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Unctad chief sets record straight on SA gold mis-invoicing

Feb 09 2017 06:02
Carin Smith

Cape Town - Just making a blanket statement to say a report by the United Nations Conference on Trade and Development (Unctad) on mis-invoicing in South Africa’s gold industry is not true is not the solution as it does not take away the fact that mis-invoicing is taking place.

This is according to Dr Mukhisa Kituyi, secretary general of Unctad, who spoke to Fin24 on the sidelines of the Mining Indaba taking place in Cape Town this week.

When the Unctad report was released last year, the SA Chamber of Mines, the SA Revenue Service (Sars) and Statistics SA disputed the veracity of the data relied upon for the Unctad report. The Chamber of Mines subsequently commissioned further research which found SA’s gold exports were correctly reflected in the data that the SA Reserve Bank, Statistics SA and the Chamber of Mines had.  

"Mis-invoicing remains a reality and a problem for developing countries, including SA," Kituyi told Fin24.

"In the case of SA and some others there is a large difference between the declared export and the final product at the destination. The mistake in the analysis of the Unctad report was to blankly generalise that the difference between the exports and arrivals represented mis-invoicing. In the global system it could have been rerouted to a better market place. So, the absence of tracking statistics should not mean mis-invoicing. It means we need more cooperation between importers and exporters."

READ: Chamber of Mines slams unrepentant UN over erroneous report

Think tank

Kituyi explained that Unctad is a think tank which often invites eminent scholars to do a working paper or white paper on very important topics. One such topic currently is tax invoicing.

"We gave a grant to an eminent scholar, who prepared a working paper for us. We explained this in our disclaimer in the report. We simply aim to provide a platform to grow the debate on mis-invoicing," said Kituyi.
 
"Although SA complained about our first paper, we actually had very positive results in some countries. In Nigeria, for example, they started to track oil that was found to be misplaced. They can track the ship and determine the difference between what was declared at the source and what arrived at the destination. In this way the Nigerian government is trying to get back the tax owed to it."
 
Kituyi said in the case of SA, what happened was that initially the statistics for dealing with mis-pricing would take the export country’s declared value of the product and then take the statistics of the destination and tally these. The difference is what is subject to debate.

"Until there is sufficient cooperation between exporters and importers in tracking the declared prices and values of SA exports, Unctad cannot provide a fair assessment of the extent of mis-invoicing. Greater transparency and minerals observance is needed to smoke out those not complying," said Kituyi.

"We need this cooperation, especially regarding products declared for transport, but then going to a transit station."

READ: Gold worth $19.5bn ‘unaccounted for’

More effort needed

In his view, there is not sufficient effort from government, miners and research institutions – not sufficient "push" within the mining industry - to tackle the problem.

"At the same time there is an increasing push globally to smoke out money laundering. On the back of this trend developing countries must ensure they get their rightful taxes so that it can be put back in communities and create a consumer base. Therefore, mining enterprises should be more under pressure to comply," said Kituyi.

"SA faces the challenge of inequality like any other country, while its resource endowment is one of the biggest levers it can use to address the challenges of social exclusion. Business as usual has not contributed adequately to this problem. Sustainable economic activity by enterprises must, therefore, show the new model of doing business, for example a shared prosperity, fair payment of taxes and investing in vulnerable people so that they are not left behind."

Kituyi added that of course some mining companies do already embrace the new model, but that does not take away from the fact that there is a general problem to address.

"African extractors like mining companies must become responsible. In the past some of them simply embraced dictators and then had no obligation to invest in communities around the mines. Extractive investors were also 'immune' to political problems," said Kituyi.

"That model of mining is an old one and must be abandoned. It cannot anymore be a case of being able to continue to extract as long as one has the 'right people' to protect you. The march to sustainability cannot be left behind by the mining industry. It must include social responsibility."

He said governments are increasingly being forced to become more transparent and have greater tax compliance.

"I agree with former president Thabo Mbeki that, given Africa’s unique over-dependence on tax and trade revenues as socio-economic resources, the continent is more interested in taxes and more vulnerable to tax abuse than other areas. Greater efforts to prevent tax avoidance and profit shifting are, therefore, critical for Africa's development," concluded Kituyi.

Read Fin24's top stories trending on Twitter:

unctad  |  mining indaba 2017  |  mining  |  gold
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