
Gold worth billions smuggled out of Africa - onetimemanytime
https://www.reuters.com/article/us-gold-africa-smuggling-exclusive/exclusive-gold-worth-billions-smuggled-out-of-africa-idUSKCN1S00IT
======
kenneth
My interpretation of this article:

The UAE is laundering dirty gold, cleaning it, and reselling it to China and
India. Western buyers tend to stay away from UAE gold because Emirati
refineries aren't accredited, but the Chinese and Indian don't care as much.
This is good business for the UAE as they become the hub for gold laundering,
and can make a hefty profit getting gold at a discount and reselling it at
spot prices.

This is really at the expense of Switzerland, which is currently the world
center for gold refining. They import raw materials, refine and purify it, and
export the finished products to industry, jewelers, and investors. If you've
ever bought a gold bullion bar (whether 1oz or 1kg), you'll usually notice
it's in an assay and branded either "Valcambi" or "PAMP," both of which are
large Swiss gold refiners.

~~~
newhotelowner
> Western buyers tend to stay away from UAE gold

Do Western buyers even buy gold like indians do? Most of Indian buys 22k
jewelry. In India, no one knows about accridated. Indians love UAE gold. Lot
of indians from USA fly through Emirates just to buy gold from UAE. Indians
thinks that UAE gold is more pure than what they can get in USA or India.

~~~
anovikov
Gold is important for Indians because there is little other ways of saving
money there... gold demand in India is huge.

~~~
sidm83
This was the case earlier but not so for a while. Current use of gold is
mainly for jewellery, especially in weddings. This is a typical bride in South
India - [https://www.bookeventz.com/blog/wp-
content/uploads/2018/11/x...](https://www.bookeventz.com/blog/wp-
content/uploads/2018/11/xcover-3.jpg.pagespeed.ic.qgVHu7bzsP.jpg)

Since about 2-3 decades, apart from use in jewellery, gold has been at best an
'alternative asset class' here. Unless of course one needs to hide cash income
from the tax man.

~~~
checker659
Unless the lady in the photo is rich, I bet most of her jewellery is fake.

~~~
govg
Actually not. It is a huge matter of "pride" in South Indian weddings when the
bride wears a lot of gold, my interpretation is that this is just one way to
carry on with the traditions of dowry. Fake jewelry for the purposes of
marriage is not as common in South India as it is in other parts of the
country.

~~~
filleokus
Is the jewellery borrowed or rented for the wedding or is it purchased and
kept? That looks like a quite substantial amount of gold, like tens of
thousands of USD worth. If she/they own that, I would kind of classify
her/them as rich.

~~~
xbmcuser
Gold jewelry is a big deal is South India. I know of a maid making $4-500 a
month in Singapore. When she went back to visit after 2 years took $8000 worth
of gold to give as gift to her family members. In other words 85%-90% of her
total earnings over 2 years.

~~~
acct1771
Orrrrr that was the best way to transfer it tax free.

------
logicx24
This is a problem of poor infrastructure and corruption. Many of these
resource-rich countries are politically unstable and lack the infrastructure
to attract legitimate foreign investment. The regulatory framework is also
broken, making it nearly impossible for new entrants to legally participate in
the industry.

A dysfunctional legal market leads black markets to flourish, as miners need
some way to sell their goods, and traders want to profit exporting the gold to
foreign countries. This leads to extralegal organizations, like criminal
syndicates and mafias, forming to protect illegal producers and connect them
to external markets.

And so, to fix this, African countries need to not only crack down on illegal
exports but also make it easier for legal entities to enter the industry. The
government needs to provide a safe business environment for legal producers.
That will cause illegal producers to naturally decline, as efficient legal
production will lower costs.

Of course, this is easier said than done. Structural reform of corrupt
kleptocracies is incredibly difficult. But without top-down reform,
restricting illegal exports will accomplish very little beyond worsening
poverty.

~~~
minikites
>This is a problem of poor infrastructure and corruption. Many of these
resource-rich countries are politically unstable and lack the infrastructure
to attract legitimate foreign investment. The regulatory framework is also
broken, making it nearly impossible for new entrants to legally participate in
the industry.

I often see this sentiment about African nations but I almost never see
thought beyond this into the root causes. If the speaker is being charitable
to the subject, it's simply accepted as the way things are. If they aren't, it
veers into a justification of Western superiority or African inferiority (two
sides of the same coin).

~~~
pulisse
> I often see this sentiment about African nations but I almost never see
> thought beyond this into the root causes.

There's a large literature on this in political science and development
economics. The subject is known as the "resource curse".[0]

[0]
[https://en.wikipedia.org/wiki/Resource_curse](https://en.wikipedia.org/wiki/Resource_curse)

~~~
minikites
>it's simply accepted as the way things are

This is the type of comment I was talking about, putting the blame on fate.
The United States has lots of natural resources, as does China, and many other
developed and industrialized nations. These nations got developed and
industrialized by exploiting the resources of poorer nations, colonizing them,
ruining the existing local governments and economies in order to optimize them
for resource extraction, and then leaving abruptly in the middle of the 20th
century.

~~~
Retric
The percentage of US and China’s GDP based on concentrated natural resources
is rather low. Historically the US’s eastern coal resources where hard to
export but boosted local industries. Kind of the opposite example.

~~~
eigenstuff
Oh, honey, no, Appalachia absolutely suffers from the resource curse as well,
to the point you often see scholars describe the region as an "internal
colony." Big Coal came in, forced people off their land, extracted all the
wealth, sure as hell didn't pay its fair share of taxes on it, bought the
local governments all the way down to school boards and sherrifs to squash any
opposition, and then left behind nothing in its wake except horrific
environmental atrocities and poverty on par with inner city black
neighborhoods, Native reservations, and the rural Deep South black belt. The
negative stereotypes of Appalachians still perpetuated to this day were
largely invented by industry to justify their exploitation and
disenfranchisement. Negative stereotypes about blacks couldn't apply to a
mainly white region so they just became "white trash" instead. The explosive
growth of the American economy in the 20th century was fueled by the blood of
over 100,000 coal miners who never saw a dime of that sweet sweet American
dream money. And this shit is still going on to this day.

The poorest state in the US is Mississippi. That is the legacy of slavery. The
second poorest state is West Virginia, which ironically shares a border with
Maryland, the richest in the country. That's not an accident nor a testament
to the allegedly poor character of Appalachians as a distinct cultural group
separate from the rest of America. That was completely by design, because you
can more easily manipulate a group of people if you force them to fight for
scraps. That is the legacy of extractive industry in Appalachia. And so the
cycle of rural poverty continues. Don't let them fool you with the "Trump
Country" narrative or "Hillbilly Elegy".

~~~
Retric
West Virginia is worse off than most of the US. But, it’s not on it’s own the
way a country would be.

So, it’s doing well compared to most of the world. The median household income
is still $43,469 which is better than say Japan at least in nominal terms.

------
walrus01
My interpretation: Gold jewelry is used as a store of value by many
traditional communities in the middle east and also in Pakistan and in India.
Go visit Rawalpindi and go to the "old downtown" area and look at how many
jewelry stores there are. Literally hundreds. People don't trust banks, don't
trust investment products which exist as intangible things in a computer
record somewhere. People trust big ridiculous jewelry you can wear during your
wedding.

The jewelry dealers in Pakistan who buy gold from the UAE most likely don't
care about its origin, whether it's ethically sourced gold, etc. They care
about its purity and cost.

I've been to these places and seen the hand fabrication of the jewelry in
person. It's a pretty big part of the economy in Pakistan.

~~~
closeparen
In the US, buying jewelry and selling it back is a substantial guaranteed
loss. Are the economics of the retail jewelry trade different there, or are
the alternatives just so bad that it’s still compelling?

~~~
pm90
The latter.

The biggest advantage of the West has been in the creation of Institutions
that create and moderate financial instruments that are not deadweight like
commodities. The Stock Market, index funds etc. are all considered “valid”
places to put your financial resources in. These instruments invest in real
companies and organizations instead of lying around in a bank.

Unless other countries figure out how to do finance better they won’t be able
to create the same dynamism that Western capital markets have.

~~~
walrus01
Also worth noting that a financial instrument like an index fund is not
something easy to understand for a very large, rural, not highly educated
population. It's a fact that there are large Indian states where the literacy
rate is between 60-70% vs 98%+ in countries where intangible investment
products are popular.

[https://en.wikipedia.org/wiki/List_of_Indian_states_and_unio...](https://en.wikipedia.org/wiki/List_of_Indian_states_and_union_territories_by_literacy_rate)

Gold is something you can see and hold. In countries with 10%+ inflation
rates, an investment that returns 4-8% is also different than, for example, a
mutual fund in the US that returns 6-8% which is significantly over the
US/Canadian inflation rate.

~~~
lotsofpulp
Trust is also not freely available in developing or poorer countries, so being
able to see and hold something is more important. In the US, the incidence of
theft* is so low that you can trust your electronic accounts won't be emptied,
and if they are, you have a court/regulatory system that will make you whole.
This is an important asset for developed countries to have as it greatly
reduces transaction costs, whereas in developing countries, people have to
deal with worrying about what happens if they get on the wrong side of someone
who has influence.

*Ignoring the constant devaluation of money to prop up asset prices.

------
zakum1
What Africa needs are institutions and infrastructure that can buy and refine
gold and thereby ensure that the benefits of our resources accrue to the
countries (and their people) from where they originate. The pirate miners are
not necessarily the source of the problem, neither are the traders in UAE and
China. All are just filling a vacuum. Similarly the traditional institutions
in Switzerland and other western countries that control precious metal markets
are also somewhat part of the problem. To the extent that political elites in
Africa benefit from the exploitation of resources, establishing local
institutions and infrastructure is narrowly seen as not in their interests.
African people and global institutions who truly care about a peaceful,
prosperous and free world need to commit investment and political focus to see
this happen.

~~~
danieltillett
They do have - they are called western mining companies. I invest in many of
them and they are doing great things for these very poor countries.

It is a pity more people don't invest in these companies as they tend to be
priced at a significant discount to mining companies working in western
countries. This is especially acute at the exploration/development stage which
makes it hard for them to raise the money to develop new mines.

~~~
indigo945
What exactly are some of the great things Western mining companies are doing
for poor countries? The only thing that I'm aware of which might be construed
as positive is that through exfiltrating resources from the country and
channeling the profits of this venture into the pockets of Western
shareholders, they lift the country of its resource curse, by lifting it of
its resources. However, this is neither ethically nor, in the short and medium
term, practically, actually a good thing. And besides that, there just isn't
much: mining ventures do not require much infrastructure, which will therefore
not see much improvement from those investments, and the wages paid to local
workers are laughable compared to the revenue mining generates, to the point
where getting that revenue into the pockets of local warlord kleptocrats might
actually be better, because if nothing else, at least their lavish lifestyle
drives demand and powers the local economy.

Or is there a different force at play that I'm not seeing?

~~~
danieltillett
I think you have a misinformed understanding about the current legal and
ethical standards that public western mining companies operate under in
Africa. They pay a huge amount of taxes and royalities and many have the host
government as a major shareholder (10-15%). It is not western mining companies
that are smuggling gold out to the UAE.

Serious mines need an amazing amount of infrustructure and capital - hundreds
of millions dollars is typical and often much more. A typical mine employs
thousand of locals in what are middle class or better paying jobs - the
western run mines are all mechanised - you don't pay $5 day to some local and
put them in charge of a $200,000 truck.

Yes the host governments often waste or steal the money, but even with this a
huge amount of good is still done. It is the areas of Africa that are not
being "exploited" by the West that are the poorest.

The local companies and companies from countries outside the West are still a
problem. We should be supporting the good companies and driving out the bad.
Unfortunately few investors are willing to do this.

~~~
saiya-jin
What you describe is some sort of lesser evil - I still fail to see the
massive positive force. Modus operandi for centuries has been to exploit the
hell out of any country, be it Africa, Indonesia or South America and give
nothing and take everything.

Only if government is not utterly corrupt and doesn't pocket nearly 100% of
income from the mine can there be some lasting benefits for the country. Its
just a continuation of theft and exploitation that made Europe so rich for
last few hundreds of years, albeit with 21st century 'we care' face. Travel a
bit in countries that were raped like this, ie Potosi in Bolivia to get full
picture of where this sort of business came from.

So while few pocket some average income while the mine lasts, country is
stripped blank of its most precious resources... and that is supposed to be
something positive? I have somewhat higher moral standards than this to
consider these kind of operations at least slightly moral and justifiable.

~~~
danieltillett
Every decision in the real world is a choice of the lesser evil. Investing in
companies that are doing the right thing is the way to make a difference to
world.

Instead of pulling down those companies that are making an actually real
difference to the people in Africa, what is your solution?

------
ragerino
I found an article that explains what happened to Lybia's gold reserves that
disapeared when Lybia was liberated by France and USA.

[https://www.libyaobserver.ly/economy/55-tons-libyan-gold-
smu...](https://www.libyaobserver.ly/economy/55-tons-libyan-gold-smuggled-uae)

~~~
ragerino
Here's another article: [https://awfulavalanche.wordpress.com/2016/01/10/who-
stole-14...](https://awfulavalanche.wordpress.com/2016/01/10/who-
stole-143-tons-of-gold-from-the-libyan-people/)

------
pcurve
Probably not very hard to smuggle gold.

1 billion dollar worth of gold is 4ft cube. That’s it.

~~~
easymovet
But that weighs almost twenty thousand lbs

~~~
Dylan16807
So ten tons, split that across the backseats of several cars and go.

Or for subtlety a single backpack can easily fit a million or two at a
liftable weight.

------
tim333
Gold is quite a hard thing for governments to control. You can make it part of
the structure of anything crossing a border.

~~~
umvi
Or just eat a ton of kaju burfi covered in gold foil and then refine it out of
your feces later

~~~
OJFord
> eat a ton [sic] of [...]

... anything, and see you in hospital, surely?

~~~
RandomBacon
Only if you overeat, or try to consume too large of a gold nugget that it
creates an obstruction. Pure gold is very soft and won't chemically react with
the body.

~~~
bruckie
I believe the parent post was alluding to this:

[https://www.google.com/search?q=one+ton+in+kg](https://www.google.com/search?q=one+ton+in+kg)

:)

------
duxup
I think black market mining has been an ongoing issue for a long time in
Africa hasn't it?

------
pattle
I've always wanted to own a gold bar, holding something that's both valuable
and visually pleasant to look at would be quite satisfying I presume.

~~~
epanchin
On the off chance you’re in London, you can hold one in the Bank of England
museum.

Not quite the same as holding your own gold bar, but £400k cheaper.

------
davidw
"It turns out he really _was_ a Nigerian prince who just needed a few hundred
bucks to help move the money out of the country!"

------
seymourbuttes
The comments here are extremely low quality

~~~
dang
High-quality ones take longer to show up. They're harder to write.

------
smadge
Part of the centuries old ongoing theft of the wealth of Africa.

~~~
toasterlovin
You realize that Africans are on one side of these transactions, right?

~~~
danans
But that doesn't disprove the parent comment at all. Economic exploitation of
regions always has local parties that assist in the process. It's not like
those parties represent the interests or desires of most Africans in their
actions.

~~~
pm90
How else would you have it though? We can’t force democracy on these nations.
Apparently they can’t create functioning legal institutions. There just
doesn’t seem to be a way to accurately represent the will of the people
without also being actively involved in the geopolitics of the region.

~~~
danans
I never claimed to have a solution to that problem.

I was just pointing out the flaw in the idea that just because some native
Africans participated in the foreign colonial exploitation of Africa, it
somehow lessens the degree of culpability for the exploitation itself.

------
caprese
commissions are commissions

------
speeq
Let's hope it's not uranium-ore:
[https://en.wikipedia.org/wiki/Shinkolobwe](https://en.wikipedia.org/wiki/Shinkolobwe)

------
lowdose
> UAE imported $15.1 billion worth of gold from Africa in 2016, more than any
> other country and up from $1.3 billion in 2006. The total weight was 446
> tonnes, in varying degrees of purity – up from 67 tonnes in 2006.

Sounds like UAE is increasingly hedging the dollar with gold.

~~~
kenneth
That's not my interpretation at all.

EDIT: moved explanation it to a top level comment because I thought it more
broadly interesting:
[https://news.ycombinator.com/item?id=19743663](https://news.ycombinator.com/item?id=19743663)

------
robotomir
I am sorry but how does that even pretend to be news?

~~~
zopppo
By which standard is this not news?

