Gordon Brown Should Read, Learn And Inwardly Digest The Latest Report From The WGC On The Impact of Gold Production On The Poorer Countries Of Africa.
Date: June 09, 2005
How much aid will actually reach Africa in any form, monetary or otherwise, as a result of Messrs Brown, Blair and Geldof pirouetting on the world stage is impossible to forecast. So far it is all a competitive PR race which is especially important to our Chancellor Gordon Brown as he has now made his first trip to Africa and is using it to burnish his image as a great giver to poor countries. Good thing it is not his own money at stake as he is a Scotsman, but if he is not to persuade the EU and the US to level the playing field of trade he will have to find the money from somewhere.
This is the same Gordon Brown who sold off a large slice of the UK’s gold reserves for a pittance between 1999 and 2002 and more recently he has been suggesting that the International Monetary Fund should sell gold to fund countries in Africa. Politicians are not be trusted as France and Holland demonstrated so deftly in recent weeks, so his future actions in this regard should be monitored carefully. In this light it is very timely of the World Gold Council to have published a key report entitled, “A Touch of Gold: Gold mining's importance to lower-income countries”. In essence it reveals how gold mining is becoming even more prevalent in the developing world, and demonstrates how gold has become one of the most important exports for heavily indebted poor countries
The new report updates one published in 1999 which was entitled “A Glittering Future? Gold mining's importance to sub-Saharan Africa and Heavily Indebted Poor Countries” which examined, for the first time, the role of gold in the economies of developing countries. At the time the study's findings played a part in encouraging the International Monetary Fund to revalue, rather than sell, a portion of its gold reserves for the purposes of debt relief. But then is then, and now is now, so it is useful that the new report shows that gold production has increasingly shifted to developing countries which accounted for 72 per cent of global output of gold in 2004. Low-income or lower-middle-income countries together accounting for two thirds of global output. If South Africa (whose production is on a long term declining trend) is excluded, gold output by developing countries rose by more than 50 per cent over the last decade.
The strongest rise in output was seen in heavily indebted poor countries whose gold production rose by 84 per cent between 1994 and 2004. Of 38 such countries, most of which are in Africa, 14 are significant gold producers with lesser production occurring in a further 14 countries. As their output rises, so also does their dependence on gold exports In 2003 it accounted for nearly 8 per cent of goods (merchandise) exports and over 6 per cent of exports of goods and services. For the 14 significant producers, gold accounted for 13 per cent of goods exports and 10% of their exports of goods and services. For example, gold is the leading export for Mali (59 per cent in 2003), Tanzania (44 per cent), Ghana (32 per cent), Guyana (26 per cent) and the second most important for Guinea (23 per cent).
Gold is also a crucial export for a number of other low-income and lower-middle-income countries. It is the leading export for South Africa, Peru, Kyrgyzstan and Papua New Guinea and an important export for several others. As James Burton, CEO of the World Gold Council, pointed out, “ this report shows just how reliant on gold mining highly indebted countries have become. For example, studies indicate that each mining employee in South Africa supports on average up to ten people. Gold is generally associated with the rich and yet this latest report proves that, in relative terms, it is actually much more important to the poor.”
Importantly, the report also shows that export revenue is not the only benefit gold mining brings to a developing country. Throughout history, the establishment of a formal mining industry has frequently been one of the first steps in a country's industrial development and often provides the critical mass for the development of electricity, water, road and rail transport in a region. Gold mining companies also try to source supplies locally and employ local labour. Gold mining also provides royalty and tax income to governments, technology transfer, skilled employment and training for local populations together with further jobs through the multiplier effect.
Hopefully Mr Burton sent Gordon Brown a copy of this report. It will make good bedtime reading for him as it is crystal clear to most thinking people, if not to him, that a sale of gold by the IMF would hit the gold price and thus affect the future of the very countries he claims to be attempting to help.
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