“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.”
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. Trade economists said this indicates large amounts of gold are leaving Africa with no taxes being paid to the states that produce them.
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 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.
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. 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.
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.
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.
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.