Gold worth $19.5bn ‘un­ac­counted for’

CityPress - - Business - DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za

A ver­i­ta­ble moun­tain of Ghana­ian gold is the most likely rea­son for what looks like $19.5 bil­lion (R272 bil­lion) in un­ex­plained il­licit fi­nan­cial flows out of South Africa.

Ear­lier this year, a re­port by the UN Con­fer­ence on Trade and De­vel­op­ment (Unc­tad) made the star­tling ac­cu­sa­tion that al­most all of South Africa’s gold had been “smug­gled” out of the coun­try be­tween 2000 and 2014 – gold worth $113 bil­lion in 2014 money terms.

The find­ing has been par­tially de­bunked a num­ber of times and has sparked a heated de­bate in the in­ter­na­tional re­search com­mu­nity around il­licit fi­nan­cial flows.

Es­ti­mates that Africa loses enor­mous amounts of money to the prac­tice of ex­port un­der­in­voic­ing have be­come widely ac­cepted, but the flaws in the Unc­tad re­port show how far off the mark they can be.

A counter-re­port com­mis­sioned by the Cham­ber of Mines was re­leased this week and ad­mits that, of the $113 bil­lion, iden­ti­fi­able mis­takes still can­not ac­count for $19.5 bil­lion in gold ex­ports.

The re­port, pre­pared by con­sul­tancy Eunomix, says that the ex­is­tence of large-scale un­der­in­voic­ing can­not be dis­counted, but that the fig­ures should be in­ter­ro­gated for al­ter­na­tive ex­pla­na­tions as well.

Eunomix’s Claude Bais­sac, one of the au­thors of the re­port, said they wanted to do more work to clear up what could have caused the ap­par­ent $19.5 bil­lion hole in gold ex­ports.

“It is in ev­ery­body’s in­ter­est that these dis­crep­an­cies get cleared up,” he told City Press.

The cham­ber told City Press that it “in­tends, in prin­ci­ple” to com­mis­sion this fur­ther re­search.

Bais­sac said it is hoped that all the sup­posed mis­in­voic­ing iden­ti­fied by Unc­tad could be in­ter­ro­gated be­fore the an­nual Min­ing Ind­aba next year.

A se­nior of­fi­cial from Unc­tad is ex­pected to at­tend and the cham­ber ev­i­dently wants to present a com­pre­hen­sive re­but­tal.

The cham­ber’s chief econ­o­mist, Henk Lan­gen­hoven, told City Press that Unc­tad had com­mit­ted to pub­lish­ing a re­vised ver­sion of its con­tentious re­port af­ter the crit­i­cisms lev­elled against it.

“They have not in­formed us what the re­vi­sion will con­tain. The cham­ber has sup­plied Unc­tad with a copy of the Eunomix re­port and has re­quested Unc­tad, in light of its er­ro­neous find­ings, to re­con­sider its con­clu­sions,” said Lan­gen­hoven.

HOW DO YOU FIG­URE?

The Unc­tad es­ti­mate was ar­rived at by com­par­ing de­clared gold ex­ports from South Africa cap­tured in the UN’s trade data­base Com­trade to the cor­re­spond­ing gold im­ports from South Africa de­clared by trad­ing partners.

This the­o­ret­i­cally al­lows you to mea­sure mis­in­voic­ing – when goods are ex­ported at less than their ac­tual value to evade taxes.

The prac­tice is be­lieved to be the fore­most form of il­licit cap­i­tal flight glob­ally, based on a grow­ing body of re­search that has many de­trac­tors and de­fend­ers.

The prob­lem with Unc­tad’s re­port is that up un­til 2010, South Africa clas­si­fied its gold ex­ports as mone­tary, which led to them not be­ing cap­tured by Com­trade at all.

Trad­ing partners de­clared the gold, mak­ing it look like it had all been smug­gled out.

From 2011 on­wards, how­ever, South African gold ex­ports do show up in the Com­trade data­base, al­though the des­ti­na­tion is still not de­clared. This led Unc­tad to still count them as smug­gled. The cham­ber’s re­search used read­ily avail­able lo­cal data on gold ex­ports and sub­tracted this from the Unc­tad es­ti­mates.

This turned the $113 bil­lion into $19.5 bil­lion.

THE GHANA­IAN CON­NEC­TION

The $19.5 bil­lion in un­ex­plained “un­der­in­voic­ing” of gold ex­ports from South Africa seems to have a sim­ple ex­pla­na­tion.

The Eunomix re­port could not ac­count for a sus­pi­cious surge in gold ex­ports from South Africa since 2012, at least ac­cord­ing to part­ner data in the Com­trade data­base. All of it was racked up in 2011, 2012 and 2013. One of Eunomix’s hy­pothe­ses is that it re­lates to the re-ex­port of for­eign gold that gets re­fined at South Africa’s Rand Refinery – the con­ti­nent’s ma­jor gold re­fin­ing op­er­a­tion jointly owned by the ma­jor min­ing com­pa­nies.

Re-ex­ported gold does not show up in the cham­ber’s gold pro­duc­tion statis­tics or in the SA Re­serve Bank’s eco­nomic data for net gold ex­ports – the sources Eunomix used to counter the Unc­tad data. Bais­sac said they had not yet tested this the­ory. Trade statis­tics, how­ever, show that it is most likely cor­rect. South Africa’s trade statis­tics, read­ily avail­able from the de­part­ment of trade and in­dus­try, how­ever, do record gold im­ports.

Cru­cially, the statis­tics show a mon­u­men­tal spike in gold im­ports around 2012 – the year that most of the miss­ing $19.5 bil­lion was racked up.

In 2010, South Africa im­ported R54.4 bil­lion in gold, which is slightly higher than usual. In 2011, how­ever, this bal­looned to R105 bil­lion. In 2012, gold im­ports rock­eted up to R150 bil­lion. Then, in 2013, it fell back to R50 bil­lion, and in 2014 and last year, fell back to lower lev­els.

The cham­ber says it doesn’t keep data on im­ports des­tined for Rand Refinery and can’t com­ment on the rea­son for this re­mark­able but short-lived surge in im­ports.

Vir­tu­ally all of the un­usual gold im­ports, how­ever, come from a hand­ful of African coun­tries where South Africa’s ma­jor multi­na­tional gold min­ing com­pa­nies have big op­er­a­tions.

Most of the gold came from Ghana, where An­gloGold Ashanti and Gold Fields have mines. The sec­ond-largest amount came from Mali, where the two also have mines.

The third-largest surge in im­ports came form Tan­za­nia, where An­gloGold also has a mine.

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