Bright Simons Writes: Ghana – Can Mahama Escape the ‘Golden Straitjacket’?

The newly elected National Democratic Congress (NDC) administration in Ghana inherits not only the reins of government, but also the burden of opacity and incoherence associated with the previous government’s various gold schemes. So far, it is proving hard to ditch this straitjacket.

Few policies exemplify this burden more starkly than the Bank of Ghana’s Domestic Gold Purchasing Programme (DGPP) and its shadowy derivative, the Gold-for-Oil (G4O) scheme.

Given the NDC’s loud criticisms of these programmes when in opposition, analysts had expected to see some truly innovative ideas about how to harness gold for Ghana’s development once the NDC entered government. Instead, the GoldBod entity the new administration has set up, whilst attracting praise for earnest efforts at broadening consultations, have worrying features that could well persist all that was shady about the erstwhile gold programmes.

The context of this spate of gold programmes in Ghana is the country’s emergence as Africa’s largest gold producer and re-entry into the global top 10 producer charts around 2018. It has been riding on the gains of liberalisation introduced in the late 1980s, after a spell of nationalisation led to rampant mismanagement and Ghana being tossed out of the top 10 gold producers worldwide for most of the 1970s and 1980s.

Whilst there is no longer any appetite for nationalising mines, the Ghanaian government has been inching towards the nationalisation of key value chains, especially in trading and export, in the wake of the metal’s massive price hike in recent years. A recent decision by regulators to deny the usually routine permit renewal for one of the mines operated by global gold mining giant, Goldfields, also reflects this growing nationalist assertiveness.

The central premise behind the GoldBod idea, as well as its predecessor programmes, is superficially attractive: accumulate gold domestically in local currency, convert it into foreign exchange, and use the proceeds to fund various imports — thus easing pressure on the cedi.

In theory, it is a creative solution to forex scarcity. In practice, it is a troubling case study in institutional overreach, data gaps and weak accountability mechanisms.

A discrepancy of tonnage and narrative

The Bank of Ghana has claimed to have purchased gold worth $9bn since the launch of the previous administration flagship gold initiatives (DGPP), in mid-2021. That would translate to roughly 3.6 million ounces over three years — an average of 1.2 million ounces annually. If accurate, such volumes ought to have left a footprint in the national gold production statistics. Yet, paradoxically, official gold output has declined during the DGPP period.

Between 2018 and 2023, Ghana’s recorded gold production fell by nearly 25%, with small-scale mining output —supposedly the programme’s main target — falling by almost 35% compared to its 2019 peak. If DGPP were truly converting illegal or informal gold (galamsey) into formal trade, as is often asserted, we would expect those numbers to move in the opposite direction. They haven’t. The numbers don’t align with the narrative. Yet, this is the underlying logic animating the GoldBod as well.

Aggregators without accountability

The processes leading to the Bank’s choice of a local gold company, Asanska, as its sole aggregator also left much to be desired. There was no clear tender process. No published criteria. No disclosure of terms. Yet this single commercial entity was ostensibly entrusted with sourcing billions of cedis worth of gold on behalf of the central bank. Our independent analysis of Asanska’s corporate information raises serious doubts over claims that it was entrusted with a $9bn trading book.

Ghana’s gold trade cannot remain the preserve of backroom deals, especially when it plays such a central role in macroeconomic stability.

The Bank of Ghana refuses to explain how it was selected from the pool in a market where over 190 licensed gold exporters exist — many more established, and arguably with more financial heft.

Yet, the new administration looks set to continue with this opaque model of choosing aggregators. It refuses to publish criteria or to commit to an open and competitive selection process. What is worse, it has now decided to also terminate the licences of existing exporters, meaning that any opaque selection of aggregators can only worsen the situation.

Refining without refinement

Refining is another blind spot. The BoG has not identified which certified refineries convert its dore into LBMA-compliant bullion. The only named official domestic partner — Royal Ghana Gold Refinery — lacks LBMA accreditation and is itself beset with transparency issues. The government claims that there is a private majority shareholder with an 80% stake. Painstaking investigations have however debunked this claim and investigators sent to India to track the investor, Rosy Royal, and its CEO failed to do so.

We are left to infer that gold is being shipped to UAE-linked refiners, yet no confirmations are forthcoming. Without verified LBMA certification, Ghana’s gold reserves could be discounted or deemed untradeable in global markets — a serious risk to the integrity of the nation’s balance sheet.

Sadly, the new government refuses to settle the issue of the official refinery. In the meantime, it has suggested that it intends to take up 15% shareholding in another local refinery and make it the official partner. Once again, no clear reasons have been provided as to how the financials and certification processes would work out this time.

G4O: A fuel policy without fuel data

The Gold-for-Oil arm of the programme has reportedly facilitated $1.2bn-worth of petroleum imports over two years — approximately 1.8 million metric tonnes of diesel and gasoline. No procurement details are public. No supplier names. No disclosed benchmarks. Only hints that intermediaries in Dubai and elsewhere are involved in fee-taking arrangements.

When public procurement laws are so visibly bypassed, the burden of justification is heavy. So far, the BoG and its former partners have offered little more than hand waving and rhetorical assurances.

The new governor of the BoG has hinted that the Gold for Oil programme will no longer receive support from the central bank. But the government has so far not made any official policy in that respect nor has it clarified if a successor is in the works.

A chance to reset

The NDC’s manifesto promises to investigate and reform both DGPP and G4O. This is commendable. But such reforms must begin with full disclosure.

The public has a right to know:

1. Who has been awarded contracts, under what terms, and through what processes?
2. Which entities are refining the gold and certifying its quality?
3. What safeguards exist to prevent galamsey (illegally mined) gold from entering official reserves?
4. What role have private aggregators and fuel traders played in the dollar conversion chain?
5. And how are these activities reflected (or not) in the BoG’s balance sheet and FX reserves?

These are not rhetorical questions. They are the minimum standards of democratic accountability.

The new administration must resist the temptation to merely reshuffle the actors while preserving the script. Ghana’s gold trade cannot remain the preserve of backroom deals, especially when it plays such a central role in macroeconomic stability.

It must rationalise the entire governance architecture of small-scale mining, artisanal trade, refining and export. The current structure of the GoldBod, with its unwieldy mix of regulatory, commercial, standards-setting, law-enforcement, and other powers, adopts all the problems of Ghana’s cocoa exporting monopoly, Cocobod, and then turbocharges each one of them. It is poised to become even more powerful and unaccountable.

This structure is certainly bound to become problematic over time. Rather than disabling the oversight of the Minerals Commission in respect of gold, a better approach would have been to reform it to continue playing the regulatory role whilst the new GoldBod focuses on value chain development and the creation of commodity exchange infrastructure to make Ghana a regional gold hub.

For too long, too much of Ghana’s gold has flowed beneath the radar — legal and illegal, traceable and untraceable. It was certainly time for a reckoning. But not in a way that merely switches the overlords of unaccountability.