A proposal for Ghana’s gold reserve storage architecture

In late 2016, Ghana inaugurated its first gold refinery — Gold Coast Refinery Ghana Limited (“Gold Coast Refinery”).

The US$110 million facility is the largest in West Africa, and the second largest in Africa, and has an annual capacity of 180 MT and can refine raw dust, scrap gold, and other precious metals, to international standards.

Over the medium/long term, a viable junior gold refinery capable of up to 100 MT should be established, to provide competition, substitution, and redundancy to Gold Coast Refinery. Perhaps, the unfinished Tarkwa Gold Refinery could be re-invested in and made operational.

If so, it will also increase West Africa’s global standard gold refinery capacity, and transform Ghana’s comparative advantage as a gold producer, into a competitive advantage as a gold trader.

The Ghanaian authorities should consider the following policy: (i) At least 80% of all legally (major and artisanal) mined gold should be refined at Gold Coast Refinery;

(ii) environmental and extractive auditors should be strategically positioned in gold-producing areas and at our ports;

(iii) once illegal small scale mining “galamsey” has been institutionalized with the appropriate environmental and auditing safeguards — all small-scale gold purchased by the BoG, will be at 95% of the World Market Price; and (iv) accept payment of taxes by gold producers in cash and in kind.

An optimal Gold Reserve storage architecture proposal could be 80% stored in Ghana at all times, with the remainder, 20% split proportionally among the United States, United Kingdom, China, Switzerland, and Mauritius.

This stores Ghana’s gold close to foreign currency markets in New York, London, HK, and Zurich, where gold is traded for foreign currency swaps. Mauritius is considered because:

(i) with the recent signing of a double taxation treaty with Ghana, greater investment inflows are expected through Mauritius;

(ii) traditionally, Mauritius has played a role as the offshore financial center for Africa; and (iii) security and logistical advantages.