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Observatory of Illicit Economies in Eastern and Southern Africa

Issue

24

March–April

2022

Summary highlights

1. Sodium cyanide in Kenya’s gold market: controlling a toxic chemical in the context of criminality and corruption.

   Sodium cyanide has increasingly become the chemical of choice for processing gold ore in Kenya, as it allows more gold to be extracted from low-grade ores than do other methods. While this could be an opportunity for Kenya’s gold sector, criminality and corruption are instead turning it into a risk. Many gold ‘leaching’ or extraction sites operate illegally, some allegedly controlled by political interests. Business disputes over leaching sites have, at times, turned violent. This situation makes effective oversight of sodium cyanide – which can be highly toxic if used incorrectly – a challenge for authorities, and it poses a danger to surrounding communities.

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2. What the proliferation of fake-gold scams tells us about regulation, corruption and criminality in East Africa’s gold market.

   Fake-gold scams have become a prolific problem in East Africa’s gold market. Defrauders promising investors discounted gold consignments – before providing substitutes or even disappearing – have made off with millions of dollars in misplaced funds. The scams are run by criminal networks operating in Nairobi and Kampala, with connections in South Sudan and the Democratic Republic of Congo (DRC). The case of Lual Lawrence Malong Yor, a flamboyant South Sudanese businessman who was jailed in Uganda last year for masterminding a million-dollar scam, illustrates the workings of the scams. In doing so, it highlights how corruption and informal gold flows in East Africa have made the gold market increasingly vulnerable to these predatory criminal networks.

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3. Illicit economies in Mozambique’s embattled Cabo Delgado: answering the key questions.

   The jihadist conflict in Cabo Delgado, northern Mozambique, shows no sign of abating. The region has long been a key economic corridor for illicit flows that traverse the East African coast, including drug trafficking (chiefly of heroin and, more recently, methamphetamine and cocaine), illicitly exported timber, smuggled gems and gold. Contrary to some expectations, research by The Global Initiative Against Transnational Organized Crime (GI-TOC) has consist­ently found since early 2021 that al-Shabaab – as the insurgents are known locally – has not been taking control of illicit economies in the region. However, illicit economies were a factor in the deep-seated local grievances that led to the conflict, grievances that government efforts to stem the violence have, as yet, done little to address.

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4. How sensationalism around the emergence of ‘new’ drugs can distort perceptions of the drug market and have a real-world impact on policing and prosecutions.

   Media reporting and public discourse about illegal-drug markets have a universal tendency towards sensationalism. Accounts about ‘new’ substances – framed either as particularly addictive or deadly or both – regularly emerge. Yet, as examples in Kenya and South Africa show, identifying new substances can often be based on misconceptions about what these substances are and their presumed effects. These misconceptions can have a real-world impact on policing and prosecutions, particularly in circumstances where forensic capacity to identify new drug types is limited. Speculative reporting about drug markets can muddy the waters, making identifying genuine new drug trends more difficult.

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About this issue

Organized crime in the gold trade – focusing on Kenya in particular – is the topic of two of the four articles in this issue of the Risk Bulletin of Illicit Economies in East and Southern Africa. The two stories are very different: one investigates groups illegally using sodium cyanide to extract gold from former mining waste products; the other explores ‘gold scams’ whereby buyers are duped into paying for falsified or non-existent gold. Yet there is a commonality between them, as both stories illustrate the complex ways in which organized crime can exploit weaknesses in legal markets and disrupt legal industries.

Gold is the global market for security in times of crisis. During the COVID-19 pandemic and in early March with the outbreak of conflict in Ukraine, global gold prices spiked as financial investors sought secure refuge. Yet, as our research surveying illegal gold markets across East and southern Africa documented,¹ it seems that in Kenya the certainty and security of this market is disrupted by criminal activity.

GI-TOC research in other regions is investigating similar questions. The latest issue of our Risk Bulletin of Illicit Economies in West Africa (another of our three regional bulletins) examines Russia’s presence in the gold-mining sector in West Africa, specifically in Mali and Central African Republic. It explores how criminal networks may play a role in disguising the origins of gold, enabling sanctioned Russian entities and individuals to use gold mined in West Africa as a means of generating funds, moving money internationally and accessing foreign currencies.²

GI-TOC research in northern Mozambique has also investigated the dynamics of the illegal gold trade, including how illicit gold and gemstone markets are (and are not) linked to the ongoing insurgency in Cabo Delgado. Although our research has consistently found that the al-Shabaab insurgents are not taking significant control of the province’s many illicit markets, these markets still make up an important part of the region’s economy and shape its political landscape. A forthcoming GI-TOC paper profiling the criminal landscape of Nampula, Mozambique’s third-largest city known as the ‘capital of the north’, details new findings about this major smuggling hub.³

Notes