Headwinds are already building up in Ghana’s commodity exports, albeit a stronger gold production in 2022 from Asante Gold’s expected Q3 2022 output will act as tailwind to the country’s export drive, according to Fitch Solutions.

With work in progress to produce approximately 175,000oz of gold in its first 12 months of operations, the fact that the gold miner is expected to begin its first gold pour in Q3 2022 from its Bibiani mine will push Ghana’s gold exports higher. Moreover, the country’s efforts to curtail illicit trading will add to these tailwinds, serving to moderate headwinds emerging from other sectors such as the country’s oil and gas sector and cocoa sector.

The Bibiani gold mine has high upside potential. Aside the 12-month production capacity of 175,000oz, the Company has plans to produce 220,000 to 270,000 ounces every year for a minimum of seven years. Furthermore, Asante is planning to initiate development of an underground mine design to the PEA level of study in Q3 2022, with a view to developing an underground mine operation from 2026.

This will provide significant overlap with open pit mining operations, which are currently scheduled to proceed into 2029. The new high-grade gold discovery recorded at the South Russel prospects, located at the Bibiani mine lease also provides upside risks to growth.

The combined effect of these will yield a net positive trade balance for Ghana. Based on Fitch’s analysis, net exports is forecast to add 1.0 percentage points (pp) to the country’s growth, however, this is lower than the five-year pre-pandemic average of 1.5pp.

“These headwinds to exports will be somewhat tempered by stronger gold production, which will be supported by the recommissioning of the Bibiani gold mine – expected to start its first gold pour in Q3, 22- and the government’s efforts to curtail illicit mining activities.”
Fitch

Services to Offer Tailwinds to Export Growth

According to Fitch Solutions, services will also offer some tailwinds to export growth, with international tourist arrivals set to accelerate in 2022 as travel restrictions are scaled back. However, strong import growth on the back of rising consumer demand will largely offset export gains.

“We believe that maturing oil fields and previous underinvestment in the oil sector will prevent Ghana from increasing its hydrocarbon output over the year. Indeed, our Oil & Gas team forecasts that oil production in Ghana will fall by 1.9 per cent in 2022.”
Fitch

The research firm also flagged the spread of the cocoa swollen shoot virus resulting in a weak cocoa harvest. “Our Agribusiness team projects that Ghana’s cocoa production will decrease by 3.5% over 2022- preventing Ghana from increasing its cocoa exports.”

In addition to these headwinds, other economic fundamentals such as inflationary risks, decline in business confidence, and depreciation of the cedi are also factors affecting export growth.

However, “…we see gross fixed capital formation growth accelerate as business sentiment improves on the back of easing inflation and a more stable cedi. Fitch added that “We hold a tepid outlook for exports growth as oil production is likely to remain stagnant and well below pre-pandemic levels”.

With gold prices remaining elevated as Fitch forecasts gold price to rise to US$1,900/oz in 2022 from US$1,700/oz previously, this is expected to provide some tailwinds to fixed investment in Ghana’s large precious metals sector. Thus, taking the above into account, “we see gross fixed capital formation expand by 5.2% over 2022, adding 1.1pp to headline growth”.