Gold is often seen as a symbol of wealth and prosperity, but in regions rich with it, the precious metal can fuel more than just economic growth; it can spark violence and instability. PHOTO/FILE
Gold is often seen as a symbol of wealth and prosperity, but in regions rich with it, the precious metal can fuel more than just economic growth; it can spark violence and instability.
So, why does this happen? Since its opening in 2016, the story of Uganda’s first gold refinery has come to be instructive.
It should have been a crown jewel of economic progress, a ticket to legally export gold. But here is a twist: the refinery didn’t just process Ugandan gold. It became a magnet for smuggled gold from the Democratic Republic of the Congo (DRC), where armed groups dominate artisanal mining, a small-scale operation with massive stakes and danger.
According to a November 14 white paper by PhD economics candidates at the Institute of Economics and Social Research (IRES) of the Université Catholique de Louvain (UCLouvain)—Diego Malo Rico and Jing-Rong Zeng—Uganda’s refinery, the African Gold Refinery (AGR), has become a “beggar-thy-neighbour” policy that increases Kampala’s gold imports and exports while circumventing the DRC’s export taxes and complex regulations.
In theory, this should have been a win for Uganda. In practice, it’s a recipe for disaster in the western neighbourhood.
Gold and guns
Since the 1994 Rwandan genocide, the DRC has struggled with persistent instability. The 1998 invasion by Rwanda and Uganda, justified as an effort to combat Hutu militias, ignited the Second Congo War.
Although the war officially ended in 2003, it left a power vacuum and severely weakened governance, particularly in eastern DRC. This created fertile ground for armed groups to reshape trade routes, driving gold flows into Uganda and fuelling smuggling.
Uganda’s official gold export data quickly outpaced the DRC’s, highlighting the scale of the shift.
From 2011 to 2017, the United Nations (UN) reports showed that after the Dodd-Frank Act limited investment in DRC gold to avoid funding armed groups, gold routes shifted, flowing more through Burundi, Uganda, and Kenya to bypass these regulations.
Without proper tracking by Uganda’s AGR, illicit trade thrived, reinforcing armed groups and escalating conflict. International due diligence laws did something. They aimed at transparency, but instead saw themselves pushing trade into unregulated channels, enhancing smuggling and violence.
The majority of gold in the DRC comes from artisanal mining, per the country’s official government data. This gold mining mostly takes place in the eastern provinces of North and South Kivu, Haut-Uélé, Ituri, Maniema, and Tanganyika.
This artisanal and small-scale mining (ASM) supports 60 million people in Sub-Saharan Africa, with 64 percent of DRC’s ASM sites focused on gold.
In the DRC, ASM offers better income than other local jobs, as industrial mining fails to integrate meaningfully with the local economy.
Yet, with low-tech, labour-intensive practices, ASM results in hazardous conditions and minimal profits. DRC’s Ministry of Mines permits ASM in designated areas, but weak enforcement fuels informal operations.
While production is significant (around 13 tonnes annually), only a fraction (e.g., 230kg in 2017) is reported, showing the scale of smuggling and unreported output.
Disruption
Now new research shows most ASM profits are captured by armed groups, local elites, and international networks exploiting the sector.
Up to 61 percent of mining sites face armed group interference, with 37 percent reporting a permanent presence, the International Peace Information Service (IPIS)’s December 2023 documentation shows.
These groups may act as security providers, engage in pillaging, or control the gold supply chain from extraction to sale. But a 2021 Interpol report shows that illicit profits finance up to 8,000 combatants, sustaining armed conflicts.
That aforementioned report, titled “Illegal Gold Mining in Central Africa,” shows that this influence distorts local gold prices to about 60 percent of the London Bullion Market rate, attracting buyers unconcerned with the source of the gold and undermining due diligence efforts.
The increased focus on gold mining has shifted the nature of violence, with armed groups competing to control lucrative mining sites, deepening regional instability.
While many economic studies typically link resource wealth to conflict through "income shocks" from commodity price fluctuations, the expert analysis by Diego Malo Rico and Jing-Rong Zeng examines the shock created by Uganda’s 2016 refinery.
Uganda’s refinery’s link
“This event led to an eightfold increase in Uganda’s official gold exports between 2015 and 2016, hinting that the gold refinery ‘formalised’ the smuggling activities through the DRC-Uganda border,” part of the research paper reads, also noting that while market access might seem beneficial for artisanal miners, integrating them into the formal economy and boosting incomes, the lack of source verification perpetuates violence and exploitation.
“For armed groups directly engaged in the illicit gold trade, the opening of Uganda’s gold refinery provided increased revenue opportunities by creating a market for conflict gold, reducing reliance on lengthy and expensive transportation routes, and attracting international demands. Moreover, even for the armed groups not directly involved in the smuggling or mining, they could still capitalise on this opportunity by imposing taxes and tolls on miners and traders,” it adds.
The study’s initial findings reveal a notable increase in conflict around artisanal gold mining sites near the Ugandan border.
Analysis showed a 32.9 percent higher likelihood of at least one battle occurring in these areas, with the number of battle events rising by 37.4 percent, equating to one more battle per site on average.
Fatalities also spiked by 45.33 percent, translating to about 3.2 additional deaths per site. These results were statistically significant, suggesting a causal link between the opening of Uganda’s gold refinery and increased regional conflict.
Adjustments using Conley-Hsiang standard errors confirmed the results were strong. Conflict, previously unpredictable, spiked after the refinery opened.
DRC’s gold exports jumped from 1,026kg in 2015 to 8,337kg in 2016, showing an immediate impact. By 2017, the effect decreased as export growth slowed and gold prices fell.
Armed group funding
A simple calculation highlights the impact of gold smuggling on funding armed groups. The UN estimated in 2021 that only two percent of illegal gold trade profits reach local armed groups, with most going to criminal networks.
“Assuming 85 percent of the 8,337kg of gold exported from Uganda in 2016 originated from artisanal gold mining sites controlled by armed groups, we calculate that the profit from gold smuggling for these groups increased significantly from 2015 to 2016. Even after accounting for the various costs associated with investing in and managing artisanal gold mining sites—such as the salaries of pit managers and artisanal gold miners—the increased profits from the rise in the quantity of gold smuggled through the DRC-Uganda border could still finance up to a few hundred armed combatants in the area,” the duo of economics and social affairs academics write.
Initial conflict surged, slowed in 2017, and then escalated again after 2017, driven by both gold prices and quantities. “The data indicate that artisanal gold mines farther from Bunia experience less frequent and less intense battles. Specifically, among artisanal gold mining cells, a one standard deviation increase in distance from Bunia reduces the frequency of battles by 16.15 percent and the intensity of battles by 22.82 percent,” the researchers explain.
Using IPIS survey data, the researchers analyzed artisanal mining sites with regular or permanent armed group presence before 2016. The results show that areas controlled by armed groups were less likely to see an increase in conflict after the refinery's opening.
‘Stationary bandit’ model
Although the changes in battle frequency and intensity were not statistically significant, the negative trend aligns with the 'stationary bandit' model, where armed groups control violence to extract revenue and maintain order. A map of artisanal mining sites, armed group control areas, and smuggling routes indicates that regions without prior armed control but along smuggling routes saw more battles post-2016, something that suggests heightened competition for resources and smuggling hubs.
Data from ACLED (Armed Conflict Location & Event Data) in 2023 shows an increase in battle frequency from 128 events (2011-2015) to 548 events (2016-2020) and a broader range of armed actors involved. Unlike earlier conflicts involving mainly Congolese state forces and militias, post-2016 battles included a wider mix of groups, complicating the conflict landscape.
Understanding the motivations of armed groups is challenging since observational data alone doesn’t fully capture their intentions. But writings in the book titled Roadblock Politics by Peter Schouten suggest that rebel groups compete for control of key trade routes, using roadblocks not just for economic gain but as symbols of political resistance. This aligns with how roadblocks regulate and legitimize trade in regions where the state struggles to control illegal commerce.
The results from the DRC-Uganda border analysis and the Tanzanian placebo test emphasize that it is not mere geographic proximity but the combination of porous borders, entrenched instability, and illicit economies that drive conflict dynamics. This understanding supports the argument that the porous DRC-Uganda border plays a significant role in regional conflict through its facilitation of smuggling, leading to cross-border violence and instability.
Policy implications
Given the complex nature of the region, the study urges caution against blanket policy interventions, especially in fragile areas with shared governance among state actors, armed groups, and local leaders. The social and political landscape of eastern DRC is shaped by decades of conflict, where resource extraction is essential for livelihoods, security provisions are often privatized, and resources are used for political patronage.
These complexities are further exacerbated by ethnic tensions, historic grievances, and cross-border geopolitics, all contributing to the region’s ongoing crisis. Policies like the Dodd-Frank Act, aimed at increasing transparency and curbing illicit trade in conflict minerals, can be well-meaning but may inadvertently harm local communities and destabilize regions if they do not consider these complexities.
Plus, the adaptability of transnational criminal actors, who often find alternative means to bypass sanctions and evade detection, diminishes the effectiveness of targeted measures. “Ultimately, this study encourages the academic and policy sector to develop nuanced, bottom-up approaches that consider local dynamics.
By prioritizing the welfare and security of artisanal mining communities and acknowledging cross-border political-economic forces, stakeholders can better navigate the challenges of resource economies and foster sustainable peace and opportunity in the Great Lakes region,” the research paper recommends.
