Invoice fraud rife in SA gold exports - UN report | Fin24
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Invoice fraud rife in SA gold exports - UN report

Jul 20 2016 20:06
Liesl Peyper

Cape Town - South Africa was fingered in a report for flagrant discrepancies between its official trade statistics of gold exports versus the records of its trading partners.

According to information published by the United Nations Conference on Trade and Development (UNCTAD), South Africa’s trade data for gold showed cumulative gold exports of $34.5bn from 2000 to 2014, whereas its trade partner data revealed an amount which was more than three times higher at $116.2bn.

“This is indicative of massive export under-invoicing,” the report said. Total misinvoicing of gold exports to South Africa’s leading trading partners amounted to $113.6bn over the 15-year period.

“In other words, virtually all gold exported by South Africa leaves the country unreported.”

The report, which was released on Saturday at a global commodities forum in Nairobi, Kenya, suggested that the gold sector in South Africa deserves close scrutiny to identify the factors that may be generating incentives and opportunities for systematic export under-invoicing.

“The puzzling case of gold exports from South Africa, where the country’s official statistics report very little gold exports, while substantial amounts appear in its leading trading partners’ records, does not appear to be a simple matter of undervaluation of the quantities of gold exported, but rather a case of pure smuggling of gold out of the country,” the report said.

The UNCTAD report investigated the incidence of misinvoicing (invoice fraud) in five countries, namely South Africa, Chile, Côte d’Ivoire, Nigeria and Zambia.

Money moved illicitly

Trade misinvoicing implies that money is being moved illicitly across borders, which includes deliberate misreporting of the value of a trade transaction.

According to the report, interest in trade misinvoicing took off in the 1980s when research was done on capital flight. It was identified as a major source of capital loss especially in developing countries.

There are three reasons why entities practice trade misinvoicing – it is done for financial motives, which include tax invasion where traders intentionally understate the value of exports and imports to minimise the amount of tax payable; misinvoicing is also done to avoid exchange and customs controls; and to avoid bureaucratic hurdles.

In the case of South Africa, the study focused on silver, platinum, other metals of the platinum group, iron ore and gold.

As for silver and platinum trade in South Africa, a cumulative amount of $19bn in export under-invoicing was recorded between 2000 and 2014. “Thus, efforts should be made to reduce trade misinvoicing in the silver and platinum sector,” the report said.


The report also highlighted the incidence of export under-invoicing of iron ore of $5.6bn between 2000 and 2010. In contrast, there was iron export over-invoicing of R1.3bn between 2011 and 2014, most notably in trade with Japan and the Netherlands.

The discrepancy between figures recorded by South Africa and the Netherlands was singled out for showing substantial export over-invoicing.

“The results indicate that a large proportion of iron ore exports from South Africa to the Netherlands, as reported by South Africa, does not appear in the Netherlands’ data, and does not appear to have ever docked in the Netherlands. Further investigation of these large discrepancies with these leading trading partners may yield valuable insights into the causes and mechanisms of trade misinvoicing in the iron ore subsector,” the report said.

According to the investigations, tax evasion is a possible reason for the prevalence of export over-invoicing noted in the five countries.

“There’s a serious need for an investigation into the role of transnational companies’ involvement in the exploitation, export and import of commodities, as well as the role of secrecy jurisdictions in facilitating trade misinvoicing. Such an investigation may shed light on the mechanisms of export over-invoicing and import smuggling,” the report concluded.


united nations  |  gold  |  fraud  |  mining  |  exports  |  sa economy


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