Gold in Sudan: Blessing or Curse?
Sudan’s gold production has increased by more than 1,200% in a decade, according to a report by the US Geological Survey, from 7 tons in 2008 to more than 90 tons in 2017. The Sudanese Minister of Minerals confirmed that gold production in the first half of 2018 exceeded 63 tons, and the state is counting on it heavily to overcome the current economic crisis. He pointed out that the mining sector accounted for 6 per cent of GDP in 2018 and had a growth rate of 14 per cent.
Mining has become the most important sector in the economy. In 2017, the value of gold exports through the Central Bank of Sudan amounted to $1.87 billion, accounting for about 57 per cent of the country’s total exports, in addition to other large amounts that feed the economy without going through the Central Bank. Sudan ranks second in Africa and ninth in the world on the list of gold producers.
Challenges and Risks
Despite the security, environmental, political and economic challenges and risks associated with the industry, gold production, which began a decade ago, has provided permanent and temporary employment opportunities for some 1.5 million Sudanese youth in hundreds of mining sites across the country. No one knows the exact number of sites because the companies and individuals involved move from one location to another.
More than 400 national and foreign companies are active in gold exploration. The oldest of these companies is Ariab Mining, founded by a Canadian-French company in the Red Sea Heights in eastern Sudan in 1991, although its ownership was later transferred to the Sudanese government. However, these companies account for only 20 per cent of the total amount of gold produced each year; traditional miners produce 80 per cent.
Traditional miners use simple, inexpensive metal detectors, most of which are imported from China. When the battery-powered devices indicate the possible presence of metals in deserts and valleys, the miners dig the sites, collect rocks and transport them to mills near the mining sites. The mills grind the stones, treat them with mercury and cyanide to extract the gold and finally sell them to intermediaries at production sites or in cities.
More Gold Equals more Inflation and Smuggling
The production of gold increased around 2010, which alleviated the consequences of the secession of South Sudan in 2011 and Sudan’s subsequent loss of 70 per cent of its oil production. However, the impact of gold on the overall economy is confusing for many reasons, including the conflicting government policies and multiple interested parties. To compensate for the acute shortage of foreign currency, the Central Bank started buying gold from miners in the local market through intermediaries for the bank’s own export purposes. However, because the Central Bank did not have the financial resources to buy the gold, it had to print additional currency. This increased the supply of money and pushing inflation up to 63 per cent. The prices of basic commodities immediately doubled and in some cases tripled.
In a bid to curb high prices and demand for foreign currency, in March 2018 the government imposed restrictions on cash withdrawals intended to reduce the circulation of money in the country. The measure served only to increase demand for domestic and foreign cash, invigorated the black market, shook confidence in the banking system and created a vicious circle of actions and adverse reactions. The government announced a new policy in October 2018 to issue high-profit bonds to the public to finance the purchase of gold with real resources, according to Sudanese Prime Minister Moataz Moussa.
At the same time, this situation has led to an undeniable fact, namely that at least 35 per cent of the gold produced in Sudan is smuggled abroad, especially to Dubai in the United Arab Emirates, making it Sudan’s largest trading partner, superseding even China. Official statistics show that gold production in 2017 amounted to 90 tons, while gold exports amounted to $1.87 billion, which means that more than $1 billion of gold was sold unofficially. Some sources point to much higher smuggling rates, which may exceed half of the gold produced. This is because government agencies responsible for the production and trade of gold lack the resources, capacity and tools necessary to effectively control the sector.
National and international media have published dozens of reports on gold smuggling from Sudan, while the Security and Intelligence Service claims to have thwarted many attempts to smuggle gold, including one operation to smuggle 245 kilograms of gold. Many smuggling operations go through the Khartoum Airport. Individuals have been arrested while trying to smuggle gold to countries as far away as India, according to Sudanese and Indian press reports.
The movement of over 1.5 million young people to the mining sites has entailed many security and political complications, including disputes – some violent – over the ownership of land and mining sites.
A recently published academic paper noted that smuggling through Sudanese rivals or neighbouring countries aims to evade government taxes and fees, as well as the low government exchange rates compared to black market prices. Gold smuggling can also serve other purposes that have negative social and economic impacts, such as funding civil wars and laundering money generated by the drug and arms trade.
A report by the UN Security Council said Moussa Helal, leader of one of the militias involved in the civil war in Darfur, had received $54 million in civil mining revenues. The report added that $123 million in gold revenue found its way into the pockets of other faction leaders fighting the government in the troubled Darfur region.
General Esmat Abdel Rahman, then interior minister, warned on 5 January 2017 of the presence of 3,000 armed foreigners in the Jabal Amer area in Darfur. It emerged that these gunmen were after Helal, who was monopolizing gold production in area and has foreign and guaranteed support from Chadian President Idriss Deby, who is married to Helal’s daughter. Helal lost in a bloody conflict that left many people dead and also saw the capture of General Hamidati, the leader of one of the pro-government militias in the region, who is currently investing in the Jabal Amer mines.
In another incident in December 2017, clashes broke out between Sudanese and Chadian tribes over control of mining sites in the border areas. At least nine people were killed and dozens injured.
Security disturbances occurred in many other areas, including an incident in Bauqah in northern Sudan in March 2018, in which one person was killed and six others wounded by the guards of a Russian company engaged in mining on land considered by local residents to be their property. The incident sparked widespread anger because the victims said the Russians were the ones who shot at them. Another person was killed in the southern city of Kaluqi in November 2017 in similar protests against a mining company.
Environmental and Health Concerns
The parliament issued a warning of the dangers of domestic mining after the death of large numbers of animals and fish in Halfa and Dongola in the far north because of the largely uncontrolled use of cyanide in the purification of gold.
According to Hashem Sayyid Hasan, an expert in mining geology, the majority of traditional miners use mercury to extract gold while companies use cyanide. Both are highly toxic and dangerous to human and animal health and the environment. Hasan added that cyanide is more dangerous, with only 0.2 grams needed to kill within a few seconds after complete paralysis of all respiratory organs due to the lack of oxidation in the cells.
Residents in many mining areas have clearly expressed their opposition to the activities of mining companies that harm and destroy the environment. Activists say that the government gives local and foreign companies rights to invest in and explore for gold without considering the interests of residents, and that the government intervenes in favour of investors in various ways, including using force, causing security and political problems.
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