Business News of Wednesday, 12 September 2018
The closure of parts of the operations of gold trading company, Menzgold, won’t significantly impact Ghana’s financial sector.
Economist, Professor Godfred Bokpin, explained that the development is as a result of investors’ risk which regulators cannot be entirely blamed for.
The SEC has ordered the immediate suspension of the gold deposit-taking business of Menzgold.
A directive to Menzgold by the Securities and Exchange Commission said the company’s gold deposit-taking business is illegal.
According to the SEC, Menzgold is engaged in the purchase or deposits of gold collectibles from the public and issues contracts with guaranteed returns with clients.
By this, clients whose investments have matured will not have access to their monies until a new order from the SEC.
Professor Godfred Bokpin told Citi Business News the affected customers chose the risk and should bear the consequence.
“It is part of the risk and therefore when something like this happens, of course, it will affect them and largely also because we picked some signal that already some people were making withdrawal requests that they couldn’t get. I want to believe that by now, Menzgold would have had some kind of arrangement in place in how it deals with the expectations of its depositors,” he explained.
Citi Business News understands that the regulator’s action also follows subsequent visits by officials where detailed information submitted by the company revealed that the said activities were a threat to unsuspecting and uninformed investors.
The seeming distraction in operation is traced to about two years ago where Menzgold started selling and purchasing gold and guaranteed the public a return of 4 to 10 per cent monthly translating into 48 or 120 per cent annually.
But on whether the inability of customers to access their funds will distort the already troubled financial sector, Professor Bokpin stressed his position as this, “No, the spillover effect will be mute because it is largely an isolated case. The reason the effect may not be that pronounced in terms of its overall impact on the market is because reasonably, people are aware of the challenges of Menzgold; reasonably the market is aware of what Menzgold should have done that they didn’t do; reasonably the market could have anticipated the end of Menzgold,” he stated.
‘We’re still open for business, SEC’s leaked letter distasteful’ – Menzgold
Meanwhile, the management of Menzgold Ghana Limited has clarified that they are still “open for business” despite a directive from the Securities and Exchange Commission (SEC), for it to suspend its gold trading operations with the public.
The company, in a statement issued in the wake of the SEC’s directive, said that it found the “leak” of its interactions with the Commission “needless, distasteful and in very bad faith.”
Menzgold added that having been engaged in discussions with the SEC in order to find a resolution to the situation, it was disappointed by the release of the details to the public.
“This needless leak believed to be coming from the Securities and Exchange Commission is to say the least, in very bad faith and distasteful; as it defeats our confidence in the body and an affront to cooperation. We totally condemn it!”
According to the SEC, Menzgold has been dealing in the purchase and deposit of gold collectibles from the public and issuing contracts with guaranteed returns with clients, without a valid license from the Commission.