GoldBod Losses & Profits: Do They Matter, When They Matter And All The Nuances To Note

Author: Gyasi Dapaa, A Trained Economist & Data Scientist Who’s Transformed Multiple Fortune 500 Companies with Strategic and Evidence-Based Decisioning

GoldBod Financials have come under heavy scrutiny lately. The minority leader in parliament, Mr. Afenyo Markin, constantly complains about a 22 billion Ghc suffered under GoldBod. GoldBod’s CEO, Mr. Sammy Gyamfi. defensively attributes that loss to Bank of Ghana, 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.

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 to primarily help BoG accumulate gold reserves and consequently generate ready foreign exchange for the stability of the Ghanaian cedi.

Monetary institutions like 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 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 a dire immaturity if not ignorance in Macro Economics!

The reason is that monetary policy objectives reign supreme because they are critical to the health of the economy. Their criticality therefore subdues the pains 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 paralyses that result 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 paralyze monetary policy and alas the economy as a result.

GoldBod is created to help 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 keep wake because we can die in our sleep –Not Sensible!

GoldBod’s revenues, as confirmed by their CEO, have been generated from fees and licenses it has charged from 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 by government executives to over tax 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 geniuses to create **NEW** value that generates new money for the benefit of the country and its People. Such new value can express in the form of refinement of gold that generates new profits, renegotation 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 these has happened under GoldBod yet and so the celebration of GoldBod profits must stop.

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 narrative is false and that 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.

Profits to State = Losses to People The people who benefit from State losses can therefore be analyzed to ascertain that state money are 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 some 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 Gold Bod, would the sum of all costs associated with the borrowing (interest plus all other transactions costs) be lower than the operational costs GoldBod incurs to generate the same amount? Efficiency concerns are always fair especially for nations where a heartwrenching majority wails under pulverizing poverty.

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 capitalized wisdom of refinement. Everyone knows that refined gold is more valuable than raw gold.

Hence, if GoldBod can develop a credible systainable 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 capitalize 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.

Losses associated with mometary policy are norma,l. Therefore, Mr. Markin should rather ask questions about the purpose Godbod was created to serve. If that purpose is worthy, he can ask questions about GoldBod’s size and complexity? Being a descendant of Danquah-Busiah party, he should cast doubts 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.

Mr. Gyamfi should not run away from GoldBod Losses. Doing so make him look defensive and weak. No matter how the losses are attributed, the losses are incurred as a result of implementing GoldBod’s purpose (ie generating foreign exchange for 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 are aligned with the interest of the nation and its People; and how the nation and its People would be worse without it.

As the CEO of the 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 rhe 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 Bank of Ghana, he needs to explain succinctly with cogent facts why it’d 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’s value chain. As explained before, it’s more glorious to better the life of Peter without robbing Paul.

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 pulverizing under abject poverty. To unnecessarily sensationalize losses and profits that don’t matter is to dtetract

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.

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