A newly established council researching the African gold sector will be courting the continent’s central banks, offering research, data, and support in managing their extensive gold reserves.
Jude Uzonwanne, CEO of the Africa Gold Council (AGC), told Business Times they’ve approached central banks on the continent about how to utilise their estimated 700 tonnes in gold reserves to achieve their most urgent fiscal and developmental goals.
“One of our fundamental drivers of demand for gold on the continent would be African central banks buying gold from African refiners. We know that it’s been a policy objective of several central banks. We have spoken to some… both in East and West Africa,” Uzonwanne told Business Times on the sidelines of this week’s Investing in African Mining Indaba in Cape Town.
He said, following informal engagements, central banks on the continent have sought the AGC’s advice, and the council now intended to advocate for an approach for how central banks can link mining to reserve management and currency stability. “For us, we see gold as a tool that can have significant implications for how economic growth is driven for all of us.
“Most African countries need at least 7%-10% GDP growth per annum to double income within a decade. Creating support around gold and an ecosystem around gold won’t solve every issue, but it’s an important part of the story… We expect that partnership with African central banks will only continue to grow.”
Central banks are considering and executing creative solutions to leverage their gold reserves to meet national goals. South Africa did this in 2024 when finance minister Enoch Godongwana announced in his budget speech that it will draw R250bn from the country’s Gold and Foreign Exchange Contingency Reserve Account (GFECRA) to pad the interest costs on South Africa’s fiscal debt.
The biggest area for cooperation is to have greater visibility and control over the cross-border flows ... and that can only be done in collaboration between ports of origin and ports of destination
— Andrew Naylor, head of Middle East and public policy at the World Gold Council
The rally in the gold price over the past year has added to the potential strategic benefit of the commodity to African economies. Gold’s price has surged 10.65% in the past month, up 73.11% compared to the same time last year, with the commodity reaching an historic all-time high of 5608.35 in January.
Uzonwanne said the AGC will offer advice to central banks based on facts and provide advice on questions, including which global financial centre in the world African central banks should store their gold reserves in, such as New York, London, or Dubai.
“We are of the view that we should have more storage sites on the continent that meet certain global standards. So, there is one location in South Africa today, but we know that a number of other places are actively preparing themselves to get to that point.”
In its information notice on the official gold and foreign exchange reserves released at the end of last month, the South African Reserve Bank (Sarb) said it had $80.193bn (R1.2-trillion) in gross reserves, $20.67bn of which was held in gold.
“The changes in the gross reserves and international liquidity position were mainly due to the increase in the US dollar gold price, the matured forward exchange contracts conducted for liquidity management purposes, valuation adjustments due to foreign exchange and asset price movements, and foreign exchange purchases.”
The Sarb’s update said these factors were marginally offset by foreign exchange payments made on behalf of the government.
Andrew Naylor, head of Middle East and public policy at the World Gold Council, told Business Times the international nature of the gold supply chain requires cooperation between countries to stop gold smuggling and better coordinate intelligence centres around money laundering and abuse of banking systems.
“The biggest area for cooperation is to have greater visibility and control over the cross-border flows, and that requires information sharing between the ports of origin, ports of destination, and mechanisms for verifying trade documentation… and that can only be done in collaboration between ports of origin and ports of destination.”
He said five central banks are on board with the World Bank Council’s programme at the moment, while three more are in ongoing talks to join. Central banks that have already joined include the central banks of Colombia, Ecuador, Mongolia, and the Philippines.
Business Times
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