Amid the pomp and pageantry surrounding the newly launched Royal Gold Ghana Limited, the Dean of the University of Cape Coast Business School, Prof. John Gatsi remains unhappy about the shareholding structure of the company.
Prof. John Gatsi notes that information available to him indicates that the Bank of Ghana only owns a 20% stake in Royal Gold Ghana Limited while the Indian Partners own the lion’s share of 80%.
The finance and economics expert explains that the current shareholding structure of the local gold refinery firm cannot significantly help deal with the country’s exchange rate instability and volatility.
Although admitting that a local gold refinery is a significant jump for the economy since it will create jobs, locally refine the country’s raw gold, and potentially increase the country’s export earnings, Prof. Gatsi says the 80% foreign ownership means 80% of the profits will be repatriated outside Ghana creating exchange rate problems locally.
He adds that it will further deepen the country’s profit repatriation problems as already done in the mining, telecommunication, banking, oil and gas, and shopping mall industries which persistently affect the stability of the cedi.
“Refining gold in Ghana is another progress for the economy. It will provide some jobs, contribute to currency management and increase earnings through export. It will, however, not be the solution to current and future volatility and instability of the cedi. Currency stability cannot be reduced into the establishment of the first gold refinery in the country. It is more than that. There is gold purchase programme currently ongoing to build reserves and there is gold for oil. These have not stopped the volatility of the currency and unbearable undulating price trends over the period,” Prof. Gatsi explains.
He adds that, “the refinery is not wholly owned by the Bank of Ghana. In fact, the Bank of Ghana owns only 20% and the Indian partners own 80%. It means 80% of the profit to be made may be subject to repatriation to India as the case is for other foreign direct investments in the country such as those in mining, telecommunication, and large shopping malls. The net effect doesn’t favor currency stability.”
The dean therefore stressed that the benefits would have been profound if the partners were Ghanaians and the profits would not have been repatriated.
This ownership structure brings to the fore a very important issue of the long-term impact of foreign ownership in Ghana’s economy. While the foreign direct investment of foreigners plays a significant role in Ghana’s economy, the stability of the cedi is a concern that needs to be addressed due to the repatriation of profits.
It is important that the country prioritize the mobilization of local resources in undertaking some investment ventures. This is because the problem of repatriation of profits would be addressed since profits will remain in the local economy hence stabilizing the cedi. However, laws are needed to stringently regulate the profit repatriation by multinationals so that they do not put the local currency in jeopardy.
