Declining gold price poses serious danger

Mr. Benjamin Aryee, the Chief Executive Officer of the Minerals Commission, says the persistent decline in gold prices poses a serious threat to the country’s revenue inflow.

 

Gold prices have declined by 30 percent on the world market as at June 2013. Currently, gold is trading between US$1,300 and US$1,350 an ounce.

This year, the price of gold has experienced a free-fall from its historical highest to its lowest in recent years at US$1,192 per ounce in June. From $1,224.53 per ounce in 2010, gold prices rose to US$1,571 in 2011 and subsequently to US$1,669 per ounce in 2012.

Expressing worry over the volatility of the metal price, Mr. Ayee said the effect would negatively impact government’s revenue and the economy since gold is the country’s highest gross foreign exchange earner.

“In the immediate term, the magnitude of the impact will be felt mostly by production and profit -- which can lead to job-cuts.

“In the short-term, we cannot do too much about it, because when the price goes down profits go down, which affects the dividend paid to government. So government needs to start rethinking its priority areas.

“In the medium- to long-term, there are issues of employment. Government should generate employment; if the price keeps going down and costs remain the same, employment is likely to go down. And that creates complications which government would have to face again, so those are things we are also going to look at.

“As of mid-July, operating mines estimated total job-cuts at 3,000, whilst production losses were estimated at 750,000 ounces -- approximately 17.4 percent of the 2012 production figure,” he said.

Mr. Aryee told public sector players in the minerals industry at a meeting in Accra to find ways of reducing the impact of a falling gold price on the Ghanaian economy.

The workshop was put together by Minerals Commission as part of a series of brainstorming sessions aimed at ensuring that the economic shock that comes with a falling gold price -- unemployment and revenue loss -- has little impact on the Ghanaian economy. 

It brought together participants from the Minerals Commission, the Ministry of Trade and Industry, the Ghana Revenue Authority, civil society and the Bank of Ghana.

Gold currently contributes 27 percent to government’s revenue as captured by the Domestic Tax Division of the Ghana Revenue Authority.

After two years of soaring gold prices in 2011 and 2012, the price of the metal recorded very low prices, forcing industry players to re-strategise on possible policy interventions to avert its negative impact on the economy.

According to GRA figures, last year the country raked in US$5.6billion in export revenues. Between 1983 and 2012, total foreign direct investment into the mining sector reached US$12.5billion.

Professor Bruce Banoeng-Yakubo, the Chief Director of the Ministry of Lands and Natural Resources, said: “The recent significant fall in the price of gold, Ghana’s flagship mineral, is a major concern to government as well as industry players.”

Prof. Banoeng-Yakubo commended the Minerals Commission for its preliminary assessment of the anticipated impact of the falling prices which will be discussed extensively to find immediate, short- and long-term antidotes. 

  

“These significant contributions have been possible because of the country’s conducive environment for investment as well as favourable precious-metal prices in the past four years,” he remarked.