“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,” he stated.
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.
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.
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.
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.
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.
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.
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.”