Who profits from Africa’s gold? | Economy News
Johannesburg, South Africa – The legacy of Mansa Musa, the 14th-century emperor of the Malian Empire, looms large in discussions about gold in Africa. Often regarded as the richest individual in history due to his empire’s vast gold reserves, Musa’s reign contrasts sharply with the current state of gold production on the continent.
Today, Africa is home to approximately 40 percent of the world’s gold reserves, according to the United Nations Environment Programme (UNEP). However, despite this wealth, the continent frequently finds itself at the lower end of the global gold value chain. Most gold mined in Africa is exported, primarily to the United Kingdom for refining and trading, which limits the financial benefits retained by the nations where the gold is sourced.
Kate Collett, an insights analyst at Africa Practice, emphasized the challenges faced by African nations in capturing value from their natural resources. “Africa’s position reflects structural constraints, including limited refining capacity and historical trade patterns that favor exporting unrefined gold,” she stated in an interview with Al Jazeera.
In response, African governments are increasingly focused on not only extracting gold but also maintaining greater control over its economic benefits. Policymakers across the continent increasingly regard gold as a strategic asset, aiming to bolster reserves, reduce economic vulnerabilities, and enhance financial sovereignty.
A Shift in Global Reserves
Gold’s status as a critical reserve asset has been reaffirmed in an increasingly fragmented global economy. Unlike fiat currencies, gold is widely regarded as a store of value during inflationary periods and geopolitical tensions. Central banks throughout the Global South, including those in China, Russia, India, and Turkey, have ramped up their gold holdings to diversify reserves and minimize reliance on foreign financial systems.
African nations are joining this trend. Ghana has intensified its domestic gold accumulation program, increasing purchases of locally produced gold by its central bank. Similarly, Nigeria has recognized gold’s importance in bolstering its external reserves, while Tanzania mandates that a portion of gold output be sold to its central bank under its reserve-building framework. Additionally, Guinea has implemented stricter licensing and export controls aimed at enhancing local oversight and refining capacities.
The increasing value of gold aligns with a broader geopolitical shift towards reducing reliance on the U.S. dollar and creating alternative payment systems, as noted by Thea Fourie, head of regional analysis at S&P Global Market Intelligence.
Capturing More of the Value Chain
Across Africa, governments are tightening regulations to retain more value from gold production. Ghana has expanded its central bank’s gold purchasing program, while Tanzania has strengthened domestic sales regulations. Guinea has canceled previously granted mining licenses that were deemed unproductive in favor of promoting local processing.
Artisanal mining, traditionally considered part of an informal economy, is increasingly being integrated into formal structures. Governments are working to formalize this sector, limiting smuggling and maximizing tax and export revenues. Collett remarked that these initiatives could help nations better harness the value of their mineral resources by formalizing production and incentivizing local refining processes.
Despite these efforts, significant challenges remain. Many small-scale miners continue to operate outside formal channels due to inadequate access to financing and technical assistance. As commodity prices rise, the divide between legal frameworks and ground realities is widening.
Resource Nationalism in the Sahel
In the Sahel region, military-led governments in Mali and Burkina Faso are advocating for increased state control over mining assets. These reforms are seen as efforts to reduce economic dependence on former colonial powers. Mali’s President Assimi Goita is overseeing a restructuring of the mining sector that emphasizes state involvement and local processing capabilities, with Russia emerging as a key partner after a shift away from France.
While Burkina Faso has increased state participation in mining, most large-scale operations in the Sahel are still run by foreign companies due to limited domestic expertise. Analysts like Fourie attribute this shift to a wave of resource nationalism driven by fiscal and security challenges.
However, analysts caution that overly stringent regulations could deter investment, especially if the legal framework lacks clarity. “The quest for African resource sovereignty should not be overshadowed by the actions of military juntas,” Collett stated.
A Long Road to Control
Despite the momentum toward greater policy control, achieving full oversight over the gold value chain remains a long-term goal. Developing local refining capacities requires substantial investment in infrastructure and training. Building internationally accredited refineries and attracting long-term capital is a complex process that will take time.
Beverly Ochieng, a senior analyst at Control Risks, pointed out that opaque policy measures can undermine investor confidence. Some governments have successfully balanced tighter control with maintaining investor trust by engaging effectively with industry stakeholders.
For now, much of the wealth generated by African gold continues to flow abroad. Ochieng noted that the success of state-controlled mining operations will depend on their ability to meet international standards and maintain stability.
Many analysts anticipate a gradual shift toward greater local control over gold resources, suggesting that the future may hold the possibility of an African coalition similar to OPEC for gold-producing nations.
