The writer - Raymond Kudzawu-D'Pherdd
The writer - Raymond Kudzawu-D'Pherdd

The Menzgold - Bank of Ghana muddle

Between 2010 and 2015, Ghana lost over $25 billion in gold sales to the state following a disagreement between the Ghana Standards Authority (GSA) and the Precious Minerals Marketing Company Limited (PMMC) over which of them has the authority to certify gold for export.

The Ghana Standards Authority riding on NRCD 173 of 1973, as a third-party government conformity assessor in the country had actually set up a gold testing laboratory fitted with state-of-the-art equipment with all the standard requirements for testing gold.


Hence GSA’s claim that her testing methods are the only acceptable standard in the testing of gold worldwide.

Meanwhile, the PMMC also stood on PNDC Law 219 of 1989 to back her claim that the PMMC was the sole recognized body to test for the quality of gold for export.

To date, the two government agencies are each staking claims and counterclaims to a sole mandate to assay and certify gold for export.

According to sources in the industry, the deduction of 0.175 per cent of the value of gold to be exported as commission to the testing agency was the source of the turf war.

While these two engaged each other in legal tussle, the taxpayer lost $25,000,000,000 within 5 years according to a Bank of Ghana report quoted by South African based African Mining News.

So if Ghana could lose that much in 5 years and still be on her feet, one daresay that Ghana is not poor.

The Muddle

In a seemingly parallel development however, the Securities and Exchange Commission (SEC) and the Bank of Ghana appear to have been sitting on the fence throughout 2017 till now and issuing disclaimers, warning the public to do business with MenzGold at their own risk. As these two institutions take forever to decide, MenzGold is expanding ambitiously and even gone global.

Critics are baffled and appalled to imagine that, the Central Bank of Ghana feigns such degree of ‘toothlessness’ in a simple matter requiring her authority. Some wonder why BoG hasn’t shut MenzGold down already if MenzGold has violated any statutes. Others believe that the MenzGold saga comes under the ambit of the SEC instead.

So why is the SEC too doing nothing apart from public awareness statements? Let’s look at the coming into existence of the trio.

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The Bank of Ghana

On the 4th of March 1957, just two days before the declaration of Ghana’s political independence, the Bank of Ghana was formally established by the Bank of Ghana Ordinance (No. 34) of 1957, passed by the outgoing British Parliament.

The Bank of Ghana has since 1957 undergone various legislative changes. The Bank of Ghana Ordinance (No.34) of 1957 was repealed by the Bank of Ghana Act (1963), Act 182. This Act was subsequently amended by the Bank of Ghana (Amendment Act) 1965, (Act 282).The Bank of Ghana Law, 1992 PNDCL 291 repealed Acts 182 and 282.

However, the current law under which the Bank operates is the Bank of Ghana Act, 2002 (Act 612). Among formulating and implementing monetary policy, the Bank is to regulate, supervise and direct the banking and credit system and ensure the smooth operation of the financial sector.

In addition to acting as banker and financial adviser to the Government, the Bank of Ghana is mandated to license, regulate, promote and supervise non-banking financial institutions. Where does MenzGold fit in in BoG’s mandate?

What about Securities and Exchanges Commission?

The Securities and Exchanges Commission of Ghana was established by the Security Industry Law, 1993 PNDCL 333, as amended by Securities Industries Amended Act 2000, Act 590. Today, SEC operates under Securities Industry Act 2016, Act 929.

Among the numerous objects of SEC is to advise the Minister on matters relating to the securities industry, maintain surveillance over activities in the securities industry to ensure orderly, fair and equitable dealings in the securities, and to register, license, authorize or regulate the current Act or Regulations.

SEC is also expected to formulate principles for the guidance of the industry: protect the integrity of the securities market against abuses arising from dealings in securities: create the necessary atmosphere for the orderly growth and development of the capital market; and examine and approve invitations to the public made by issues other than the government’s.


So what is MenzGold doing?

MenzGold proclaims to be a proud African Gold Bank. MenzGold is a limited liability company duly registered and incorporated in Ghana by the company’s Act of 1963 (ACT 179) and undertakes dealership in Gold, Diamonds and other precious stones and metals. Menzgold has a license from the Minerals Commission of Ghana to undertake the aforementioned business.

The company has further created a bullion investment platform (gold trading), that offers ten percent (10%) monthly return on investment (ROI). The company reports an unblemished 100% record since its inception; being exceedingly successful, offering individuals a sure alternative source of income amidst the current global economic ills.

Menzgold has intelligently avoided any form of direct reception of money from the public or her customers. As a result, she is not a Financial Institution and therefore has no business with the Bank of Ghana. So she hasn’t registered with BoG.

MenzGold is also not clearly trading in the securities so she is not obliged to stay under the radar of SEC.


In fact, the Securities and Exchange Commission is duty bound to create the necessary atmosphere for the orderly growth and development of the capital market in this instance.

MenzGold’s business model is an intelligent over the counter derivative.

The derivatives’ market

The derivatives’ market is excessively huge but cannot be regulated: and that is the danger; that a $270 trillion dollar market cannot be regulated globally!

May we not stampede our understanding here and gloss over the fundamental question. What is a financial derivative in the first place? A financial derivative is a security that depends on an underlying asset. So a stock option for example is a financial derivative whose value is dependent on the price of the stock.


The most common underlying assets of financial derivatives are therefore bonds, stocks, commodities, interest rates and market indices. The derivatives market exists in two folds.

One fold is under the radar of the exchange clearinghouses, called the futures and the other is over-the-counter (OTC). The OTC option reduces such financial derivatives to a mere contract between two parties.

The question therefore is who can regulate a contract between two parties? Your guess is as good as a toddler's; especially so when the two parties have an understanding and there hasn't been any default. For this reason, two parties can equally agree on whether the temperature in a room would increase or decrease, use the temperature as an underlying asset of their derivative. Who can regulate that understanding?

Paul Wilmont who is an authority on the subject estimates that the derivatives market is 20 times the size of the world economy.

He puts the financial derivatives market around a total of $1.2 quadrillion, whence the world's annual domestic product is estimated at only $55 trillion on the average.

The derivative markets are always ahead of regulators, and the fact is, they are so many already but new ones are being introduced into the market on a daily bases.

They cannot be regulated because they are over the counter transactions. In the coming months Ghanaians should expect El Gold another business similar to Menzgold but with superior mechanism and even higher returns.

The Conundrum

On one hand, MenzGold has a legitimate license from the Minerals Commission of Ghana to purchase gold. And she proceeded to use the price of the gold purchased by her customers as an underlying asset for a financial derivative with both European options, that is an option in which the customers can exercise their rights only on an agreed maturity date, or the American option in which the customers can exercise their right any time before and up to the maturity date.

This is a contract between two parties, over the counter, and doesn’t come under the jurisdiction of the Central Bank of Ghana nor the Securities and Exchange Commission of Ghana.

Nonetheless, there are legitimate but hypothetical moral concerns for the protection of the vulnerable citizenry.

What happened in the US

A similar situation reared its ugly head in the United States and this is how she dealt with it. Futures contracts for agricultural commodities have been traded in the United States for more than 150 years and have been under Federal regulation since the 1920s.

In 1973, grain and soybean futures prices reached record highs. This was blamed in part on excessive speculation and allegations of manipulation. Congress quickly took over the issue and revised the Federal regulatory scheme for commodities. By October 1974, Congress effectively passed the Commodity Futures Trading Commission Act of 1974, it was signed by President Gerald Ford. This bill overhauled the Commodity Exchange Act and created the Commodity Futures Trading Commission (CFTC or Commission), an independent agency with powers superior to those of its predecessor agency, which was the Commodity Exchange Authority.

For example, while the Commodity Exchange Authority only regulated agricultural commodities enumerated in the Commodity Exchange Act, the 1974 Act granted the CFTC exclusive jurisdiction over futures trading in all commodities. This gave immediate direction, clarity and sanity.
Parliament of Ghana is therefore the solution.

In a similar fashion, (and this is not to suggest whatsoever the absolute copying of everything from the United States), the writer nonetheless believes that an opportunity has presented herself for the country’s legislature to get to work.

Parliament can equally and ably define the way forward in this apparent 21st century innovative business model by Menzgold which is intertwined with unclear legalities and perhaps fondness, sizzled and garnished with financial romance between MenzGold, SEC and the Bank of Ghana.

To equally overhaul the current system, Parliament should cause the establishment of a body that captures the area MenzGold is treading on. Currently, it appears she is neither under the radar of the Securities and Exchange Commission nor that of the Bank of Ghana and all the periodic disclaimers from both SEC and BoG for the past 2 years are just causing fear and panic.

Meanwhile, the ever increasing confidence which the public appears to be reposing in MenzGold and her products must be protected, while the innovative business model engineered by her is aided to grow and blossom. There have been a few unfortunate historic financial experiences in Ghana. A good and recent example is the DKM story, which must not be repeated. Indeed, some critics believe that MenzGold has residual metamorphic signatures akin to the erstwhile ESSELF GOLD, which went the DKM-way in 2012.

Parliamentarians can, therefore, help protect businesses and the people who elected them into office by couching a legislative solution or instrument on this issue before its too long again. As seen from the above, the inactions or wrong actions of government institutions can cause the nation to lose billions of US dollars in aggregates. Without prejudice, let us see what comes out from EOCO.

Writer's email: [email protected] Tel: +233 266 211 660

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