Kwame_Seth

1. Since the Newsfile episode on GoldBod, I have received a ton of feedback. 2. Only two categories deserve my public reaction: 1) granted that the current GoldBod model poses risks and is prone to losses, what is my proposed alternative? 2) Has this alternative been shared with GoldBod? 3. Before one can invest in promoting an alternative, one has to convince enough fair-minded and reasonable people that the status quo has serious shortcomings. 4. Despite clear evidence that there have been significant losses and much effort made to explain the serious risk of the situation worsening (brightsimons.com/2025/12/is-tal… & brightsimons.com/2025/12/is-the…), hardcore partisans have done everything to drown all analysis. 5. Recent feedback tells me that enough people have broken through the noise barrier and are ready for the alternatives to the status quo and strategies to reduce the risk. 6. In this post, I will share the summarised version of our proposed fixes. A detailed paper will be sent to the Board and management of the GoldBod in due course. If GoldBod's experts & consultants find anything useful in them, fine. If not, our duty as policy activists would have been discharged. 7. The starting point for our alternative architecture was carefully analysing all the countries that have implemented systems similar to GoldBod. We then built a "maturity rating" system. 8. Contrary to popular misconceptions, Ghana is a late adopter of the "domestic gold purchase program". Countries that adopted it much earlier, like Ecuador and the Philippines, have added features which minimise some of the risks. See the infographic below. We have been guided by their experience. 9. The principal problems with the current GoldBod model are as follows: A. Bank of Ghana (BoG) pumps large amounts of cedis at zero interest to Bawa Rock to buy gold from lower-tier traders. Where do those Cedis come from? We believe it is largely by "printing", thus necessitating mop-up of excess Cedis with expensive borrowing. The BoG can provide the breakdown of source of funds to help the debate. B. Bawa Rock is the only one that gets free cedis from BoG. Hence it is the only aggregator that also passes on the bonuses paid by GoldBod to miners to deter smuggling. The bonus can occasionally make GoldBod pay even higher than the World gold price per our calculations. We note that GoldBod has removed the bonus this morning. Feels arbitrary. A clear policy is needed to guide. C. The next tier of aggregators (Self-financed/SFAs) must find their own money. If they approach banks or other lenders, the interest rate would kill them. If they let overseas offtakers send dollars through GoldBod (only permitted channel currently) they get the Cedis at interbank rate without any bonuses. Naturally, they can't compete with Bawa Rock. D. Some of the SFAs have told us that it has become almost impossible to compete with Bawa Rock. They allege that 90%+ of all the gold is going to Bawa Rock. Our view is that this worsens the overconcentration risk. E. Some of the offtakers tell us that they have sent money through GoldBod to SFAs for almost 2 months and no gold has come through. Meanwhile prices continue to fluctuate, creating massive anxiety for them. F. Because the gold being exported from Ghana is raw (dore) and payment is based on pure form (fine) gold, there are usually discrepancies between what GoldBod assays declare and what the refinery overseas confirms leading to discounts. That whole process is also subject to manipulation if opacity remains. G. Because the trading is driven by BoG's liquidity needs rather than world price margins, sometimes large amounts of gold must be sold even when market conditions are not optimally. 10. Each of these problems divides and compounds to multiple others. 11. We propose a 3-stage process to transition GoldBod from its current trading remit and limit its role to the management of a national Gold Trading Trust-Chain Network (GTTNet). 12. During the first stage, the sole aggregator license given to Bawa should be urgently revisited. The Advanced Payment Guarantee that only it could get is odd on many levels. A. There was NO open RFP process for the licensing that led to Bawa Rock alone emerging as the sole aggregator. Without the standard RFP process, the process lacks transparency & structure. B. A 2 billion GHS Guarantee can only be provided by a bank with 8 billion in equity (BoG Single-obligor, Net retention rules, etc). As at 2024, GCB, one of the most capitalised banks, had barely 4 billion GHS in equity. The entire banking system had ~32bn GHS in equity & reserves. C. GoldBod's management has mentioned an "insurance bond". The insurance sector in Ghana is even more thinly capitalised. Whilst reinsurance is a possibility, our contacts at NPRA could not confirm minimum regulatory steps taken in respect of such a large bond. D. It is strange that Bawa Rock would catapult from being a buying agent for much larger companies to becoming the only company that can be trusted with over 100 billion GHS of interest free money. Since it was already working with the Gold-for-Reserves program and its competitors were both suspended, it appears that conditions were created to ensure that only it could satisfy the requirement. E. So far, no details have been provided about the insurance company that underwrote tens of billions of GHS in risk. Was the state a backstopper in anyway. The idea of a "counter-indemnity" suggests "circular logic". At any rate, Bawa Rock being a single point of failure is problematic. 13. The first stage of reforming GoldBod should also see the implementation of a deviation tracker with preset levels for all loss drivers (be they assay penalties or local bonuses), with all deviations reported in a public risk management ledger. 14. A special audit is required of the stock of gold-program losses. The recent claims that routine audits will provide clarity are flawed. GoldBod does not recognise the trading net proceeds on its books at all. How can an audit disclose any losses? 15. The BoG doesn't publish line by line, program by program, audit results. That is how come prior year losses of these same gold programs have never been disclosed until GoldBod management decided to release them to counter the political opposition. A. BoG must book gold inventory as a reserve asset at fair value (IAS 8 guidance). Record foreign currency sales into reserves. Any difference between cedi cost and USD receipts must be recognized as profit or loss in the period (per IFRS). B. The 2024 BoG accounts use “mark-to-market” rules (IAS 21/IAS 29 style) for gold valuation, which in the current context allows obscuration. 16. Only a special assurance exercise relating specifically to the gold programs would provide disclosure. 17. The next stage should require a new escrow management system operated across the commercial banks for two purposes. Overseas off-takers transparently licensed to operate in Ghana should be able to utilise any of these escrow facilities based on competitive USD to GHS rates that tracks the market (given the wholesale nature of the flows). And they should be able to access any of the aggregators based on competitive terms. 18. The last stage of reform should end the flow of interest-free cash to privileged aggregators. A digital public infrastructure mechanism should allow for open bids and asks across the BoG, offshore off-takers, and the aggregators, to promote price discovery and the optimal exchange rate for gold dollars through deep participation of the commercial banks in rate-competition. A. We believe that with clever design, complicated blockchain is not required for any of this. Though many years hence that can be introduced to deepen transparency. B. Domestic banks and investors can also stake capital into a liquidity pool that provides short-term trade finance to accredited SFAs against their verified gold inventory. C. Ultimately, the goal is to eliminate the need for GoldBod to guess the market price or pay arbitrary bonuses. If the market is willing to pay a premium for assayed gold, the miner and any useful intermediary gets it; if not, the price reflects reality. This removes the trading loss from the BoG's books and transfers price risk to the market participants. 19. The process should also level the playing field among aggregators and offtakers. Right now, 99% of Ghana ASM gold goes to UAE and India. Roughly 90% are bought by 4 or so overseas offtakers. Coupling all this with a local superaggregator that controls ~90% of local trading (only one buying from the downstream traders) constitute massive concentration risk. It also means overdependence on BoG funds. And a massive systemic vulnerability to a price correction in the Global gold market as we have explained with previous infographics and articles (above). 20. So long as gold prices keep rising, we can paper over these risks. However, the wise thing to do always is to build one's nest before the rains come. Building resilience into the domestic gold trading programs is is possible but only if there is a will to think hard and act creatively. Attached is an overview of the proposed model created with Mermaid (lighter note: since I started using mermaid, chart-purists like @CallmeAlfredo have stopped laughing at my diagrams. 🏃‍♂️🏃‍♂️🏃‍♂️)