G7 to phase out gold sales

The recent decision by the industrialised G7 group of weathy nations to suspend the sale of gold in order to finance debt relief for poor countries has provided a temporary reprieve for gold producing countries of sub-Sahara Africa, officials of the Southern African Development Community (SADC) told IRIN. “The SADC mining ministers agreed with the G7 to suspend the sales to allow the region’s finance ministers to conclude talks with the relevant central banks on alternative ways to finance debt relief,” a SADC official said. Last month’s decision by the Bank of England to auction bullion on the open market, and the International Monetary Fund’s (IMF) intention to sell 10 percent of its gold stocks saw the gold producing countries’ fears of a drop in the price of gold realised. Two months earlier in July, the gold price had dropped to a 20-year low of about US $260 an ounce. This brought in its wake massive retrenchments and mine closures in South Africa’s gold mining industry. These closures and retrenchments affected Mozambique, Lesotho, Swaziland and Malawi, who have many of their male citizens working as migrants on the mines. Mozambique, for example, suffered the worst when about 2,500 of its citizens were retrenched in July following the liquidation of South Africa’s East Rand Proprietary Mine, one of the oldest gold mines in the country, which employed a majority of Mozambicans. The planned debt relief for sub-Saharan Africa’s 33 countries out of the 41 highly indebted poor countries initiative, (HIPC), is an initiative of both the IMF and G7 countries meant to ease Africa’s foreign debt which some analysts estimate at about US $350 billion. However, the proposal to sell gold stocks to fund the initiative was roundly condemned as counter-productive as sub-Saharan Africa’s HIPC cases, who among them produce 25 percent of the world’s gold, would negatively affect their gold mining industry. The metal, analysts say, comprises about 7.8 percent of the region’s total exports and earned the region an estimated US $6.8 billion in 1997. Commenting on the gold sales suspension, SADC’s mine ministers chairman, Syamukayumbu Syamujaye, said the sales would have escalated the overall cost initiative which would have resulted in declining exports of gold producing countries. Syamujaye said had the sales been allowed to continue, many gold mines in the region would have been forced to close, leading to the countries to borrow more from industrialised countries, thereby increasing their indebtedness.