Chinese Company Funds Militia in Eastern Congo Gold Rush

By Irene Gaitirira
Published July 7, 2016

Sophia Pickles,Global Witness's Senior CampaignerArmed groups in eastern Congo-Kinshasa received gifts of arms and cash from a Chinese mining company and made up to US$25000 per month extorted from local miners during a two-year gold boom that reached its peak in 2014 and 2015.

River of Gold, a report by Global Witness, says up to US$17 million of gold produced by Kun Hou Mining, the Chinese-owned company, went missing as the Congolese state lost out on tax revenues on up to US$38 million of artisanal gold produced per year during the gold rush due to smuggling and misconduct by provincial authorities in just a year. Evidence gathered also shows a provincial authority colluded with armed groups in illegal taxation of miners while another altered official export documents so gold looked as though it was coming from legally-operating mines.

Armed groups, known as Raia Mutomboki, received at least two AK-47 assault rifles and US$4000 in cash from Kun Hou Mining, which operates mechanised gold dredging machines along the Ulindi River in Shabunda territory, South Kivu province of eastern Congo. In addition, the armed men taxed artisanal miners operating locally-made dredgers extracting gold along the river. Local authorities also collaborated with the Raia Mutomboki, through a tax sharing deal. The taxes collected by authorities appear to have disappeared.

“The Congolese government must enforce its own laws to ensure that companies in its gold sector do not produce or trade gold that has funded armed groups,” says Sophia Pickles, Global Witness’s Senior Campaigner. “Any company breaking these laws must be held accountable for their actions. Provincial mining authorities that fail to properly govern the minerals sector must also be held liable.”

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Global Witness’ research shows that almost half a million dollars’ worth of Kun Hou’s gold was exported to a Dubai company through official channels. The rest of the company’s estimated US$17 million of gold production is likely to have been smuggled out of the country.

Global Witness says up to US$17 million of gold produced by Kun Hou Mining went missing as the Congolese state lost out on tax revenues on up to US$38 million of artisanal gold produced per year during the gold rushGlobal Witness says it has found evidence that mining officials in the provincial capital, Bukavu, deliberately falsified documentation to obscure links to Shabunda. Officials changed the gold’s origin on official export documents to show instead it came from the handful of legally-operating artisanal mines in South Kivu. This pattern has been repeated with other mines in the province. As a result, it is much more difficult for international buyers to be sure that gold has not funded armed groups.

“Provincial authorities overseeing Shabunda’s boom have, by their actions over the past two years, directly undermined international and the national government’s efforts to reform eastern Congo’s artisanal gold trade,” says Pickles. “States have a responsibility to ensure that companies do no harm, including checking supply chains for links to conflict and human rights abuses – Congo and the United Arab Emirates have dramatically failed in this respect.”

River of Gold shows that:

  • South Kivu’s provincial government and mining authorities continued to support Kun Hou Mining despite repeated legal violations by the firm and repeated requests from Congo’s national government in Kinshasa to shut down its operations
  • Mining officials in Shabunda town working for SAESSCAM, a governmental body mandated to support artisanal miners, ran an illegal taxation racket in areas where the local dredgers operated, including in collaboration with Raia Mutumboki armed groups
  • Gold from Shabunda’s boom was sold on to a gold trading house in Bukavu that then sold it to their sister company, Alfa Gold Corp DMCC, in Dubai. Neither firm carried out supply chain due diligence to international standards, which would have revealed that the gold had been obtained in direct contravention of Congolese law and UAE Guidelines. Alfa Gold Corp DMCC has a wholly owned UK subsidiary registered in London’s Hatton Garden jewellery area. Alfa Gold in Dubai and London did not respond to request for comment, and
  • a French citizen Frank Menard, who worked for Kun Hou Mining, is deeply implicated in the company’s wrongdoing. Raia Mutomboki armed groups wrote to Menard in February 2015 to thank him for the two AK-47 assault rifles and $4,000. Menard also signed an official document confirming the sale of Kun Hou’s gold to Alfa Gold’s Congolese office. Global Witness’ attempts to contact Franck Menard were unsuccessful.

Congolese state lost out on tax revenues on up to US$38 million of artisanal gold produced per year during the gold rush due to smuggling and misconduct by provincial authorities in just a year.RELATED:Financial Credential-Stealing Malwares Increase

In recent years there have been significant international efforts to tackle the link between violent conflict, human rights abuse and the minerals trade in Congo and elsewhere including international supply chain guidance set out by the Organisation for Economic Cooperation and Development (OECD) five years ago, which has been a legal requirement in Congo since 2012. The US also passed a law and most recently industry supply chain guidelines based on the OECD standard were agreed in China. The Chinese guidelines set a precedent for Chinese companies to recognise and reduce supply chain risks and if adhered to should allow companies sourcing minerals from high-risk areas to do so responsibly.

While Kun Hu Mining is said to have refused to comment in response to three requests from Global Witness, SAESSCAM is reported to have denied that its agents collaborated with armed groups.