Minerals:  Gold

What is gold and where do I use it? | What impact does the extraction of gold have in central and eastern Africa? | Resources

What is gold and where do I use it?

Gold is a precious metal. It is as crucial to jewellery as tantalum is to mobile phones. It is also found in many of our everyday products; ranging from electronic devices such as mobile phones and laptops, to jewellery, medical equipment, cars and aeroplanes.

Gold Supply Chain

 

External demand

With the global financial crisis, central banks have rushed to increase their gold reserves. China, for example, has gone from storing 600 tons of gold in 2003 to nearly 3,000 tons currently.

Massive increase in demand for gold jewellery from Indian and Chinese consumers, with the gold ‘spot’ price an all time high at £1,908 an ounce in 2012 (currently above $1,700) with experts predicting increase to above $2,000 per ounce. This is during a time when global gold production is declining, with traditional seams drying up.
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What impact does the extraction of gold have in central and eastern Africa?

Democratic Republic of Congo

 

A map showing DRC's position in Africa

The DRC is estimated to have over $23 trillion worth of gold reserves.

Latest statistics puts DRC’s GDP worth at US$15.64 billion in 2011.

Artisanal gold mining produces between US$1-2 billion per year and undeniably represents the biggest single source of income for eastern DRC and has potential for economic growth and development.

 

Gold is extremely valuable, and with a lack of good governance in the DRC, its gold is often traded illegally. Even small weights of gold are valued highly, which makes it easier to conceal and transport than the 3Ts that come from the same region. It is estimated that 95% of all gold in eastern DRC is traded without record, which then makes it one of the primary sources of income for armed groups and neighbouring states looking to make quick and easy money in order to buy weapons. The illicit trade results in a loss of tax revenue for the Congolese state and this undermines efforts from international organisations to break the links between the gold trade and financing abusive armed groups, report Global Witness. The funds from these minerals are utilised to finance rebellions and line the pockets of the political elite which completes the process in which a perpetual state of chaos aids participants who engage in the illicit trade.

Problems in DRC
  • The Congolese government lacks any credible and reliable institutional presence, any statistical data, or any genuine plan to collect data. Inevitably, all policy implementation efforts for the informal gold sector are ineffective.
  • Physical, economic and social insecurity among artisanal and small-scale miners. Though the fear of homicidal militias is virtually irrelevant today, they now face new problems with corrupt government officials, functionaries, law-enforcement and security personnel, who all wrest illegal taxes and fees from miners. Straight bribes are also taken with no service provision put in place to justify the money taken. All of these problems are made worse by the widespread ignorance of the laws in force.
  • The artisanal gold-mining communities display all the classic symptoms of a gold rush – chaotic migrations, poor sanitary and health conditions, dangerous mine excavation techniques resulting in frequent fatalities, increasing criminal exploitation of the entire process, and incalculable environmental costs.
  • The identity of those responsible for the exploitation has now changed. Government administrators, members of the government’s military and security organisations, and many regional traders have replaced the warlords and militia leaders.
Case study on Ituri District, Orientale Province

Of the four main gold mining sites in the DRC (Maniema, North and South Kivu and the Orientale), the latter reflects many of the problems associated with gold mining in DRC. Nowhere is artisanal and small-scale gold-mining anchored more deeply into the history, economy and suffering of the Congolese people than it is in the Ituri District, the western section of Orientale Province. It is also here that studies have identified the main problems associated with gold mining. Although the conflict has been significantly reduced in this region recently, there is still high tension in the region especially among artisanal miners that conflict could be around the corner largely because of the miners fear of insecurity and lack of protection on their livelihoods.

Key problems identified in Orientale Province:

  • poor communication strategies between joint ventures and miners – this means that miners do not know the benefits of working with public companies or if they dig on land under the jurisdiction of the Provincial Mining Division. This has big consequences for labour standards and wages
  • miners charged for artisanal mining permits – no service provision is put in place so this is unjustified. On top of this, taxes, bribes and other government demands make the mining unsustainable for miners
  • civil servants exercise veritable organised extortion – miners have no support from civil servants yet must obey to continue
  • traders must pay for permits to obtain money from artisanal miners – a form of exploitation as miners lack proper permits which make the gold they trade illegal

There are vast gold reserves worth an estimated $20 billion in DRC’s Orientale province – twice the size of UK. Currently, one of Africa’s biggest investments in the gold mining industry has begun in the Ituri region (NW DRC) Kibali, where the stakeholders are as follows; AngloGold Ashanti (SA) 45%, Randgold (UK) 45% and Sokimo (DRC) 10%. It remains to be seen if the new initiatives are effective in this project which pilots many of the new conflict-free schemes.

M23 role in the conflict

Tutsi General, Bosco Ntaganda, nicknamed, “The Terminator” is supposedly responsible for setting up the M23 movement. M23 are a Congo armed group named after the 23 March 2009 peace deal, which the armed group claim the government failed adhere to. Ntaganda is, “just as dangerous as Joseph Kony“, according to Fatou Bensouda, the chief prosecutor of the ICC. Congo President Joseph Kabila has supposedly avoided arresting him in order to establish peace in the Congo. He has has shifted between fighting for national armies and other armed groups. He apparently built a business empire for himself in north and south Kivu, where he illegally collects taxes from mines controlled by the soldiers under his command.

Even before M23 started to rebel against the Congolese government, Ntaganda took control of a multi-million dollar operation, which resulted in gold smuggling into Rwanda for illegal sale. General Ntaganda, is alleged by the Economist, to have the backing of Rwanda’s Tutsi leader, Paul Kagame, though direct links based on ethnicity alone and not well founded. Rwanda can be said to have more control in eastern DRC than Congo’s own government which is 1,000 miles away in Kinshasa. Although wanted by the ICC for war crimes against humanity, including forced recruitment of child soldiers, as well as murder, rape and pillaging of towns and villages, without the support of the Rwanda and Congo governments, the ICC’s power is limited. In 2002, “The Terminator” commanded troops accused of killing at least 800 civilians in the town of Mongbwalu, Ituri, because of their ethnicity and in order to gain control over rich gold mines in the area. Mr Kabila finally called for Ntagandus arrest on 11 April 2012. Ntagandu surrendered and handed himself into the US embassy in Kigali in March 2013.

Rwanda

A map showing Rwanda's position in Africa

There are no official statistics on the contribution of gold to Rwanda’s GDP. There is a great deal of evidence to suggest that official figures not be taken at face value due to illicit trading and exporting in the country.

Latest statistics put Rwandan GDP at $6.95 billion (2012).

The Rwandan economy has traditionally centred on coffee, tea and tourism but the mining sector is increasingly attracting the attention after investments in various mines across the country.

In the last few years there has been a lot of investment into researching potential gold mine sites with many new discoveries and exploitation is set to increase over the new few years. Recent discoveries and investment include Western and Northern provinces. Big mining companies such as Kivu Gold and Rogi Mining have now been licensed by the Government to operate in these provinces. The local General Mining Company and Transafrika have completed initial explorations and intend to exploit their new discoveries. However, focus remains on fully realising the potential of other minerals; cassiterite, coltan and wolframite, before the government hands out permits for the more long-term gold exploitation rights are granted. Gold is far behind Rwanda’s number one mineral export, cassiterite, with 6.9 million tonnes exported in 2011 equating to US $ 96.8 million.

Rwanda in DRC

UN reports have highlighted the role of Rwanda in supporting and funding the M23, an armed group operating in the DRC. The official statement from the Rwandan government denies any involvement funding armed groups yet the report has specific evidence of supplies to M23 ranks from Uganda and the presence of Rwandan troops to aid the group as participant combatants. Rwanda has a long history of military involvement in the DRC going back to 1994, when the Rwandan Patriotic Front (RPF) pursued the Forces Démocratiques de Libération du Rwanda (FDLR) over the border into Goma, DRC following the 1994 violence.

The armed group FDLR (Forces Démocratiques de Libération du Rwanda) who are now based in eastern DRC, continue to play a pivotal role in the conflict that arises from the mineral trade, according to the UN. The group are apparently supported by top army commanders and external support networks in Burundi and Tanzania. The group is supposedly able to coordinate military and arms trafficking activities due to the group’s far-reaching international diaspora network. The FDLR are said to be assisted by Ugandan businessmen in the illegal gold trade. A Wilson Center report identifies opportunities for disarmament and repatriation of foreign armed groups such as the FDLR in eastern DRC.

Burundi

A map showing Burundi's position in Africa

Burundi officially produces 750 kilograms a year, after the last count of gold production in 2009.

As with initial reports in 2001 from the UN, the more recent UN report continues to implicate Burundi as part of a coalition of three countries and their governments in eastern Africa (Uganda and Rwanda) involved in creating proxy wars in order to “systematically exploit” gold in the DRC.

Tonnes of gold produced in eastern Congo benefits armed groups and high-ranking members of the Congolese and Burundian state armies, research has revealed. The gold is laundered through Burundi’s domestic gold sector and exported to Dubai.

Gold Cartels

Gold cartel businessman Rajendra Kumar Vaya, otherwise known as Raju, who now operates through family networks in Kenya and Dubai, was trading through both Burundi and Uganda until recently. A UN report, five years ago stated that Raju was one of the sources funding armed groups in the DRC and explained brought Burundi and Uganda into the equation. Operating through various fronts, Raju trades in gold through a Burundian registered company, Farrel Trade and Investment Corporation, and Ugandan registered firm, Machanga Ltd. The two companies smuggled gold until they were blacklisted by the UN in 2007. Raju and his accomplices have since set up camp in Kenya. A recent UN report in April 2013, listed individuals and entities subject to travel bans and imposed freezing of assets. Raju is still known to by gold through a “regular commercial relationship with traders in DRC tightly linked to armed groups”. This constitutes ‘provision of assistance’ to illegal armed groups in breach of the arms embargo of resolutions 1493 (2003) and 1596 (2005). Assets of Raju’s Machanga, held in the account of Emirates Gold, were frozen by the bank of Nova Scotia Mocatta (UK) in 2010. Kumar continues to be one of the most prominent gold buyers in the Great Lakes region, sourcing largely from areas affected by the presence of armed groups and criminal networks, without conducting due diligence.

The other main smuggling house in Burundi is run by Mutoka Ruganyira, who partners with large Congolese exporters and has ties to the Congo armed groups in order to define the continued supply of gold. A UN report explains that, “Mr Mutoka exerts a near monopoly on the entire flow of gold owing to his ability to pay slightly above market prices and maintain a web of pre-financing networks operating in Burundi and DRC”. The 2012 UN Security Council Expert panel report revealed that in addition to local Congolese traders, export house Namukaya supplies Mutoka and Kumar (Uganda) with a quantity of gold that, “represents at least ten times its official exports“.

Uganda

A map showing Uganda's position in Africa

The Enough Project, a group campaigning against conflict minerals, states that “Uganda officially produced less than $600 worth of gold in 2007, yet exported over $74 million worth of gold”. In 2012, 30% of Uganda’s export revenue was from gold alone, which accounted for $200 million, yet the country is losing out on revenue collection due to illegal mining which has seen reportedly over 1,000 illegal gold miners flooding into the country. Illegal buyers are said to be arriving too from South Sudan, Rwanda and Burundi to purchase gold and send it to the United Arab Emirates and Dubai. Police are reported to not be responding to the illegal activities after citizens report.

According to a UN report, Uganda was accused of having, “provided support to M23 in the form of direct troop reinforcements in Congolese territory, weapons deliveries, technical assistance, joint planning, political advice and facilitation of external relations.”

One of the main gold smugglers in Uganda, is business tycoon, Jamnadas Lodhia, who operates under the Ugandan Commercial Impex. His son Kunal is Kenyan and owns the Internet company Tangerine with its head office at Lornho House in Nairobi CBD. Authorities in DRC have been lobbying Uganda, Kenya and Burundi to break the gold cartels in their respective countries and deny funding the armed groups in eastern DRC. Despite pressure from President Kabila in 2011, action including a security committee to investigate the smuggling resulted in the death of one of the investigating officers. The resultant report stated that no gold had been smuggled through Kenya. A UN Security Council report also stated that the main personalities orchestrating gold laundering and smuggling between Butembo, Kampala and Dubai were Indian traders in Kampala (Raju and Lodhia). Experts have some indications that there is high-level protection and even complicity in some cases in the illicit gold trade by governments and commercial airlines (Emirates Airlines, Kenya Airways and Ethiopian Airlines).  The Ugandan Revenue Authority officially provided records of 130 gold exports between January 2008 and May 2009, yet experts were able to obtain statistics through an employee displaying 215 recorded gold exports during the same period.

Uganda businessman Jigar Kumar is known to have purchased regularly from the Mai Mai Simba armed group, and in 2011 Ugandan traders ran a gold-trafficking network with the Rwandan Hutu Democratic Forces and the Allied Democratic Forces armed groups, as well as the Congolese army, which ran from Walikale to the Congo-Uganda border according to Enough Project.

Research has revealed that neither local buyers in the Great Lakes region nor international traders conduct adequate checks on the gold they purchase to ensure that it has not funded conflict or human rights abuses in the eastern Congo.

Karamoja Gold Rush

Karamoja, one of Uganda’s poorest and most marginalised regions has recently been the source of discovery of vast amounts of gold mines which hold potential for the region’s development. Artisanal miners and large companies are seeking to take advantage of the discovery. In a region reknowned for castle rustling, locals have adjusted their focus to the gold mines for their livelihoods. There is a definite fear among local residents that due to neglect from the central government that this gold mine will benefit the elite who will sell off the land to investors leaving the local population gaining nothing from the gold. The locals suffer from not being able to gain information on government contracts with the private sector in the extractives industry, according to Transparency International Uganda.  We have yet to see if the rumours among MPs in the region that politicians are landgrabbing are true or trickle-down benefits from investments will really make a difference to the lives of those living in the region.

Uganda has been recommended by the UN Expert Group in June 2013 to do more to combat gold smuggling and to restructure its gold sector.

Despite numerous testimonies from gold dealers, local officials, and civil society representatives in Ituri and North Kivu that virtually all gold produced in these areas is exported to and traded in Kampala, the government of Uganda told the group it officially exported only 286kg [630lb] of gold during 2012.

– UN Expert Group

Complementing above findings, the report detailed how a businessmen, who now resides in Uganda, gave an armed group arms and ammunition in exchange for gold and ivory – poaching is taking place in many areas across eastern DR Congo.

Central African Republic

A map showing CAR's position in Africa

The CAR officially exported 72,834.51 grams of gold in 2011. The most recent record from January to June 2012 amounted to 30,670.40 grams. There is however an extreme lack of knowledge on CAR’s unofficial gold export record. Research suggests that up to 95% of gold exports could be illegal.

There are many difficult issues in relation to CAR’s gold mining sector. This includes a lack of transparency, an insufficient legal/institutional framework, and the poverty trap of local mining communities. Until the recent coup which overthrew President Francois Bozize, a number of measures were introduced which were improving the mining sector but as the recent tragedy highlighted, when 52 artisanal miners died during the collapse of a gold mine, there remains plenty of room for improvement. The removal of Bozize has resulted in a break-down of the monitoring and control measures placed on the gold and diamond mining sectors. Bozize had started participation in the EITI and created a national union for artisanal mining cooperatives.

The 2009 Mining Code ensured that all mineral resources, whether in the ground or on the surface, was the property of the CAR. The state can then choose who to grant access to it’s resources. This act also cleaned up the mining sector and ensured legal rights on resources.

Gold exploitation in CAR has been done exclusively by artisanal mining, with industrial exploitation starting this year. Roughly between 80,000 and 100,000 artisanal miners (or diggers) participate in gold ore and diamond extraction, transport and wash after gaining a card from the Mining Brigade, which officially registers them.

Due to the size of the country and it’s low population density and inaccessible mining zones, controlling gold mines is difficult to monitor. The legitimacy of the government’s control over it’s resources is hardly acknowledged in rural areas where customary rights replace modern law. Miners are not encouraged to register for permits as they see no benefits to their welfare and feel there is a good chance on not being caught. Rural CAR is then often the site of many informal mining communities who operate within informal networks and smuggle gold across borders. Cameroon has a lower tax on exports in comparison to CAR and only requires 12 carats of gold in comparison to CAR’s 18 for exportation. There are many gold-buying offices on the Cameroon border for this reason.

Research has also revealed that there is a high level of corruption within the informal gold mining sector. The CAR government is then limited when build revenues from tax to develop the economy.

With relation to conflict-gold and insecurity, the biggest threat is reported to come from Baba Ladé, leader of the armed group, Chadian Front Populaire pour le Redressement (FPR), which operates in the centre-north of the CAR. This group allegedly also earns income from the sale of gold in Bangui.
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