Over the course of 14 years (2000 to 2014), South Africa lost a shocking US$78.2 billion in revenue from gold exports (67% of total gold exports) due to misinvoicing.
Furthermore, the under-invoicing of iron ore exports to China (from South Africa) – over the same period – resulted in a US$3-billion loss.
This according to a report released this week by the United Nations Conference on Trade and Development (Unctad), which noted that trade misinvoicing was thought to be one of the largest drivers of illicit financial flows from developing countries, so that the countries lost precious foreign exchange earnings, tax, and income that might otherwise be spent on development.
The study uses data from up to two decades covering exports of commodities such as cocoa, copper, gold, and oil from Chile, Cote d'Ivoire, Nigeria, South Africa and Zambia.
"This research provides new detail on the magnitude of this issue, made even worse by the fact that some developing countries depend on just a handful of commodities to boost their economies," said Unctad secretary-general, Dr Mukhisa Kituyi.
He pointed to the fact that the data around gold exports from South Africa "is peculiar in that there is a perfect correlation between gold export under-invoicing and the volume of exports as reported by the country’s trading partners”.
According to Kituyi, this suggests that export under-invoicing is not due to under-reporting of the true value of gold exports, but rather to pure smuggling of gold out of the country. “In other words, virtually all gold exported by South Africa leaves the country unreported," he said.
The report points out that commodity exports may account for up to 90% of a developing country's total export earnings. "Importing countries and companies that want to protect their reputations should get ahead of the transparency game and partner with us to further research these issues," Kituyi said.
