Congo’s Golden web: The people, companies and countries that profit from the illegal trade in Congolese Gold

Congo’s Golden web
In 2011, the Southern Africa Resource Watch (SARW) launched a regional monitoring and research project to assess the physical, social and economic security risks – as well as the socio-economic, humanitarian and commercial conditions – faced by gold mining communities in the provinces of North and South Kivu, Maniema and Orientale in the Democratic Republic of Congo (DRC). Two previous reports – From Conflict Gold to Criminal Gold (2012) and The High Cost of Congo’s Gold (2013) – included detailed research and analysis on the changing nature of the gold industry in eastern Congo and its negative impact on miners, their families and communities. 
This report completes the ground breaking series by describing all aspects of the commercialization of Congolese gold – including gold that is produced by industrial, semi-industrial and artisanal mining operations, and gold that is traded and refined by small merchants, well-capitalised trading groups and powerful refineries. 
SARW initiated this research project at a time when Congo’s mining environment was improving, propelled by a number of exceptional conditions, including a gold super cycle, which saw prices on world markets rise to over US$1950 per ounce in 2011 and 2012; the establishment of peace in most major gold mining regions in eastern Congo; and the restructuring of government agencies mandated to support gold mining and trading.
However, in April 2013, while this report was being drafted, the gold price declined precipitously, eroding profit margins for all gold mining activities and disrupting the global gold production industry. The challenge faced by the DRC government to maximize benefits from the nation’s gold resources has now become harder. Nevertheless, progress is visible with the inauguration of industrial gold production at Banro’s Twangiza mine and at the Kibali project managed by Randgold Resources. 
Despite these positive developments, international investors in gold projects in Congo remain cautious due to its problematic political risk profile. This SARW report highlights issues that are most detrimental to the Congo’s reputation and to the ability of the Congolese to benefit from their significant gold endowments, including: 
  • Widespread corruption at all levels of the Congolese government, which is a major enabler of activities that are either outrightly criminal or in violation of existing regulations governing industrial, small scale and artisanal gold extraction and trade; 
  • The illegal trade and exportation of gold, which accounts for most of the gold extracted by Congo’s hundreds of semi industrial and hundred of thousands of artisanal miners – with traders not paying the appropriate fees and taxes, exporting gold without the required certification and payment of export duties, or only paying duties on a small portion of their total turn over by significantly underreporting the true scale of their gold trading; 
  • Routine contravention of their licences by semi industrial and industrial permit holders, which delay significant investments that they are contractually obliged to make so as to boost their stock market performance by inflating their gold reserve portfolio, which can be divested whenever the need arises; 
  • Aiding and abetting the smuggling and illegal trading of Congo’s gold by neighbouring countries, specifically Burundi and Uganda, which continue to pretend that their actions have no impact on DRC’s illegal gold trade, while their economies benefit; and 
  • The inadequacy of existing international and multilateral instruments, including UN sanctions, ICGLR protocols, OECD guidelines and other multi stakeholder initiatives, which have failed to encourage the necessary international collabouration to stop the criminal networks that are trading Congo’s gold. Even where compelling evidence exists that trading and refining companies are implicated in the illegal trade of Congo’s gold, no meaningful interventions or investigations occur – a grievous betrayal of various states’ commitments under current UN sanctions and other international treaties.