A 2024 Swissaid report reveals that between 321 and 474 metric tons of gold are smuggled from Africa annually through artisanal mining, representing 72% to 80% of the continent's small-scale production. The UAE is the primary buyer, importing 405 metric tons of this smuggled gold in 2022 alone. By facilitating the illegal gold trade, the UAE jeopardizes its reputation as a trustworthy and ethical partner in the global mining industry. This association with illicit activities could lead to increased scrutiny and regulatory challenges, making it more difficult for the UAE to secure future mining licenses and mineral contracts.
A report by Swissaid, released on Thursday, reveals the alarming extent of gold smuggling out of Africa. Between 321 and 474 metric tons of gold are produced annually through artisanal and small-scale mining (ASM) operations without being declared, representing 72% to 80% of Africa's total artisanal gold production.
Africa's Role as Gold-Producer
Africa is a major gold-producing continent, with 710 metric tons produced in 2021, a figure that has been steadily increasing. South Africa, once the leading global producer, now ranks among the top 10 globally, producing about 90 metric tons annually. Ghana is Africa's top gold producer, with around 140 metric tons, followed by Sudan (93 metric tons), Mali (61 metric tons), and Burkina Faso (56 metric tons).
In 2022, Asia produced 877 metric tons of gold, with Europe and North America producing less at 550 metric tons and 514 metric tons, respectively. From 2012 to 2022, gold was mined industrially or semi-industrially in over 26 African countries, yielding a combined 5,332 metric tons, valued around $245 billion, from more than 125 gold mines.
ASM production accounts for approximately 20% of Africa's annual gold production based on declared gold. However, if the Swissaid data is accurate, the true proportion of artisanal gold production in Africa is closer to 50%. An estimated 10 million people are involved in ASM mining across the continent.
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UAE's Role in Legitimizing Gold Smuggled From Africa
Between 2012 and 2022, 80% of the gold leaving Africa went to three countries: the UAE, Switzerland, and India. In 2022, official figures indicated that half of Africa's gold exports (i.e., 204 metric tons) were imported by the UAE, up from 86.3 metric tons in 2012. Swissaid reports that the UAE received 405 metric tons of smuggled gold in 2022 and an estimated 2,500 metric tons over the previous decade, valued at over $115 billion.
Once in the UAE, the smuggled gold is refined at one of its many refineries, where it is mixed with declared gold. This process results in newly minted gold that is stamped with a clean bill of health and sold on the international market.
The UAE is attractive for smuggling due to favorable import policies and established gold trading infrastructure, including refineries and professional traders. But also because of a lack of suitable infrastructure in most African nations to certify gold. According to Chris Noyes, CEO of aow.gold and African Critical Minerals Association member, "[o]ne of the biggest problems is there isn't infrastructure built to help facilitate the [gold] trade so that it's a legal trade by Western standards."
Harm to Africa From Gold Smuggling
The World Gold Council estimates that Africa loses between $24 billion and $35 billion annually due to undeclared gold production. If all 435 metric tons of gold smuggled out of Africa in 2022 were declared, the producing nations would have more tax revenues for development projects and services.
Gold smuggling funds and supports criminal groups, cartels, and terrorists. Smuggling networks use bribery to evade detection, undermining the rule of law and fostering corruption. Artisanal miners receive minimal compensation, with most of the value in the supply chain going to transporters, brokers, and traders. Additionally, undeclared gold mining often involves environmentally destructive practices. Mercury, used in the extraction process, contaminates water supplies and soil, posing serious health risks to local communities. Cyanide spills can devastate ecosystems, killing wildlife and destroying habitats.
Furthermore, the socio-economic impact on artisanal miners is profound. These miners often work in dangerous conditions without proper safety equipment, leading to frequent injuries and fatalities. The lack of fair compensation perpetuates poverty and limits opportunities for economic advancement, trapping communities in a cycle of exploitation and hardship.
How the UAE is Undermined By Facilitating Undeclared Gold Flows
The UAE's role as a major hub for smuggled gold tarnishes its reputation as a trustworthy and ethical partner in the global mining industry. Mining in particular requires close cooperation, with governments and other parties, over a long period of time. It could find itself negotiating and making promises to behave ethically in the country while at the same time profiting in a major way from the illicit gold flows out of the same nation.
As gold prices rise scrutiny over illegal mining practices will increase and the headline risk for Dubai rise. Last year, Emirates Gold, one of the UAE's largest gold refineries, was banned from accessing some international gold markets due to failing to meet anti-money laundering and responsible sourcing standards. This sets a precedent that could deter future partnerships and investments.
In 2023, UAE's Primera, an Abu Dhabi-based gold trader, was granted a 25-year concession from the government of the Democratic Republic of the Congo (DRC) for the trade and export of ASM-mined gold. This move aims to cooperate with the DRC to curb gold smuggling, particularly from the eastern regions where rebels fight for control. However, if the UAE continues to be implicated in the illicit gold trade, it risks undermining these efforts and losing credibility as a legitimate investor in Africa’s mining sector.
Moreover, continued involvement in the illicit gold trade could attract international sanctions and increased regulatory scrutiny. This not only hampers the UAE's current operations but also threatens future opportunities for legitimate business expansion in Africa. The negative impact on the UAE’s reputation could result in strained diplomatic relations with African nations, making it difficult to negotiate and secure new mining licenses and contracts.
Addressing the issue of illicit gold trade is not only an ethical imperative but also crucial for the UAE’s long-term economic ambitions in Africa. Fostering legitimate trade relationships will benefit both African nations and UAE investors.
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