The dilemma of delay in Africa’s rise (4)

GOLD COAST WAS THE name by which a former British colony in West Africa was known from 1821 till March 4, 1957 when its name was changed to Ghana as the United Kingdom granted independence to what is today an Anglophone country, one of the most popular in West Africa. The name Gold Coast became a vogue since the transatlantic slave trade era when the Europeans identified the region as the Gold Coast because of the large supplies of, and market for, gold that existed there then. Ghana, the post-colonial era name, was derived from the ancient West African empire, a name that is now being questioned by the younger generation who argue that the name Ghana as a country bears no relationship with the old Ghana empire.

Ghana has since lived up to its old name as a prominent country in Africa reputed for its gold in the international market. For Ghana, gold remains relevant as a major national revenue earner. Of Africa’s top gold mining countries, Ghana has snatched the top spot from South Africa in 2019, after mining more than 142 metric tonnes of gold, which now accounts for 90 percent of Ghana’s total mineral exports, helping to push the contribution of all minerals’ exports to 37 percent of the country’s total exports. This means gold remains Ghana’s dominant export commodity in the mineral sector, accounting for nearly a third of its export earnings. Ghana’s gold export is therefore a microcosm of Africa’s export commodity-based economy and a reason why Africa’s future could remain tethered to upswing and downswing in the global commodities market. For gold in particular, Africa may thus be unwittingly selling out its strength in the future global economy.  

The concerns are well founded as many African countries’ economies depend on gold ore exports. Notable among those countries heavily dependent on gold revenues is South Africa, a country that — for over the past eight decades — has been a leading gold exporter, but fell to 118 metric tonnes in 2019 from 137 metric tonnes in the previous year. However, according to 2018 MiningGlobal data, South Africa is still estimated to possess 6,000 metric tonnes reserves, making it the second-largest in the world. The underlying reasons for the on-going civil war in Sudan may seem unclear to many cursory observers. Battle for the control of gold mines is evidently one of the leading factors, especially if all that links the paramilitary body and the mercenaries working under Russian authorities are brought under critical focus. In 2019, when there was still relative stability while the deposed Omar al-Bashir was leaving the stage, Sudan came third in Africa with gold production of more than 76 metric tonnes, although it was still a big drop from the 93 tonnes produced the previous year and the 107 tonnes in 2017. 

Mali reportedly produced more than 71 metric tonnes of gold in 2019, a sizeable increase from the 61.2 tonnes in 2018. Mali has been rated fourth among Africa’s top gold producers – mining through large mining companies as well as through artisanal miners, the latter being mostly informal and improperly accounted for, although producing a sizeable chunk of gold in the country. The recent decision of Ibrahim Traore – the Burkina Faso’s military leader – to ban foreign miners could be considered meritorious and patriotic.

Producing 62 metric tonnes of gold in 2019 placed Burkina Faso in fifth position as a major exporter of gold in Africa. It is said to have one of the most dynamic mining sectors in West Africa.

What many commodity-exporting countries in Africa consider as national revenues pale into insignificance when juxtaposed with products of knowledge-driven economies. While, in 2022, Guinea exported just over $5.1 billion of bauxite (103 million tonnes at $50/tonne), and $5.8 billion of gold, and Ghana exported gold valued at $1.71 billion as of the second quarter of 2023, these remain minuscule in whole countries operating national and sub-national bureaucracies, embassies, military, judiciary, legislature and executive arms of government. Mali, in 2018, could boast of just $2 billion in export value of gold, in a country where the mining sector is a driver of exports. Burkina Faso’s real Gross Domestic Product (GDP) growth in 2021, at an estimated 8.5 percent, was attributable to increases in gold exports. For the country, the top exports are gold ($6.74 billion), raw cotton ($502 million) and other oily seeds ($169 million).

The California “Gold Rush” laid the foundation of what has become the most prosperous state in the US today. It began on January 24, 1848, with a rapid influx of fortune seekers in California after gold was found by James W. Marshall at Sutter’s Mill in early 1848 and reached its peak in 1852. According to estimates, more than 300,000 people came to the territory during the “Gold Rush,” lasting till 1855. But while many African countries still rely on gold mining and export as the mainstays of their economies, California has since diversified its economic base, spawning enormous wealth from enterprises associated with Hollywood in more than half a century and Silicon Valley in over three decades. 

Comparatively, California’s economy has proved larger than Africa’s continent-wide economy. While the economy of Africa – by recent count – is estimated at $3 trillion, that of California (Gross State Product) hovered around $3.9 trillion in 2023, rated as the largest sub-national economy in the world. If California were a country, the size of its economy could therefore be the sixth largest economy, behind India and ahead of the United Kingdom GDP ($3.495 trillion). Today, California’s Silicon Valley is home to some of the world’s most valuable technology companies, including Apple, Alphabet and Facebook. Among the Fortune 100 companies and the Fortune 500 companies, a total of 11 and 53 respectively are headquartered in California. According to the Public Policy Institute of California, from 1994 to date, California’s economy has undergone major changes, mainly brought about by population and technological shifts. “Innovations in computing, automation, and information technology have grown entirely new sectors — concentrated in California — creating new wealth and shifting activity in many other sectors.” From commodities to cyber-based economy, California has attracted and retained a lot of wealth and people over the years, with about 12 percent of the US population living and working in the state.

The dynamism of the economy of California puts a lie to claims that Africa’s slow development is as a result of its climate, which some consider as unfriendly. California’s climate is marked by two seasons — wet and dry. California is known for its variable climates. In particular, the hot, dry, southern sub-tropical climate and that of semi-arid areas, highly variable with droughts and irregular episodes of above-average rainfall are responsible for droughts, annual wildfires, water scarcity and salinity. Some regions in California experience hot semi-arid climate. Yet, the regions keep drawing and retaining people and the economy keeps growing.

The precarious situations faced by commodity exporters who mostly export in raw forms are also experienced in the gold trade market and industry as prices are determined mostly by the importing countries. They are up against many vagaries in the global value chains as they operate more as rule takers than as rule makers, and are subservient to those who determine the prices. Therefore, exporting countries that have to plan their annual budgets on these uncertainties will continue to have a hard time developing, growing or innovating. In 2022, one troy ounce of gold had an annual average price of $1,800.09. From 2012 to 2018, the annual average gold price dropped from $1,668.98 per troy ounce to $1,268.49 per troy ounce, with a slight growth to approximately $1,400 per troy ounce in 2019, with a rebound in 2020 to a record $1,769.64 per ounce. So, the trajectory of most African countries that export minerals is easily predictable. 

For instance, Ghana’s gold mining contributes over 40 percent of its total export earnings, while the same industry faces challenges such as illegal mining in Burkina Faso. It is now clear that South Africa has lost the world’s top gold producer status despite the country’s gold mining industry history dating back to the late 19th century, contributing significantly to the development of Johannesburg, also known as eGoli, the “City of Gold.” Sudan’s predominance in dependence on artisanal mining for the majority of its gold production presents both opportunities and challenges for local communities. The on-going civil war is a test case in this regard.

Democratic Republic of the Congo – known more for its vast mineral wealth, including diamonds and copper, is also a significant gold producer. The country’s mineral-rich eastern regions have both industrial-scale gold mines and small-scale artisanal operations, often overshadowed by challenges like conflict and illegal mining.

Although Guinea’s gold mining contributes significantly to the country’s economy, it is also the source of much of its current environmental and social challenges. While Tanzania rakes in about four percent of its GDP from gold mining, it remains to be seen whether President John Magufuli’s reforms of the mining sector actually gained traction or remained in force after his death in March 2021.

Zimbabwe’s gold mining industry, apart from  facing issues such as lack of investment and political instability, is also prone to jeopardy through official misconduct and scandals at the highest level of government. Recently, a Cable News Network undercover investigation exposed the shady deals traced to President Emmerson Mnangagwa. According to the network, various gold smuggling gangs in Zimbabwe have one thing in common –  Emmerson Mnangagwa. A member of his family has been convicted of trying to smuggle gold worth over $330,000 (£272,000). Henrietta Rushwaya, who is president of Zimbabwe Miners Federation, was caught with bars weighing 6kg in 2020. 

In summary, the centre of gravity of gold ownership is shifting away from Africa as major determiners of its values and relevance are outside the continent. It is doubtful if the flow of gold from Africa to Europe, North America and Asia will ever stop as the inducements are mostly from economic and pecuniary considerations for Africa. The strategic importance of gold in the global monetary system seems lost on Africa that currently blindly exports the commodity for its immediate economic gains. Before it is too late, Africa needs to grasp the wider ramifications of gold endowment, trade and revenue earnings. It was time Africa began to get involved in global economic politics involving gold as a commodity.

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