Will Congo's Recent Elections Affect The Flow of Illegal Gold To The West?

Politically stability apparently has come to the perpetually embattled Democratic Republic of Congo, but will it be enough to stop the illegal gold trade that is now finding its way into the West? The Gold Rate raises the question as the answers can have significant implications not just on the country and its neighbors, but on the other side of the globe as well.

The victory in the December polls by 55-year-old challenger Felix Tshisekedi over incumbent president Joseph Kabila is heralded as the country’s very first peaceful transition to power in more than 20 years. However, until the new leader takes firm rein, everyone is taking a cautionary wait-and-see attitude. This includes the armed militia, official and unofficial, that has been making money from the illicit trade following the 1997 overthrow of strongman Mobutu Sese Seko.

These so-called ‘conflict forces’ watch a stern eye over the thousands of artisanal mines all over the DR Congo. A huge portion of the wealth that flows from it ends in their pockets. Corrupt government officials who sign off on the transactions and paper trail while looking away are also immensely paid for their assistance and/or silence. A report from the Enough Project estimates that the annual value of gold being smuggled out of the DR Congo amounts to $600 million. A mere hundred grams of gold can fetch up to $4,500 on the black market, says the DW. The International Peace Information Service (IPIS) reveals that nearby Uganda receives 75 to 98 percent of all the illegal gold that leaves the country.

The individuals and agencies in Uganda that accept the gold then take care of the documentation. They process the necessary papers and pay tax to the Ugandan government. No supply chain can be traced to DR Congo. Once the illegal gold becomes recognized as a legal and invaluable commodity, it is then transported to legitimate clients based in countries like China and Dubai.

It is turning out that those longtime customers of Ugandan-filtered gold just might be the clearinghouse or midway point for the developed countries in the west. Security and Exchange Commission filings done in 2018 show that Europe received significant portions of the gold from Dubai. The estimate for American companies who benefited the same way in 2017 might reach into the hundreds.

Groups like The Enough Project are advocating that the Western nations do take a good hard look at the real source of their growing gold supply. At the same time, it recommends a more efficient, cost-effective way of legally processing, categorizing, and processing the precious metal. To date, there are 60 conflict-free gold mines in the DR Congo, and they need structures, policies, and incentives that can trigger growth. However, the current tax measures on the legitimate Congolese companies doing business in the industry limit sustainability and expansion, and this difficulty actually encourages those with less resources to deal with the armed militia and the black market.

There are no easy answers here, and reducing the illicit gold trade that is now spreading globally cannot be done overnight. The new government will have a huge fight on its hands if it goes against decades of profitable smuggling. However, any reform it makes in this area is the only chance that the Congolese gold producers have in removing the power and profit in the sector from the militias and corrupt government officials, and transferring them into the hands of responsible business owners under the moral and legal protection of a law-abiding government.