BoG’s domestic gold purchase programme a game-changer, says Bawumia

The vice-president, Mahamudu Bawumia, has hailed the decision by the Bank of Ghana (BoG) to implement a gold purchase programme, devised to build stocks of locally produced gold.

He described the BoG’s move as a masterstroke in the quest for stronger macroeconomic management and to provide a bulwark for the cedi.

Addressing participants at the Ghana Gold Expo 2021 (Ghana Mining Week ’21), a mining policy forum in Takoradi, on Thursday 1 July, Dr Bawumia said the benefits of having healthy stocks of physical gold in a country’s reserves are varied and enormous, including shoring up the value of the local currency. The BoG decision, he argued, is a “game-changer”.

“The launch and implementation of the Domestic Gold Purchase Programme by the Bank of Ghana (BoG) and the community mining programme together are going to be a catalyst for the formalisation of our artisanal small-scale sector,” the vice-president said.

“The Domestic Purchase Programme by the central bank and other programmes by PMMC [the Precious Minerals Marketing Company] and Ghana Revenue Authority (GRA) will in the coming years set everybody’s mind at ease regarding the volume and value of gold legitimately exported and reserved.”

Royalty take

Dr Bawumia noted, “Ghana is Africa’s largest gold producer, having overtaken South Africa in 2019. But Ghana’s extracted gold assets are based on the royalty take, limited dividends and corporate income tax.

“These fiscal gains are typically taken in cash, and about 80% paid into the Consolidated Fund. The Bank of Ghana holds a moderate amount of physical gold of 8.7 tonnes as part of its reserves. For nearly three decades – almost 60 years – we have not added an ounce to our reserve holdings.

“But gold has now become the cornerstone of central banks’ modern reserve management,” he said. “Central banks have become the third force behind the jewellery and technology and investment sectors in global gold demand in the past decade.”

Recalling his suggestion to the Bank of Ghana a year ago to consider the possibility of purchasing locally produced gold as a way of boosting the economy and shoring up the value of the cedi, Dr Bawumia expressed his delight that the Bank had taken up the challenge and implemented the scheme.

“The Bank of Ghana spent a whole year carefully studying the entire gold production value chain and putting in place the necessary internationally acceptable procedures, and has, since June 2021, begun a Gold Purchase Programme that will strengthen the future macroeconomic management and shore up the cedi over time with real gold backing.

“The benefits are enormous and we can only hope and encourage the Bank to continue with this initiative.”

Huge gold reserves

According to the World Gold Council, central banks have acquired a record 670 tonnes to boost their reserves. Gold has now become the cornerstone of central banks’ reserve management.

In 2020, amid the COVID-19 pandemic, Turkey was the largest annual gold buyer, adding 134.5 tonnes to its official reserves, followed by India (93.8 tonnes), the United Arab Emirates (22 tonnes) and Qatar (9.18 tonnes).

Ghana’s entire gold reserves, at 8.7 tonnes, are equivalent to only 6.9% of South Africa’s gold reserve holdings of about 125.3 tonnes, even though it is the largest gold producer in Africa and the sixth biggest in the world.

The South African Reserve Bank has managed and held gold reserves since 1925 and purchases nearly all the gold produced in South Africa. Other major players in the financial sector, such as the International Monetary Fund and World Bank, also hold large reserves of gold.

The BoG intends to focus its purchasing plans on artisanal small-scale mining, which account for 50% of Ghana’s gold production.

With the government rolling out community mining schemes and providing the miners with equipment and new technology that requires very little water to extract the gold from the ore without using zero mercury or cyanide – sometimes just a barrel – the impact of a ready market for sustainably mined gold on the environment and the lives of the people in mining communities is expected to be far-reaching.

Each community mining scheme engages 3,000 miners. With a projected 100 such schemes by the end of this year alone, the incidence of galamsey and youth unemployment is expected to shrink significantly.

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