Ghana’s Gold Trade Programme Faces Allegations, but Continues to Drive Economic Growth

0
Gold
Gold

Ghana’s controversial gold-for-oil programme, launched under the previous administration, has been hit by allegations of losses and impropriety.

With the Bank of Ghana and the Minerals Income Investment Fund (MIIF) at the center of the controversy, critics have raised concerns about the transparency and effectiveness of the initiative. However, despite these accusations, MIIF continues to emerge as one of the country’s most successful state-owned entities, achieving impressive growth and profitability in recent years.

MIIF, which has grown its assets from US$180 million in 2021 to approximately US$1 billion in 2024, has played a critical role in supporting the mining sector in Ghana, particularly by increasing the country’s equity interests in mining projects. In 2023, the fund recorded over 100 percent profit, a remarkable achievement that has helped position MIIF as a key player in the national economy.

Amid growing concerns, Ghana Extractives, an organization monitoring MIIF’s activities, has investigated the gold trade programme, which forms a central part of the fund’s operations. This research, which included engagements with MIIF at various public forums and press conferences, seeks to provide a clearer picture of the fund’s operations and its impact on the country’s financial landscape.

The primary objective of MIIF’s Gold Trade Desk is to improve the integration of Ghana’s gold value chain. The fund has outlined its plans to support the creation of a gold-backed Exchange Traded Fund (ETF), which would enhance the country’s gold reserves, stabilize the cedi, and bolster returns for the fund. Additionally, the programme aims to support the formalization of the small-scale mining sector, a vital component of Ghana’s economy.

Between October 2023 and September 2024, MIIF’s gold trade initiative injected nearly US$600 million into the Ghanaian economy, with other trade lines bringing the total revenue generated by the programme to over US$1 billion. This success is largely due to MIIF’s partnership with licensed aggregators, who purchase gold from small-scale miners and sell it to accredited refineries, such as those certified by the London Bullion Market Association (LBMA).

The gold-for-forex model, one of two trade structures used by MIIF, has proven especially successful in generating foreign exchange. Under this model, MIIF provided a revolving trade line worth the cedi equivalent of US$30 million to its first aggregator, Goldridge. Contrary to allegations of missing funds, investigations suggest that this monthly revolving outlay has generated approximately US$60 million per month over an 11-month period. The model has also attracted interest from commercial banks, such as Fidelity Bank, which invested their own capital to participate in the programme. Between June and September 2024, this collaboration yielded US$156 million.

In addition to the gold-for-forex model, MIIF also participated in the government’s gold-for-oil programme, which did not require any capital outlay from the fund. In this arrangement, oil bulk distribution companies (BDCs) provided cedis to MIIF’s Trade Desk through the Chamber of Bulk Oil Distributors (CBOD). This partnership brought approximately US$650 million in forex between February and September 2024, contributing to the stabilization of the cedi and helping to moderate fuel prices in the country.

However, the success of MIIF’s gold trade programme has not been without its challenges. A significant forex variance emerged in September 2024, caused by a disparity between the rising local gold prices and the lower commercial exchange rates prescribed by the Bank of Ghana. This led to a variance of US$19.5 million in the trade with Fidelity Bank’s capital and US$42 million in the trade with BDCs under the gold-for-oil scheme. While MIIF has managed to remedy a portion of these variances, the forex discrepancy has raised concerns about the sustainability of the model in the face of volatile market conditions.

Despite these setbacks, the gold trade programme continues to be a crucial source of foreign exchange for the Ghanaian economy. The initial capital outlay to Goldridge was temporarily suspended in September 2024 due to the forex variances, but MIIF remains committed to expanding the programme. With a projected foreign exchange inflow of US$3 billion over the next two years, the fund is poised to play a key role in shaping Ghana’s economic future.

The success of MIIF’s gold trade programme has demonstrated the potential for innovative commodity trading to drive economic growth. It also offers a pathway for formalizing the small-scale mining sector, which has long struggled with issues of informality and inefficiency. By integrating gold into the national financial system, MIIF is helping to create a more stable and sustainable economic model for Ghana.

Looking ahead, MIIF’s experience with gold trading provides valuable lessons for future initiatives, including the proposed Ghana Gold Board. While the risks of forex variances are inherent in commodity trading, MIIF’s example shows that with proper oversight and hedging strategies, Ghana could capitalize on its vast gold reserves to strengthen its economy and position itself as a global player in precious metal markets.

The controversies surrounding the gold-for-oil programme may persist, but the evidence points to a gold trade initiative that has already made a significant impact on the Ghanaian economy. As the country seeks to navigate the complexities of global commodity markets, MIIF’s success in the gold trade programme offers a blueprint for future economic growth.

Send your news stories to newsghana101@gmail.com Follow News Ghana on Google News