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How the DRC can curb illicit gold trade to spur economic growth
According to a report by the United Nations, gold production in the Democratic Republic of Congo is underreported while tonnes of the precious metal is smuggled into global supply chains. The report further indicated that the government lost up to $1.88million in taxes through the smuggling of at least 1.1 tonnes out of Ituri Province alone in 2019. Yves Kabongo, Managing Partner at KBG Capital spoke to CNBC Africa for more.
Tue, 10 Nov 2020 11:45:20 GMT
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AI Generated Summary
- The DRC faces significant challenges in regulating the gold mining industry due to the vast and porous borders facilitating illicit activities, resulting in substantial revenue losses for the government.
- Endemic corruption and vested interests among influential figures perpetuate the issue of gold smuggling, hindering law enforcement efforts and necessitating comprehensive reforms to address the problem.
- Proposed solutions include enhancing government presence, creating job opportunities, investing in infrastructure, and fostering regional cooperation through bilateral agreements with neighboring countries to regulate gold exports and promote economic development.
The Democratic Republic of Congo (DRC) has long been plagued by the issue of illicit gold trade, with tons of the precious metal being smuggled into global supply chains, leading to significant revenue losses for the government. According to a report by the United Nations, gold production in the DRC is significantly underreported, and the government lost up to $1.88 million in taxes through the smuggling of at least 1.1 tons of gold in just two provinces in 2019. Yves Kabongo, Managing Partner at KBG Capital, shed light on the dire situation of gold smuggling in the country in an interview with CNBC Africa. He highlighted the vast expanse of land in the DRC, covering a territory as large as one-third to half of Western Europe and bordering multiple countries such as the Central African Republic, Sudan, Uganda, Rwanda, Burundi, and Tanzania. This vast and porous border poses a significant challenge for the government in controlling the illegal trade of gold, particularly alluvial gold which can be easily accessed by individuals with simple tools like shovels. The lack of border control allows anyone to smuggle gold out of the country without being detected. Kabongo emphasized the urgency for the DRC government to address the issue of illicit gold trade, considering the substantial financial losses incurred through tax evasion and smuggling activities. The magnitude of the problem is alarming, with estimates suggesting that illicit gold trade amounts to 20 to 30 tons annually, translating to a staggering $1.4 to $1.5 billion in today's gold market. The government's inability to regulate the gold mining industry effectively results in multimillion-dollar revenue losses annually, jeopardizing the country's economic stability. Kabongo underscored the need for concrete action from the government to curb illicit activities and enhance revenue collection. As a significant portion of the gold smuggling networks in the Eastern DRC involves known individuals and enterprises, Kabongo questioned the lack of legal actions against these perpetrators. He suggested that endemic corruption and vested interests among powerful figures in the country hinder law enforcement efforts, allowing the illicit trade to persist unchecked. To combat this deep-rooted issue, Kabongo proposed a multifaceted approach focusing on bolstering government presence, creating job opportunities, investing in infrastructure, and promoting legitimate business activities in the region. By incentivizing investors and establishing trade-free zones, the government could channel the artisanal gold sector towards formalized structures, thereby fostering economic development and social empowerment. Moreover, Kabongo emphasized the necessity of regional cooperation and bilateral agreements with neighboring countries like Uganda, Burundi, and Tanzania to regulate gold exports and ensure transparency in trade transactions. By implementing mechanisms akin to the Kimberley Process for diamonds, the DRC could strengthen its governance of the gold industry and foster mutually beneficial partnerships with neighboring nations, promoting shared prosperity and sustainable economic growth. Overall, Kabongo's insights shed light on the complexities of tackling illicit gold trade in the DRC and underscore the imperative for concerted efforts to combat illegal activities, promote transparency, and unlock the country's economic potential.
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