Across Ghana, anticipation is building around the announcement of the Royal Ghana Gold Refinery, the country’s first commercial gold refinery. With an estimated investment of $20 million, the refinery is expected to significantly reduce Ghana’s reliance on exporting raw gold, transforming the nation from a mere exporter of the precious metal into a more integrated player in the global gold market. The refinery, a public-private partnership between Rosy Royal Minerals of India and Ghana’s central bank, in which the latter holds a 20% stake, has the capacity to process 400 kilograms of gold daily into refined products. While the implications for Ghana’s economy are profound, can Ghana live up to the expectation?
A long-awaited development
Ghana’s rich history with gold dates back centuries, earning it the moniker “Gold Coast.” The Akan people were skilled goldsmiths and traders long before European arrival in the 15th century. Gold fueled the region’s economy and culture. The Portuguese, drawn by gold, established trading posts, leading to British colonization in 1874. Gold mining became the backbone of the colonial economy. Post-independence, Ghana aimed to control its gold sector, establishing state-owned enterprises and increasing regulation of the industry. However, the West African country faced challenges due to economic downturns, mismanagement, and political instability. In the 1980s, the IMF and the World Bank supported the country’s economic reforms to revive the industry. By the 2000s, Ghana had solidified its position as a leading African gold producer.
Since then, Ghana has been Africa’s leading gold producer and the sixth-largest producer globally, with gold accounting for nearly 40% of the country’s total exports. In 2022 alone, Ghana produced approximately 4.7 million ounces of gold, contributing significantly to the country’s export revenue. Yet, much of this gold has been exported in raw form, meaning that Ghana captured only a fraction of its potential value.
Refining gold domestically allows Ghana to retain a larger share of the profits from its gold industry. For instance, if Ghana had refined just 10% of its 2022 gold production, the additional revenue could have exceeded $850 million, assuming an average gold price of $1,850 per ounce. Moreover, the Royal Ghana Gold Refinery is expected to create significant employment opportunities. The project is projected to generate hundreds of direct jobs at the refinery and thousands of indirect jobs across the supply chain, from gold mining to logistics and ancillary services.
Another benefit of the Royal Ghana Gold Refinery is the increased control it offers Ghana over its gold resources. Ghana has long struggled with illegal mining, known locally as “galamsey,” and the smuggling of gold out of the country. These activities have cost the economy an estimated $2 billion annually, according to the Africa Center for Energy Policy (ACEP). By refining gold locally, the government can exert greater oversight over the industry, reducing illegal activities and ensuring that more of Ghana’s gold wealth remains within the country.
Besides, the involvement of Ghana’s central bank in the refinery provides a strategic advantage. The central bank’s 20% stake in the refinery allows the government to directly monitor the refining process and ensures that a portion of the profits is reinvested in the national economy. This could also contribute to building the central bank’s gold reserves, which has been 8.7 metric tons since last year.
The Royal Ghana Gold Refinery positions Ghana to compete more effectively in the global gold market, not just as a top producer but also as a refiner of high-quality gold. The demand for ethically sourced gold is growing, particularly in markets like Europe and North America, where consumers and regulators are increasingly focused on responsible sourcing. By refining its gold domestically, Ghana can better meet this demand, potentially commanding higher prices for its gold exports. Moreover, the refinery could spur the growth of a domestic jewelry and manufacturing industry. The value of the jewelry market is expected to reach over $330 billion by 2026
The other side of the “gold” coin
While the Royal Ghana Gold Refinery is a significant achievement, it is not without challenges. One of the primary challenges is the refinery’s capacity to consistently operate at full potential. While the facility is designed to process 400 kilograms of gold daily, historical data from similar projects in other regions show that reaching and maintaining full operational capacity is often fraught with difficulties. For instance, in South Africa, one of the largest gold refiners experienced a 20% drop in production capacity during its first two years due to technical issues and supply chain disruptions.
Environmental compliance is also a concern. Gold refining is energy-intensive and produces significant emissions and waste, which, if not properly managed, can lead to environmental degradation. Ghana, like many other African nations, has been under increasing pressure to adopt more sustainable practices in its extractive industries. Moreover, global market fluctuations present another layer of risk. The gold market is notoriously volatile. In recent years, demand has shifted somewhat towards digital assets like cryptocurrencies, which saw a 40% increase in investment from 2020 to 2021,
Regardless of the challenges, the bottom line remains that Ghana’s gold industry needs a catalyst, and the Royal Ghana Gold Refinery is well-positioned to play this role. As of 2023, the global jewelry market, was valued at $352.26 billion and is expected to grow at a compound annual growth rate (CAGR) of 4.7%. Ghana’s first gold refinery could be a turning point for the country’s gold industry and its broader economic strategy.
