Earth Finds

Earth Finds

Illicit Gold Trade Thrives With Impunity In DR Congo

IMPACT's newest report reveals how the Democratic Republic of Congo's (DRC) illicit gold trade continues to thrive despite efforts to clean up the sector.

Traders and exporters who are legally registered in the DRC, Rwanda, and Uganda are operating without apparent fear of sanction, even after being publicly named by the United Nations and international organizations year after year as contributing to the illicit trade of artisanal DRC gold.

In its latest report, "The Intermediaries: Traders Who Threaten the Democratic Republic of Congo's Efforts for Conflict-Free Gold," IMPACT documents how registered traders and exporters provide a sheen of legality by declaring a small percentage of their gold exports while pocketing massive profits from the illicit trade. They thwart attempts to disrupt their scheme by reconfiguring their operations across the region when necessary or by creating phantom entities.

This means that gold smuggled out of DRC and flowing onto the legal international gold market –into consumer products—is potentially tied to criminality, money laundering, armed groups, and human rights abuses.

"Much effort has been made to strengthen responsible artisanal gold trade in DRC, but as long as these shady intermediaries between the miners and the market operate with impunity, all such efforts are futile," said Joanne Lebert, IMPACT's Executive Director.

IMPACT found that despite efforts by the DRC government and international actors to introduce traceability and due diligence for artisanal gold supply chains in DRC, the illicit trade appears to be booming: only a fraction of gold production is exported legally, meaning, declared to authorities with all duties and taxes paid.

The report uses several case studies to illustrate the extent of the problem, including that of Bukavu-based Cavichi SARL, a licensed exporter from 2013-2016:

  • Between 2015-2016, Cavichi SARL exported 25.7 kg as declared to DRC authorities, but 5,290 kg as declared to Rwandan authorities in transit documents.
  • Cavichi SARL significantly undervalued its exports, with the 5,290 kg having a declared value of $17.3 million USD whereas international market value at the time would place it closer to $191.5 million USD.
  • Though the company closed down, its founder Caetano Victor Chibalonza continues to operate as a gold trader.

IMPACT's investigation also takes a closer look at Rwanda as a transit point for DRC gold and the recent growth in Rwandan gold exports. Research suggests Rwandan authorities are failing in their due diligence on gold entering from DRC into Rwanda.

These failings are demonstrated by the case of two phantom entities, Congo Golden Mining Ltd and Omega Gold Mining Ltd:

  • Responsible for 18 gold shipments totalling 627 kg from 2015-2016, Congo Golden Mining Ltd and Omega Gold Mining Ltd are phantom entities that only appear in Rwandan transit documents.
  • Rwandan authorities failed to pick up on fake or suspect documentation such as the vague address, "Building Dubai, UAE", listed for the phantom entity Al Haitham DMCC, the supposed buyer for Congo Golden Mining Ltd's gold shipments.

Artisanal mining is often poverty-driven and economic incentives to operate through illicit channels remain great. While some traders and exporters see the benefit of working with traceability and due diligence schemes, those described in this IMPACT report have no incentive to do so.

In light of its conclusion that traceability and due diligence systems for DRC gold cannot make a dent in the scale of illicit trade until the intermediaries' systems are dismantled, IMPACT is calling on the Government of the DRC to:

  • Investigate, bring to account, and expose well-known intermediaries, including by revoking or denying any trading, exporting, or refining licenses of individuals and companies tied to the illicit trade
  • Streamline the steps for legal gold exports, ensuring they are clear and not arduous, and that related costs do not discourage legal trade

"This is the moment to bring the intermediaries out of the shadows. For too long, they have been allowed to get away with gaming the system. Never has it been clearer than now, with COVID-19, how these traders profit off of miners' vulnerability. Authorities must act to halt their operations," said Joanne Lebert, IMPACT's Executive Director.

IMPACT also calls on the Governments of Rwanda and Uganda to foster cooperation between law enforcement agencies to identify trade discrepancies and enhance regulatory controls on any gold that is declared as DRC gold.

IMPACT's newest report reveals how the Democratic Republic of Congo's (DRC) illicit gold trade continues to thrive despite efforts to clean up the sector.

Traders and exporters who are legally registered in the DRC, Rwanda, and Uganda are operating without apparent fear of sanction, even after being publicly named by the United Nations and international organizations year after year as contributing to the illicit trade of artisanal DRC gold.

In its latest report, "The Intermediaries: Traders Who Threaten the Democratic Republic of Congo's Efforts for Conflict-Free Gold," IMPACT documents how registered traders and exporters provide a sheen of legality by declaring a small percentage of their gold exports while pocketing massive profits from the illicit trade. They thwart attempts to disrupt their scheme by reconfiguring their operations across the region when necessary or by creating phantom entities.

This means that gold smuggled out of DRC and flowing onto the legal international gold market –into consumer products—is potentially tied to criminality, money laundering, armed groups, and human rights abuses.

"Much effort has been made to strengthen responsible artisanal gold trade in DRC, but as long as these shady intermediaries between the miners and the market operate with impunity, all such efforts are futile," said Joanne Lebert, IMPACT's Executive Director.

IMPACT found that despite efforts by the DRC government and international actors to introduce traceability and due diligence for artisanal gold supply chains in DRC, the illicit trade appears to be booming: only a fraction of gold production is exported legally, meaning, declared to authorities with all duties and taxes paid.

The report uses several case studies to illustrate the extent of the problem, including that of Bukavu-based Cavichi SARL, a licensed exporter from 2013-2016:

  • Between 2015-2016, Cavichi SARL exported 25.7 kg as declared to DRC authorities, but 5,290 kg as declared to Rwandan authorities in transit documents.
  • Cavichi SARL significantly undervalued its exports, with the 5,290 kg having a declared value of $17.3 million USD whereas international market value at the time would place it closer to $191.5 million USD.
  • Though the company closed down, its founder Caetano Victor Chibalonza continues to operate as a gold trader.

IMPACT's investigation also takes a closer look at Rwanda as a transit point for DRC gold and the recent growth in Rwandan gold exports. Research suggests Rwandan authorities are failing in their due diligence on gold entering from DRC into Rwanda.

These failings are demonstrated by the case of two phantom entities, Congo Golden Mining Ltd and Omega Gold Mining Ltd:

  • Responsible for 18 gold shipments totalling 627 kg from 2015-2016, Congo Golden Mining Ltd and Omega Gold Mining Ltd are phantom entities that only appear in Rwandan transit documents.
  • Rwandan authorities failed to pick up on fake or suspect documentation such as the vague address, "Building Dubai, UAE", listed for the phantom entity Al Haitham DMCC, the supposed buyer for Congo Golden Mining Ltd's gold shipments.

Artisanal mining is often poverty-driven and economic incentives to operate through illicit channels remain great. While some traders and exporters see the benefit of working with traceability and due diligence schemes, those described in this IMPACT report have no incentive to do so.

In light of its conclusion that traceability and due diligence systems for DRC gold cannot make a dent in the scale of illicit trade until the intermediaries' systems are dismantled, IMPACT is calling on the Government of the DRC to:

  • Investigate, bring to account, and expose well-known intermediaries, including by revoking or denying any trading, exporting, or refining licenses of individuals and companies tied to the illicit trade
  • Streamline the steps for legal gold exports, ensuring they are clear and not arduous, and that related costs do not discourage legal trade

"This is the moment to bring the intermediaries out of the shadows. For too long, they have been allowed to get away with gaming the system. Never has it been clearer than now, with COVID-19, how these traders profit off of miners' vulnerability. Authorities must act to halt their operations," said Joanne Lebert, IMPACT's Executive Director.

IMPACT also calls on the Governments of Rwanda and Uganda to foster cooperation between law enforcement agencies to identify trade discrepancies and enhance regulatory controls on any gold that is declared as DRC gold.

Republic Of Congo Scores Meaningful Implementation Of EITI Standards

The Republic of Congo has made meaningful progress in implementing the EITI Standard, with significant improvements in transparency of state-owned enterprises, oil sales and license information. Validation, the EITI’s quality assurance process, found that the Republic of Congo’s performance in implementing EITI Requirements has improved markedly since the country’s first Validation in 2018.

Spurred both by a new International Monetary Fund programme in 2019 and by EITI implementation, the Republic of Congo has published data for the first time on its national oil company. Information now entering the public domain includes oil sales by the state and international oil companies and the management of oil revenues not transferred to the Treasury. Publication of this data, previously considered sensitive, has led to more open public debate.   

“We welcome the Republic of Congo’s efforts to expand extractive industry disclosures beyond minimum requirements to areas of high public interest, including oil sales, production costs and the national oil company’s financial statements,” said EITI Board Chair Helen Clark. “The challenge is for all stakeholders to sustain progress and ensure that the EITI is contributing to evidence-based public debate.”

Consolidating oil sector transparency

The past two years have seen a series of firsts in the Republic of Congo’s disclosures on the upstream oil and gas sector. Building on the disclosure of oil and gas contracts, the Republic of Congo launched a publicly-accessible oil and gas cadastre system in 2018. The 2016 and 2017 EITI Reports break down data on oil and gas production, production costs and oil sales to an unprecedented level of detail, including information on individual oil fields. SYSCORE, a new online reporting system under development, will bring timelier disclosures of extractive company payments to government. This new transparency provides a strong basis for greater public use of extractive data, including in areas such as open financial modelling and revenue forecasting.

“The government’s oil sector reforms in the past two years have led to unprecedented transparency in the governance of the country’s extractive industries,” said EITI Congo Permanent Secretary Michel Okoko. “EITI implementation is a governmental priority and our core strategy is to regularly improve all governance policies.”

Strengthening oil revenue traceability

New disclosures have extended to the national oil company, the Société nationale des pétroles du Congo (SNPC), a central player representing the state in the oil and gas sector. In the past two years, the Ministry of Finance and Budget published SNPC’s audited financial statements for 2012-2018 for the first time, although consolidated financial statements for the SNPC Group have yet to be disclosed. Combined with the Republic of Congo’s EITI reporting, these documents have opened up the management of the state’s oil revenues and highlighted the deductions made to fulfil state commitments.

Since mid-2018, the government has gradually reflected these various deductions from state oil revenues in its fiscal reporting. Successive fiscal reports for 2018 and 2019 present the value of deductions from state oil revenues, while the national budget reflects related expenditures in the government budgets for 2019 and 2020.

Key to improving the accountability of these deductions, the government has pledged to disclose more information on the agreements underpinning the various deductions, including the framework agreement with the Chinese government on the reimbursement of infrastructure projects and pre-financing agreements with commodity traders.

Opening space for debate

Accounting for a third of government revenues and 80% of exports in 2017, the extractive industries are of national importance in the Republic of Congo. Public debate around the management of the forestry, mining, oil and gas sectors is crucial for improving the accountability of public finance management. The EITI Board’s decision on the Republic of Congo’s second Validation acknowledged improvements related to freedom of expression on oil and gas issues previously considered too sensitive for public debate. While more work is needed to address remaining administrative bottlenecks related to civil society’s engagement in the EITI, the emergence of robust debate on the basis of EITI findings and recommendations is a welcome development.

The Republic of Congo will have 18 months to address nine gaps in its implementation of the EITI Standard before its third Validation.

  • Published in Africa
  • 0

Culture Holding Back Women & This Must Be Fought – Panelists

Women globally are the cornerstone of every society playing not only their motherly roles but also providing moral and spiritual support needed for society to achieve it’s set communal development goals.

However, oftentimes, women barely get the recognition or rewards for their input, instead, they're cast aside because of cultural and sometimes religious biases.   

Speaking during an online talk show organized by Victoria University on Friday at the university’s auditorium under the theme ‘Enhancing Women Capabilities towards development in Uganda’, the role of women in society was emphasized.

The talk show was graced by Sheena Ruparelia, the Managing Director of Speke Group Hotels, Uganda Law Society President-elect Phiona Nabasa Wall, Katusabe Ssemwezi the Academic Registrar Victoria University, Karitas Karisimbi, a Media personality, and Malaa Kivila Odera, the Founder & C.E.O of Sylmax Consult.

The panellists agreed that some cultures are holding back women from being empowered. “Culture has told us how to behave and men have always been superior. I cannot say that we have been undervalued but we haven’t been accorded the opportunities we deserve. Culture has forced women to be below men and I want to see this changing,” Sheena said in her submission.

Victoria University’s Academic Registrar Katusabe Ssemwezi noted that this change is not an event but a process that women must be part of. She said that in the past, it was unimaginable to see parents allocate resources to girls like allowing and financing their stay in school to get an education. This she said is changing.

Malaa Kivila Odera, the Founder & C.E.O Sylmax Consult, agrees with Ssemwezi and adds that women have to be part of the process to achieve this change, which is a life long struggle. She discussed that while girls are raised to be homemakers, which she says is a critical thing to do, girls should also be prepared and presented with equal opportunities like the boys.

“We are getting things done in urban centres but in rural areas, cultures are holding girls back and this must be fought,” Malaa said.

Karitas Karisimbi, a local and celebrated television host, noted that there is a need to traverse the rural areas. “We are at a place where the world is listening; now we have to take the fight to the finish line,”

In so doing, the mentorship of the women to be independent, men should be involved. “We cannot talk to the women alone when the men are in bars drinking. They will come back from bars and abuse these women. It is time for us to go out there and involve the men at an early stage. The earlier we do, the better,” Karisimbi said.

To achieve this, Sheena says, there is a need to work as a community. “The struggle is long, it’s hard but it is possible and we must unite together, we must support one another, we must be willing to learn and listen. Open your opportunities in every single day and appreciate it,” she noted.

She adds: “I think it’s up to us to change the society, no one is going to do it for us, it is us to work together and togetherness education, willingness, openness and target orientation makes it possible, we can do it.”

Uganda Law Society President-elect Phiona Nabasa Wall believes that if we don’t empower boys, it will be a disaster. We need a strategy to bring boys on board, she said.

  • Published in Events
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Meera Investments Sues FBW Over Failed Kabira Country Club Contract

Architectural firm FBW (U) Ltd and its two directors Nigel J. Tilling, and Paul Moores have been sued by Meera Investments Limited for breaching a $3m Kabira Country Club extension contract.

In September last year, Meera Investments, a subsidiary of Ruparelia Group, a conglomerate owned by businessman Dr. Sudhir Ruparelia, sought legal redress after dragging FBW, a UK based consultancy firm, to police accusing it of contract breach.

The suit actioned by Ssemambo & Ssemambo Advocates and Magna Advocates by has been filed before the Commercial Division of the High Court and the defendants have been given two weeks to file their defence.

According to Eagle Online, FBW entered into a contract with Meera on 6th February 2012 for both Speke Apartments Wampewo and Kabira Country Club extension with the scope of work including design development encompassing architectural, structural engineering, mechanical and electrical engineering, other civil services, design team coordination, construction supervision and incidental services.

Meera went ahead and made payments in instalments stipulated in the contract and it was agreed that the Kabira expansion project is stayed until the completion of Speke Apartments Wampewo. In October 2018, the parties mutually agreed to resume the implementation of Kabira’s expansion project.

FBW and its directors undertook to complete full construction drawings before the end of December 2018 with construction scheduled to start in January 2019. By this time FBW had already received three instalments which covered work up to the submission of construction drawings package.

However, in contravention of the contract, FBW demanded more money totalling to $75,000 (20%) which they were supposed to receive when construction had commenced. Meera who urgently needed construction to commence made the payments and FBW to their surprise demanded more money in November 2018.

Meera in dire need of the project to commence made another $37,500 payment which was supposed to be the fifth installment, also supposed to be an in-between construction payment, long after the drawings should have been submitted.  

Meera requested for the architectural drawings but to their shock, FBW demanded a sixth installment which was supposed to be paid on completion of construction of the shell structure. On insistence, FBW only handed over PDF format which was neither adjustable nor usable and they didn’t include the CAD files of the construction drawings.

As a result, Meera hired other professionals to complete the work so that their building could meet the 36 months schedule to completion. Meera engaged the architectural services of M/S Design 256 Ltd at a cost of $65,000, engineering firm Constulka Services for final construction drawings plus CAD files at $55,000 and a mechanical and electrical engineer James Bakyaawa Ssozi of Chase Consults Ltd to convert PDF drawings to Auto-CAD on A1 and a payment of $16,000 was made.

Meera now wants the court to compel FBW plus Tiling and Moores to refund $132,750 being money received to the plaintiff’s use by the defendants, plus special damages of $286,739 arising out of defendants’ breach of contract and general damages inclusive of $2,672,579 as income Kabira will miss because the project will be delayed for six months arising from FBW’s breach of contract.

Meera also wants the court to compel FBW to pay an interest rate of 25 per cent per annum until the money is paid in full and costs of the suit.

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