French Parliament Raises Question About Illegal African Gold Trade Based on Tactics Institute Analysis

French Parliament Raises Question About Illegal African Gold Trade Based on Tactics Institute Analysis

Tactics Institute: Recent years have seen a sharp increase in illegal African gold mining and trade. A series of reports by the Reuters news agency reveal a vast illicit gold market in which the United Arab Emirates (UAE) plays a key role as a major trading hub that receives, processes and ‘launders’ African gold. As well as tax-avoidance and health and safety implications, the surge in the volume and scope of the illegal gold trade has given rise to grave security concerns. Revenue from gold smuggling appears to be financing Jihadist radicalisation and armed conflict in Africa and the battle for control of the gold mines is destabilising already vulnerable and impoverished states.

Tactics Institute gives an overview of the booming trade in African gold and considers its role in the spread of radical Jihadi networks.

The Scale of the Challenge

Across Africa, small-scale gold mining is flourishing. However, in most cases, Small-scale has become a euphemism for illegal and the workers who are often referred to as informal diggers are a workforce operating in an unregulated market. In sum, this trade amounts to large-scale mining taking place below the radar, with taxes replaced by bribes, and costs cut through poor working and environmental standards.

Indicative of the continental boom in illegal gold mining were South Africa’s 19 refining plant licenses issued in the first quarter of 2019, more than during the preceding three years combined. According to Reuters, in early 2020 there were 26 refineries operating or under construction across 14 African countries. While some of these plants did ensure that the gold they processed was mined responsibly, this was by no means the norm. All but one of the world’s London Bullion Market Association-accredited gold refineries are located outside Africa. Switzerland, despite not producing any gold, has proved a difficult competitor to African refineries, for whom acquiring legitimacy is a time-consuming and expensive endeavour. Hence the widespread cutting of corners.

Unregulated refineries often receive high level political support, yet the human and environmental impacts of this industry are becoming hard to ignore. This untaxed and unregulated economic activity generates massive amounts of capital, which is channelled to parties engaged in armed conflict, completing a vicious economic circle that sustains several stakeholders: miners, refiners, weapons manufacturers, and political leaders.

Louis Marechal, an Organisation for Economic Co-operation and Development (OECD) expert on responsible business conduct, describes the illegal gold trade in Africa as a “race to the bottom.” In just one week in February 2019 over one hundred people died in mining accidents in three countries, Zimbabwe, Guinea and Liberia.

As the industry has grown, so has competition between refineries, meaning there is less incentive for them to check whether the gold has been ethically sourced. The gold is often not declared to customs officials. The corner-cutting is so widespread that it is only South Africa that meets the OECD’s standards on auditing refineries.

Violence in Burkina Faso

The link between gold, violence and terrorism is particularly stark in the Sahel region of Africa, a belt of territory south of the Sahara that includes large areas of Burkina Faso, Chad, Mali and Niger. In this already-troubled region, forces allied to al Qaeda and Islamic State have muscled in on an industry that the OECD estimates to be worth $2 billion.

Having lost territory and momentum in the Middle East, Jihadis have shifted their attention to mining areas of the Sahel. The region’s mines provide these terrorist groups with income to be used to recruit members and purchase weapons, as well as being ideal hideouts and sources of explosives used in attacks.

The aforementioned Reuters series highlighted the struggles of Burkina Faso which has seen an influx of Jihadis, attracted by the country’s perfect storm of gold mines and weak infrastructure. Hundreds have been killed in conflicts over who controls gold exports in Burkina Faso, including 39 mine workers ambushed by Jihadists in November 2019. Burkina Faso’s official gold exports for 2018 were 300kg, estimated to be less than two percent of the real figure when unofficial exports are included.

A satellite imagery survey by the government revealed approximately 2,200 informal gold mines in Burkina Faso, half of which fell within 16 miles of sites of militia attacks. Jihadi groups sometimes take over the running of mines, meaning they become employers in a country where the annual per head income is $660 according to the World Bank, creating a reliance on terrorist groups for workers seeking to achieve a subsistence level of existence for their families. Insecurity and crime are increased further by the robberies and kidnappings associated with the competition for control of gold mining in these lawless areas that fall outside government control.

The Burkina Faso government has proscribed certain sites, banning miners from digging there, but Jihadists have ordered diggers to proceed regardless, tipping the power balance and undermining the rule of law. The Jihadists’ grab for control of gold digging comes in the context of an already insecure situation, with northern regions of Burkina Faso seeing Islamist attacks on churches. Christians make up just 10 percent of the country’s population. Terrorist groups such as al Qaeda’s regional affiliate Jama’at Nusrat al-Islam wal-Muslimia and Ansarul Islam see the value of Burkina Faso’s gold. It is a precious metal that retains its value and can be used as a proxy currency across swaths of Africa, the Middle East and Asia.

In January 2019, Burkina Faso’s government carried out air strikes on areas around Kabonga and implemented military operations dubbed ‘Operation Firestorm’ and ‘Operation Uprooting’ in the east and north of the country respectively. The government also imposed a ban on small-scale mining across these areas. Between June and November 2019, around 500 deaths were attributed to the Jihadi struggle for control of the gold trade. The government’s actions appear not to have succeeded, with at least 15 gold mines being occupied by Islamist forces at the end of last year.

Smuggling

A feature of the gold trade crisis is the ease in which it crosses national borders.  Often, illegal gold mined in one country is channelled through neighburing states. According to Burkina Faso’s Minister of Mines, Oumarou Idani, much of the country’s illegally mined gold is transported to Togo, from where it makes its way to the UAE.

Togo functions as a smuggling hub; Sahel-mined gold is refined in the small costal state then exported on, with the UAE the primary recipient. From the UAE, gold is exported on again.

Uganda takes gold mined in the neighbouring Democratic Republic of Congo (DRC) with tax authorities reporting “rampant cases of fraud,” founded on a criminal industry powered by forged documents, stamps, and signatures. Worse yet, gold smuggling is linked with the financing of rebel forces operating in the DRC. Seeking to break the link between gold and militants, the United Nations has sanctioned any traders found to be involved in gold smuggling.

Another example is Mali, where smugglers and money launderers sell gold at three percent below market value, using hard foreign currency to purchase electronic goods and cars, which they can sell at home at inflated prices. 

Emirates Hub

From this chaotic and violent situation in Africa, the gold is transported across borders to the UAE, where the permissive attitude of a portion of the authorities allows the Gulf state to act as a gateway to other western markets such as the European Union, United States, Saudi Arabia, Turkey and Switzerland.

Emirati customs data for 2016 showed that the UAE imported $15.1 billion of gold from Africa, making them the number one importer of the product. However, industrial mining companies in Africa do not export to the UAE, meaning that the UAE is importing its African gold from informal sources operating outside of official, formally regulated, and accountable channels.

Comtrade, a UN database for customs statistics, has shown that in 2016 Africa was the world’s leading gold exporter, with the UAE becoming the number one importer. That year, the UAE imported gold from 46 African countries, out of a total of 54, recording higher volumes of gold imports than declared by exporting countries.

And gold is not just a matter of consumer lifestyle in the Emirates; gold trading represents almost 20 percent of the country’s GDP. No Emirati gold refineries are accredited by the LBMA, meaning that the country is heavily reliant on the African trade, which is based on dangerous conditions, smuggling and an avoidance of oversight. Gold mining has also become a source of income and power for some of the world’s most dangerous terrorist groups who have gained a foothold in vulnerable African states. In return for providing a market for Africa’s gold exporters, the Emirates offers legal imports, tax-free and, crucially, no questions asked.

Reuters reports a persistent discrepancy in the amount of gold exported from the 46 African countries trading with UAE, and UAE’s own reporting of the import data..

This issue, however, ultimately represents a threat to UAE’s own security and interests. In the past few years, networks of Iranian smugglers, working hand in hand with other organized crime rings, such as the “New IRA” , have targeted India and other countries, and operated through networks and companies established in UAE. In recent years, US and the Emirati authorities have increased intelligence cooperation and successfully cracked down on a number of such enterprises, but much more needs to be done.

The armed insurgents benefiting from such operations proliferate across Africa, where they may target governments and societies friendly to UAE and its interests. Furthermore, their destabilizing activities facilitate the spread of extremist ideology which runs counter to UAE’s recent efforts to promote moderation, tolerance, and peacebuilding in the region and beyond. Furthermore, increasing numbers of reports about this activity threaten UAE’s growing reputation as a strong ally in the fight against terrorism and extremism and are sure to be used by its adversaries to put pressure on Abu Dhabi.

Already, the question about this issue was raised in the French Parliament following the presentation of the Tactics Institute Analysis.

On 14th July 2020, French MP Bruno Fuchs submitted a written question at the National assembly on the issue of illegal gold smuggling from the Sahel to the United Arab Emirates. Mr Fuchs raised not only the economic and human cost of the illegal trade but also the security cost with the trade becoming a vital source of income to terrorist groups to expand in an already fragile and volatile region.

Sahel remains a top priority for France, but also is a zone of influence for Qatar and Iran. Facilitation of gold smuggling ultimately empowers the states which may present national security concerns to UAE.