By Gyasi Dapaa
GoldBod’s financials have come under heavy scrutiny lately. The Minority Leader in Parliament, Mr. Afenyo Markin, constantly complains about a 22 billion Ghc loss suffered under GoldBod. GoldBod’s CEO, Mr. Sammy Gyamfi, defensively attributes that loss to the Bank of Ghana (BoG), and rather touts a surplus of 5.4 billion Ghc generated under his executive leadership of GoldBod.
Are profits and losses the right metrics to assess GoldBod’s value to the nation? Otherwise, when are GoldBod’s financials a fair game? This article explores these and other critical existential questions about GoldBod and its utility to Ghanaians.
1. GoldBod Losses Don’t Matter
Losses and profits are typically paramount in assessing the performance of most financial institutions and enterprises. However, GoldBod is not like other public institutions. GoldBod is essentially a monetary policy structure created primarily to help BoG accumulate gold reserves and consequently generate ready foreign exchange for the stability of the Ghanaian cedi. Monetary institutions like the Bank of Ghana are charged with the duty of regulating inflation, interest rates and exchange rates to promote a well-functioning economy.
In discharging their monetary policies, they are predominantly judged by their ability to meet their monetary policy objectives and rarely by the losses and profits they generate as a result. For example, to regulate inflation in the country, central banks like the Bank of Ghana will buy or sell bonds. These transactions are called Open Market Operations. Therefore, central banks at any point in time have a portfolio of bond assets (some purchased, some sold). Changes in bond prices can consequently create material profits or losses depending on the composition of the portfolio.
To fixate on these resultant losses or profits and elevate them above the achievement of the monetary policy objectives will be a symptom of dire immaturity, if not ignorance, in macroeconomics! The reason is that monetary policy objectives reign supreme because they are critical to the health of the economy. Their criticality therefore subdues the pain of any costs incurred to achieve them. Erratic price changes (wild inflation) make it difficult for market participants to plan and make decisions; the decision paralysis that results can fatally slow or even collapse economic activity. To avoid this fate, central banks are empowered to do all possible, even if costly, to regulate fluctuations in general price levels in the country. The fear is that if we subjugate monetary policy objectives to the costs of implementing them, we may inadvertently paralyse monetary policy and, alas, the economy as a result.
GoldBod was created to help the Bank of Ghana regulate the stability of the cedi by generating sufficient foreign exchange when needed. Hence, we cannot be emotional about all of its operational losses. Losses and profits associated with monetary policy implementation are as typical as the cock’s crow at dawn. But to thwart a monetary policy because losses will be suffered is to stay awake because we can die in our sleep – not sensible!
2. GoldBod Profits Don’t Matter
GoldBod’s revenues, as confirmed by its CEO, have been generated from fees and licences it has charged its clients (whom I suspect to be predominantly Ghanaian). When government institutions use their extortionary powers to take money from the people, the revenues and profits that result must not be celebrated as successes. Otherwise, we may create a perverse incentive for government executives to overtax the citizenry just to tout such collections as marks of achievement, if not their genius. The only fair celebration of such success is when government officials have used their genius to create NEW value that generates new money for the benefit of the country and its people. Such new value can be expressed in the form of refinement of gold that generates new profits, renegotiation of better gold trade deals that shift newer benefits to Ghana, creation of more efficient processes and plans in gold trades that cut costs without necessarily sacrificing value, and other new creative implementations that did not predate GoldBod. Nothing like this has happened under GoldBod yet, and so the celebration of GoldBod profits must stop.
3. When Will GoldBod Losses Matter?
Although losses suffered for the implementation of monetary policies are normal, they are problematic under certain scenarios, and I will mention a few. Losses will be a concern if shown to be a consequence of corruption. For instance, most of the losses suffered under GoldBod have been attributed to incentives (in the form of exchange rates higher than the official BoG rate) offered to gold sellers to attract them to GoldBod. If somehow, such a narrative is false and the losses are rather a monetary pipeline to pump the pockets of politicians and their peers, then the people must be alarmed! Even if losses are not due to corruption, losses to state institutions are profits to some group of people inside or outside the country. I highlighted this subtle reality with the grand equation I introduced in an earlier article.
Losses to State = Profits to People Profits to State = Losses to People
The people who benefit from state losses can therefore be analysed to ascertain that state money is not going to beneficiaries not endorsed by the people. For instance, if the monetary policy of an otherwise socialist government is inadvertently greasing the pockets of a few aristocrats or foreigners, the people at least deserve to know. Another scenario where GoldBod losses can become a concern is one of efficiency, that is, if we can achieve at least the same monetary policy outcomes with a loss lesser than what is suffered under GoldBod. For instance, if we had borrowed the foreign exchange generated by GoldBod, would the sum of all costs associated with the borrowing (interest plus all other transaction costs) be lower than the operational costs GoldBod incurs to generate the same amount? Efficiency concerns are always fair, especially for nations where a heart-wrenching majority wails under pulverising poverty.
4. When Will GoldBod Profits Matter?
As mentioned earlier, GoldBod profits will be meaningful if they accrue from true value creation rather than merely from government extortion in the form of taxes, licenses, fees and other tolls. The gold trade value chain is broad, with various participants (nations) taking different portions of the value pie. True value-add shall be expressed in the form of GoldBod figuring out creative ways to augment the share taken by Ghana. This point is key and must be carefully noted: If GoldBod makes more profits without expanding Ghana’s share of the pie, it is merely profiting at the expense of the people of Ghana (again, remember my Grand Equation). Such profits would be merely parasitic and will be at the expense of the people’s welfare. But if GoldBod increases Ghana’s share of the value pie, then the marginal increment can be used for the benefit of the people of Ghana.
There are luckily many ways GoldBod can employ to increase Ghana’s share of the value pie if willing. One way is the age-old yet still to be capitalised wisdom of refinement. Everyone knows that refined gold is more valuable than raw gold. Hence, if GoldBod can develop a credible, sustainable capital structure to refine gold, then it would have managed to augment Ghana’s share of the pie. A less familiar idea is for GoldBod to think about how it can capitalise on its aggregation powers to claim a bigger share of the pie. For example, aggregation brings scale and scale affords leverage in bargaining, competition and efficiencies. It’s up to the creativity of GoldBod to activate all of these powers to yield dividends for the state.
5. What Will Be a Better Line of Attack for Afenyo Markin and the NPP?
Losses associated with monetary policy are normal. Therefore, Mr. Markin should rather ask questions about the purpose GoldBod was created to serve. If that purpose is worthy, he can ask questions about GoldBod’s size and complexity. Being a descendant of the Danquah-Busia party, he should cast doubt on the ability of government to be efficient and whether GoldBod will not become the next COCOBOD – a canker of fiscal corruption and incompetence. And if he really wants to talk about the losses, he cannot merely make it about their magnitude – monetary policy losses are always big. He rather has to show how we can achieve the same monetary policy objectives with a lesser loss (he may need smarter economists to help him with this one). He can even raise questions about the monetary policy objectives and argue to the people why they don’t necessarily serve their interest. There are thus effective debates to be had about GoldBod. Mr. Markin, as the prominent mouthpiece of his party, must learn how to make them.
6. How Mr. Sammy Gyamfi and the NDC Can Better Defend GoldBod and Its Sensational Losses
Mr. Gyamfi should not run away from GoldBod’s losses. Doing so makes him look defensive and weak. No matter how the losses are attributed, the losses are incurred as a result of implementing GoldBod’s purpose (i.e., generating foreign exchange for the Bank of Ghana) and so are legitimately GoldBod’s. He must rather explain them as necessary expenses incurred to achieve a greater monetary purpose for the nation and its people. He must explain why and how GoldBod’s purpose is aligned with the interest of the nation and its people and how the nation and its people would be worse off without it. As the CEO of GoldBod, he should wear the hat of the Educator-in-Chief for the institution and painstakingly explain to the people the purpose of GoldBod and/or the problem it seeks to solve. The people need to understand how that purpose was served before GoldBod, and why GoldBod is a better solution. For instance, for the purpose of generating foreign exchange for the Bank of Ghana, he needs to explain succinctly, with cogent facts, why it would be worse for Ghana to borrow the foreign exchange as done in the past.
Mr. Gyamfi should also stop celebrating the cheap revenues GoldBod generates from the licenses and fees it charges. He should rather tout plans that are being activated to increase Ghana’s share of the gold value chain. As explained before, it’s more glorious to better the life of Peter without robbing Paul.
7. Why Does an Enriched Conversation About GoldBod Matter?
GoldBod is an institution charged with a critical monetary policy responsibility – accumulation of gold for the cedi’s stability. The expenses needed to achieve its obligations will be just as high as its obligations. Therefore, the debates around GoldBod cannot be immature or unserious. We do so to the continuous peril of the many millions of Ghanaians already pulverized under abject poverty. To unnecessarily sensationalise losses and profits that don’t matter is to detract from serious debates that can meaningfully change policies and lives for the better. That is why articles like these must be written to carve minds that know better and curate hearts that plan wisely.
The writer, Gyasi Dapaa, is a Trained Economist & Data Scientist Who Has Transformed Multiple Fortune 500 Companies with Strategic and Evidence-Based Decision-Making
