Ghana’s ban on foreigners from trading in its local gold market aims to boost national revenue and address environmental concerns caused by widespread illegal gold mining, also known as galamsey.
Ghana’s Gold Market Ban: A Bid to Boost Revenue and Address Environmental Concerns
Ghana has banned all foreigners from trading in its local gold market as part of efforts to boost national revenue and streamline the country’s mining sector. The ban, which takes effect next month, is aimed at addressing widespread illegal gold mining, known as ‘galamsey,’ that has been causing environmental disaster and economic hardship.
Ghana is a country located in West Africa, bordered by Côte d'Ivoire to the west, Burkina Faso to the north, Togo to the east, and the Gulf of Guinea to the south.
With a rich history dating back to the Gold Coast era, Ghana has been an important hub for trade and commerce.
The country is home to over 30 million people, with diverse ethnic groups and languages spoken.
Accra, the capital city, is known for its vibrant markets, cultural festivals, and historical landmarks like the Kwame Nkrumah Memorial Park.
The Impact of Illegal Gold Mining
Ghana is Africa’s largest gold producer and the sixth largest in the world, but it struggles to address the growing problem of galamsey. The mineral-rich West African country faces harsh economic times with a high cost of living and sees little of the profits from chocolate production, which is dominated by foreign investors.
Galamsey is a local term used in Ghana to describe small-scale, informal gold mining operations.
These activities often involve artisanal miners using rudimentary equipment and techniques.
Galamsey has been a significant contributor to Ghana's gold production, but it also poses environmental and health risks due to the lack of regulation and proper safety measures.
Estimates suggest that galamsey operations account for up to 70% of Ghana's total gold output.
Fuelled by rising gold prices and youth unemployment, illegal gold mining has been growing in Ghana despite military operations to shut down galamsey activities. Chinese nationals have been active in Ghana’s informal mining sector, along with Ghanaian nationals, who have repeatedly ignored environmental concerns.
The New Regulation
Under the new law passed by parliament last month, the Ghana Gold Board (GoldBod) is granted exclusive authority of gold mining and becomes the sole buyer, seller, and exporter of all gold produced by the artisanal and small-scale mining sector. Foreigners are allowed to apply to buy or off-take gold directly from GoldBod but can no longer operate within the local gold value chain.
The Ghana Gold Board (GGB) is a government agency responsible for regulating and monitoring the country's gold trading activities.
Established in 1963, the GGB aims to ensure that 'gold exports are done in accordance with international standards and regulations.'
The board oversees all gold transactions, from mining to export, to prevent smuggling and revenue loss.
Ghana is one of Africa's leading gold producers, with the metal accounting for a significant portion of its export earnings.
The licenses of local dealers have been revoked, but given a grace period to allow a smooth transition before the directive takes effect next month. During this period, gold transactions will only be carried out in Ghana cedis, the local currency, and priced based on the Bank of Ghana rates.
The Benefits and Challenges
The government has allocated $279m (£212) to GoldBod to purchase and export at least three tonnes of gold per week. This move aims to help boost foreign exchange inflows and stabilise the local currency. However, Kwaku Effah Asuahene, chairman of the Chamber of Bullion Traders Ghana, fears that the government may not be able to raise enough revenue to purchase all the gold.
The ban is seen as a concrete step by the new administration of President Mahama to tighten regulation and control of the gold sector and deliver on its anti-galamsey campaign promises. If properly applied, the new law could bolster government revenue and bring some order to the chaos in the gold sector.
Environmental Concerns
Ghana’s illegal gold mining industry causes environmental disaster, with over 60% of the country’s water bodies affected. The ban is also expected to make it difficult for illegal miners to sell gold in the country, which could help mitigate the environmental damage caused by galamsey activities.
Gold prices shot up to $3,200 per ounce last week due to trade tensions between the US and China, forcing investors to seek refuge in the commodity because of uncertainties. Ghana’s gold exports grew by 53.2% to $11.64bn last year, nearly $5bn of which was from legal small-scale miners.
Conclusion
Ghana’s ban on foreigners from trading in its local gold market is a bid to boost revenue and address environmental concerns. While the move faces challenges, it could help deliver on the government’s anti-galamsey campaign promises and bring some order to the chaos in the gold sector.
