief technical officer
Neil Harby told Reuters. Investigators and people in the gold
industry say the ease with which smugglers can carry gold in
their hand-luggage on planes leaving Africa helps gold flow out
unrecorded. And limited regulation in UAE means informally mined
gold can be legally imported, tax-free.
A general view of Sheikh Zayed Road in Dubai, United Arab Emirates. File picture: Hamad I Mohammed/Reuters
Gold can be imported to Dubai with little documentation,
African traders told Reuters.
A DMCC spokesman said it has a robust regulatory framework
that includes strict responsible sourcing rules. These are
aligned with the international benchmark for responsible
sourcing laid out by the Organisation for Economic Cooperation
and Development (OECD).
Sanjeev Dutta, head of commodities at DMCC, said in January
that the centre is building strategic relationships with most
gold-producing countries on the African continent, "and we are
very confident of how that production is done and how
responsible" it is. Over the past 12 months, he said, DMCC has
firmed up a standard for refineries, called Dubai Good Delivery,
which he said is very strict on responsible sourcing and
sustainability. "We track right from responsible sourcing to
sustainable development, things like human rights etc.," he
said. "We demand export certificates."
A "very limited" number of refineries accept gold that has
been imported as hand luggage, Dutta said, but gave no figures.
An artisanal gold miner holds a gold nugget at an unlicensed mine in Gaoua, Burkina Faso. Picture: Luc Gnago/Reuters
GOLD TO GO
Some African miners are swapping their pickaxes and shovels
for diggers and crushers – increasing production volumes
exponentially. Regulation remains scant, and accidents are
frequent. In one week this February, three accidents at illegal
mining operations in Zimbabwe, Guinea and Liberia claimed the
lives of more than 100 people.
Often, miners must surrender a cut of their output, as
commission, to the people who control a pit, let out the
equipment, or buy and sell the gold. NGOs such as Global Witness
and Human Rights Watch have documented child labour, corruption
and links to conflict at some of these mines. At one mine in
Zimbabwe visited by Reuters, people said they had to hand over
some of their find before they would even be allowed out of the
pit.
Reuters presented its analysis to 14 African governments. Of
them, five said it reflected an existing concern about gold
being smuggled out of their countries that they are trying to
address. One said they did not think gold smuggling was a
problem for them. The rest declined to comment or did not
respond.
The United Arab Emirates has imported unrefined gold worth billions of dollars from African states since 2006, as rising gold prices after the 2008 financial crisis encouraged informal mining.
Governments across Africa are trying to work out how to
manage a sector that, whatever its risks, provides a livelihood
for many of their citizens, and which could be harnessed as a
source of revenues.
Some, including Ivory Coast, are taking gradual steps to
regulate their informal mining operations. Ghana and Zambia have
sent security forces into mining areas to halt operations so
miners can be registered and regulations put in place. Ghana,
concerned that a rush of mainly Chinese-led ventures is harming
the environment, has arrested hundreds of Chinese miners and
expelled thousands in the past six years.
At the end of last month, Ghana temporarily banned the
import of excavator equipment to try to stem a surge in illegal
mining using heavy machinery.
In Sudan, one of the continent's biggest producers, the
government has unveiled a $3 billion plan for private banks to
work with the central bank to buy gold from small-scale miners,
offering prices that would make it less attractive to sell on
the black market.
A Tanzanian parliamentary report estimated that 90 percent
of annual production of informally mined gold is smuggled out of
the country: The government wants the central bank to buy this
up. In March, President John Magufuli launched a plan to
establish hubs where the trade would be formalised by offering
access to financing and regulated markets.
In Burkina Faso, Oumarou Idani, minister of mines, believes
his country is leaking gold to UAE on a massive scale. Of the
9.5 tonnes of gold the government estimates informal miners dig
up each year, just 200 to 400 kg are declared to the
authorities, he said.
Much of the gold is smuggled from landlocked Burkina Faso to
its Atlantic coast neighbour Togo, according to the minister. In
Togo, virtually no taxes are imposed on gold.
Togo's director of mining development and controls, Nestor
Kossi Adjehoun, said informal mining is "an area that we have
not properly figured out." For now, he said, Togo saw no reason
to suspect gold was being smuggled through the country.
"I understand that Dubai is the destination for this gold,"
his Burkina Faso neighbour, Minister Idani, told Reuters in an
interview last year. "But since (the trade) is fraudulent, I
have no details."