DRC artisanal miners face uncertain future as Covid-19 disrupts market
Vulnerable community representative organization Impact reports mounting concern for artisanal miners in the Democratic Republic of Congo (DRC), as Covid-19 begins to impact on this vulnerable group of people, with lower demand, price cuts and threats of violence.
Impact has been closely following how Covid-19 is affecting the artisanal gold mining sector in the DRC, noting that it is “undeniable” that the entire artisanal gold supply chain, and the women and men that depend on artisanal mining, face grim days ahead.
The organization is particularly concerned about the pandemic’s impact on livelihoods, how it could fuel the illicit trade of minerals and undermine peace and security in the country.
Impact notes that despite the remoteness of most artisanal gold mine sites in the DRC, there is evidence that miners there are already being negatively impacted as a result of Covid-19 and measures implemented by the local authorities.
There is reportedly a lack of liquidity among local gold buyers, forcing miners to take significant spot-price cuts of as much as 30% and 50%, depending on location.
According to Impact’s research, in one area of the DRC’s gold-rich Ituri province, 79 out of 85 gold trading houses have shut down because they have no buyers.
It is reported that some of those that are no longer operational have opted to trade in mercury instead, which is also being discounted by as much as 60%, in an effort to secure some liquidity and to eventually reopen their gold buying businesses.
Closed borders and airspace have also interrupted traditional export patterns of gold, both in the Great Lakes region and beyond. The famed gold souk in Dubai, where much of the trade first enters international markets, is closed. So is the Zaweri Bazaar in Mumbai where it is often manufactured into jewellery.
However, Impact states that the crisis faced by many has also brought an “immense opportunity” for a few, even at the expense of the already marginalized miners, the already fragile peace and security of eastern DRC, and international efforts to legitimize the artisanal and small-scale mining sector.
According to Impact, this presents the potential for those with appetites for high risk to buy low and sell high; thereby leading to continuation in production, despite the potential for outbreaks of Covid-19 in crowded mine sites.
The logistical challenge of commercial flight bans aside, illicit exports continue to leave East Africa for international markets, while the commodities that cannot be easily exported are otherwise being stockpiled.
Meanwhile, gold prices have remained relatively steady throughout the crisis, at over $1 600/oz, which is well above $1 290 from a year ago. While a shortage of buyers is leading to price drops for local miners, scarcity at a regional and international level may push prices even higher for those who still manage to get gold out, according to Impact.
In the current buyers’ market, a kilogram of gold is going for as low as $28 000 in Nairobi, and reselling for as much as $46 000. The prices depends on from whom and where the gold is sourced.
A Nairobi dealer tells Impact that the more hands involved, the more commissions need to be paid. “Direct from the mines is best.”
Impact states that gold’s value-to-weight ratio makes it one of the most lucrative of conflict minerals. “It is the reason why gold has played a signature role in financing the decades old civil war in eastern DRC. Any shortage in the gold supply, or issues of liquidity at the mine site level, can be like a match to a petrol can and spell trouble for the security situation in the country.”
These circumstances lead to the formation of shadow economies, which do not follow the same rules as formal ones. Gold payments, for example, often bypass formal banking channels entirely through the use of hawala, or by paying in commodities that can be easily sold at the point of export and converted to cash, states Impact.
Legitimate enterprises, such as grocery or import-export businesses, often convert local profits to gold as a way to evade strict foreign exchange controls. “These shadow economies often thrive in unstable economic conditions,” Impact notes.
Closed borders, stagnant trade and the loss of liquidity at the local level, Impact states, are likely to have three direct consequences for the security situation in artisanal mining communities.
The formal economy in Ituri, north and south Kivu provinces will become even more informal, as the artisanal mining sector becomes an attractive investment opportunity in uncertain times.
“New buyers will arrive directly from outside, disturbing the local gold ecosystem and its hierarchy. Various armed groups and political elites will begin competing for preferential access to these outside buyers but also for control of new territory (and mine sites),” according to Impact.
In addition, the Covid-19 pandemic brings an additional security threat – with the international community overstretched and focusing all resources on domestic responses to the virus, Impact claims that it is uncertain whether there will be funds or troops to support the United Nations Organization Stabilisation Mission in the DRC should any instability worsen.
Source: Mining weekly
