It is obvious that Ethiopia is a country with high reserves of mineral resources.
One of these minerals is gold and research has confirmed that the country has a large amount of gold reserves. According to the data obtained from the Ministry of Mines, more than 517 tons of gold reserves have been found in the survey carried out so far.
As evidences indicate; there are two types of gold: gold ore and alluvial gold. Alluvial gold can be extracted from the rock above it when it decays and breaks down due to various reasons. As this type of gold is usually found in the mountains, it is carried by water or wind to a lower place and accumulates. It can be produced traditionally with low technology and low cost. Alluvial gold is temporary and can be depleted in a short period of time.
Gold ore is mined deep into the ground and mined and produced using large-scale technology. According to the current data, the presence of alluvial gold at this level is an indication that there is a large deposit of gold ore. Research conducted in the sector indicates that the reserves are not easy to find because the gold ore requires deep technology and a long time.
As the gold ore requires a lot of resources and investment, it is operated by large companies with high potential. Gold ore resources are widely available in Tigray, Benishangul, Gambella, Oromia, Southwest Ethiopia and other regions. Few companies in the country are engaged in this development.
The mining sector has been made one of the five pillars of the economy due to the government's focus on its contribution and job opportunities it creates for citizens. Following this, many works are being done to make use of mineral resources as an economic source and earn foreign currency.
The amount of gold owed to the National Bank has decreased over the years due to illegal production and trading. The gold production was illegally taken to foreign countries. Since the government established a task force to prevent and control this illegal activity, however, many illegal actors were arrested. It is also known that action has been taken against foreigners suspected of the act.
According to the data of the National Bank, gold production is one of the export products that play a key role in Ethiopia's economy. A few years ago, more than 600 million dollars was earned from gold exports alone; in 2022, the foreign exchange income from gold alone reached 672 million Dollars.
This gold-earning foreign currency has dwindled to the point of becoming issue of discussion. Though Gold reserve is available and production was underway, the product has not been delivered to the National Bank due to various reasons. Especially, with the fact that gold is vulnerable to smuggling and illegal trade and circulation, years have passed without much success.
Among the reasons for this is the fact that the payment given by the National Bank to gold suppliers was not fair. This situation has forced the National Bank to constantly improve the price it gives to its suppliers. Especially in the gold-producing regions of Benishangul, Gambella and Tigray, illegality was rampant and gold was traded illegally and smuggled to neighboring countries.
Although the government has established a task force consisting of security forces to prevent smuggling and illegal trafficking and operations are being carried out and monitored; it has not been possible to stop the increasing smuggling of gold and minerals in the regions.
To solve this problem, the government has been focusing on solving the problems faced in the mining sector, especially in gold development and marketing. It is conducting strict monitoring and control over mineral producers and dealers, taking action against illegally and making various reforms.
Months ago, the macroeconomic reform, which is believed to be of great benefit to the country's economy, has been fully implemented. This is of great importance to the export business, increasing the flow of foreign direct investment, etc. Following the reform, the National Bank has reformed the foreign exchange management system that allows the foreign currency transaction to be carried out outside the national bank or managed by the market.
It is recalled that the National Bank of Ethiopia has issued revised guidelines as it is believed that the reforms in foreign exchange transactions will create a lasting incentive for gold suppliers and it is necessary to improve the supply of gold in a sustainable manner. Regarding the price of gold, the bank stated that according to the procedure in force since July 31, 2024, the purchase price of gold is determined based on the selling rate of foreign currency that is stated on the bank's website every day.
Data indicates that such reforms are causing changes in the amount of gold entering the bank. During the review of the first 100 days of the 2024/25 fiscal year in the presence of Prime Minister Abiy Ahmed (PhD), Minister of Planning and Development, Fitsm Assefa (PhD) said that it is planned to achieve a growth of 8.4% in the current fiscal year.
In the first 100 days of this fiscal year, the complete macroeconomic reforms have recorded better economic performance in exports, government revenue, foreign direct investment and foreign exchange earnings. She explained that in terms of export trade, a very successful work was done, especially in the gold trade.
For example, in the 2023/24 fiscal year, the amount of gold entered the National Bank was only four tons, the minister said. In the first three months of the current fiscal year, seven tons of gold has entered the National Bank. This is an indication that the macroeconomic reforms have brought changes in a short period of time.
According to data obtained from the Ministry of Mines, the macroeconomic reform has brought about a change in itself. State Minister of Mines, Million Mathewos said; the macroeconomic reforms being implemented by the government are significantly increasing the productivity of minerals, especially gold production.
According to the State Minister, Due to the reform, it is planned to produce 8.6 tons of gold in the current fiscal year, and in the first quarter of the fiscal year /in the last three months/ alone, 70% of the plan has been achieved. The reform is benefiting the mineral producers as they have bought better machineries and utilizing technologies.
The State Minister said that work is underway to increase production by making traditional producers use technology, improve their income and accumulate capital. Of the planned 8.6 tons of gold to be produced in the current fiscal year, 3,600 kilograms will be produced in traditional ways. The traditional mining is being developed into a small, medium and large scale industry. Measures are being taken to modernize the traditional production to reduce product and labor wastage.
He further explained that, efforts are exerted and changes are being made to achieve the plan for gold production at the regional level. In Tigray Region, for example, encouraging changes have been seen since the last months, according to the data of the Land Use Management and Mining Bureau of the region.
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In general, the amount of gold entering the National Bank and the amount of gold that has been brought to the foreign market earns more than 500 million Dollars. Especially, after the full implementation of the macroeconomic reforms, results are being recorded. This is indicated by the fact that the amount of gold provided to the National Bank in the first quarter of the 2024/25 fiscal year alone is almost twice the amount obtained in the entire year last year.
It is believed that the change in gold trading as a country is due to the macroeconomic reforms implemented months ago and the reform of the foreign exchange management system issued by the National Bank.
The implementation of the reform will play a vital role in ensuring that the country gets the appropriate benefits from its potential gold mines and gold resources that are being developed in a traditional and modern way. As soon as the reform was implemented, significant results could be seen. This result also indicates that a large change can be registered in the future.
To make this result sustainable, all stakeholders must fulfill their responsibilities in the implementation of the reform. In this way, it is possible to make the efforts started to save gold from illegal activity when it is done. If gold continues to rise in value at this rate, producers will be more motivated to supply it to the National Bank than to illegal traders thereby the foreign currency that the country earns from gold will increase.
BY BACHA ZEWDIE
THE ETHIOPIAN HERALD TUESDAY 12 NOVEMBER 2024
