Adnan Adams Mohammed
The Ghana’s version of Extractive Industry Transparency Initiative (GHEITI) has cast shadow for the government’s newest ‘game changer’ policy, Gold for Oil (G4O).
In the 2020 report of GHEITI, it raised a number of concerns and observations about the G4O policy which make the ideation and implementation looks poorly thought through. It says the policy implementation lacked wider stakeholder consultation while worsening issues of smuggling among others.
The government has been looking for a sustainable way to tame the excess demand of foreign exchange by importers, especially for the Bulk Oil Distribution Companies (BDCs). Although, government has acquired the first consignment of 40,000 metric tonnes of oil under the deal and it is optimistic that this would cushion fuel consumers. Yet, many experts in the extractive industry are yet to understand the impact of the whole deal.
“There had not been any disclosure on the buyer and the supplier selection criteria for the sale of gold and the purchase of refined petroleum products, respectively”, the 2020 GHEITI report released last week observed with worry. “Similarly, there has not been any disclosure on the pricing method (such as spot, futures, discount, margins etc.) for the gold sales and oil purchases.”
Other concerns raised included: “There is no clarity whether or not the purchases from ASM will be refined before they are sold. This has implication for the realisable value of gold sold.
“It is also not clear how the overall transaction cost under the programme would be covered; The Government did not indicate how it will raise money for the gold purchases, whether through loan syndication, Central Bank financing or government budgetary allocation; If the directive is strictly enforced, ASM gold supplies will not be available to domestic jewellery manufacturers anymore, threatening their livelihoods; The directive will centralise gold purchases from the ASM subsector, similar to what pertains in the cocoa sector, and give the country greater control over its gold exports.”
Under the Gold for Oil programme, government plans to purchase the country’s total ASM gold production, and a portion of large-scale production in Cedis. The arrangement is intended to secure reliable and regular sources of affordable petroleum products for the country.
This is expected to ease the demand pressure for US Dollars, which has led to a heavy depreciation of the local currency.
Consequently, GHEITI’s MSG has reviewed the proposal and made the following recommendations to help make the policy work better: “Broader consultations are encouraged to identify the potential impact of the programme on diverse stakeholders, and to address same ahead of implementation. For instance, some ASM actors engage in pseudo forward sales with off-takers, including foreigners, who expect to receive dore in exchange for forex. This situation could increase the incidence of smuggling;
“Government is also encouraged to subject the policy to periodic review and further stakeholder consultations to adjust and improve implementation.
“Government should prioritise building up its gold reserves as a mechanism for dealing with the impact of the volatility associated with gold prices by predominantly stock piling gold when prices are low and selling when prices are high” and
“Additionally, government could enhance its gold stockpile by exercising the option of taking
royalty in-kind, in line with the provisions of the Development Agreements with Newmont,
AngloGold and Gold Fields.”
