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As much alarmed by the absence of goldsmiths buying
gold from the central bank they were at the lack of
enthusiasm to legalise the supply chain, authorities
at the federal bank were challenged last week over
whether their policies on the gold trade are viable.
Close to 40 goldsmiths and jewellers from across the
city were resistant to the idea imposed by the
central bank last November that they all should buy
gold from it, unlike in the past where they could
receive it from literally anywhere.
But, no transaction has been conducted since then
with the central bank, promoting a meeting held
inside the Ministry of Mines (MoM) on Tuesday,
January 17, 2012.
Called by Sinkinesh Ejigu, minister of Mines, the
goldsmiths confronted officials from the central
bank claiming that their policy of adding a premium
and service charges on a gram of gold will make
retail prices in local stores more expensive than
imports.
The price of a gram of gold in the local retail
shops is 900 Br for 18 carats, while 21 carat gold
is priced at 1,100 Br. Imported gold is available
for 10 to 20 Br more than the local price, depending
on the carat.
Aiming at combating the illegal trade of gold and in
turn identifying the sources of the precious metal
and its supply chain, authorities at the federal
government issued a directive ordering goldsmiths to
buy gold only from National Bank of Ethiopia (NBE),
as of November 7, 2011.
They have also been required to reregister and
should obtain a certificate issued by the Ministry
in order to operate in the market. The Ministry
issues certificates for all operators, including
craftsman, brokers, exporters, and refiners. It has
registered 180 individuals, although officials at
the Ministry estimate the existence of more than
400.
The central bank, which has been selling gold to
buyers in the international market, is now offering
it to the local market at the international price,
plus a five per cent service charge. The central
bank has been buying from artisans since 2008/09,
thereby boosting the nation’s balance of payments
from gold exports.
The volume of gold that artisans produce has
increased since last year. The central bank has
purchased a total of 6,615.2kg of gold worth of 4.8
billion Br from them. It is a volume way beyond what
the government had thought would be produced within
the next five years: 5,250kg.
There are around 1,759 traditional miners organised
in 53 cooperatives, and more than half a million
individuals are involved in traditional mining in
the top five gold producing regions: Oromia, Tigray,
Benishangul Gumuz, Southern, and Amhara regional
states.
These artisans can only sell to the central bank at
the international price of 53.3 dollars per gram for
18 carats.
Despite the efforts by central bank authorities,
such as Abebe Senbeto, director of the Foreign
Exchange Directorate, to justify the additional
percentages on top of the international prices as
meant to cover operation costs, the goldsmiths who
met last week were not convinced.
The central bank ought to sell gold at a breakeven
margin, for gold has a recognised standard, they
strongly argued.
“We are adding our production costs on the product,”
said Brehane G. Kidan, owner of a gold and silver
shop in Piazza area, one of the voices against the
directive, told Fortune. “It will be expensive, and
customers might prefer importing from abroad.”
Such are demands devoid of logic, Abebe of the
central bank told Fortune.
The controversy with goldsmiths and jewellers does
not end with the variance in gold prices. The
central bank has set a minimum volume of 250 grams
to sell to the goldsmiths. The latter find it too
high a volume to carry on with their business.
“Going lower than this will make the central bank a
retailer,” Abebe told the meeting. “We had thought
that this would be a volume that your capacity could
absorb.”
The goldsmiths did not agree.
“This will kick us out of business, as we are not
allowed to operate according to our capacity,”
Brehane, who usually buy up to 400 grams of gold
annually, told Fortune.
Nonetheless, the central bank officials recommend
that the goldsmith get organised into cooperatives
in order to buy and distribute amongst themselves.
In order to make a purchase from the central bank a
goldsmith should present documents, including a
trade licence, articles of association (if it is a
company), and a support letter from the Ministry. |
