The gold market operates as a massive and intricate industry
connecting economies, politics and societies globally. Perhaps the most
interesting thing about this market is the part Dubai plays, a nation with no
gold mines, which is the second largest gold exporting nation in the world,
controlling over 20% of the world’s trade. Although Dubai is considered the
center of the world gold market, a deeper analysis of this statement shows that
most of the gold that passes through the emirate is produced in Africa – a continent
that possesses a wealth of gold reserves but, sadly, has not been able to
maximize this natural wealth.
Of note, much of this gold is sourced from illegal or
artisanal mines, which tend to employ illegal mining practices, child labor,
and other unethical practices. This article seeks to discuss the complexities
of this gold trade by examining 5 African countries, Nigeria, Ghana, South
Africa, Mali and Tanzania, and by providing real-time facts and figures that
represent these complex realities of the industry. We will also analyze the
repercussions of Dubai’s role in this trade from an economic and political
perspective vis-à-vis Africa.
The Rise of Dubai as a Gold Trade Hub
Dubai’s ascendance as a center for gold trading is indeed
phenomenal. The UAE has become a key hub for global gold worldwide, even though
there is no gold mining taking place in the country. It is now a hub for
refining, trading and distributing gold, refining over 1,500 tons of gold every
year.
Among several factors, Dubai’s strategic policies, low
taxes, and liberal economy are central to the city-state’s success in becoming
a gold power hub. Further, Dubai’s strategic location and logistics
capabilities for shipping and trade made it an ideal place for gold traders
internationally. There is minimal regulation in the UAE’s gold market, with
gold sometimes changing hands without questions of provenance, and it is this
feature in particular that makes the gold trade appealing to individuals and other
actors engaged in illegal activities.
Africa’s Gold Reserves: The Treasure Trove
The continent has some of the wealthiest gold reserves in
the world. Africa accounts for about 20% of global gold production according to
the World Gold Council, and among the largest producing countries in Africa are
Ghana, South Africa, Mali, Tanzania, and Nigeria.
South Africa:
South Africa used to be the largest gold producer in the
world, but has seen declines in production in the past few years. South Africa
only accounted for 3 per cent of world production in 2020, with gold output a
mere 90 tons.
Ghana:
As of 2020, Ghana produced 142 tons of gold and is the
largest gold producer on the continent, having recently surpassed South Africa.
Mali:
Mali is among Africa’s biggest gold producers, with an
approximate output of 50 tons in 2020.
Tanzania:
In turn, Tanzania produced about 48 tons of gold in 2020,
making it also an important player in the African gold market.
Nigeria:
Nigeria’s gold production is low despite large gold
reserves. Gold deposits remain untapped in the country, which has also begun to
progress recently, getting into exploring and regulating its gold industry.
Nigeria’s gold output was estimated at approximately 1.5 tons in 2020.
Illicit Gold Mining and the Role of Artisanal Miners
The presence of illicit gold from Africa’s artisanal mining
sector is one of the key drivers behind Dubai’s golden success story. Artisanal
and small-scale mining (ASM) is a common phenomenon on the continent, and is
especially prevalent in Ghana, Mali, and Nigeria. These small-scale informal
mines are frequently not regulated, and men and children work in perilous
conditions.
The United Nations Environment Programme, UNEP, estimates
that about 10 million people do some form of artisanal mining in Africa, while
over 03 million people are involved in illegal gold mining specifically.
Therefore, artisanal mining accounts for roughly 30% of national gold output in
Ghana and more than 50% in Mali. This gold is typically exported via illicit
means and sold on the black market with minimal tracking or oversight.
Gold produced from these artisanal mines often makes its way
through Dubai, melted down and refined to enter the legitimate global market.
UAE is a hub for gold trading and has lenient customs rules, making it an ideal
point of entry for illegal gold. The lack of regulations on this gold trade is
ethically troubling, especially due to the prevalence of child labor and
dangerous working conditions across most of Africa’s mining zones.
The Economic and Political Implications for Africa
The economic and political costs of Africa are immense for
the illegal gold market. In economic terms, although countries such as Ghana
and Mali are reaping the revenues of gold exports, the wealth generated by this
industry does not remain in the local economy. The majority of the population
is kept in poverty, while from a distance, political elites have a direct
connection to mines and extract a bulk of the profits.
Gold mining, for example, is the largest exporting sector in
Mali and contributes over 20% of the GDP of the country. But, most of these
revenues from gold mining are limited to a few elites, while local communities
do not experience much change in their living standards. Likewise, in Ghana,
even where national contributions of the gold sector have been significant,
“corruption and bad governance” have prevented the effective use of gold
revenues to benefit the wider population.
Dubai has been part of that dynamic in different ways. This
means the UAE becomes the economic beneficiary in African states by being the
destination of illegally mined gold. The gold trade similarly provides Dubai
with political use, because it becomes embedded in the networks of the
political elite. This also gives Dubai the ability to affect decision-making
and keep strategic connections with African states.
Real-Time Facts and Figures: The Scope of the African Gold Trade
For a more precise idea of the gold trade from Africa to
Dubai, we can look at the following real-time numbers:
Gold Exports from Africa:
As the African Development Bank (AfDB) reports, in 2020,
Africa’s outflow of gold was above 600 tons. Most of this gold was sent through
Dubai for distribution internationally.
Gold Refineries in Dubai:
There are over 30 refineries in the UAE, with Dubai as the
regional gold refining hub. The Dubai Gold & Commodities Exchange (DGCX)
enables transactions in billions of dollars’ worth of gold annually, much of it
sourced from Africa.
Gold Smuggling in Africa:
Gold smuggling results in an estimated loss for Africa of between $8 $12 billion a year, according to the Global Initiative Against Transnational Organized Crime. The gold derived from this illegal operation finds its way to Dubai and is sold on the legal market.
The Function of Child Labor:
According to a UNICEF report,
“over 1 million children work in gold mining across Africa, often under
dangerous and abusive conditions” Countries like Ghana, Mali, and Burkina Faso
are particularly affected by this problem.
Conclusion
While the gold trade is an essential industry for Africa and
Dubai, the journey from African gold mines to the gold souks of Dubai is imbued
with ethical, economic and political complications. Role in the global gold
market, whether Dubai has become one of the leaders in the illicit trafficking
of African gold, is a worrying part. Because Dubai’s gold trade is not
transparent or regulated, much of Africa’s gold wealth is drained by elites,
with local populations involved in the mining reaping very few benefits.
This points to the need to rethink the gold trade in Africa,
and to do so more transparently, with better regulations, and with
accountability. Gold in Africa has the potential to change things if it is
handled appropriately and if the extraction of the wealth from the gold is
enjoyed by the wider populace. This, in turn, will only enable the continent to
fully benefit from its gold and to transform Dubai’s position in the trade from
being an exploitative to a fair and ethical business place.
