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Report: Tons of gold smuggled illegally out of Africa every year


Gold Prices

Sat 01 Jun 2024 | 09:43 PM
Waleed Farouk

Billions of dollars' worth of gold is smuggled out of Africa each year, mostly ending up in the United Arab Emirates. There, it is refined and sold worldwide, according to a report by Swissaid, Swiss aid and development group.

According to a new study, between 321 and 474 tons of artisanal gold are produced annually in Africa without being declared, and at least 435 tons of gold were smuggled from the African continent in 2022 alone. These are significant figures that represent a significant loss of revenue for many African states. This lack of state control reflects other problems: corruption, financing of armed conflicts or human rights violations.

In 2022, over $30 billion in gold, or more than 435 metric tons, was smuggled out of Africa, says the report by Swissaid, aThe main destinations for this gold were the United Arab Emirates, Turkey, and Switzerland, the report stated.

It is this opacity that Marc Ummel and Yvan Schulz, colleagues in the raw materials unit at SWISSAID, have tackled in a new study on African gold. In order to follow the precious metal trail, they quantified the production and trade of gold, both declared and undeclared, for all 54 countries in Africa over a period of more than ten years.

The authors of the report said their goal was to make the trade in African gold more transparent and put pressure on industry players to do more to make gold supplies traceable and supply chains more responsible.

"We hope that this will improve the living conditions of local populations and the working conditions of artisanal miners throughout Africa," Yvan Schulz, one of the authors, told The Associated Press.

The report found that between 32% and 41% of gold produced in Africa was not declared. In 2022, Ghana was the largest gold producer in Africa, followed by Mali and South Africa, it said.

Between 2012-2022, 2,569 metric tons of gold, worth around $115 billion were smuggled to UAE. The report said the gap between UAE imports and exports from African countries has widened over the years, meaning that the amount of gold smuggled out of Africa appears to have increased over the past decade. For example, it widened from 234 metric tons in 2020 to 405 in 2022.

Switzerland is one of the top three importers of African gold, along with the United Arab Emirates and India. the report said In 2022, Switzerland was responsible for 21% of direct imports of African gold abroad. In addition to direct imports from Africa, Switzerland also imports a significant amount of gold from Dubai (more than 1670 tonnes of gold between 2012 and 2022). As the United Arab Emirates has no mines on its territory, it also imports gold, much of it from Africa. But this gold is not always declared. The study reveals that between 2012 and 2022, 2596 tonnes of gold not declared for export were imported from Africa to the UAE.

Due to Swiss legislation, which makes the last place of processing the place of origin, gold imported from the UAE is considered Emirati even if its real origin is elsewhere, for example in Africa. “This situation is problematic because for many years smuggled gold potentially linked to conflicts or human rights violations has been legally landing in Switzerland,” says Marc Ummel, head of the raw materials unit at SWISSAID and co-author of the study.

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Switzerland has an important role to play here: it has four of the nine largest refineries in the world and almost50% of the world’s gold imports pass through. If it were to legislate more strictly on these imports, it would have a real impact on the global gold trade.

The Customs Act, which is due to be debated in Parliament in the autumn, is an opportunity to strengthen the legal framework and improve the traceability of raw materials. In this respect, the study is timely and hopes that it will tip the balance in favour of stricter legislation that can improve the living conditions of people in the South.

The United Nations Commodity Trade Statistics Database, which contains detailed imports and exports statistics, shows that Switzerland is the main buyer of gold from the UAE. "Sourcing gold from the UAE is notoriously risky," the report said, describing the difficulty in ascertaining the origins of the refined gold. 

An official within the UAE government's media office said the country has taken significant steps to address concerns around gold smuggling and the risks it poses. The continued growth of the UAE's gold market reflected the confidence of the international community in its processes, the official said, responding on behalf of the country's press office without providing further identification.

"The UAE remains steadfast in its efforts to combat gold smuggling and ensure the highest standards of transparency and accountability within the gold and precious metals sector," the official said.

The Swiss government said it was aware of the challenges identifying the origins of gold and that it had introduced measures to prevent illegal flows.

"Switzerland is and stays committed to improve the traceability of commodity flows, the transparency of statistics and the quality of controls," Fabian Maienfisch, spokesperson for Switzerland's State Secretariat for Economic Affairs, said.

The report compared export data from African countries with import data from non-African countries, along with other calculations, to extrapolate the data. Among its recommendations, it called on African states to take steps to formalize artisanal and small scale mining and reinforce border controls.

It also called on non-African states to publish the identity of the countries of origin and the countries of dispatch of imported gold, and to work with authorities to identify illicit gold flows.