Gold worth at least $400 million was smuggled out of the Democratic Republic of Congo to Uganda and other East African countries in 2013.
The latest United Nations report assessing the gold smuggling racket points out that this money is being used as a source of financing for the wars raging in the eastern DR Congo.
The 276-page report by the UN Group of Experts on the DR Congo names three Uganda-based families as "major illegal gold exporters in 2013."
Armed conflict, corruption, poor quality of life for citizens and illegal mineral exploitation and interference from neighbouring countries in pursuit of mineral wealth remain major sources of instability in the DR Congo.
Obscure mining concessions in the DR Congo are said to be undermining the country's economic growth. The Africa Progress Panel, after analysing five mining deals in the DR Congo late last year, said there was massive undervaluation of assets and sale to offshore companies.
In total, the five deals have cost the DR Congo$1.36 billion, about twice the country's combined annual budget for health and education in 2012.
The UN group estimates that about $271 million's worth of gold — two-thirds of the total value of smuggled DR Congo-extracted gold — passed through Uganda last year. The Ugandan government lost an estimated $2.7 million in tax revenues by failing to account for this trade, the UN report says.
The six-member panel of experts puts the quantity of gold smuggled out of Uganda last year at 6,761 kilogrammes, although the Ugandan government officials told the UN group that only 161kg of gold were exported from the country during the period from January 1 to November 28.
Four major minerals found in the DR Congo comprise the primary sources for funding of rebel groups — gold, tin, coltan (tantalum) and tungsten.All the minerals are central to the manufacture of various goods across the globe.
The DR Congo contributes about 20 per cent of the global production of tantalum and is home to 88 per cent of the world's reserves.
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Uganda's official trade in gold has declined steeply after the UN Security Council imposed sanctions on the country's two largest gold exporters in 2007, the report notes. But exporters have been able to continue operations illegally because "the government of Uganda has failed to acknowledge and address the illegal gold trade," the UN experts say.
Some of the proceeds from the gold smuggled through Uganda are said to help finance the Democratic Forces for the Liberation of Rwanda, a Hutu-led rebel force in the DRC known by its French acronym, FDLR.
There is irony in this alleged trade because Uganda is an ally of Rwanda's, which regards the FDLR as its mortal enemy.
"Several ex-combatants told the group that FDLR sustains itself in North Kivu primarily through looting, gold mining and illegal taxation, as well as agriculture and charcoal production," the UN report states. "These sources also stated that gold mined by FDLR around Kasugho is traded in Butembo and then in Kampala."
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The experts' report appears to confirm the saying that there is no honour among thieves.
"At least one major gold buyer in Kampala uses a table to estimate gold purity that contains fraudulent values, thus enabling fraudulent transactions," the group reports. And it estimates that gold buyers in Kampala annually "cheat sellers out of more than 200 kg of gold" worth between $5 million and $13 million.
Gold smuggled from the DR Congo is also shipped to and out of Tanzania and Burundi, the report says.
"Gold produced in Misisi (in the DR Congo) is traded to Bujumbura (Burundi) through either Bukavu or Uvira and to the United Republic of Tanzania through Kigoma," the experts state. The report does not estimate the quantity or value of gold smuggled through Burundi because the country has no production data for gold nor a tracing system for gold exports.
The report notes, however, that "Burundian intelligence officials and a gold trader told the group that most of the Congolese gold smuggled through Burundi is exported to Dubai."
As is the case in Burundi, the report adds, Congolese gold smuggled into Tanzania is blended into official exports and smuggled separately out of the country.
Government officials told the UN group that gold from the DR Congo is not being traded in Tanzania, the report notes.
But it asserts that Congolese gold is smuggled from South Kivu into Tanzania primarily by boat across Lake Tanganyika to Kigoma.
"A gold trader, a Mai-Mai ex-combatant and a civil society leader told the group that traders in these towns take the gold to Dar es Salaam, from where it is exported to Dubai," the report adds.
Gold smuggling on so enormous a scale would not occur if the DR Congo government were to crack down on the illegal trade, the UN team suggests, noting that elements of the Congolese army play an important role in the illicit operations.
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A transhipment point for gold for a long time, Uganda in May 2010 saw the commissioning of a gold refining operation in Kampala, for the first time bringing the trade above board.
Run by Russian entrepreneur Yuri Bogorodistkaya, Victoria Gold Star depends on supplies from the DR Congo, from Tanzania as well as internal supplies from Uganda's budding gold mining industry.
According to the Uganda Investment Authority, Uganda's gold industry has grown in volume over the past decade and half on the back of aeromagnetic surveys that identified alluvial deposits over a belt running from the southwest to the northeast of the country. There is active mining in Busia, Buhweju, Mubende and Karamoja. Victoria Gold Star's refinery has a nominal capacity of 60kg daily.
Accusations of gold smuggling against Uganda are not new, with a raft of high-ranking military officials once being accused by the UN Panel of involvement in smuggling Congolese minerals and other natural resources from the DR Congo.
However, Uganda says it now has a mineral processing protocol with the Congolese government and dealings with Congolese gold dealers are above board.
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The UN report says that local militias in the DR Congo, backed by Uganda, Rwanda and mining multinationals, get supplies of food, money, and military hardware in exchange for smuggled minerals.
It accuses Rwanda, Uganda and Zimbabwe of systematically exploiting Congolese resources and recommends that the Security Council impose sanctions.
In March 2011, Kenya and the DR Congo agreed to jointly investigate the illegal gold trade because Kenya had emerged as a major hub for the trade, after Congolese President Joseph Kabila visited Nairobi to request then president Mwai Kibaki to help him locate 2.5 tonnes of gold worth $100 million that had disappeared in Kenya.
READ: Kenya and DRC to fight illegal gold trade
Kenya'sJomo Kenyatta International Airport is the leading aviation hub in the region through which smuggled mineral pass.
Much of the gold is exported to the Middle East and Europe, while coltan, which is used in electronic goods such as mobile phones, is in high demand worldwide.
In 2010, President Kabila banned mining in much of the east of the country, saying he wanted to cut the link between conflict and minerals, but the move did not work because Kinshasa failed to streamline the extracting industry, so that highly placed personalities in his own government preferred the status quo for their own benefit.
Citing a United States Geological Survey estimate of 10,000kg of gold artisanally mined per year in the DR Congo, the report notes that official gold exports from January to October last year amounted to only 181kg. Thus, the UN says, 98 per cent of the DR Congo's artisanally produced gold was smuggled out of the country last year.
The group estimates the value of the illegally traded gold to be between $383 million and $409 million, with the result that the DR Congo government lost between $7.7 million and $8.2 million in tax revenue during 2013.
Kenya and Uganda have become major exporters of gold, since the two countries have the infrastructure to transport illegal minerals to international markets. An estimated 20 million people in DR Congo, Uganda, and Rwanda and to some extent Kenya, depend on the illegal mining of minerals as their only sources of livelihood.
Tanzania has initiated tight controls over smuggling after it emerged that the country was losing more than $15 million annually to illegal trade.
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In Rwanda, in 2011, more than 11 tonnes of smuggled minerals were seized by the Rwanda National Police in the Western Province districts of Rubavu, Rusizi and Karongi. The source was suspected to be the DR Congo.
In 2012, another UN report said that traders in Rwanda profiting from tin, tungsten and tantalum smuggled across the border from mines in eastern DR Congo were helping fund the M23 rebels.
Additional Reporting by Fred Oluoch in Nairobi and Michael Wakabi in Uganda.