Gold continues to be the leading foreign exchange earner for the country, accounting for 38% of total exports in 2022. Total export receipts from the precious metal amounted to US$6.6 billion in 2022 representing a 30% upswing year-on-year. According to the Bank of Ghana, a total of approximately 3.8 million ounces of gold were exported in 2022. This shows an increase in gold export volumes by 34% of the 2.82 million ounces exported in 2021 but a 9% downturn of the volumes exported in 2020 in the midst of the COVID-19 pandemic.
The Bank of Ghana attributes the increase in gold export volumes to the introduction of the community mining scheme which has boosted small scale gold production; and the reduction in the withholding tax on unprocessed gold from 3% to 1.5% which sought to encourage small scale gold producers to export their gold through formal channels through licensed gold buying and exporting companies to reduce gold smuggling and illicit trading of the precious metal.
Contribution to Gold Exports: Large scale versus Small scale mining
Over 90% of gold produced by both large scale and small scale mining companies in Ghana are exported. According to figures presented by the Deputy Minister of Lands and Natural Resources, Hon. George Mireku Duker at the ‘Ghana Mining Expo 2023’ held last month in Takoradi in the Western Region, the total value of gold exports by the large scale sector amounted to US$5.51 billion whilst the small scale sector contributed US$1.17 billion representing 17.7% of total gold export value in 2022. Contribution of the small scale sector to gold exports witnessed an upturn of over 500% rising by US$0.98 billion from US$0.19 billion recorded in 2021. The value of gold exports contributed by the large scale sector also rose by US$0.63 billion from US$4.88 in the previous year.
The rise in Ghana’s gold export receipts in 2022 can be largely attributed to improved performance of the small scale mining sector aside the bullish traded price of the precious metal in the international market. According to the Deputy Minister, gold production by the small scale sector increased significantly from 110,274 ounces in 2021 to 712,405 ounces in 2022 which clearly translates to over 500% growth in export volumes by the sub-sector.
The reduction in the withholding tax from 3% to 1.5% on unprocessed gold in 2022 has indeed improved the small scale mining sector’s contribution to gold exports although the figures remain below the pre-pandemic and pandemic levels. In 2019, the value of gold exports contributed by the small scale sector plummeted from US$2.47 billion in 2018 to US$2.09 billion after the imposition of the 3% withholding tax and further dropping to US$2.04 billion in 2020.
The gold smuggling challenge
Notwithstanding the upside in gold production and export, it is important to note that figures on gold exports attributed to the small scale sector may be underestimated since smuggling and illicit trading of gold remain major frailties of the gold sub-sector. A significant amount of gold leaves the country unaccounted for which have detrimental consequences on the country’s gold export revenues. In 2019, it was reported that the country lost about US$9 billion to gold smuggling. In Al Jazeera’s recent “Gold Mafia” documentary, a gold smuggler captured on tape revealed smuggling $40 million worth of gold every month from Ghana.
The country stands a better chance to benefit greatly from the small scale mining sector if appropriate regulations and efforts to formalize the sub-sector are fast tracked tied with the development of robust gold traceability systems to curb smuggling and illicit trading of gold.