Thorny questions about who stands to lose and who will benefit from natural resources in Africa’s...
KAMPALA, Uganda — Cars and motorcycle taxis rocket over the uneven pavement, while church sermons blare from loudspeakers. Vendors hawk bananas, cakes and chapati. Brightly colored shops sell stationery and advertise printing services. But amid all the mundane, quotidian commerce here on Nassar Road in Uganda’s capital city, it is widely rumored that traders can buy false certificates to disguise the provenance of gold that has been smuggled over the border from the Democratic Republic of Congo and South Sudan, both of which face international sanctions on their gold trade due to its role in funding their internal conflicts. The false certificates allow the smuggled gold to be refined in Uganda and sold on the international market.
The gold trade here is booming, even as other businesses have been forced to close amid the coronavirus pandemic. The precious metal has overtaken coffee to become Uganda’s most important commodity in recent years, with gold exports totaling $1.7 billion between November 2019 and December 2020—44 percent of its total exports.
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But the East African nation itself is not rich in resources. Much of this gold comes from neighboring countries, spirited across the border by shadowy smuggling networks. Uganda’s central bank estimated in 2019 that only about 10 percent of the gold flowing out of Uganda was actually mined in the country.
This bustling illegal market, and the challenges related to properly regulating it, have been a source of both fascination and frustration for years, within Uganda and internationally.
The pace of Uganda’s gold trade shot up after the establishment of the African Gold Refinery, which officially opened its doors in 2017. AGR, founded by the Belgian tycoon Alain Goetz, is located on the shores of Lake Victoria in Entebbe, near a major United Nations compound and Uganda’s international airport.
Goetz, one of the richest men in Belgium, was reportedly given a sweetheart deal to establish the refinery by Ugandan businessman Barnabas Taremwa, brother-in-law to Salim Saleh, himself the brother of—and adviser to—President Yoweri Museveni. Under the terms of the agreement, AGR reportedly received a five-year monopoly on Uganda’s gold trade and an export-tax exemption for at least 10 years, according to an investigation by journalists at the Belgian newspaper De Standaard. Now, Uganda exports some 50 times more gold than it did a decade ago.
AGR has long been scrutinized by watchdog organizations like The Sentry, which published an extensive investigation in 2018 accusing the firm of dealing in smuggled gold, citing documents and interviews with multiple gold traders and government officials in the region. This alleged smuggling potentially fuels conflict in nearby and even in other parts of the world. AGR landed in some hot water in 2019, when a 3.6-ton consignment of gold was briefly confiscated by Ugandan police after the government found that it may have been smuggled from Venezuela; 3.8 tons of gold from the same shipment had already been processed and sold before the police acted. Uganda’s attorney general ultimately ordered the confiscated gold returned to AGR, but he also ordered the refinery to stop importing gold from Venezuela due to U.S. sanctions on the country.
AGR has long flatly denied all allegations of smuggling. “It is untrue that African Gold Refinery is in any way involved in illegal smuggling of gold from the Congo, South Sudan or any other jurisdiction,” a company representative wrote in an emailed statement to WPR. “AGR has stringent due diligence procedures that all of its customers undergo.”
The company’s denials have done little to dispel the cloud of suspicion around it, however. Goetz himself no longer has a stake in AGR, but he was convicted alongside his brother, Tony, on unrelated money laundering charges in Belgium last year, with both of them receiving 18-month suspended prison sentences.
AGR and other refineries operating in the region also remain under scrutiny. A report released last year by the U.N. Panel of Experts monitoring sanctions enforcement against Congo found that gold from the country was being secretly routed “to regional refineries and other international destinations.” These refineries, the experts found, “acted as brokers, used cash payments, undertook refiner-to-refiner trading and used corporate networks to obscure ownership, thereby inhibiting supply chain accountability.”
Gold from Uganda is often flown first to Dubai in the United Arab Emirates and from there to markets around the world. Impossible to track once it is melted down, illicit gold from conflict zones could easily be mixed with legally sourced metal. “The difficulty in tracing gold is a major hurdle in establishing transparency,” said Marcena Hunter, an analyst focusing on gold at the Global Initiative Against Transnational Organized Crime. A necklace bought at a high-end jeweler in Geneva, for example, could contain Congolese conflict gold that was smuggled out via Uganda.
Uganda’s Ministry of Energy has been tasked with regulating the gold trade, but its commitment to doing the job properly has been questioned, with senior government officials allegedly benefiting from illicit gold flows. “While on paper there may be a very serious commitment to disrupt the trade, in practice there is very little incentive to do so,” said Joanne Lebert, director of IMPACT, a Canadian nonprofit focused on resource management.
Uganda’s Financial Intelligence Authority also helps to monitor the gold trade, but has not been able to do much to control smuggling networks. According to the FIA’s director, Sydney Asubo, some of the blame lies with eager international buyers.
“The source countries, the transit countries do have weaknesses, but the problem is accelerated by willing buyers in the destination countries,” Asubo told WPR. “Our argument has been that if there are no ready buyers then the motivation to engage in illegal activity will reduce. But there are ready buyers in certain places. Ready buyers don’t concern themselves with whether ethical standards have been met or not.”
The problem has only been exacerbated by the COVID-19 pandemic, which made it difficult for local mines and traders to continue operations. Artisanal miners struggled to sell gold to local buyers, who in turn struggled to move it. But with gold prices climbing on the international market, the appetite for smuggling gold only increased.
Meanwhile, as the economic impact of the pandemic lingers in Uganda and across the region, more people have been driven to pan for gold, according to Simon Longoli, the executive director of the Karamoja Development Forum. Located in the far east, Karamoja is one of the few places where Uganda has its own gold deposits.
“This pandemic has increased the dependence of people on natural resources for survival,” Langoli told WPR. But most artisanal miners, in Uganda and outside of it, see few of the benefits from the country’s soaring gold exports. “The sector really doesn’t reward [the miners],” Langoli said, adding that miners in Karamoja make about $1 a day.
Uganda has emerged as a hub for the illegal gold trade, but the problem extends well beyond its borders. In February, The Sentry estimated that $4 billion in high-risk gold, mined in war-torn countries like Congo, South Sudan and the Central African Republic, flows through the international market annually. A U.N. investigation in August also implicated traders in neighboring Rwanda of dealing in gold and coltan from Congo, despite reported efforts by Rwandan authorities to stamp out the illicit mineral trade.
There have been some attempts at international regulations to address the issue, including a new responsible sourcing report from the London Bullion Market Association, written in an attempt to encourage transparency in the mining industry. U.S. Senators Cory Booker and Benjamin Cardin in April sent a letter to the U.S. Treasury Department, urging it to impose sanctions on gold traders and refinery owners dealing in conflict minerals.
The overarching goal, experts say, is to better regulate the industry and support legal operations at the local level. Yet with gold smuggling and trading networks in countries like Uganda deeply entrenched, and a long line of willing buyers around the world, regulators face steep challenges ahead.
