South African gold is being looted on an “industrial scale”, with research estimating that the country loses about $1bn (around R14.4bn) through illegal gold mining every year, the Sunday Timesreported.
According to the report, much of this looting occurred during the height of state capture, between 2012 and 2016, and it has been linked to the alleged decimation of the South African Revenue Services’ (SARS) capacity to investigate the illicit economy.
According to the paper, research by the Global Initiative Against Transnational Organised Crime (GI) shows large anomalies in gold trade data.
In one case, Dubai bought 34 tons of gold from South Africa from 2012-2016, but this is not reflected in South Africa’s trading accounts.
In another case studied by the GI, eSwatini (Swaziland) reportedly sold 2.1 tons of South African-mined gold to India between 2011 and 2016.
Rising commodity prices
eSwatini reportedly earned $40m (around R577m) from the sales, while South Africa was paid only $91 445 (around R1.3m) for the gold sold to it.
This illicit trade is reportedly being driven by rising commodity prices, the limited resources of the South African Diamond and Precious Metals Regulator, and the closure of the SARS illicit economy investigative unit, according to the Sunday Times.
Former SARS commissioner Tom Moyane reportedly closed that unit, but SARS has announced that it would be reinstated.
More research by GI and Columbia University reportedly shows how organised crime rings conduct mining operations on an “industrial scale”.
“Armies” of illegal miners and international networks of buyers are reportedly being used to smuggle South African gold through places like eSwatini and Mozambique, to jewellery manufacturing hubs in Dubai, Mumbai and Karachi.
The modus operandi is reportedly to melt the illegally-mined gold down with legitimate gold at refineries run by criminal syndicates, and then smuggle it out of the country via second-hand gold and scrap-metal dealers.
According to Mining Review, South Africa’s illegal mining trade is estimated to be worth R7bn a year, reportedly citing PwC South Africa’s Mine Report 2017. The reasons behind this are thought to be gold’s high value, the ease of finding willing buyers and the high number of abandoned gold mines.
In 2015, the South African Human Rights Commission (SAHRC) estimated that there were 30 000 illegal miners in South Africa.
The Minerals Council of South Africa says illegal mining and organised crime are intertwined, with illegal mining being led by international criminal syndicates. This often leads to losses not only in revenue and taxes for South Africa, but also losses in employment opportunities, capital expenditure, exports and foreign exchange earnings.