Formerly known as “the Gold Coast,” Ghana is historically known to be one of Africa’s largest gold producers, if not the largest. In 2019, Ghana was Africa’s top gold producer, before losing its spot to South Africa. Ghana reclaimed the throne last year by increasing its gold production with a 32% increase in output, driven by small-and large-scale mining sectors. But a more important question is worth asking: Does Ghana export gold as a manufactured good or as a raw commodity?
The reality is that while being the top producer of gold may sound great as a status symbol, if the country is not able to process its gold into a manufactured product then being the top producer of a raw commodity does not weigh any real substance because it will not reduce its trade deficit. For Ghana’s status as Africa’s top gold producer to weigh any real substance, the country must process its gold into manufactured goods.
Ghana is currently experiencing environmental conundrums. indeed, illegal gold mining has severely harmed many of the nation’s forests, rivers, and other bodies of water, raising substantial health issues in mining areas. The Ghanaian government aims to combat illegal mining activities while promoting the formalization of small-scale mining and implementing alternative livelihood programs to address poverty and unemployment challenges.
Due to a steep decline in production, South Africa replaced Ghana as the leading producer of gold on the continent in 2021. According to the Ghana Chamber of Mines, the country’s gold production increased dramatically from 2.8 million ounces the year before to 3.7 million ounces last year.
Artisanal and small-scale mining accounted for 43% of Ghana’s total gold production in 2018, ensuing in high revenue rates and foreign exchange for the government. Large corporations mine the majority of it, using heavy machinery. But about 35% is extracted through small-scale mines, many of which operate informally or without a valid license. This unregulated small-scale and artisanal gold mining is known locally as galamsey, a slang word derived from the Ghanaian words “gather” and “sell.” Thus, about one million Ghanaians engage in the practice, supporting about 5 million people in the country. Many of the galamseyers live in poverty, and their activities often come at a cost to both human health and the environment.
The processing of gold in Ghana is not done by Ghanaians but by multinational corporations. Indeed, Gold Fields Limited of South Africa holds a 71.1% interest in the Tarkwa and the Damang gold mines in a joint venture with Toronto-based IAMGOLD Corp. (18.9%), and the Government of Ghana (10%). This means that Ghanaian gold is mostly exported as a raw commodity to the global market rather than as a manufactured good.
Why doesn’t Ghana export its own gold as a manufactured good rather than as a raw commodity? Because the Ghanaian government failed to promote “local champions.” The Ghanaian government failed to pass laws that will enable Ghanaian entrepreneurs to become captains of industry. Thus, Ghana does not have the upper hand in the negotiation when exporting its gold. It sells its gold at a low price and buys it back as a manufactured good at a much higher price. If Ghana could process its own gold before exporting it, then it would have been much easier for Ghana to sell its gold at a much higher price since it would be selling it as a manufactured good.
Goods that are sold as manufacturing goods are sold at a higher price because of the cost of production it incurs. Processing a commodity into a manufactured good requires investment in the factors of production. Capital and labor (workforce, machinery…etc.) are required to process a raw product into a consumable one. So sellers of manufactured goods sell their goods at a higher price to make a profit from the cost of production they incurred during the manufacturing process. Raw commodities are generally sold at a lower process because they aren’t consumable in their raw state.
Ghana's Trade Balance
Source: Bank of Ghana
Ghana has regained its status as the top gold producer in Africa. According to the Bank of Ghana, Ghana recorded a trade surplus of $225.1 million in April 2023. This trade surplus is less than in March 2023, when Ghana recorded a trade surplus of $483.7 million. Between May 2022 and April 2023, Ghana recorded only one trade deficit, and this was in July 2022. It is undeniable that Ghana is making enormous progress in trying to maintain a positive trade balance. It is crucial for the country to continue maintaining its exports higher than its imports. A continuous trade surplus is what will truly help the Ghanaian economy benefit from the goods it produces and exports on the global market.
Hence, Ghana must increase its gold-processing capacity to thoroughly have the upper hand in trade negotiations. Even though the country is currently experiencing a trade surplus, it would put Ghana in a position of strength if the country could process its gold before exporting. This will help the country increase its profit margins and stimulate the economy.