Africa loses far more money through illicit financial flows every year than it receives in aid and foreign direct investment. Global Financial Integrity (GFI) estimated that Africa loses a total of US$38.4 billion annually through trade mispricing, and US$25 billion through other illicit flows.
According to a joint report by the African Development Bank and GFI, the illicit haemorrhaging of resources from Africa is about four times that of Africa’s current external debt. Unethical commercial transactions by multinational companies make up a massive 60% to 65% of the illicit outflow of the continent’s wealth.
Indeed, the scramble for Africa’s resources has continued unabated, and is arguably worse than during the era of colonialism. Emerging industrial powers in the East have joined those of the West in exploiting Africa’s mineral wealth ‘at all costs’. In some cases, they collaborate with illicit networks and militias. The result is that many prospects and opportunities for the development of the continent suffer a slow death.
The resource-rich Democratic Republic of Congo (DRC) is a clear case in point. The Institute for Security Studies (ISS) is currently researching illicit smuggling networks in eastern DRC to better understand and respond to this challenge that continues to undermine the stability and development of the region.
Since the late 1800s, the Congolese people have suffered at the hands of foreign and local businessmen and political leaders intent on exploiting resources such as rubber, ivory, diamonds, gold, copper, cobalt and timber. The potential prosperity of the DRC is complicated by its history of violence and fragility. The country gained independence in 1960, but a period of instability ensued after the assassination of Congolese independence leader Patrice Lumumba in 1961. Belgium and the United States of America were implicated in this crime.
In 1965, Joseph Mobutu was brought to power via a coup. The influx of refugees from Rwanda following the 1994 genocide further weakened the state, leading to overthrow of Mobutu in 1997. The rebel force installed Laurent Kabila as president of the renamed DRC. Civil war continued, causing the deaths of millions of people and leading to the president’s assassination in 2001.
Laurent’s son, Joseph Kabila, was officially elected the DRC president in 2006, but the fighting continued. Throughout the country’s fragile history, external actors from the region and abroad have contributed to destabilising the DRC.
The roots of the country’s mineral smuggling scourge can be traced back to 1981, when Mobutu legalised artisanal mining, thereby liberalising mineral trade in the country. The artisanal mining sector expanded as locals started exploiting minerals and selling them wherever they could find a market.
Neighbouring countries took advantage and provided free, unregulated cross-border trade that created an ideal environment for mineral smuggling. This saw the formation of regional illicit mineral trade networks.
The ISS research found that smuggling networks are well coordinated between and within states, driven by the demands of international markets and comprised of a web of dangerous, intertwined groups that link the market chain from the mine to jewellery stores. These networks often operate in the formal and open sector as well as the illicit underworld; making them both invisible and opaque.
Networks are made up of decentralised components that enjoy significant autonomy, but which ultimately answer to political elites and business moguls. The latter parties facilitate illicit trade by compromising formal state structures, state security measures and other trade regulations. For the networks, the control of flows and routes – including cross-border channels – is more important than control of territories.
To what extent, however, does illicit mineral trade harm the DRC? The United Nations Security Council Group of Experts on the DRC estimated in a 2014 report that a staggering 98% of the gold produced in the country is smuggled out. According to the United States Geological Survey, artisanal miners produce an estimated 10 000 kg of gold per year. However, between January and October 2013, official export records show that only 180.76 kg had legally left the country.
The main trading towns in eastern DRC for gold smuggling are Bukavu, Butembo, Bunia, Ariwara and Kisangani. The vast majority of the gold traded in these towns leaves the country illegally. Most illicit minerals from eastern DRC are exported through companies based in Europe, China, Russia, South Africa, the United Arab Emirates, Lebanon and other Asian markets.
Since 1997, Kampala has been a major trading location and transit hub for Congolese gold. Nearly all of the gold traded in Uganda and Kenya is illegally exported from the DRC.
Burundi is also major transit country for gold originating in eastern DRC, as is Tanzania, itself a major gold producer.
In addition to gold, the eastern DRC has large deposits of tin, tungsten and tantalum (3Ts), mostly used in manufacturing electronics like mobile phones and laptops. It has been alleged that Rwanda is a transit point for the exportation of smuggled 3Ts from the DRC.
Terrorist organisations have also become involved in these networks, according to an interview with Remy Kasindi, Director of Research at CRESA, a think tank based in Bukavu. Kasindi explained that groups such as al-Shabaab and the Allied Democratic Forces-National Army for the Liberation of Uganda have joined hands in smuggling minerals from North Kivu, and are financing their activities by using gold and other natural resources stolen from eastern DRC.
Many local and international initiatives have aimed to curb the menace of illegal mineral trade. These include the Kimberly process, Extractive Industries Transparency Initiative, and the International Conference on Great Lakes Region (ICGLR) initiative against the illegal exploitation of natural resources – but so far they have attained limited success. The future development of Africa requires a fundamental change. An effective solution must start with member states in the Great Lakes Region, who must prioritise the implementation of the ICGLR initiative.
Together with regional economic communities and under the umbrella of the African Union, cross-border trafficking in the region must be investigated and addressed with practical measures. This must happen in a way that reinforces transparency and accountability, and ensures inclusivity in line with the African Mining Vision.
Given the eastern DRC’s vast wealth of resources, it is incomprehensible that the area remains fraught with development issues. It is time for this to end.
This article was first published by the Institute for Security Studies and is republished here with their permission.