Gold supply surges by percent

By Kaleyesus Bekele

The National Bank of Ethiopia (NBE) bought 1,350 kilograms of gold valued at 50 million dollars from local traders in the three months from July-September 2010. The amount of gold supplied to the central bank by local traders in this quarter surpassed that of last year’s by 229.2 percent. The bank bought only 410 kilograms of gold from July-September 2009.

Placer gold (alluvial gold) is traditionally mined in five regional states. Previously, traditional gold miners were forced to sell the placer gold only to NBE at uncompetitive prices and most of the gold was smuggled out of the country by contraband traders. Individuals were not allowed to trade raw gold. In 2005, the then Ministry of Mines and Energy (MoME) caused the enactment of a law that allows individuals to buy gold from traditional miners and sell it to the state bank at a globally competitive price enabling the Ministry to control the illicit gold trade and increase the gold supply to the bank significantly.

The previous minerals transaction proclamation the Ministry which was introduced in August 2009, gives traditional gold miners the right to sell gold directly to NBE or to licensed gold traders. According to the proclamation both traditional miners and gold traders are obliged to sell the gold only to NBE. The miners and traders are not allowed to sell the gold to gold smiths. Goldsmiths are permitted to buy the gold from the bank.

A senior official of the Ministry of Mines told The Reporter that the new precious minerals transaction proclamation enacted last year has enabled the ministry to substantially increase the amount of gold supply to NBE. “Some amount of the traditionally mined gold was going directly to the goldsmith. But now this is a punishable act. The artisanal miners sell the gold to traders and the traders are allowed to sell the gold only to NBE, not to goldsmiths. And the bank is offering attractive prices. This is one of the factors that boosted the gold supply,” the official said.

The Ministry is providing technical assistance to traditional miners in different regional states. The official said the Ministry was working on promoting the traditional gold mining and legal gold trade as well as curbing illegal transactions in collaboration with regional mining bureaus, regional, woredas and zonal administrations and the Ethiopian Revenues and Customs Authority (ERCA). He added the authority was playing a pivotal role in curbing the illicit trade in gold. “Through a coordinated effort with regional administrations and ERCA, the Ministry is boosting the legal placer gold trade. Increasing the gold supply to NBE results in earning more foreign currency for the country,” the official told The Reporter. He further said the mining sector is expected to make a significant contribution towards the realization of the government’s five-year Growth and Transformation Plan (GTP).

In the last fiscal year, the Central Bank bought close to 3,000 kg of gold from local traders valued at 105 million dollars. So far MIDROC Gold is the only company engaged in large-scale gold mining (production of primary gold) in Ethiopia. The company annually produces 3.5 tons of primary gold from its Legedembi mine in the Oromia Regional State. It exports the entire produce to Europe, mainly to Switzerland. The volume of gold produced by traditional miners is to surpass the amount produced by MIDROC Gold. Officials of the Ministry of Mines expect the traditionally mined gold supplied to NBE will soon reach 5000 kg per annum.

Ethiopia volume earns USD 290 million annually from minerals export with more than 75 percent of the revenue accounted for by gold, In addition to gold Ethiopia exports tantalum, platinum and gemstones.

EthiopianReporter