River of Gold | July 2016 1

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River of Gold | July 2016 1 Basa Kubali, age 47 I have eight children. The eldest is 20 and the youngest is three years old. I have two girls studying and two boys studying. The three boys who aren’t at school don’t have any work. Since the dredgers arrived there is no longer a price for ‘the poor’. Normally everyone buys according to their pocket, but today there is no longer a reduction – no negotiation. Prices went up. Life has become more and more difficult. Since prices went up I started to work double. Now I look for firewood and I sell it. I sell sombe (green leaves) and a bit of flour. I work more to adapt. I force myself from day to day to adapt to this life but it’s difficult. It’s difficult. Photo: Global Witness Global Photo: RIVER OF GOLD | JULY 2016 1 Contents Executive summary 2 1. Shabunda’s gold boom – a good news story gone wrong 5 The case of Kun Hou Mining – a predatory company that made off with the gold 6 The Kun Hou gold: for militias, against the people 7 Letting them get away with it 9 2. The Raia Mutomboki’s broader use of Shabunda’s gold boom 11 Failure of state agencies to manage the boom and the gold sector 13 SAESSCAM: the state mining authority profiting from the gold trade alongside armed men 13 Disguising Shabunda’s gold on official export records 15 Shabunda’s disappearing gold 16 3. Shabunda’s “conflict” gold went to Dubai 17 ICGLR certificates: why they matter 19 4. Why all of this matters for Congo and the implications 20 for international companies An urgent role for the Congolese government 20 International companies and their obligations 21 Recommendations 22 Endnotes 25 2 RIVER OF GOLD | JULY 2016 Executive summary An estimated $28 billion worth of gold lies under Global Witness has seen documents that show that the soil in eastern Democratic Republic of Congo at least 12kg of Ulindi gold that had benefited armed (hereafter Congo).1 But the country’s gold wealth, groups was exported by a South Kivu gold trading the majority of which is artisanally mined, has long house to its sister company in Dubai.4 But the majority been ill-used. Preyed upon by armed groups, bandits of the boom’s gold – and taxes levied on it – have and corrupt elites the revenues generated by eastern disappeared, almost certainly smuggled out of the Congo’s artisanal gold sector have all too often funded country. South Kivu’s provincial accounts for 2014 and corruption or fuelled abuses and violent conflict 2015 show no evidence of a gold rush. The gold boom rather than helping to relieve the region’s poverty. left Shabunda town almost as it found it: a deprived enclave with no roads, running water or electricity Global Witness’ investigation into a recent gold rush and its people suffering grinding poverty. along the Ulindi River in Shabunda territory in eastern Congo reveals the extent of the problems that beset Gold booms are not uncommon in Congo and the region’s artisanal gold sector. The Ulindi boom Shabunda is not an isolated case: four-fifths of eastern generated more than a tonne of gold per year, worth Congo’s artisanal miners work in the gold sector.5 around $38 million,2 whose beneficiaries included Semi-industrial dredging companies, often Chinese- armed groups and a predatory Chinese-owned owned, have been accused by Congolese provincial company, Kun Hou Mining, rather than the local officials and others of not paying taxes and smuggling population. gold out of the country in other parts of eastern Congo.6 Hundreds of millions of dollars of artisanally Global Witness research reveals that Kun Hou Mining produced gold from the country’s east – which may paid Raia Mutomboki armed groups operating along have fuelled human rights abuses and violence – the banks of the Ulindi $4,000 and gave them two end up on global markets each year, often passing AK-47 assault rifles in order to secure access to rich through transit countries such as Uganda, United gold deposits on the river bed. Kun Hou Mining ran Arab Emirates (UAE) and Switzerland.7 Ultimately the four semi-industrial river dredging machines along the gold ends up in products like jewellery and electronic Ulindi in the boom. Members of the same armed groups circuit boards sold around the world. also earned up to $25,000 per month by regularly taxing the workers on locally-made dredgers who were doing Shabunda’s gold rush could have played out very the dangerous job of manually sucking up gold from differently. Since 2010 companies all along gold the river bed.3 Up to 150 of these manually operated supply chains have had access to international dredgers worked along the river at the height of the guidance developed by the Organisation for Economic rush. South Kivu officials charged with oversight of the Cooperation and Development (OECD) and the United province’s artisanal gold sector appeared to defend Nations (UN). This guidance helps them source and Kun Hou Mining rather than enforce Congolese law and trade gold from high-risk areas like Shabunda in a hold the company accountable for its illegal activity. responsible way. Companies operating in Congo’s gold sector have been legally required under Congolese In some cases, the same authorities worked hand- law to implement the OECD guidance since 2012. in-hand with armed men and women from Raia Recent Chinese industry due diligence guidelines for Mutomboki armed groups to illegally tax artisanal responsible mineral supply chains,8 based on the OECD gold diggers, in violation of Congolese law. Mining guidance, provide directions and advice for companies authorities in Bukavu, the regional capital, falsified like Kun Hou Mining to help ensure that their operations declarations of origin for the small quantities of are not linked to abuses. Guidelines introduced in the Shabunda’s artisanal gold that were officially UAE in 2012 make clear that all Dubai Multi Commodities exported in order to obscure its origins, which are Centre members and non-members should manage considered “high risk” by international standards. their supply chains according to the OECD principles. RIVER OF GOLD | JULY 2016 3 In order for these reforms to translate into meaningful Eastern Congo’s artisanal gold production should changes in conflict-affected and high risk areas like benefit Congolese people and the state rather than Shabunda, governments must hold companies and armed men and predatory companies. For this to public officials involved in abuses to account. happen: Companies either producing or internationally trading The Congolese government must hold provincial Shabunda’s gold did not implement these supply officials to account where they neglect their duties chain due diligence standards. Those companies related to the artisanal gold sector or operate illegally. operating in Congo acted in direct contravention Companies operating illegally in Congo, such as of Congolese supply chain due diligence laws, Kun Hou Mining, should be investigated, and where which Congolese authorities failed to enforce. As a evidence of wrongdoing is found, prosecuted. consequence, gold that benefitted armed men and a company operating illegally was left unchecked and Companies at all stages along global gold supply traded internationally. Meanwhile the boom and its chains must implement the OECD due diligence accompanying huge influx of gold diggers put pressure guidance on responsible mineral supply chains. on already scarce resources in Shabunda town, This includes publishing an annual report detailing pushing up food prices and leaving many local people the risks found in their supply chain and the measures unable to make ends meet. At the same time, mining taken to reduce these. authorities in Shabunda town ran an illegal taxation racket and, where gold was officially taxed, failed to States have an obligation under international law to deposit revenues with the Provincial government. ensure companies respect human rights.10 As such, This money is badly needed: in 2014 the town’s only they must legally require companies under their hospital recorded 535 cases of malnutrition.9 jurisdiction to undertake OECD standard supply Photos: COSOC-GL Photos: Mortality rates are high for artisanal dredge workers along the Ulindi River, where drowning, collapsing river banks and poor air supply while diving for gold are occupational hazards. Divers seeking gold dive metres down into the river’s fast-flowing brown water for hours at a time, their oxygen provided by a flimsy plastic tube held between their teeth that is attached to the barge above water. A local hospital worker described how divers would often be killed when large logs rolling along the riverbed with the current catch them off-guard, trip them up and disconnect them with the dredging machine and their air tube. 4 RIVER OF GOLD | JULY 2016 Figure 1 Shabunda town, the eponymous hub of Shabunda territory, cannot be accessed by vehicle. Considered an “enclave”, the town has no running water or electricity: generators provide current for the few who can afford it. chain due diligence, and must effectively monitor Methodology its implementation.11 Companies that fail to meet international supply chain due diligence standards Global Witness engages with companies, governments and laid out by the OECD must be held to account. other partners around the world to tackle the issue of natural resource-funded conflict. For the past 15 years we have reported on the links between the trade in minerals and armed conflict in Artisanal miners operating in eastern Congo must be eastern Democratic Republic of Congo, working with Congolese properly supported by the Congolese government. civil society, policy-makers and business leaders to develop SAESSCAM, the Congolese state agency charged with practical solutions.
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