The Gold Trinity – The Worst Scam Of All Time.

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My daughter, Naa Densua just sent me a 6 page document: “Government of Ghana Gold for Oil (G40) Programme Framework.”

I didn’t even bother to read it. My immediate response was: the biggest scam of all time. Gold for oil is one arm of a trinity of deception foisted on Ghanaians as a solution for the economic mess this government has willfully created. The other two are: Gold for cedi, and gold for cocoa.

Anybody with the most basic understanding of Newtonian mechanics, quantum mechanics or thermodynamics know this simple truth, that controls most of the physical world:

“The total energy of a system remains constant, even though one form of energy may be transformed into another form.” 1st law of thermodynamics

“The total wealth of a country remains constant, even though one form of wealth may be transformed into another form.” 1st law of Afreeconomics.

Writing on the trinity will be a whole book. I will just bring out the fallacies.

1. Gold for cedi

Oz of gold $2000
Ton of gold $64.3m

Ghana exports about 140tons
Ghana earns about $9b from gold.

Even if Ghana buys 10% of total gold exported, the value is $900m, enough for only 2months of fuel imports.

$900m at ¢12 to the $ is almost ¢11b. Where will government get the unbudgeted ¢11b from? Print it? Now, this is when I’m assuming that, the mines will sell the $ at ¢12. It may be as high as ¢18 to the $, as government itself pegged the $ for fuel purchase late last year. At ¢18 to the $, government will need ¢16.5b unbudgeted money to buy 10% of total gold exported from Ghana.

Last year, government reported buying 26 000oz from Newmont. Newmont produces up to 700 000oz/year. Government therefore purchased only 3.7% of gold Newmont produced.

Value of 26 000oz is $52m. This represents only 11% of cost of fuel imports for JUST ONE MONTH. It doesn’t even scratch the surface of our liquidity problem. We have just transformed one form of wealth into another. The total wealth remains the same.

How much did Newmont change the $ for in cedis? We don’t know. Newmont sold only 3.7% of its gold, getting the amount of cedis it needed (probably at a rate better than on the black market) for its local operations eg payment of salaries and maintaonance of equipment etc.

The only winner is Newmont.

2. Gold for oil
   I understand we have 8tons of gold in reserves. Total value is therefore $514m. If we sell all our gold in reserves, we can’t import more than a month of fuel ($450m). Gold for oil is a scam. Ghana is the loser.

Gold is a store of value. Gold appreciates more than any currency over a generation. When Sam Jonah “sold” our 11m oz of gold in the ground in 1999, it was $300/oz. Today, that same oz is $2000. The market value of $300 in 1999 isn’t even $600 today. Only an Esau government will mortgage its future wealth for immediate gratification. Esaus cry, and this government will cry.

By the way, there are different prices for different modes of payment. Cash price is different from credit price. Single price is different from bulk price etc etc. Very likely, $ price may be different from gold price. How much is the gold price for oil?

3. Gold for cocoa

Bawumia talked about this few months ago. One of my young friends argued with me about it. I just smiled. Ghana doesn’t have the capacity or leverage to determine the mode of payment from its prospective cocoa buyers. Even if they decide to buy cocoa with gold, who decides the price of the gold? This is what happens in a buyers market. The buyer makes the rules. You need the buyers money more than he needs your cocoa. The wise buyer who knows the future value of gold would want to pay you in $ which he has plenty anyway. If you insist on gold, he would forecast the appreciation of gold against the $ and fix the rate for you. If you’re stupid, he’s not.

The only ways to begin solving our problems are:

1. Positive terms of trade
2. Budget surplus

With these two, the total wealth of our country will begin to increase, then there’s real progress. Changing one form of wealth to another while total wealth remains the same is meaningless and a scam.

This trinity of gold is the worst of all scams.

Tswa omanye aba

Nii Amu Darko
President, ARM
05/02/2023