The African Review: 18th August 2021

The African Review

18th July 2021

Gold smuggling in Africa is a well-known problem, and it has plagued the continent since the advent of the international gold trading system we know today.  Small and artisanal miners sell their gold for cash to local buying desks, and it then makes its way through a murky chain of intermediaries, often through Rwanda, Burundi and Uganda, and finally to Dubai, where it is re-processed and mixed with other gold, entering the official global market alongside product from better-regulated sources.  The problems inherent in this system are abundant, from a lack of protection for the miners themselves to the bypassing of tax revenue for cash-strapped African nations, and from the financing of local militias and criminals to the shady involvement of international players looking to establish a stake in a resource-rich continent.

An artisanal gold mine near Kamituga in the DRC

Global traders are aware of these problems, and they like to be seen to be tackling them.  At the end of last year, the London Bullion Market Association (LBMA) published an initiative aimed at curtailing the buying of gold from sources that do not meet OECD standards, which is noble in and of itself.  But the problems with such initiatives are twofold.  Firstly, according to this publication by The Sentry, an investigative and policy team targeting dirty money in the African gold trade, 95% of the gold mined in central and east Africa ends up in Dubai.  Once it gets there, I wish very good luck to anyone trying to separate it from the ‘clean’ gold from other sources.  It is supremely unrealistic to think that the Western actors trying to bring order to the industry will have any real impact there; no government or trading body is going to go in to bat for artisanal gold miners against the UAE when the UAE does such enticing things as being the only Arab state to recognise Israel and providing the global market with abundant oil.  I certainly can’t imagine a world where any kind of boycott or real pressure would be applied over this issue.  And secondly, even if it were, the ones who ultimately suffer will be the subsistence miners who have few other options for earning an income.  The middlemen can always shift to another dodgy industry, the gold traders would love to see prices go up as supply from artisanal miners dwindles, but what will the men and women of the DRC, South Sudan and the Central African Republic do to get food on the table?

Ultimately the solution to this problem needs to come from within the jurisdictions where gold is mined.  This can and should be heavily supported by the international community, and it would be great to see more investment in regulation and anti-smuggling measures from wealthy nations that will pay the recipient countries back many times in increased taxes and royalties.

One nation that is getting on top of this in some respects is Sudan.  After the 2019 ousting of dictator Omar al-Bashir, a transitional government took over and has been desperately looking for income since, in order to shore up its public support and prevent the military from taking over.  The gold industry was an obvious target; under al-Bashir, miners dealt with warlords and corrupt officials instead of official buyers who could funnel revenue to the state.  And it seems that “strong measures” to crack down on illegal cross-border trade and smuggling have paid off already; the official gold output nearly doubled in the first half of 2021, bringing in USD $86 million for the government.  This is, of course, a good sign.  But the situation remains complex; a major pillar propping up the current administration is Mohamed ‘Hemeti’ Hamdan Dagalo, whose switch of allegiance was central in the ousting of al-Bashir.  Brushing away the trappings of his current position, Hemeti is a warlord whose segment of the Janjaweed militia took over the Jebel Marra gold mine in 2017, which was probably very nice for his family company, Al Gunade, which has a focus on gold.

Government revenues from gold production are way up in Sudan

The simple fact is this: top-down measures to curtail gold smuggling are not going to work alone, because they fail to take account of the realities of the illicit gold trade.  But at the same time, grassroots measures in source countries are heavily affected by local pressures and are susceptible to changes in the political and military environment in often volatile states.  Ultimately the solution must come from wealthy nations and traders investing heavily in anti-corruption and anti-smuggling measures that are supported by local governments so that miners can enjoy safer working environments, governments can reap the benefits of taxes and royalties, and the international market can be secure in the knowledge that its product does not come bathed in blood.  That’ll be the day.

Around the Traps

This video from Origin Exploration, whose focus is Liberian gold, is a must-watch for anyone with an interest in geology, ESG, gold or African mining.  Geo Rowan Thorne is talking about the role geologists can play in ensuring sustainable ESG standards.  Check it out below, or on YouTube here.

The massive diamonds are coming thick and fast out of Africa at the moment! BlueRock (LON:BRD) announced the unearthing of a 58.6 carat stone from its Kareevlei mine this week, hot on the heels of a 21.6 carat diamond last week.  If anyone is in the market for a convincing engagement ring, now is your chance.

THAT stone

Bad news for AngloGold Ashanti (NYSE:AU, JSE:ANG), who might not restart production at their Obuasi gold mine in Ghana before the end of the year, following a fall-of-ground incident in May at the recently recapitalised site. It’s been a bit of a nightmare run for the company in recent times.  This article summarises the woes pretty well.

Trevali Mining (TSX:TV, BVL:TV, OTCQX:TREVF, FRA:4TI) has a Feasibility Study out on the expansion of its Rosh Pinah zinc-lead mine in Namibia.  It’s looking good to expand the throughput from 0.7 Mtpa to 1.3 Mtpa.

Trevali has big plans in Namibia

That’s all for this month’s African news, I hope that wherever you are you’re emerging from lockdowns and getting back to business!

- Jane Lockwood