The recent formation of a Ghana Gold Board (GoldBod) presents a fine opportunity to thoroughly and impartially treat this new and somewhat complicated entity.Ghanaian Cultural Tours
The board has been touted as the backbone behind the recent appreciation of the cedi against major currencies and stability thereof.
These successes notwithstanding, a rigorous academic analysis of the GoldBod issues remains essential to guarantee that Ghana continues to reap the maximum benefits from its mineral investments.
It is trite from economic principles that the core mandate of government is to put in place the necessary institutional and legal framework for a well-functioning market. Furthermore, the government is required to provide public goods whenever the market supply is insufficient or non-existent or enter the market in the presence of market failure.
The passage of the Ghana Gold Board Bill 2025 on Friday, March 28, 2025, which established the Ghana Gold Board, however, marks a tectonic departure from this mandate.
On the other hand, the government’s intervention in the gold business is also a strategic opportunity that cannot be disregarded, given that gold ranks as the largest source of Ghana’s foreign exchange earnings, followed by crude oil and cocoa―the commodity from which the GoldBod draws its framework.
This article explores potential challenges GoldBod may encounter in its operations, some of which are already unfolding, and suggests measures to mitigate them.
What’s the mandate of GoldBod?
The mandate of the GoldBod is clear and unambiguous—to regulate the trading of gold and other precious minerals. This, in essence, is a complete dichotomy from a competitive market, where there are numerous buyers and sellers, to a monopsony, which is characterised by multiple sellers, but a single buyer controlling the market.Ghanaian Cultural Tours
More importantly, GoldBod retains a monopoly over gold exports, effectively eliminating competitors such as licensed private traders and bullion dealers. According to the Minister of Finance, Dr. Cassiel Ato Forson, who announced the bill’s passage, the board has the potential to revolutionise Ghana’s gold industry. “The GoldBod will ensure that Ghana harnesses the entire gold value chain—from extraction to refining, value addition, and marketing—both locally and internationally,” he emphasised.
Challenges and Solutions
While this restructuring may be viewed as novel in Ghana’s gold sector, with the objectives of streamlining gold exports, reducing smuggling and boosting the government’s foreign exchange earnings, controlling illegal mining (galamsey) and creating jobs, GoldBod is, however, not a unique establishment. In fact, the acting CEO of the Precious Mineral Marketing Company (PMMC), Sammy Gyamfi―who led the creation of the board―in an interview disclosed that the GoldBod is structured similarly to the operations of the Ghana Cocoa Board (COCOBOD), which is the sole government body responsible for regulating cocoa marketing both home and abroad through its licensed buying companies (LBCs) and the Cocoa Marketing Company (CCMC) respectively.Ghanaian Cultural Tours
A little background about the operations of COCOBOD will suffice in giving insight into the economic setup of GoldBod. COCOBOD announces the price per tonnage (or per 64kg bag) of cocoa at the start of each marketing year, typically in September. This effectively makes LBCs and producers alike price-takers. In other words, the price is fixed for both the buyer and seller. Although the LBCs have the wriggle room to increase prices, they typically do not adopt price incentives to boost purchase volumes; instead, they use non-price incentives like free agro-inputs and prompt payments.
The LBCs subsequently supply the cocoa to COCOBOD at a pre-determined margin per bag. Assuming GoldBod has adopted this operational setup, this will establish parallels between the two government entities. Another similarity is that both commodities are traded on the futures market. Yet, serious differences might undermine GoldBod ‘s operational activities.
First, there is the underlying commodity. Whereas cocoa is a perishable commodity, gold, on the other hand, is durable and has no shelf life. This distinction will prove pivotal in gold supply to the board. Sellers and buyers could potentially hoard gold to take advantage of future higher prices or arbitrage in neighbouring countries. Although the same phenomenon is present in the cocoa market, hoarding is highly risky due to perishability, bulkiness and the associated storage cost. The nature of cocoa ensures that farmers seek to market their cocoa as soon as possible to avoid these risks.
Similarly, LBCs favour rapid onward transfer of purchased volumes to the government to limit storage cost, risk of perishability, increase turnover, and circumvent limitations of fixed warehouse capacity. Furthermore, the seasonality of the cocoa crop makes it conducive for the government to set annual prices. However, this approach might not necessarily translate to the gold market, primarily because gold is mined all year round, thus subject to no such seasonality. Will the government maintain a real-time price?
Second, arbitrage opportunities through smuggling of cocoa to neighbouring countries, particularly Côte d’Ivoire, are primarily driven by the incentive of higher prices. The culmination of this illegal export of cocoa is significant revenue losses to the government. In the 2023/24 season, Ghana reportedly lost over a third of its output to smuggling. This situation is already unfolding in the domestic gold market, as evidenced by reports of the GoldBod task force arresting illegal dealers and smugglers. These reports are likely to intensify, particularly with Côte d’Ivoire’s emergence as a major player in the gold market and the associated incentives for cross-border arbitrage.
Here is the catch: whereas cocoa is bulky, making it easy to detect, nevertheless, the incentive of higher prices across the border is enough to mitigate the risk. On the other hand, gold is relatively less bulky and much easier to clandestinely transport. Given the fact that gold is by far the valuable commodity by weight, the associated incentives to smuggle are tremendously high, for as long as there are opportunities to arbitrage.
By way of example, a track load of cocoa (about 600 64kg bags or 42.3 tons) is worth an approximated $127,000 (using 2024 prices GHc 48000 per ton and $1 to Ghc16 exchange rate and April 3, 2025 gold price of $100,743 per kilo; $3,133 per ounce), whereas a kilo of gold is worth about the same. This huge price-weight disparity is what is likely to undermine efforts to prevent gold smuggling.
Third, one of the central arguments present both in the academic literature and administrative circles is the role of COCOBOD and its subsidiaries in protecting the premium status of Ghana’s cocoa as well as shielding farmers from price-exploitation by intermediaries. These policing roles are achieved via the Quality Control Unit (QCU) and publicly announced farmgate prices. However, gold is a quality-differentiated commodity, which is aptly reflected in its price. So, basically, the premium argument may not suffice in the case of gold, but the exploitation argument is valid in theory.
Yet reports of GolBod’s prices trending below recent market prices are beginning to undermine this expectation. One such report reveals that 10-ounce gold prices have dropped by no less than 32 per cent (GH₵12,000 or GH₵13,000 to GH₵8,200). Such a steep decline threatens the economic viability of small-scale miners and may provide exactly the kind of incentive smugglers need to ramp up operations.
Other considerations are nuanced. For example, the status of existing licensed gold dealers both domestically and internationally. Will these businesses be afforded adjustment periods to meet long-term obligations? What will be the status of the old licenses? But more crucially what will be the allocation mechanism for new licenses under the new setup? These are serious questions the government needs to adequately consider for the smooth operation of the board.
Finally, the standard economic argument against government involvement in business, particularly commercial enterprise. These arguments include but are not limited to inefficiency; crowding out of the private sector (especially given the monopolistic powers of GoldBod); unavoidable political interference; moral hazard, which may promote uncalculated risk-taking; and the budgetary drain in periods of insolvency. These are not just theoretical expectations; the real-world evidence lies with COCOBOD, which is reportedly close to collapsing due to debt constraints.
These challenges, while significant, can be mitigated or at least minimised. Here are some suggestions. License allocation through public auctions. While this approach is transparent and engenders the public trust, more importantly, it elicits the maximum willingness-to-pay, which can proxy for the marginal cost of the license.
A possible drawback of this approach is having the rich and connected or politicians hijacking sales for arbitrage. To mitigate this, a quota should be allocated to small-scale miners, and in the event the allocation is limited relative to demand, a lottery system should bring some semblance of fairness.
Additionally, a no-transfer embargo should be put on the license, for say 5 years, to limit the operations of arbitrageurs. After this period, full property rights may then be conferred on license holders. Next, if GoldBod adopts the pricing strategy of COCOBOD, which is offering 70 per cent of the freight on board (FOB) price to producers, they are likely to run into problems, because, unlike cocoa, there are bound to be quality differences. Computing the quality premium is likely going to lead to multiple price points. A solution will be to set a price floor that is quality-premium adjustable. On the other hand, prices tied to the stock market will be most reliable, cost-effective and transparent.
Irrespective of the pricing method, the effect of the government-announced price on gold supply and, by extension, the environmental impact will depend on the elasticity (or responsiveness) of gold supply. If supply is elastic, the government should expect more illegal mining (galamsey) with its associated adverse environmental effects. There is also the substitution effect, which is already in play, as reports indicate cocoa farms are being sold for illegal mining, with consequent adverse impact on cocoa output and revenue.
This effect might undermine existing efforts to curb illegal mining and boost cocoa output, unless the government and appropriate agencies significantly strengthen enforcement and invest substantially in land reclamation, both of which entail real costs. The expectation here is for the government to dedicate a portion of its margins to these efforts, while enabling the private sector to competitively bid on reclamation projects.
Conclusion
Overall, if the successes of COCOBOD are anything to go by, we should expect GoldBod to attain similar heights but do so by capitalising on the lessons learnt from the over 80 years of COCOBOD operations to innovate and adjust for maximum efficiency―sentiments shared by the Minister of Finance.
It is also refreshing that the National Concerned Association of Small-Scale Miners, Ghana (NCSSMAG) has given its support to the establishment of the GoldBod, in a statement signed by its President, Michael Kwadwo Peprah.Ghanaian Cultural Tours
However, the government must continually engage stakeholders on issues raised in this article, particularly issues of license allocation, pricing and land reclamation for the smooth and successful operation of GoldBod.
For now, GoldBod, so far so good!
By Festus Attah
Ph.D. Candidate, Auburn University
Email: fsa0005@auburn.edu
