Over $ 4 billion a year in high-risk gold flows from DRC, Uganda, Rwanda, CAR and others

US and EU must work with African governments to harmonize gold export taxes to reduce smuggling and promote conflict-free gold, says investigative and policy group The Sentry.

Uganda, Rwanda, the Democratic Republic of Congo (DRC), Central African Republic (RCA) and Cameroon are the states most in need of tackling the problem, according to The Sentry’s report released in February. Uganda and Cameroon have significantly lower gold taxes than those in DRC or CAR, making it much more profitable to smuggle gold to those countries, according to the report.

The report estimates that $ 4 billion in high-risk gold from Central and East Africa is channeled to international markets each year, especially to the United States, India, the Middle East, Europe and China. The conflict gold trade will never be eliminated, but better due diligence by governments and the private sector can dramatically reduce it while promoting responsible artisanal gold trading, says The Sentry.

  • The four main “conflict minerals” are gold, tin, tantalum and tungsten.
  • Gold has proven to be the most difficult to process, as it is easy to smuggle and sell virtually anywhere. When refined, gold loses all trace of its origin and is marketed as a standard product.

Researchers led by Nicolas Berman have shown that conflict mineral mining increases the chances of violence unleashing and then spreads and perpetuates the violence by building the financial capacities of combatants.

  • Between 1997 and 2010, Berman shows, up to a quarter of violence levels in African countries can be explained by rising gold prices.

Bullion centers

In November, the London Bullion Market Association (LBMA) has issued recommendations for investment hubs such as Dubai with three main goals: responsible sourcing of recycled gold, elimination of cash transactions, and support for artisanal and small-scale mining. The LBMA has said it will only allow its Good Delivery List (GDL) refiners to source materials from investment centers that meet OECD standards.

The LMBA initiative provides “useful leverage” to bring the investment center into compliance, according to The Sentry. But much remains to be done.

  • Government policies in the region make it difficult for minors to legally register and secure property rights. “Government corruption exacerbates these challenges,” says The Sentry.
  • Donor governments should work with African mining ministries to create policies aimed at formalize artisanal mining, says the report.
  • This can be done by reducing the bureaucratic burden on them, reducing registration costs and strengthening property rights.

The report mentions a serious lack of funding for conflict-free artisanal mining in East and Central Africa, leaving the door open to illegitimate sources of funding.

  • Jewelry and electronics companies should stop sourcing from refiners who cannot show a credible independent audit, says The Sentry, as this has helped clean up the trade of other conflict minerals.

The lack of real consequences of participation allows smuggling to continue. According to the report, refiners and traders who deal in conflict gold suffered little, if any, consequences for contributing to the armed conflict.

Final result

The wide variations in African gold tax regimes are a standing invitation to smugglers.

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