Why Does Most Gold Smuggling from Africa Pass Through Dubai?
Quote from chief_editor on September 19, 2023, 6:17 pmAccording to data from the United Nations Comtrade database, Africa's share of gold imports into Dubai increased from 16% in 2006 to 50% in 2016. On July 14, 2020, the COVID-19 crisis prompted a statement from the World Gold Council: "Investors have viewed gold in 2020 as a primary portfolio hedging strategy. The pandemic may have a lasting impact on asset allocation. It will also enhance the value of gold as a strategic asset." By August 5, the price of gold reached an all-time high of $2,048 per ounce. As demand for gold prices soared, artisanal mining and smuggling activities increased, with Africa being a hotspot for such activities. United Nations experts pointed out that much of the smuggling activity is concentrated in the eastern Democratic Republic of Congo. Some refineries act as brokers in these transactions, using cash to purchase gold from mining sites and then reselling it to other refineries to conceal the sources of smuggled gold. Most of these transactions bypass regular banking channels and are concentrated in international trade centers such as Dubai.
It is reported that the new refineries in the African Great Lakes region can process over $33 billion worth of gold annually. The largest of these is the African Gold Refinery (AGR) located in Uganda, with an annual capacity of $21.9 billion. The second-largest is the Aldango refinery in Rwanda, with an annual capacity of $7.3 billion. AGR was founded by Alain Goetz, a descendant of a Belgian gold trading family, who also holds shares in Aldango and a Dubai-based company called PGR Gold Trading.
Sudan also faces significant issues with gold smuggling, as artisanal miners in the Blue Nile, Cordofan, and particularly in Darfur produce tons of gold that are then sold to traders who smuggle it to Gulf countries. In November 2019, Sudan's Minister of Minerals, Adil Ali Ibrahim, publicly disclosed that Sudan produced approximately $9.3 billion worth of gold in 2018, making it the third-largest gold producer after Ghana and South Africa. However, from 2014 to 2018, Sudan officially exported gold worth only $8.6 billion, while its main trading partners recorded imports of Sudanese gold worth $12.7 billion. Experts believe that this $4.1 billion discrepancy is a result of smuggling activities between Sudan and the UAE.
According to data from the United Nations Comtrade database, Africa's share of gold imports into Dubai increased from 16% in 2006 to 50% in 2016. From 2011 to 2018, non-oil trade between Dubai and African countries reached $252 billion, making Dubai one of Africa's most important trading partners. Dubai is also one of the top ten investment sources for Africa, with much of the investment going into the mining sector, particularly small-scale refineries.
However, it is worth noting that in April 2020, the Financial Action Task Force (FATF), based in the United States, placed Dubai on its watchlist, expressing concerns about its money laundering activities. Compared to other popular destinations like London and Switzerland, Dubai's government conducts fewer reviews of smuggling activities.
Despite efforts by Western governments to call on Dubai to cooperate in curbing illegal capital flows, such as gold smuggling, gold trading constitutes 20% of Dubai's economy and is a major pillar of its economy. Consequently, Dubai's government has not responded positively to calls from Western countries. Additionally, as part of an agreement brokered by U.S. Secretary of State Mike Pompeo, Dubai recognized Israel, which may make Dubai less likely to succumb to international pressure on capital flow issues.
Currently, African countries are facing economic slowdowns due to the COVID-19 pandemic. This may lead to increased gold smuggling to supplement national revenues, but the results of efforts to counterbalance this by African governments and vested interest groups in the region remain to be seen. For Chinese investors, it is essential to stay updated on the dynamics of the host country's government to ensure that their investments are legal and compliant, reducing unnecessary risks and complications.
According to data from the United Nations Comtrade database, Africa's share of gold imports into Dubai increased from 16% in 2006 to 50% in 2016. On July 14, 2020, the COVID-19 crisis prompted a statement from the World Gold Council: "Investors have viewed gold in 2020 as a primary portfolio hedging strategy. The pandemic may have a lasting impact on asset allocation. It will also enhance the value of gold as a strategic asset." By August 5, the price of gold reached an all-time high of $2,048 per ounce. As demand for gold prices soared, artisanal mining and smuggling activities increased, with Africa being a hotspot for such activities. United Nations experts pointed out that much of the smuggling activity is concentrated in the eastern Democratic Republic of Congo. Some refineries act as brokers in these transactions, using cash to purchase gold from mining sites and then reselling it to other refineries to conceal the sources of smuggled gold. Most of these transactions bypass regular banking channels and are concentrated in international trade centers such as Dubai.
It is reported that the new refineries in the African Great Lakes region can process over $33 billion worth of gold annually. The largest of these is the African Gold Refinery (AGR) located in Uganda, with an annual capacity of $21.9 billion. The second-largest is the Aldango refinery in Rwanda, with an annual capacity of $7.3 billion. AGR was founded by Alain Goetz, a descendant of a Belgian gold trading family, who also holds shares in Aldango and a Dubai-based company called PGR Gold Trading.
Sudan also faces significant issues with gold smuggling, as artisanal miners in the Blue Nile, Cordofan, and particularly in Darfur produce tons of gold that are then sold to traders who smuggle it to Gulf countries. In November 2019, Sudan's Minister of Minerals, Adil Ali Ibrahim, publicly disclosed that Sudan produced approximately $9.3 billion worth of gold in 2018, making it the third-largest gold producer after Ghana and South Africa. However, from 2014 to 2018, Sudan officially exported gold worth only $8.6 billion, while its main trading partners recorded imports of Sudanese gold worth $12.7 billion. Experts believe that this $4.1 billion discrepancy is a result of smuggling activities between Sudan and the UAE.
According to data from the United Nations Comtrade database, Africa's share of gold imports into Dubai increased from 16% in 2006 to 50% in 2016. From 2011 to 2018, non-oil trade between Dubai and African countries reached $252 billion, making Dubai one of Africa's most important trading partners. Dubai is also one of the top ten investment sources for Africa, with much of the investment going into the mining sector, particularly small-scale refineries.
However, it is worth noting that in April 2020, the Financial Action Task Force (FATF), based in the United States, placed Dubai on its watchlist, expressing concerns about its money laundering activities. Compared to other popular destinations like London and Switzerland, Dubai's government conducts fewer reviews of smuggling activities.
Despite efforts by Western governments to call on Dubai to cooperate in curbing illegal capital flows, such as gold smuggling, gold trading constitutes 20% of Dubai's economy and is a major pillar of its economy. Consequently, Dubai's government has not responded positively to calls from Western countries. Additionally, as part of an agreement brokered by U.S. Secretary of State Mike Pompeo, Dubai recognized Israel, which may make Dubai less likely to succumb to international pressure on capital flow issues.
Currently, African countries are facing economic slowdowns due to the COVID-19 pandemic. This may lead to increased gold smuggling to supplement national revenues, but the results of efforts to counterbalance this by African governments and vested interest groups in the region remain to be seen. For Chinese investors, it is essential to stay updated on the dynamics of the host country's government to ensure that their investments are legal and compliant, reducing unnecessary risks and complications.