By: IOL

Anywhere between 5% and 30% of gold in South Africa – once the world’s top producer – is mined illegally, laundered, and shipped as legitimately mined precious metal.

However, it’s impossible to really quantify the extent of the damage to the economy caused because of these illegal shipments, according to a new report from SWISSAID, an NGO based in Switzerland. Although gold output is declining, it still contributes billions to South Africa’s economy.

SWISSAID’s report stated that, because South Africa is clinging to an opaque gold trade reporting system dating back to apartheid, there is no quantifiable way of completely and accurately determining total imports and exports, as well as the origin, of the yellow metal.

As a result, it states, this “opacity makes the identification and calculation of illicit gold flows almost impossible”.

However, through data provided by industry players as well as Rand Refinery, Africa’s largest precious metals refinery, SWISSAID said it was able to circumvent deficiencies in gold trade statistics and arrive at “what is arguably the most realistic picture of the South African gold trade to date”.

This enabled the NGO to determine that, while the South African industrial gold sector is declining, illegal/informal gold production is on the rise and that South Africa plays a key role as a transit hub in the gold trade, including for smuggled gold.

“Artisanal and small-scale gold mining in South Africa takes place mainly in abandoned or unused industrial mines. The activity is illegal, largely controlled by syndicates, and involves mainly undocumented migrants from neighbouring countries,” it stated.

Estimates of gold production from artisanal and small-scale mining (ASM) vary widely, ranging from 5% to 30% of total production, it said. Moreover, this illegally mined gold is “laundered into formal supply chains through local refineries and may be exported legally”.

South Africa is a known destination for smuggled ASM gold from neighbouring countries, particularly Zimbabwe, the report stated. That gold is also laundered locally before export.

“Consequently, there is a high risk that reprocessed, unprocessed, melted or scrap gold from South Africa may in reality contain in freshly mined ASM gold associated with smuggling, money laundering or human rights violations,” the report found.