Chinese Now Influential Players In Illicit Gold Trade: Study

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By Lawrence Paganga

CHINESE nationals are now “prominent and influential actors” in Zimbabwe’s lucrative gold sector and have formed questionable partnerships with the elite in Zanu PF and senior law enforcement agents.

The foreign nationals are also reported to have become daring and are now calling the shots to the extent of telling government compliance officers “they are small boys”.

This is part of the findings from a recent study carried out by the Global Initiative Against Transitional Organised Crime (GI-TOC) on; “Illicit Gold Markets in East and Southern Africa” published last month.

According to the study, the presence of Chinese nationals in the gold mining sector in Zimbabwe has become a “hot political potato” as they were also involved in the smuggling of the precious mineral.

“Chinese nationals are also prominent and influential actors in Zimbabwe’s gold sector where they have formed partnerships with Zimbabwe African National Union Patriotic Front (Zanu PF) elites, along with senior military and ZRP (Zimbabwe Republic Police) officers,” the report noted.

“The Chinese have the audacity to tell government compliance officers that they are small boys’.”

The report covered South Sudan, Uganda, Kenya Zimbabwe, and South Africa, which are major gold-producing countries in East and Southern Africa regions.

“Foreign nationals are also involved in the sector, operating as influential buyers and investors. Across all the countries studied, the involvement of foreign players and their ability to profit from the sector relies on dubious agreements with political elites, who also profit from the arrangement,” the report added.

“Laws that require foreign nationals to partner with locals in mineral enterprises have been introduced to avoid the capture of mineral resources by foreigners.

“However, in practice, it facilitates high-level corruption, with large amounts of money paid to political elites by foreigners, often in profit-sharing arrangements. For example, in Zimbabwe bans on riverbed mining and mining in protected areas have been lifted, allowing senior politicians and military chiefs to parcel out lucrative riverbed mining permits to foreign investors in exchange for hefty payments.”

It said the government had only awarded licences for riverbed mining to Chinese and Belarusian companies only. However, the lack of alluvial gold mining experience in Belarus had raised further concerns about the deal.

“The presence and influence of Chinese nationals in the Zimbabwe gold sector has significantly grown since 2010. The presence of Chinese nationals has become a political hot potato. Benefits allegedly include fast-tracking licences and protection from law enforcement. One industry representative reported, ‘The Chinese have the audacity to tell government compliance officers that they are small boys’.

“Chinese nationals are also involved in supplying equipment and processing gold ore in Zimbabwe. In most gold mining towns, Chinese owned shops sell ASGM (Artisanal and Small-scale Gold Mining) equipment, including mercury thought to be sourced from China”

According to GI-TOC, in the main gold production districts of Bubi, Kwekwe, Shamva, Shurugwi, and Kadoma, the Chinese position is dominant and cemented by their ownership of custom mills – gold processing facilities that employ more efficient technology than traditional stamp mills.

“Chinese nationals rarely buy gold not produced at their milling centres and reportedly offer competitive gold prices, especially when wanting to retain a trade relationship with a miner who has quality gold ores.”

The report added the major illegal foreign buyers for gold were also from South Africa, India, and Dubai, and they tend to partner with licensed Zimbabwean dealers to buy large quantities of gold on the illicit market.

“They sponsor gold buyers in Harare, providing pre-financing of up to US$1 million for gold purchases. Zimbabwean nationals provide a front for the operations, hiding their involvement.”

The report said the gold was then is easily smuggled from Zimbabwe into South Africa through porous land borders that make it easy for criminal groups to cross into the neighbouring country where laundering opportunities and transport services are more readily available.

“While there are informal border crossings, the official Beitbridge border post remains a preferred route for gold smugglers. Smaller quantities of gold are hidden in clothing and headdresses, while larger amounts are stowed away in car glove compartments, spare wheels, and any other parts of a vehicle that can be modified for smuggling purposes.

“On the Zimbabwe-South Africa border, both bus drivers and truckers are reported to smuggle gold. On the borders, there appears to be a lack of capacity and will to stop gold smuggling. In Zimbabwe, only luggage is subject to scans by customs officials so travellers without luggage are unlikely to be searched.”

A map shows how gold is smuggled out of Zimbabwe, the majority of which, according to the Global Institute Against Transnational Organised Crime, moves through SA and on to international gold markets

Johannesburg in South Africa is the regional gold magnet, although there are reports that significant and increasing amounts of gold are being exported directly from Harare to Dubai and other international destinations.

“In Johannesburg, locally produced gold and imports from neighbouring countries, especially Zimbabwe, is traded and laundered. Some is laundered into formal supply chains through local refineries.

“From regional trade and transit hubs, most gold moves by air, legally and illegally, to global hubs such as Dubai. Moving gold by air often requires the influence of political elites or bribing airport officials. For smaller quantities of less than 10 kilograms, smugglers may directly pay security officials at checkpoints. Alternatively, gold can be made into jewellery which is then worn by passengers on flights out of the country, mainly to India, the UAE, and to a lesser extent Russia.”

In December 2019, President Emmerson Mnangagwa reported that a syndicate of local businessmen had smuggled gold worth US$60 million to Dubai that year.

In October 2020, Henrietta Rushwaya, the head of the Zimbabwe Miners Federation and a relative of Mnangagwa was arrested at Robert Gabriel Mugabe International Airport with 6kg of gold in her handbag, and according to the report, Indian buyers are allegedly the most likely to smuggle gold in this manner.

A Central Intelligence Organisation officer, Chamakandiona Nyahunde was last month arrested at the Robert Gabriel International Airport for allegedly assisting Rushwaya’s former driver, Tashinga Masinire, to smuggle 13kg of gold out of the country.

Masinire was arrested at the OR International Airport in South Africa en route to Dubai with the loot.

Nyahunde is in remand prison while Masinire was granted R100 000 bail in South Africa.

“In Zimbabwe, smuggling gold out of Harare’s airport is suspected of being done by powerful gold dealers and political elites. It was reported that individuals moving gold as jewellery will make at least one to two trips each month. The destination of gold mined and bought illegally by Chinese nationals remains unclear.”

According to the study, gold mined is moved to the trading hubs of Harare or Bulawayo before it is smuggled out of the country. While Bulawayo’s reach is limited to gold mining in areas close to the town, Harare attracts gold from across the country.

“Bulawayo buyers are generally less well-resourced and lack the US dollar buying power of their Harare competitors. Miners or buyers may also take gold directly to South Africa, especially from Matabeleland province in the south. Nearly 40% of gold mined in Matabeleland is believed to be smuggled directly to South Africa. Smuggling is rife.

“Gold buyers revealed in interviews that they were selling between 10 and 30% of their gold to the FPR (Fidelity Printers and Refiners) only to maintain their gold licences, with the rest being sold on the illicit market. Major foreign buyers, often from South Africa, partner with Zimbabwean dealers to buy large quantities of gold on the illicit market.

“The involvement of foreign buyers has increased official gold deliveries but is also believed to be fuelling illicit trade. If 17.5 tonnes, the official small-scale gold production figure in 2019, only accounted for this small share of actual ASGM production, it means that billions of dollars worth of gold is being lost to the illicit market annually.”

Leaders of Pentecostal churches, which have large followers were also fingered in the illicit trade of gold buying and smuggling while preaching the “gospel of prosperity”.

“Leaders of large Pentecostal churches, often referred to as prophets, can also be important sponsors for locals in the ASGM sector and a number of them have been involved in the gold trade, preaching the gospel of prosperity.”

According to GI-TOC, corruption in ASGM and the gold market is endemic, and political elites are heavily involved.

“This has led to a rise of violent machete gangs in the country, who terrorise miners. While there have been initiatives like the Bubi Gold Centre near Bulawayo, launched in 2018, government programmes have been plagued by allegations of corruption, including a lack of transparency and accountability.

“Mining disputes occur when multiple mining titles being granted for the same location, which has led to conflict and chaos. While mining activity should be suspended while disputes are resolved, many actors instead use violence, political connections, and bribery to continue operating in disputed areas.

“This is especially the case when a gold rush occurs, with senior politicians reportedly abusing their power to quickly secure ownership of claims. If they are unable to secure permits, they may employ machete gangs (traditionally used for political violence during elections) to displace ASM (Artisanal and Small Mining) miners, secure access to mine sites, and, in some cases, steal gold ore.”

Appearing before the Parliamentary Portfolio Committee on Mines and Mining Development last week, the Zimbabwe Chamber of Mines chief executive Isaac Kwesu said gold production in the country dropped from 35 tonnes in 2018 to 20 tonnes last year.

He said the major reason was smuggling and even mainstream producers were tempted by the illicit trade of the precious metal.