The Centre for Democracy and Socio-economic Development (CDS) Africa has called on government and the Central Bank to provide measures to ensure that gold purchased under the Gold for Oil (G4O) policy are from legal entities in the country.
According to the Centre, it recognizes and appreciates the government’s genuine efforts to shore up the country’s forex reserve. It noted that this “timely policy initiative” will help to relieve the pressure on the cedi and may help the small-scale gold mining industry in Ghana to become competitive.
Nonetheless, it expressed the need for government to exercise due diligence in ensuring the success of the policy.
“CDS Africa believes that the success of the Gold for Oil program would depend on several factors, including a clear policy implementation guideline. In respect of this, we wish to call on the government and the Bank of Ghana to provide measures put in place to ensure that gold purchased under the policy is solely from legal mining entities within Ghana.”CDS Africa
CDS Africa recounted that Government of Ghana’s Gold for Oil (G4O) program commenced with the first consignment of about 40,000 metric tons of diesel on January 15, 2022, valued at about 40 million USD. With this, it noted that prime objective of the program is to use additional foreign exchange resources from the Bank of Ghana’s Domestic Gold Purchase (DGP) program to provide foreign exchange currency for the importation of petroleum products for the country, which currently stands at about 350 million USD per month.
The Center explained that per the framework of the policy, the payment for oil supply is done through two channels; a barter trade where gold is exchanged for oil or through a broker who purchases gold from the Bank of Ghana and provides forex to pay for oil. The initiative, it indicated, when implemented fully, will ease pressure on the country’s forex reserve, most notably the dollar and afford some stability in the exchange rate market and thus, save the country from the rampant increase in fuel prices.
That notwithstanding, the Center expressed concern over the sourcing of the Gold needed for the implementation of the program.
“Under the arrangement, gold purchased through the Bank of Ghana’s DGP program will be mainly through the Precious Minerals and Marketing Company (PMMC). The Bank of Ghana has stated that PMMC will solely act as the nation’s assayer, evaluating the gold to ascertain its ingredient and quality.”CDS Africa
Government urged to be circumspect in policy implementation
Moreover, CDS Africa questioned whether the Gold Aggregator and mining firms have the capacity to provide enough gold for this initiative. It highlighted that currently, the country consumes 350 million USD per month of imported oil amounting to about 4.2 billion USD per year, and that during the launch of the Bank of Ghana’s DGP Program, the Governor praised Ghana’s position as the largest producer of gold in Africa, “yet the country’s gold reserves have remained unchanged at 8.77 tonnes”.
Also, CDS Africa emphasized that the policy will be detrimental to the country if goevernment is not shrewd in its dealings, especially with the illegal mining activities occurring in the country. Currently, it noted that Ghana is battling with the issue of “galamsey” and its associated impact on water bodies, arable farmlands, and forests reserves.
The Center cited that in 2020, the Ghana Water Company reported exorbitant hikes in operational costs owing to the activities of illegal mining operations on the country’s water bodies.
“They explained that they have had to spend more on materials and treatment of water to ensure its wholesomeness for consumption… It is important for the government to come up with a clear policy statement about this aspect of the program so that it does not become a fertile ground for illegal mining operations in Ghana.”CDS Africa