On the trail of African gold

Tracing the path of gold from its extraction to its final use is not easy. After being extracted, the precious metal will be sold, transported, processed, exported, reprocessed and then resold. All of this often through the hands of many people, in different countries. Much of the gold trade is opaque.

It is this opacity that Marc Ummel and Yvan Schulz, colleagues in the raw materials unit at SWISSAID, have tackled in a new study on African gold. In order to follow the precious metal trail, they quantified the production and trade of gold, both declared and undeclared, for all 54 countries in Africa over a period of more than ten years.

The results are striking: each year, between 321 and 474 tonnes of artisanal gold are produced in Africa without being declared. This equates to a value of between $24 billion and $35 billion as well as between 72 and 80% of Africa’s total artisanal gold production. The research also highlights a worrying phenomenon: gold smuggling in Africa continues to grow. It has more than doubled between 2012 and 2022.

These figures are all the more important when we know that gold is the main source of revenue for many African states, a tool for financing armed groups and the cause of serious human rights violations and environmental degradation.”Shedding light on the African gold trade is essential, if governments and the industry are to face up to their responsibilities”, explains Yvan Schulz, project manager at SWISSAID and co-author of the study.

Switzerland is one of the top three importers of African gold, along with the United Arab Emirates and India. In 2022, Switzerland was responsible for 21% of direct imports of African gold abroad. In addition to direct imports from Africa, Switzerland also imports a significant amount of gold from Dubai (more than 1670 tonnes of gold between 2012 and 2022). As the United Arab Emirates has no mines on its territory, it also imports gold, much of it from Africa. But this gold is not always declared. The study reveals that between 2012 and 2022, 2596 tonnes of gold not declared for export were imported from Africa to the UAE.

Due to Swiss legislation, which makes the last place of processing the place of origin,  gold imported from the UAE is considered Emirati even if its real origin is elsewhere, for example in Africa. “This situation is problematic because for many years smuggled gold potentially linked to conflicts or human rights violations has been legally landing in Switzerland,” says Marc Ummel, head of the raw materials unit at SWISSAID and co-author of the study.

Switzerland has an important role to play here: it has four of the nine largest refineries in the world and almost50% of the world’s gold imports pass through. If it were to legislate more strictly on these imports, it would have a real impact on the global gold trade.

The Customs Act, which is due  to be debated in Parliament in the autumn, is an opportunity to  strengthen the legal framework and improve the traceability of raw materials. In this respect, the study is timely and hopes that it will tip the balance in favour of stricter legislation that can improve the living conditions of people in the South.

What exactly did you focus on in your new study?

Yvan Schultz: We have analysed the gold flows of each of the 54 African countries. To do this, we collected data on the gold production, exports and imports of African countries and compared this data with the African gold imports reported by importing countries (which are almost exclusively non-African countries). This is an important aspect, because undeclared gold causes a loss of income for African states. They cannot invest these revenues in public services such as education or the health system.

What surprised you the most about your research?

Marc Ummel: Several things. The amount of undeclared gold in Africa, for example, is much higher than previously assumed, and some importing countries, including Switzerland, have loopholes in their legal framework that make it possible and likely to import undeclared or conflict-affected gold.

We were also surprised to see that some African states that produce a lot of gold have virtually no official exports, while others that produce little export a lot of gold. This shows that strengthening legislation and increasing controls at the level of non-African importing countries, important as they are, are not enough to solve the problems that arise; a lot of work also needs to be done in Africa itself, particularly at the national and regional levels.

Why did SWISSAID undertake this study?

M.U.: By documenting illegal gold flows, undeclared exports and laundered quantities, and by pointing the finger at the countries involved, we are increasing the pressure for effective guidelines to finally be enacted! But the goal goes far beyond regulation; in the long term, this should make it possible to improve the working and living conditions of millions of artisanal miners and their families, to increase the incomes of African states and to fight against human rights and environmental abuses. This study is therefore the continuation of our development activities in the field and concretely contributes to moving the lines.

What does this study bring to the gold sector?

Y.S: Our study concerns a phenomenon that is already known, but whose magnitude we could only imagine until now. By looking at the African continent as a whole and by putting a figure on all gold flows, SWISSAID was able to prove that African gold smuggling was much more important than previously assumed. More broadly, the study has significantly increased transparency in African gold trade, which will require policymakers and other decision-makers to strengthen legal frameworks, customs controls and corporate due diligence requirements.

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