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.
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.
“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.
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 said.
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.
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 400kg 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, said in an interview last year.
“But since (the trade) is fraudulent, I have no details.” — Reuters.