Bloomberg News

Congolese Gold Escapes Oversight, Funds Armed Groups, UN Says

January 06, 2012

Dec. 30 (Bloomberg) -- Armed groups in eastern Democratic Republic of Congo are frustrating efforts to regulate the trade in minerals, especially gold, perpetuating a conflict that has persisted for more than 15 years, a United Nations report said.

While Congo has made some progress reforming its markets in minerals including tin ore, smuggling by armed groups and “criminal networks” in the Congolese army is rife, a report by a UN group of independent experts on Congo said today. Gold, which hit record prices in 2011 and is easy to traffic in small quantities, is a particular problem, the report said.

“The gold trade is one of the main sources of financing available to DRC armed groups” and criminal elements in the Congolese army, the report said. “Most of the gold trade goes unrecorded and most transactions are concluded in cities in neighboring countries” including Burundi, Uganda, Tanzania, Kenya and the United Arab Emirates, it said.

War began in eastern Congo in the mid-1990s and armed groups in the region still fight over land, ethnicity and control of natural resources. Over the past two years, the UN, the U.S. and the Organization for Economic Cooperation and Development have developed new regulations on the mineral trade from Congo to try to break the link between mining and conflict. Earlier this year, electronics-industry groups called for companies to audit their mineral supply chains and verify that their purchases didn’t support armed groups in Congo.

Gold Production

Much of the legal mineral trade in the country’s Kivu provinces has slowed as companies try to implement tagging and tracing mechanisms for exports of tin ore, wolfram, and coltan to comply with the regulations, according to the report. Several Chinese companies continue to buy untagged materials, the report said.

Congo is Africa’s largest producer of tin ore and is one of the world’s biggest suppliers of coltan, a material used in electronics. While Canada’s Banro Corp. opened the country’s first new, commercial gold mine in more than 50 years in October, the Mines Ministry estimates that about 80 percent of Congo’s gold exports are smuggled.

Gold is also used as currency to buy weapons and uniforms from poorly paid Congolese soldiers, the report said. More than a dozen foreign and Congolese rebel groups operate in eastern Congo, which borders Uganda, Rwanda and Burundi. A Burundian rebel group known as the National Liberation Forces has been active smuggling weapons and gold in eastern Congo and has linked up with other Congolese armed groups, the report said.

Rebel Fighters

Bosco Ntaganda, a Congolese general who is the acting head of military operations against rebels in the east, controls operations worth millions of dollars smuggling natural resources including gold, timber and tin ore, the report said. Ntaganda is wanted by the International Criminal Court for using child soldiers. The general, who was a rebel until three years ago when he joined the national army as part of a peace deal between Congo and Rwandan-backed rebels, has been involved in a number of deals trading fake gold, the report said.

As much as three tons of fraudulently-traded Congolese gold made its way to Dubai via Uganda last year, according to the report.

The report also warned oil companies working in eastern Congo to “ensure that their exploration and eventual production operations do not directly or indirectly benefit armed groups or criminal networks” within the Congolese army. Congo has five oil blocks along its border with Uganda. Companies including Total SA and Soco International Plc have stakes in the blocks.

--Editors: Paul Richardson, Tony Barrett.

To contact the reporter on this story: Michael J. Kavanagh in Kinshasa at mkavanagh9@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.


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