The recent publication of the forensic audit into the Gold Board has raised concerns about its operations. The forensic audit revealed that “poor management of gold in its possession resulted in losses of over $10 billion for the period 2012 to 2014.” The report found that the losses were due to the maintenance of high stocks while the price for gold declined. The Board “seemed uncertain how to respond to changing market conditions and continued to hold large quantities of gold even as the price declined further.” The report, which is damning in several other respects, comes while reports of the smuggling of 450 pounds of gold to Curaçao in November 2012 and Minister Trotman’s estimate of 15,000 ounces of gold being smuggled out of Guyana every week are still resonating as unresolved problems.
The Gold Board was established under the provisions of the Guyana Gold Board Act 1981 in the era when capitalism in Guyana was under official attack and nationalization of large foreign owned companies had been executed with zeal. Foreign trade, if not nationalized, had become heavily regulated. And so the Guyana Gold Board Act was passed to establish the Gold Board as the body which would take over all trade in gold. Section 8 says that “no person shall sell any gold to, or purchase any gold from, any person other than the Board…”
While the rigidities under the Act were somewhat ameliorated by amendments made in 1994, after the PPP/C government came into office, these did not affect the purpose of the Act, the PPP itself being wedded to a high degree of control. For example, one amendment extending the time for a producer to retain gold before selling it to the Board contained this provision: “It shall be unlawful for a person, not being a producer, to have any quantity of gold in his possession.”
The time has come to consider whether in this era of the fetishizing of market forces, there is any need for government to be the sole purchaser of gold. There is no other product of Guyana that is required by law to be sold to the government. There are products, the export of which is regulated, such a rice and timber. Good reasons exist for this.
In the case of rice the regulation of the quality and assistance in the obtaining of export markets are important. In the case of timber, environmental concerns require the monitoring of exports. Also government’s export fees are required to be calculated. Like the mining industry, of which gold is only one product, the rice and forest industries are regulated by law but the products are not required to be sold to the government.
It is clear that no advantages now accrue from the compulsory sale to the government of gold. The Gold Board has lost a substantial sum and has probably lost much in the past as well. It is not known whether the Gold Board has marketing experts to advise it. If so, the experts have failed. If not, the local managers have failed. In either case, there is on this basis alone a strong argument for the repealing of the legislation and the scrapping of the Gold Board. Buying gold just under the world market price and selling it at the world market price appears to be a no-brainer. But speculation, for which the Board might not have been qualified, may have done the damage.
Apart from the huge losses, the control of the purchase and sale of gold by the government has given rise to an enormous amount of smuggling. Apart from the 450 pounds smuggled to Curaçao, stories occasionally surface about other large amounts of gold being smuggled out of Guyana. Once a Guyanese BWIA pilot was caught and charged. The smuggling of gold appears to be extremely lucrative. The removal of government out of the equation ought to be accompanied with measures which would reduce or eliminate the profit from smuggling.
Apart from smuggling, opportunities abound for corruption in the course of the purchase of gold when its purity has to be ascertained by testing. No matter what systems are put in place, the scourge of corruption cannot be eliminated when between vendor and purchaser another person has to intervene to determine the quality of the gold. Apart from this aspect, there are several other areas where the potential for corruption exists and goes on. The last government did nothing to stop it.
The continuing regime with relation to gold is one of the few remaining survivors from the era of government control over the economy. It now serves no useful purpose and, as is seen, is causing great harm to the economy and to the Guyanese people. It is time that the government get out of the gold business and miners take on the responsibility of selling their own gold with the aid of a Gold Board for only marketing assistance if they so wish.