Swiss Refineries and Dubai Lockdown- One Step Forward, One Step Back
By Shawn Blore - April 8, 2020
In the race to re-start global artisanal gold supply chains the world took one stop forward April 6 with the re-opening of critical Swiss gold refineries in the country’s gold-refining hub of Tecino. One day later, unfortunately, it took one step back as Dubai announced a sweeping two-week lockdown which restricts residents from leaving their homes except for essential purposes such as buying food or medicine.
While the world is rightly focussed on fighting the COVID-19 pandemic, in developing countries millions of artisanal miners depend on gold for their sustenance and livelihood. Gold is in many ways literally their daily bread. The freeze-up of the artisanal gold supply chain caused by the ongoing COVID-19 pandemic has revealed both the complexity and fragility of that supply chain. The freeze-up of the chain has now put millions of miners at risk. In many artisanal producing areas, gold prices have crashed, falling on average by 40% or more. In other places, such as Bunia in the eastern DRC, miners have found the value of their gold reduced to zero: Miners have gold to sell in hand, but there is no one there to buy.
Re-starting those ASM gold supply chains is the current focus of the Artisanal Gold Council’s Supply Chain Re-activation Project. Both Dubai and the Swiss refineries in Ticino are critical parts of the puzzle.
Dubai is the primary hub for artisanal gold for most of Africa and many parts of Central and South Asia. Artisanal miners in remote areas all over the African continent sell to local gold buyers, who sell to country level exporters, who hand carry the gold by airplane to Dubai, where it is sold in the Dubai gold souk. According to the UN Comtrade database, in 2016, some 34 tonnes of gold worth almost $600 million – nearly all of it ASM – travelled to Dubai each month (in 2019 prices this is likely closer to US $1 billion per month). The African and Asian exporters collect their cash (or bank deposits) and head back home to buy more gold.
However, that gold does not remain in Dubai for long. Souk buyers quickly re-direct their newly purchased gold to a number of destinations, with Switzerland among the most important. The UN Comtrade database shows the UAE exporting nearly 14 tonnes of gold each month worth over $540 million to Switzerland, nearly all of it to the refiners in the Tecino region.
Swiss refiners, Dubai souk buyers, country exporters, miners – all of these actors are necessary for the gold chain to keep working and delivering wealth to remote rural communities. Without the Swiss refiners to sell to, buyers in Dubai cease buying. Without a Dubai export market, country-level exporters cease exporting, and the local buyers who sell their gold to these exporters find themselves with no market for their gold so they stop buying. The collapse of just one link in this chain causes the whole gold chain to seize-up, and we have seen two links break already – both the Dubai and Swiss parts. This is the reason miners in many regions find themselves holding onto gold they cannot sell.
Re-starting the artisanal gold supply chain will require all of these key players, or substitutes, to come back on line. The news that the Swiss refineries will be re-opening, even at reduced capacity, is thus a huge step forward, although we have no specific information about if artisanal gold will be a priority.
As noted in the recent blog post on the AGC’s COVID-19 website on Choco, Colombia, gold from Colombia often by-passes Dubai and travels straight to Switzerland. The Swiss re-opening thus brings with it the possibility of re-starting the Choco and Colombia artisanal gold supply chains, provided other barriers such as domestic and international travel bans can be overcome.
Potentially, Swiss refineries could help out with the African freeze-up too by sourcing artisanal gold from African exporters. However, Swiss refiners have long been wary of sourcing artisanal gold directly from Africa, for fear of running afoul of OECD Due Diligence responsible sourcing guidelines and the provisions of the US Dodd-Frank Act. Without some change in this policy (a temporary COVID-19 amnesty?), the stopover in Dubai remains a critical part of the chain.
In Dubai, meanwhile, it’s unclear whether a gold supply chain reboot will require waiting for the lockdown to end or if work on that project can begin now. The Dubai lockdown includes exemptions for vital sectors of the economy but it’s unclear yet whether the artisanal gold trade – $ 7 billion part of the UAE economy – is considered vital.
For the artisanal gold miners of Africa and Asia, of course, the answer to that question is obvious.
Air Travel – the Missing Link
As the world moves into and through the COVID-19 pandemic, some parts of the economy will return to normal more quickly than others. It doesn’t take a huge amount of foresight to predict that passenger flight links to developing countries with unknown levels of COVID-19 infection will be very slow to come back on line. But these links are a vital part of the artisanal gold supply chain, and so a way must be found to allow exporters to transport their gold from African export hubs such as Entebbe to the gold souk in Dubai, if important transfers of wealth to the poor are to be restored in time to help them get through COVID19’s health and economic impacts.
One solution would be to revive the use of air freight for transporting artisanal gold. Air freight has fallen out of favour with African ASM gold exporters, partly because of flexibility and diversification of supply routes, and partly because some exporters avoid royalties and taxes by effectively smuggling gold to Dubai in 20kg hand-carry parcels. The revival of air freight for gold could thus be a win-win: African miners and their communities would see their incomes restored to pre-COVID-19 levels avoiding a potential humanitarian crisis; and the shape of the gold supply chain would even be improved beyond pre-COVID-19 for African governments, who could finally start collecting export royalties they are legally due. Everyone comes out ahead.
What’s AGC Doing?
Artisanal Gold Supply Chain Reactivation Project (coming soon)
 https://finance.yahoo.com/news/gold-supply-squeeze-ease-swiss-104002772.html (accessed 6-apr-20)
 AGC 2008
 Pers comm, April 4, 2020
 Contraband Gold in the Great Lakes Region, Shawn Blore, Partnership Africa Canada, May 2015; Pulling at golden webs: Combating criminal consortia in the African artisanal and small-scale gold mining and trade sector, Marcena Hunter, ENACT, April 2019