The Guyana Gold Board must be prohibited from purchasing any more gold. It must confine itself to regulating the gold mining sector.
The laws of Guyana allow for the Guyana Gold Board to be responsible for the purchase of all gold produced in Guyana and for the sale of this gold, locally and overseas. The Gold Board also has powers to engage in other industrial or commercial activities. These laws should be repealed. They are archaic.
The government is suffering huge losses as a result of the purchase of gold. According to information received by this newspaper, between 2012 and 2014, the Guyana Gold Board recorded losses of $10.1B. It owes the Ministry of Finance $8.7B and has an overdraft with the Bank of Guyana of $17.6B.
The Guyana Gold Board is in a worst financial state than GuySuCo. The sugar company has been a drain on treasury in recent years, but it hopes to be able to wean itself off of government’s subvention by 2020. There is no indication as to when the Guyana Gold Board will be able to register a profit after settling its astronomical indebtedness.
Guyana does not need a Guyana Gold Board to trade in gold. It needs a regulatory gold board. The trading of commodities is best left to the market. There should be no role for the government in this gold trading. The losses will continue to mount.
Gold production is increasing. The Gold Board will therefore be required to purchase more and more gold. This means it can incur more losses in the future. There is no reason why this should be happening.
The government is effectively assuming all the risks associated with the movement of prices. This risk can be easily passed on to the private sector without any adverse effect on the economy.
Governments are getting out of commodity trading. So why does Guyana wish to hold on to the State having a role in the buying of gold?
One reason which has been given is that it is a means of ensuring that foreign exchange earnings are repatriated. But this is a feeble excuse, because in the past, when there were tighter foreign exchange restrictions, those who exported commodities were required to repatriate their foreign exchange through the Bank of Guyana. There is no reason why this cannot happen in the case of gold exports.
There was once a company in Guyana called Omai Gold Mines Limited, which was allowed to export its gold production. A law was passed to allow this to happen. No one has ever challenged that law on the grounds that it is discriminatory. But if Omai could have been allowed to export gold, why can’t local gold buyers be given the same latitude? If Guyana is serious about a free market system it has dump old systems of centralized control such as having a role for government in the purchasing of gold.
There are already some market mechanisms in place. Persons have been licensed to buy gold for the Board. And therefore there is no reason why this cannot be extended to full liberalization of the trade in gold.
The miners have long complained that the high royalties which have to be paid represent a form of tax on the industry.
The gold mining sector in Guyana needs stronger regulations. The environmental destruction caused by gold mining is reaching dangerous levels. And there is no strong regulatory body to enforce the mining regulations. This should become the remit of the Guyana Gold Board. It should become an agency concerned exclusively with regulating the gold industry.
The Guyana Gold Board was created in 1982 when there was State control of the economy and when there was a need for a tight rein on foreign exchange earnings. That was in the socialist era. There is no need, when the State is being rolled back, for Guyana to retain State-involvement in the trading of gold, no need at all.
The Guyana Gold Board is the trading and commercial arm for gold in Guyana. Those functions need to be privatized, just as Guyana has privatized everything except sugar and the purchasing and sale of petroleum.
The Guyana Gold Board will become a financial and administrative drag on the Ministry of Natural Resources. It should be dumped and replaced with a regulatory authority and staffed by persons with expertise in regulating the gold mining industry. There is no longer any need for a Guyana Gold Board.
It is easy to say that the government should have a role in the trade in gold. But without any justifiable rationale, this statement becomes just empty rhetoric.
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