Monograph 54: Theft from South African Mines and Refineries, The Illicit Market for Gold and Platinum, By Peter Gastrow

This Monograph draws from a study undertaken by the Institute for Security Studies (ISS) for the Chamber of Mines of South Africa at the beginning of 2000. The study aimed to assess the threat faced by the South African economy, the mining industry and its employees as a consequence of the theft of precious metals from mines and refineries.

The decision to commission such a study arose, among others, out of a concern expressed by the Chamber that large volumes of gold and platinum group metals were being stolen annually from mines and refineries without any independent assessment being made of the extent of such theft. Nor had any independent study been made to assess the extent to which such thefts represented a threat to the mining industry, its employees or the economy of the country. There was concern that the incidents of theft appeared to be increasing and that the strategies being adopted by both the mining industry and the government to address this were not being given sufficient priority due to a lack of credible information.

This first attempt to assess the extent of the theft of gold and platinum group metals has many imperfections. The findings of the study were based on incomplete statistics obtained from mines and the police and on assumptions with clear limitations that will hopefully no longer apply when similar exercises are undertaken in future. The gold and platinum group metal (PGM) mining sectors are very diverse and information relating to product theft and security on mines was insufficiently shared between mines and mining houses in the past. The information about product theft collected by mining houses was kept confidential as in-house information for the use of the specific mining house only. The reasons for such confidentiality may be understandable, but they need to be reconsidered. It is clear that, without reliable statistics from mines and the police, a reasonably accurate national assessment of the nature, extent and impact of gold and platinum product theft in South Africa will not be possible.

The study also attempted to throw some light on the role played by organised criminal groups in the theft of gold and platinum group metals. Far more work needs to be done on this aspect. From the study it became apparent that, despite the widespread theft of precious metals from mines and refineries, very few of the top illicit gold and platinum group metal dealers have been arrested. At the top level, the criminal networks that are involved have reached a level of sophistication that makes their successful investigation and prosecution very difficult. This is a problem that law enforcement agencies face across the world. As a result, a debate has emerged among experts on organised crime about the need to develop a better understanding of illegal criminal markets. It is argued that governments need to look at illegal commodities and their markets as a whole, considering how to attack the market itself rather than solely depending on legislation and law enforcers to stop the activity of the criminals or a specific criminal group. Hopefully, this study will contribute towards efforts by the government, the South African Police Service, the mining sector and the public to combat organised crime in the mining industry more effectively and to reduce the criminal market for gold and platinum group metals.

The study into the activities of organised criminal groups was based almost exclusively on primary research. Police records were made available and interviews were held with members of the Diamond and Gold Branch at different locations in the country. Some of the Branch offices were visited and interviews were conducted. This report therefore contains some insight into the magnitude and nature of their task and the conditions under which they operate. With limited resources, particularly insufficient numbers of staff, they find it difficult to cope with the increased activities of the numerous criminal networks that are active in the illicit markets for gold and platinum group metals. The priority now given to organised crime by the South African government has led to the establishment of new specialised investigative units. A restructuring of existing specialised units is also under way. This may affect the Diamond and Gold Branch and therefore the interests of the mining industry as well. Studies such as this will hopefully provide information that is relevant to the debate around restructuring.

In undertaking this study, the assumption was made that particulars relating to the extent of the theft of gold and platinum group metals at mine level, as a matter of practice, were forwarded to the head office of the mining house concerned on a regular basis. The representatives of the mining houses who were consulted confirmed this. As a consequence, the investigation into the extent of this kind of theft focused more on the information that is available from the head offices of the relevant mining houses than on information that might be available at mine level. Visits to some of the gold and platinum mines were primarily aimed at obtaining information about mining processes, the nature and location of thefts, and the general security measures at mine level. The assessment of the extent of theft was therefore dependent on the information supplied by the head offices of the mining houses and not by the mines themselves. Meetings and discussions were held with representatives of relevant mining houses as well as with personnel from some mines.

At an early phase of the study, information was sent to the General Secretary of the National Union of Mine Workers (NUM) to explain the nature and objective of the study and to seek an interview with him. The purpose of the interview was to obtain the perspective of the NUM on the issues that were to be dealt with in the report. The NUM office subsequently indicated that, as the NUM had not been informed by the Chamber of Mines about the study, it would not serve a purpose to participate or to proceed with an interview. As the NUM had declined to provide its perspective, it was regarded as potentially divisive and damaging for labour relations to proceed with meetings with the other labour unions that are active in the mining sector. For this reason, the report was prepared without input from any of the labour unions involved in the mining sector.

Finally, the ISS, as an independent research institute, takes no institutional positions on issues relating to research done by its staff. Researchers have the freedom to express their own opinions without the ISS necessarily endorsing them. This monograph therefore does not reflect the views and findings of the ISS as an institution. As the author of the report, I take full responsibility for its content.

Peter Gastrow
Director: Institute for Security Studies
Cape Town Office