Ghana’s efforts to formalise the gold trade could struggle to retain miners and aggregators in the regulated market if the formal system fails to offer competitive margins, faster settlement and workable operating conditions, transactional expert Amanda Akuokor Clinton has said.
Clinton made the observation during an interview on Ghana’s gold market, focusing on investor exposure, GoldBod, foreign-exchange conversion, formalisation and institutional risk.
Her argument is that formalisation cannot depend on regulation alone. Participants in the gold supply chain will ultimately compare the economics of operating within the official system with the returns and convenience available through informal channels.
“If the informal sector can get a better margin, they will continue to find other channels,” Clinton said.
That creates a particular challenge for GoldBod as it seeks to bring more of Ghana’s gold supply into a centralised and traceable market.
Economics will determine participation
Clinton said miners and aggregators are often more commercially sophisticated than policymakers may assume.
Even where participants have limited formal education, she said, many closely follow international gold prices, local discounts, margins, buyers and payment timelines.
Their decisions are therefore likely to be driven not simply by whether a transaction is legal, but by whether the formal route provides an attractive commercial proposition.
For the formal market, that means the cost of compliance, speed of payment, access to financing and margins available to miners and aggregators can influence whether supply remains within the regulated system.
If those conditions become materially less attractive, participants could seek alternative channels.
Formalisation and smuggling
The issue has implications for Ghana’s long-running effort to curb gold smuggling.
Clinton argued that smuggling should not be viewed only as an enforcement problem. The economics of the gold trade also matter.
Where gold producers and aggregators can obtain better returns outside the formal system, enforcement is effectively competing against a commercial incentive.
That could make it harder for the state to capture the country’s gold production through official channels, even as regulatory controls become tighter.
The challenge is therefore to make the formal market sufficiently attractive that participants have a commercial reason to comply, while maintaining the controls needed to improve traceability and reduce leakages.
GoldBod needs informal supply
The relationship between GoldBod and the informal sector is consequently more complicated than a simple regulator-versus-trader dynamic.
Ghana’s formal gold market depends on the miners and aggregators who physically source and consolidate gold across the country.
That gives those participants influence over the success of the formalisation effort.
Clinton’s assessment is that GoldBod therefore needs to bring informal actors into the formal system while ensuring that the system does not become so costly or cumbersome that it creates incentives to remain outside it.
This becomes increasingly relevant as Ghana tightens control over the gold supply chain and seeks to increase domestic value addition.
GoldBod has announced that from September 1, self-financing aggregators will no longer be permitted to export unrefined artisanal gold dore, with such gold required to be refined in Ghana before export.
The policy direction increases the importance of ensuring that the formal route remains commercially viable for the participants who supply the gold.
For Clinton, the long-term test of Ghana’s gold formalisation strategy is therefore not simply whether the state can regulate the market, but whether the formal market can offer an economic proposition strong enough to keep miners and aggregators inside it.
