Gabon: Covid lockdown boosts gold sales
By Shawn Blore - June 10, 2020
The travel restrictions imposed by Gabon to deal with the corona virus have inadvertently turned out to be a boon for the country’s government-run artisanal gold buying comptoir, now successfully buying ASM gold at 10 times its pre-Covid rate.
A West African nation of some 2.1 million people, Gabon shut down passenger air traffic and closed its land borders with neighbouring Cameroon, Congo (Brazzaville) and Equatorial Guinea on April 10 as part of a package of state-of-emergency measures designed to halt the spread of the Covid-19 pandemic.
These measures appear to have proved effective. Gabon reported its first case of the virus on March 12 and recorded its first death March 20, but as of June 10 total cases had grown to just under 3300, with only 21 deaths. On a per capita basis, Covid-19’s toll in Gabon is far below anything in Europe and below that even of many of its sub-Saharan neighbours.
The travel restrictions also had the unexpected effect of re-directing artisanal gold flows back towards the legal Gabon government buying agency, the CGCO (Comptoir Gabonais de Collecte de l’Or). According to a source within the CGCO, the government comptoir purchased about 100kg of artisanal gold over the two-month period from mid-March to mid-May 2020.
|Table 1: Sample CGCO Purchases of ASM gold in Gabon|
(% of spot)
A wholly owned subsidiary of the state mining company, the Société Equatoriale des Mines (SEM), the CGCO was set up in 2010 to buy gold from Gabon’s artisanal gold producers, but for many years had only limited success. According to its own figures the CGCO bought only 42.8kg in all of 2013, and only 28.9kg in all of 2014. The CGCO’s rate of purchase during the Covid-19 pandemic is thus somewhere between 10 and 20 times greater than before the pandemic hit.
The CGCO’s new competitive edge is not higher prices. Transaction data from the CGCO (see Table 1) show that the government comptoir is currently buying gold in Libreville at about 71% of world price. Figures from 2015 show that before the advent of Covid-19, prices in the Gabonese capital used to run at about 94% of world price. That the CGCO is now able to attract gold in such quantities is thus likely due to the closure of borders and international air links. In normal times, illegal buyers dominate the gold market and then export their gold via a variety of clandestine routes involving both land borders and international air travel. The closure of Gabon’s land and air borders has left the CGCO as the only viable option for miners looking to sell their gold production.
However, the border closures may not be the only reason behind the CGCO’s new ability to attract gold. In previous years, the CGCO found itself out-competed by illegal buyers who could offer better prices simply because they were not paying the government taxes. A 14% value added tax (VAT) imposed on all domestic commercial transactions was particularly damaging to legal gold purchasers.
The Gabon National Action Plan (NAP) for Artisanal and Small Scale Mining in accordance with the Minamanta Convention on Mercury reduction, completed in 2019 with technical assistance from Artisanal Gold Council, recommended that VAT be eliminated on gold purchases, as a way of encouraging legal gold sales. According to Wesbert Moussounda, previously the AGC’s project manager in Gabon and now a sales manager with the CGCO, the Gabonese government has at least partially adopted this recommendation. Effective January 2020, gold sales to the government-run CGCO are no longer subject to the VAT.
Artisanal gold sales to the CGGO, according to Moussounda, had already increased slightly in January and February before the corona virus hit, and then of course boomed from March onwards as travel restrictions shut down first gold hubs like Dubai and then Gabon’s own borders.
The challenge now in Gabon will be to hold on to these artisanal gold sales as the Covid-19 crisis weakens and borders and air links begin to re-open. The 50kg per month currently coming into the CGCO represents a significant portion of Gabon’s total artisanal gold production. The Gabon NAP estimated annual ASM gold production in Gabon at 1000 kg/year, or about 83 kg/month. Based on that estimate, the CGCO is currently capturing some 60% of Gabon’s ASM gold production.
In order to retain this market share, Gabon has begun implementing another recommendation of the National Action Plan, extending small scale mineral tenure to artisanal producers. According to the CGCO’s Moussounda, a small number of artisanal mining claims have already been created, with more planned when the Covid-19 crises wanes. The CCGO believes that having a guaranteed right to exploit ore in particular location will provide miners with a strong incentive to sell their gold via legal channels.
For the moment, the CGCO is faced with the more comfortable challenge of exporting their stockpile of ASM gold, which now approaches 200kg with the purchases from January and February included. The challenges of selling gold in the time of Covid will be subject of the next post.