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Jun 6, 2006 12:48 am


EAST AFRICAN GOLD RUSH



I read Le Monde Diplomatique because, if I disregard its blatant ideological tilt, it contains some interesting information. This month's Stefano Liberti's" Congo and Uganda: A Rush of Gold is an excellent case in point as is the following sentence:

In 1998, when the country was invaded by Rwanda and Uganda, the region was occupied by the Kampala forces, which flew the gold straight back to Uganda.

In the manner reminiscent of the bias exhibited in articles about the Israeli/Palestinian conflict, Liberti failed to provide the reason for that invasion , which the PBS Newshour described thus:

LINDSEY HILSUM, ITN: Rekindling past glory, Rwandans soldiers celebrate how they ended genocide in 1994, but today these soldiers are at war again. The enemy are bands of Hutu extremists, who attack and run and hide in the hills. The most powerful man in the country, Vice President General Paul Kagame, encourages the troops.

MAJOR GENERAL PAUL KAGAME: (speaking through interpreter) There are individuals who are violating our peace. We are fighting them, and I'll tell you here, we'll carry on fighting them.

LINDSEY HILSUM: Last month, the army failed to prevent two attacks on Tutsi settlements just near here. Hundreds were slaughtered by the Hutu militia, the Inherahamwe, and the former army. The memory of the dead hangs over the New Year morale boost. Everything here goes back to the genocide. The insurgents that this army are fighting are the Hutu extremists who still are trying to wipe out the Tutsis. But as the war intensifies and the soldiers get harsher, increasingly, it's the ordinary Hutu peasants in the hills who are defined as the enemy. This morning, the peasants have been summoned to hear the big man speak.

The soldiers say that those who carry a hoe one day carry a gun the next. Many Hutus got military training in the two years they spent in refugee camps in Zaire. Their mass return to Rwanda foreshadowed today's war. But they say the army tars all Hutus with the same brush. This man tells General Kagame that his soldiers are murdering young Hutu men. Relatives returning from exile are disappearing, and everyone dreads the soldiers' knock on the door. The general accepts that some soldiers misbehave, but he challenges the peasants to identify infiltrators among themselves. No one steps forward.

Similarly, the article fails to mention the serious abuses committed by the UN peace keaper in the Congo and detailed in a UN report:

The report documents 68 cases of alleged rape, prostitution and pedophilia by U.N. peacekeepers from Pakistan, Uruguay, Morocco, Tunisia, South Africa and Nepal. U.N. officials say they have uncovered more than 150 allegations of sexual misconduct throughout the country as part of a widening investigation into sexual abuse by U.N. personnel that has plagued the United Nations' largest peacekeeping mission, U.N. officials said.

"Sexual exploitation and abuse, particularly prostitution of minors, is widespread and long-standing," says a draft of the internal July report, which has not previously been made public."Moreover, all of the major contingents appear to be implicated."

But despite this and many other shortcomings, I found the description of the Congolese Wild West strangely familiar and even hopeful and decided to share it with you.

The pillage of former Zaire Congo and Uganda: a rush of gold

In November the UN Security Council adopted sanctions, which include freezing assets and travel restrictions, against anyone breaking the arms embargo on the Democratic Republic of Congo. The east of the country is rife with smuggling, especially in gold. Regional conflict that left 3 million dead between 1998 and 2003 has exhausted the country, and general elections that were due this year have been pushed back to June 2006.

By Stefano Liberti

MONGBWALU, a desolate village in Ituri district in the northeastern region of the Democratic Republic of Congo (DRC), looks like something out of an old western. A single dusty road runs through it, with cafes on either side that resemble saloons, a squalid hotel with a broken-down sign, and groups of youths observing passersby as though they were expecting a shoot-out any minute. The comparison with the Wild West isn’t fanciful, for here, as in the towns that mushroomed in the United States during the gold rush, everything revolves around gold.

Ituri is right in the middle of one of the most important gold deposits on earth (1). Several hundred kilograms are extracted every month from the primitive mines around Mongbwalu. The gold is taken illegally to neighbouring Uganda, from where it is exported to Europe, usually Switzerland. Because of the enormous profits generated, the gold is much coveted - and the cause of the bloody conflict that has plagued the DRC and this region since 1998 (2).

The subsoil of this huge African country - formerly Zaire - is so gorged with minerals that it’s sometimes called a geological outrage. From 1982, when the dictator Mobutu Sese Seko (in power from 1965 to 1997) liberalised gold mining in parts of the country, Mongbwalu became a sort of tropical Klondike. Thousands of small-scale miners threw themselves into a business that continued through the worst moments of the war. The miners still leave the village every day at dawn in battered old 4x4s and follow the earthen tracks to the mines. There they split into teams and start digging. The open pit mine resembles an enormous hive in which thousands of people busy themselves inside mud combs. Some men stand waist deep in water, digging feverishly and putting the earth in plastic crates that are passed along by men pressed against the sides of the embankment.

Each team works for itself. The soaked earth and stones are placed on a sieve above a pool of water. The first stage is to look for gold dust. Then the more promising stones are broken with clubs in the hope of finding veins of gold. “You have to know where to dig,” says Etienne, who spent 10 months in the hills of Mongbwalu. Around him a group of young men are examining stone chips in a sieve, hoping to find a few specks of gold. “No luck today,” says Etienne, “but I’m sure it’ll get better later. If we find a good chunk, we’ll manage to get $5 each.”

At the top of the embankment you can make out the ruins of a building. It is all that is left of the “factory”, the public enterprise set up for gold extraction in the Kilo-Moto region to which Mongbwalu is the gateway. Gold mining was in full swing during Mobutu’s time, when Ituri was under the control of the Kinshasa government. In those days the profits went straight into Mobutu’s pockets, enabling him to amass a fortune in foreign banks. The battle to gain control of this rich piece of land was triggered immediately after his fall in 1997.

Africa’s largest gold seam

Kilo-Moto is one of the most unstable areas in the Great Lakes region. Because of its extraordinary potential - it has the largest gold seam on the continent - it has been coveted by the main players of what has been called “the first African world war” (which pitted government forces supported by Angola, Namibia and Zimbabwe against rebels backed by Uganda and Rwanda).

In 1998, when the country was invaded by Rwanda and Uganda, the region was occupied by the Kampala forces, which flew the gold straight back to Uganda. After the 2003 Sun City agreement in South Africa, foreign troops were obliged to leave the country. The area then became the scene of fighting between the Union of Patriotic Congolese (UPC), supported by Rwanda, and the Front for National Integration (FNI), backed by Uganda. Sixty thousand people are thought to have died in these conflicts, despite timid intervention by Monuc, the UN observer mission in the DRC, set up in 1999. After falling to the UPC, the region was taken back by the FNI.

The militiamen stand accused, among other things, of subjecting workers to forced labour. According to a report by Human Rights Watch (HRW), the FNI takes a percentage of the mined gold and extracts one dollar a day from the workers in exchange for allowing them to work the mines (3). The soldiers hotly deny this. “It’s peace, our men are unarmed. All the men here work for themselves and for the good of the country,” says Iribi Pitchou Kasamba.

This small, stocky man became head of the front after its leader, Floribert Ndjabu, was arrested in Kinshasa for killing nine Bangladeshi Monuc troops in Ituri in February. Flanked by his “lieutenants”, Kasamba inspires fear and respect in equal measure in the zone around the mine. He describes the accusations by HRW as “total rubbish”, adding that “the only money we’ve received is the $8,000 that AngloGold Ashanti paid us quite voluntarily.”

This major South African company obtained a 10,000sq km mining concession around Mongbwalu and has recently been accused of bribing the rebel forces. Since 2003 the UN embargo prohibits any support to armed rebels in the DRC (4). The company claims that it was obliged to pay to guarantee the safety of its employees. But the scandal has tarnished its image - particularly since it boasts an ethical policy inspired by a commitment to “corporate social responsibility” (5). In any case AngloGold Ashanti has not yet started to mine gold in its concession.

Shovels and sieves

Mining continues the primitive way, with shovels and sieves. Near the site a crowd of men equipped with scales gets ready to start buying. The luckier gold-washers crowd around them clutching handfuls of their precious find. This is the start of the transaction. The gold dust in placed on a coal heater and mixed with nitric acid to separate any impurities. The remaining gold is then weighed and sold. The price is about $10 a gram. The rate depends on the market and increases the further you get from the mining area. In Bunia, Ituri’s main town, gold fetches $11.5 a gram. The small-time buyers at the source, as well as the dozens of others who gather in Mongbwalu’s main street, are the middlemen for traders in Bunia and Butembo in the neighbouring province of North Kivu.

Numerous small jobs are grafted on to the business of the mine itself. Women sell fruit, potatoes and rice; young motorcyclists ferry people to and from the mining sites and the centre of Mongbwalu. There is also a motley crew of musicians who seem more comfortable with guns than guitars and seem to monitor the comings and goings. The mere presence of Kasamba is enough to deter anybody from speaking.

Only later, and anonymously, does someone from Mongbwalu agree to give us his view: “In the factory and the other mines near the village, the FNI’s control is limited. Since the Monuc forces arrived the militia have had to be more discreet. But you only have to go a few kilometres further out to see them back in their old ways, forcing people to work for them, harassing them and confiscating gold.”

The 140 Pakistani soldiers from Monuc (6) who arrived in April, and who are in charge of disarming the militia, are even more discreet than the rebels. They are confined to their camp outside the village and their actions are limited to a few patrols. One of the leaders of the contingent admitted that he didn’t really know what went on in the mines.

At the Bunia headquarters, this state of affairs is confirmed. “In theory Monuc could supervise the gold traffic,” says Karin Volkner, the mission’s political affairs officer, “but in reality we don’t have the means to carry out that kind of control. There’s only one military contingent in Mongbwalu. We’re thinking of sending a group of civilians but so far we’ve only carried out exploratory missions.” The Monuc forces are occasionally called in for heavy operations and to support the elections that should end to the transition period (7), but they scarcely bother with the gold smuggling that goes on under their very noses.

In broad daylight In Bunia gold dust is sold in broad daylight. In this village, ravaged by war and poverty where thousands of refugees are crowded into a camp by the airport, the gold trade is the only commercial activity possible. Almost everyone seems to be at it, in one or other of the two markets.

According to the new DRC mining code established in 2002, government authorisation is required for wholesale gold purchasing (8) but nobody bothers about that in a region where the state is totally absent. “Ituri suffers from government failure,” says Volkner. “The Kinshasa government is very far away and has never bothered much about the people to the east. On top of that, some ministers are directly involved in raw materials trafficking and have no interest in establishing peace in the region.”

The entire trade rests on a well-organised network of small-scale miners, buyers and intermediaries. The town’s traders sell the gold to a handful of middlemen, who smuggle it to Kampala. They use a variety of vehicles (trucks, jeeps, motorbikes), or canoes to cross Lake Albert, making the most of a total absence of controls at the Congolese border. As the process advances, the number of people involved is reduced. In Kampala only three companies buy the gold; all are managed by Indian entrepreneurs. The largest company, Uganda Commercial Impex Ltd (UCI) (9), has its headquarters in the suburb of Kamutckia.

According to Jamnadas Vasanji Lodhia, the owner of UCI: “We buy approximately 350kg of gold for a total of $5m. Our suppliers are always the same six or seven people, all Congolese from Bunia and Butembo.” The best known of these is Kambala Kisoni, owner of the Congocom Trading House. Kisoni also owns a small Antonov plane that flies between Mongbwalu and Butembo almost daily under the name of Butembo Airlines. According to UN experts, Kisoni has breached the arms embargo many times and has transported arms and FNI personnel to Mongbwalu (10).

When we reached Kisoni by telephone, he denied the accusations. “They consider us accomplices or rebels but, in fact, we’re hostage to the FNI people, who behave as though they run the area. They charge us $60 every time we land at Mongbwalu. We’d like the Congolese army to regain control of the region and establish some order.”

Kisoni did not deny exporting gold without authorisation from the mining ministry in Kinshasa. “It’s become dangerous to export with a licence,” he explained. “Given the level of corruption in the government, we’d risk losing everything. We used to have a licence but our gold cargo was stolen three times. And we know that the thieves were connected to the government.” Kisoni added that Congocom is simply an unofficial bank. “Gold is the currency here. With our clients’ gold we buy merchandise, which they sell in Congo. The Kampala buyers like UCI open lines of credit for the big companies that supply our clients with the products. We restrict ourselves to working as middlemen between the Ugandan companies and the traders in eastern Congo.”

The gold bought by UCI is melted down in the company’s Kampala headquarters. The small ingots are then sent every month to Metalor Technologies SA in Switzerland, a leading European dealer in precious metals. But since June the market has apparently ground to a halt. Following the publication of the HRW report, the Swiss company decided to stop gold imports. The UCI boss, Lodhia, was furious. “This trade has carried on for a century,” he said. “I don’t understand why they are making such a fuss. They accuse us of stealing wealth from Congo, but our suppliers are Congolese. With the money they earn from us they buy goods to sell in their country where there is nothing. They don’t buy arms, but sugar, coffee, blankets and clothes. What’s the point of buying arms anyway? Congo is full of them. That’s what earns the least money.”

Offshore bank accounts Lodhia said he knew nothing about the supposed links between his suppliers and the armed rebels in Ituri. He confirmed visiting Bunia and Butembo, but denied ever having been to Mongbwalu. “I’ve occasionally been to see clients in the east of the country,” he admits, “but I’ve never visited the mines.” He showed us the company accounts that record transactions with Congolese clients worth millions of dollars. Most of the money is stored in offshore bank accounts in places like Mauritius or Hong Kong. “Our clients don’t trust local banks,” he explained, “so we pay the money into the accounts they choose. Which is totally legal.”

Indeed, the trade is legal. The Ugandan government does not require certificates of origin. It merely levies a 0.5% duty on gold exports and an annual licence fee of $1,200. In theory imported metals should be declared at the border, but it is so easy to cross the Congo-Uganda border that nobody bothers with customs declarations.

The numbers reveal the extent of this vast trade. In 2003 local gold production was worth $23,000. Officially imported gold totalled $2,000 while exported gold reached $45bn. The same data, supplied by the ministry for energy and development in Kampala, reveals that Uganda’s gold production totalled 40kg for that year, yet exports were more than four tonnes. In 2002 official production stood at 2.6kg with exports of 7.6 tonnes (11).

As a result of this vast legalised smuggling operation, gold is the second biggest Ugandan export after coffee. “That’s no secret,” said Lodhia. “Everybody knows that the gold in Kampala comes from Congo. In any case the government is virtually non-existent in former Zaire, especially in the east, and there are no controls. It’s been like that since the Mobutu era.”

Uganda has been the hub for Congolese gold since 1994, when the Kampala government decided to withdraw the central bank’s monopoly in buying precious metals, to scrap high export duties (of between 3% and 5%), and to make the regulations on trading companies more flexible. Previously, gold from Ituri transited through Kenya where the trade had already been liberalised. Lodhia admits to having switched from Nairobi to Kampala. “From a logistical point of view, it’s much easier to work out of Uganda,” explained the Indian entrepreneur. “The country is nearer to the DRC and security is excellent.”

The value of the gold increases as it travels from the Congolese towns to the Ugandan capital. UCI buys at $13.5 per gram. The selling price abroad depends on fluctuations on the international markets. “But we work on the basis of a profit margin of 0.5%,” explained Lodhia. “Gold mining is a living for thousands of people in eastern Congo. Those Human Rights Watch militants are lobbying intensively to stop it, but their ideological thinking will end up hurting the very people they think they’re defending. I’m losing money myself, but I’m not going to starve. If the Swiss stop buying and I don’t find other outlets, then sooner or later I’ll have to stop buying.”

There are thousands of people involved in gold smuggling, from the miners in Mongbwalu to the big traders in Kampala and the middlemen in Bunia and Butembo. Although there is no doubt that gold mining has supported - and continues to support - the rebels in the east of the country, it would be difficult to prevent this through embargoes or other means. UN experts believe that, given the size of the country, a total export ban on natural resources would be an extremely costly measure and hard to enforce (12). For them the ideal solution would be to set up a “traceability” process that would prevent smuggling to Uganda. But a system like the Kimberley process for diamonds (13) has not yet been devised for precious metals.

According to Enrico Carisch, a UN finance expert: “The only way to stop the warlords from making money would be to put pressure on the region’s governments to end this regime of impunity. The Ugandans, in particular, should normalise bilateral trade with Congo. But to do that, the Kinshasa government must regain control over the east of the country with the help of the international community.” In a region where the state is notable for its absence and gold is the only source of revenue for the majority of people, it is hard to imagine how the gold mining business could be changed at one stroke - particularly with the strong international demand for gold.




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