Africa, AngloGold Ashanti, Bank of Ghana, Central bank, Export, ghana, Ghana cedi, Gold as an investment, Mining, Newmont Ghana, Price, Record producer, South Africa, United States, West Africa, World Bank
Reflex Eco Group – Africa News
Antony Sedzro (Ghanaian journalist)
This Blog is sponsored by http://www.reflexecogroup.com
The World Bank in its latest report is warning Ghana of huge drop in export earnings as a result of falling prices of gold and cocoa. The bank based its predictions on the huge fall in prices of the two commodities in the coming months.
The development has already affected revenue from these commodities. The Monetary Policy Committee of the Bank of Ghana, the country’s central bank, in July released figures to show that export earnings from gold for the first half of 2013 was estimated at US$2.7 billion, compared to US$3.2 billion in the same period in 2012, fall of about 16%. This fall is attributable to lower prices and volumes.
The price of gold on the international market has fallen from a high of about $1,700 in November 2012 to a low of $1,200 in the middle of this year. This is the highest fall in the value of the precious metal in thirty years.
Gold is Ghana’s main foreign exchange earner and the country is Africa’s second biggest producer behind South Africa. The fall in the world market price of the commodity has equally hit mining companies in the country.
Anglogold Ashanti, which operates one of the biggest mines in Ghana, has started the process of laying off about 430 of its mine workers. Newmont Ghana will cut at least 300 jobs in a bid to manage costs more efficiently, directors of the company said last month. Other mining firms have cut back on new mining projects in Ghana, West Africa’s second biggest economy.
During the boom in commodity prices, Ghana last year produced 4.3 million ounces of gold in 2012, a record for the country. Artisanal (small-scale) mining, which contributes about 30% to the country’s total production annually, also blossomed and saw the attraction of thousands of Chinese miners who mined illegally. A public outcry against the presence of Chinese miners led to a security crackdown on their operations. But even the artisanal miners have seen a sharp drop in their activities due to the steep fall in the precious metal’s price.
In a contribution on how this fall in revenue on the country’s economy can be remedied in the long term, respected Ghanaian economist, Dr. Joe Abbey, has revealed that concentrating on Non-traditional Exports (NTEs) could help address the expected challenge in the long term.
“So there is no choice for us but to look at the factors that determine the quality and cost of producing in this country. Oil may save something for us now, but we need to go beyond oil and get to non-commodity-based thing.”
Ghana produces and exports pineapples, oranges, bananas, cashew nuts, and others. These are normally produced by small-holder farmers with very low production capacity but with enormous potentially if supported financially.
For many years, the country has depended on hard currencies earned from exports from gold and cocoa to finance imports and shore up the local currency’s value.
The fall in price of gold and cocoa has also adversely affected Ghana’s currency, the Ghana cedi.
To stem this trend, Dr. Abbey, states that with less earnings from exports and an less controlled imports, “the Bank of Ghana would have to draw down on its holding of foreign exchange to meet the gaps”.
In spite of Ghana’s political stability, the Ghana cedi is currently the second most depreciated currency in Africa, according to the latest Ecobank report on the performance of currencies in Africa.
The report puts the cedi’s rate of depreciation at 14.5%.
- Ghana’s Terkper Seeks Budget Gap Below 9% of GDP in 2014 – Bloomberg (bloomberg.com)
- Ghana cedi falls 3.9% in value in eight months of 2013 (ghanabusinessnews.com)
- Ghana’s Biggest Cocoa Buyer Delays 150 Million-Cedi Rights Offer – Bloomberg (bloomberg.com)
- Ghana Turns to Longer Term Debt After Fitch Cuts Rating – Bloomberg (bloomberg.com)
- GNPA urged to publish names of debtors (modernghana.com)
- Increase earnings of cocoa farmers to cushion them – Akrofuom MP (modernghana.com)
- Ghana launches $1.2m cocoa platform (ghanabusinessnews.com)
- Ghana cuts imports by $300m as trade deficit shrinks (ghanabusinessnews.com)
- Fitch ratings doesn’t reflect true state of economy – Finance Ministry (modernghana.com)
- COCOBOD forms committee to tackle cocoa farmers’ challenges (ghanabusinessnews.com)