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Alex Kimani

Alex Kimani

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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Illegal African Gold Makes It Way To UAE

Gold

There is a new gold rush in Africa, and the UAE is busy cashing in on the lucrative yet unregulated industry, as exposed by an exclusive Reuters report.

Every year, billions of dollars worth of gold leave Africa to the United Arab Emirates and the Middle East, major gateways for markets in the United States and Europe. Yet, African governments receive minimal taxes for the precious commodity, with the vast majority smuggled through elaborate black markets.

Trade economists have arrived at this conclusion after studying customs data and discovering huge discrepancies between import and export data. 

Unregulated industry

According to the United Nations’ international trade statistics database, Comtrade, the UAE imported 446 tonnes of gold worth $15.1 billion from 46 African nations in 2016, nearly 12x what it imported from the continent a decade ago. Only 21 countries from this group submitted data to Comtrade while the other 25 did not. Meanwhile, the UAE reported it received 7.7 tonnes of gold from the 21 countries that filed reports with Comtrade, which is $3.9 billion (~67 tonnes) more than what the countries said they had shipped.

In other words, about half of the gold that made it to the UAE from Africa that year was smuggled. Mind you that’s UAE data only. Extrapolate it over the scores of other countries that import gold from Africa including China and Switzerland and the figures could be truly shocking.

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It’s not hard to see how the world’s poorest continent can be losing such vast resources.

Small-scale gold collection by individuals, aka artisanal mining, is a booming business in many parts of Africa, as Quartz details.

Artisanal gold mining is an unregulated cottage industry with miners, including children, digging and panning for gold with little official oversight. Most of these miners simply do it for a living and most have no ties to big businesses. According to Ghanaian president Nana Akufo-Addo, this informal mining has become so lucrative that criminal enterprises run by foreigners have taken over the industry. Ghana is the continent’s second largest gold producer after Libya.

Informal gold mining is a rapidly expanding industry in Africa. It’s a highly controversial subject because on one hand, it provides a livelihood to millions with little recourse from inept governments.

On the other hand, scores of rebels in countries like the Democratic Republic of Congo (DRC) use ill-gotten money from sale of precious minerals like gold and diamonds to fund wars aka ‘blood diamonds.’ Further, the mining methods use dangerous chemicals such as mercury which eventually leak into soil, rocks and rivers.

Many governments feel powerless to stop it. DRC is a major gold producer, yet very little makes it to formal markets with the rest smuggled across porous borders to neighboring Uganda and Rwanda. Thierry Boliki, an official of the Congolese government body meant to regulate high-value minerals like gold, says the government has very little leverage to stop the practice.

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DRC is not alone. A host of other African governments such as Ghana, Zambia and Tanzania have complained that vast quantities of the yellow metal are illegally produced and smuggled out of their countries every year. Some of these operations are run by cartels, often at a high human and environmental cost.

Some miners in this chain work legally, typically selling their gold to middlemen. The middlemen then fly the gold out or simply trade it with neighboring countries.

Nevertheless, there’s growing debate on regulating this type of mining, not only to prevent small miners from eating into official revenues but also to prevent human rights abuses that are embedded in the microcosms created by the mining communities. There’s no concrete official data on how much money Africa loses every year through this type of mining. The consensus, though, is that it’s too big to ignore any more.

By Alex Kimani for Safehaven.com

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