"GoldBod must use ‘front door' not ‘back door’ in gold acquisition – Dr. Said Boakye

Dr. Said Boakye, Executive Director of the Institute of Fiscal Studies, has questioned Ghana's approach to gold acquisition, arguing that the country must move away from relying on gold produced through informal channels and establish a more sustainable system that allows the state to directly benefit from its mineral resources.

He maintained that although the Ghana Gold Board (GoldBod) has contributed to efforts to strengthen the country's foreign-exchange position through gold purchases, the long-term sustainability of the arrangement remains uncertain if significant quantities of gold continue to be extracted and traded outside the formal regulatory framework.

Speaking on the economic implications of Ghana's gold trade, Dr. Boakye argued that the country should not find itself in a position where it has to purchase natural resources that constitutionally belong to the state after other operators have extracted them.

He questioned the rationale behind a system in which private individuals and operators undertake gold production, while the government subsequently enters the market to purchase the same gold to build national reserves and support foreign-exchange inflows.

According to him, Ghana must develop a framework that allows the state to participate more directly in the extraction and production of its mineral resources rather than concentrate largely on buying the finished product.

“Gold must come through the front door, not the back door,” his argument suggests, highlighting the need to formalise gold production, strengthen regulatory oversight and ensure that the country receives a fair share of the economic benefits from its mineral wealth.

Dr. Boakye proposed the adoption of production-sharing arrangements between the government and private investors as a possible alternative to the current approach.

Under such an arrangement, private operators would provide the financial resources, equipment, technology and operational expertise required to extract gold, while the government would receive an agreed portion of the minerals produced.

He explained that this would allow investors to recover their costs and earn returns on their investments while ensuring that the state benefits directly from the resources extracted.

He described the current situation as problematic, particularly when the country has to use public resources to purchase gold that has already been extracted from its own territory.

The fiscal economist also linked the persistence of illegal small-scale mining, popularly known as galamsey, to the enormous profits associated with gold extraction.

He observed that even operators using relatively poor mining technology continue to generate substantial financial returns, creating strong economic incentives for the activity to persist despite enforcement efforts.

In his view, the significant amounts of money involved in illegal gold production make it difficult to eliminate the practice through enforcement measures alone.

He suggested that the government must examine the economic incentives driving illegal mining and develop formal production arrangements that enable the state to capture more value from the sector.

Dr. Boakye acknowledged that gold purchases have provided some support for Ghana's foreign-exchange position, particularly at a time when the international economic environment has presented considerable challenges.

He noted that the gold-related inflows have helped support the stability of the cedi, which might otherwise have faced greater pressure under less favourable external economic conditions.

However, he cautioned against assuming that these gains would continue indefinitely, especially if the gold supply depended significantly on production and trading arrangements that were not sufficiently transparent or sustainable.

He argued that Ghana must look beyond the immediate foreign-exchange benefits and address the structural weaknesses in its gold production and trading system.

For him, the fundamental issue is that the country must exercise greater control over its natural resources and ensure that the economic benefits of gold production translate into sustainable national revenue.

He stressed the need for Ghana to move towards a system in which private investors and the state share the benefits of mineral extraction through transparent and mutually beneficial arrangements.

Ultimately, Dr. Boakye's position is that Ghana must stop relying primarily on purchasing gold produced by others and instead establish a system that allows the country to participate directly in production and secure a fairer share of its mineral wealth.

Story by: Joshua Kwabena Smith and Priscilla Dodoo