East Africa's first gold trading hub to fight smuggling

Monday March 18 2019

Gold trading

Tanzania is set to launch an international gold trading centre joining South Africa and Botswana. FOTOSEARCH 

BEATRICE MATERU
By BEATRICE MATERU
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Tanzania has launched an international gold trading centre in the gold-rich region of Geita.

Tanzania will thus join South Africa and Botswana, which boast a gold exchange hub and diamond bullion market respectively.

The centre, inaugurated on March 17, is among reforms introduced in the mining sector in the past three years to curb mineral smuggling.

The gold hub is meant to ease mineral trading, and ensure that businesses pay the required levies to the government.

Geita produces over 40 per cent of the gold exported from the country.

According to Geita Regional Commissioner Robert Gabriel, each of the five districts in the region will have one gold collection centre for small-scale miners, and two banks where gold trading will be taking place.

Early last month, parliament approved a Bill designed to relieve small-scale miners of the burden of paying withholding tax of 5 per cent and an 18 per cent value added tax. This leaves the holders of a primary licence with a 7 per cent tax obligation only.

The development is in line with President John Magufuli's latest directive to ensure that Tanzania takes the lead in the international gold business.

"We are not profiting from our gold as we should," said President Magufuli.

In 2017, President Magufuli ordered the military to construct a 24km perimeter wall surrounding the tanzanite mines in Mererani, Manyara Region, to curb smuggling of the rare gemstone.

Later on, he gave a 30-day ultimatum for installation of surveillance cameras round the tanzanite mines.

The fencing off of the Mererani mines has seen the country record increased revenues from sales of tanzanite.

As at September 2018, tanzanite revenues rose to Tsh1.28 billion ($461,000), from a low of Tsh166 million ($74,000) recorded in January 2015.

Mining Act

Last month, the government reviewed the Mining Act to allow the Mining Commission to establish mineral buying and selling centres.

Under the amended law, contractors, subcontractors and financial institutions with at least 20 per cent equity owned can participate in mining activities.

Tanzania mineral wealth includes gold, tin, nickel, iron, copper, zinc, lead, diamonds and uranium. Its gemstones are varied, including tanzanite, coal and industrial minerals such as soda, kaolin, gypsum, phosphate and dimension stones.

Meanwhile, Ugandan authorities said on Wednesday they are investigating the country’s biggest gold refinery over recent imports of an estimated 7.4 tonnes of gold worth $300 million.

Ugandan state-run media reported the gold could have originated from Venezuela, which has been selling gold to prop up its struggling economy.

African Gold Refinery (AGR) said the gold came from South America, but gave no further details, dismissing allegations of smuggling.

“All the required documents has been provided to them (the police)... AGR transactions are legal and documentations are 100 per cent legitimate,” the firm said in a statement.

Fred Enanga, a spokesman for Uganda’s police, said intelligence reports indicated that AGR received a shipment of 3.8 tonnes on March 2, and then another shipment of 3.6 tonnes on March 4. Neither shipment passed through official Customs entry points, he said.

Then, on March 7, police raided the premises of AGR after securing a court order and found the 3.6-tonne batch, however, the first shipment had disappeared, he said.

“Investigators have already questioned and obtained statements from officials at AGR. We are very much interested in them indicating to us where the 3.8 tonnes of gold are,” said Mr Enanga.

“The one who is found in possession of this gold has to explain... AGR officials are a subject of investigation.”
Mr Enanga said the 3.6 tonnes that investigators found have been turned over to the central bank.
Meanwhile, investigators are seeking to establish where the gold came from, who owns it and how it was shipped into the country.
Citing the commander of a Ugandan security unit that oversees the policing of the mining sector, state-run daily New Vision reported that the gold was believed to have originated from Venezuela.
Mr Enanga said he could not definitively say whether it had originated from Venezuela. “It could be from Latin America or from DRC, investigations will tell us all that.”
Uganda has over the years evolved as a regional gold smuggling and trading hub, with dealers exploiting its proximity to Democratic Republic of Congo, which produces tonnes of gold but has been plagued by decades of conflict and mismanagement.
Rampant corruption, lax rules and weak enforcement mean smugglers face few hurdles as they ship or trade the lucrative metal through Uganda, analysts say.
Last year, Uganda’s gold export earnings jumped 23 per cent to $514 million from the preceding year, overtaking coffee for the first time as the country’s top foreign exchange earner.

The country shipped 13.2 tonnes of gold compared with 10.8 tonnes exported in 2017.

Venezuela has been selling gold abroad in a bid to provide the cash-strapped country with liquidity.

In January, a senior official said that Venezuela planned to sell 15 tonnes of gold from the central bank to the United Arab Emirates in return for euros in cash.

Located in Uganda’s lakeside town of Entebbe, AGR was officially commissioned in early 2017.

The firm has frequently faced criticism from rights activists, including The Sentry, co-founded by actor George Clooney, who say it could be facilitating gold smuggling from conflict areas in DRC. AGR has denied the allegations.

Additional reporting by Reuters

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