A modern-day gold rush believed to be driven by organised crime syndicates is plundering one of SA’s most valuable resources.
Research on the world’s illicit gold industry reveals how tons of gold were shipped out of the country between 2012 and 2016, when state capture was at its height.
Case studies cited by the Global Initiative Against Transnational Organized Crime (GI), which conducted the research, show dramatic discrepancies in global gold trade data.
Dubai, for example, bought 34 tons of gold from SA in those four years, but the sales — worth about $1bn — are not reflected in SA’s trading accounts.
The GI obtained the Dubai information from various international databases including the UN trade statistics database, ComTrade. This data, in turn, comes from individual countries’ revenue services.
The Dubai sales are among several SA trades the GI investigated in its research on the illegal gold industry. The research indicates that SA’s fiscus loses $1bn (about R14.4bn) annually from illegal gold mining.
A 2016 report by the UN Interregional Crime and Justice Research Institute, using SA Revenue Service (Sars) data, showed the economy was losing nearly 10% of its GDP annually to the illicit economy.
Other trades investigated by the GI included a sale of 2.1 tons by Eswatini (Swaziland) of SA-mined gold to India between 2011 and 2016.
While Eswatini, which only buys SA gold, earned $40m from the sale, SA was paid only $91,445 [R1.3m] for the gold sold to Eswatini. GI researchers said this raised questions about how and from where Eswatini sourced the gold.
GI researchers and Oxfam say the SA gold rush is driven by rising commodity prices, the closure of the Sars illicit economy team and the SA Diamond & Precious Metals Regulator’s limited number of inspectors.
The illicit economy team, which was shut down by former Sars commissioner Tom Moyane, investigated illicit financial flows. In August, Sars said it would be re-established.
Sars and the National Treasury did not respond to questions about the value of precious metals lost by the country and initiatives to combat illicit financial flows.
Mineral resources department spokesperson Ayanda Shezi said the regulator had 13 inspectors to police mines, refineries and jewellery industries, with scrap-metal and second-hand dealerships regulated by the police.
Research by the GI and Columbia University anthropology professor Rosalind Morris shows that organised crime syndicates conduct mining operations on an “industrial scale” using armies of illegal miners and international networks of buyers, scrap-metal and second-hand jewellery dealers, and refineries. Illegally mined gold is smuggled primarily through Eswatini and Mozambique to the jewellery manufacturing hubs of Dubai, Karachi and Mumbai.
GI researcher Alan Martin said illegal gold was made untraceable by melting it down with legitimate gold at refineries operated as fronts by criminal syndicates. “They use second-hand gold and scrap-metal dealers to smuggle it out of the country.”
A man who mines illegally in Welkom said he and his group sold about 4kg of gold a month. “In a month, our buyer collects maybe 40kg from the different miners here,” he said.
Martin said while ComTrade data needs to be carefully reviewed because of different reporting methods, it indicates potential smuggling routes.
The gold is smuggled to Mozambique and Eswatini before couriers fly it to Dubai and India via SA.
“Hidden inside luggage, the gold is often booked through to the destinations via Johannesburg, where no security checks are done because they are deemed to have been done in Eswatini or Mozambique.”
Inspectors employed by the regulator do not have the investigative skills to identify anomalies in reports provided by syndicates’ front companies, said Martin.
Brigadier Ebrahim Kadwa, head of the serious organised crime unit at the Hawks, says illegal mining has reached a point where it threatens SA’s economy.
“Syndicates smuggle gold through front companies like scrap-metal and second-hand goods dealers, melting it down with stolen jewellery and laundering it through jewellery markets in Dubai and India,” he said.
Oxfam mining expert Thembinkosi Dlamini says Sars’s capacity to deal with illicit financial flows has been decimated through political interference, and the mineral resources department is unable to recruit or retain the skills needed for monitoring.
“The government simply doesn’t know who is taking what from the ground,” he said.
Hillary Macaulay, spokesperson for Rand Refinery, said Africa’s biggest refinery had not exported 34 tons of gold to Dubai between 2012 and 2016.
“It’s possible other refineries could have exported this material,” she said, adding that Rand Refinery primarily delivers gold to India, China, the UK, Switzerland, Germany and the US.
• This story was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. The content is the sole responsibility of the author and the publisher.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.