SEC should assist Menzgold to grow, if it may have the potential to grow

The recent rumpus between the Bank of Ghana (BOG) and Securities and Exchange Commission (SEC) on the one hand and Menzgold company on the other is not helping anyone. The Bank of Ghana maintains that Menzgold is acting like a financial institution by receiving deposits and giving returns and warns the public not to do business with them.
If the BOG had left it at that and acted behind the scenes, there would have not been any panic.

It is SEC’s action of forcing Menzgold to stop its activities without any information for Menzgold customers that led to the panic and rush of customers to the Company.

Before that instruction, Menzgold was not apparently having any problems and was operating normally.

Menzgold argues that it does not receive deposits but buys and sells gold as their mandate gives them. The gold that is purchased from Menzgold is in turn invested with it for a return. I suppose that after the gold has been invested with the company, Menzgold in turn exports them since we are not told that Menzgold processes gold. Besides, Menzgold will not make any money by hoarding them in its vault.

If Menzgold is not buying and selling gold, then it is probably violating the tenets of the license and the institution/s that issued the license should bring them to book. If Menzgold is doing what it is doing then it cannot be accused of receiving deposits and paying interest as the BOG is indicating.



My worry is that, if Menzgold has been operating for about 4 years openly with a license but is breaking the rules of the license given it, why is that it is only recently that the two institutions and EOCO are acting in a manner that is causing panic to the company’s customers and disrupting their activities? Where is the Institution that issued the license to Menzgold?

Government’s duty to Protect Citizens

It is the duty of the government to protect the citizens of Ghana from dubious business and any other activities that could affect their welfare. This is achieved through government institutions. Such institutions do not help government if they are not doing their duty. The practice whereby institutions wait for years for inappropriate activities perpetrated against some citizens by companies and others to occur before actions are taken is most unfortunate. When such actions are taken, the harm would already have been done. There are countless cases of these. Just a few illustrations will suffice.

Going to Madina market, there is a turn to a road that leads to the main market. There is a big hole over a drain that has sat there for years and nothing has been done about it. In fact, the action to be taken is simple and not expensive. Just put a slab on it. This is common in several places in Accra.

The responsible authority will wait till a child or someone falls into it and severely get injured of die before an action is taken. This is a common occurrence in Ghana. When such an accident occurs, no one or institution is sanctioned.

The Environmental Protection Authority (EPA) has a law limiting noise-making

Yet the noise levels in Accra and other places are unbearable. Religious noise is on ascendancy, some at some unholy hours in the morning. Several One-man/woman self made preachers with loud speakers disturb people with their unsolicited and distorted gospel. In fact, all these actions are illegal because they have never sought permission from anyone to disturb. Actually, the problem is the Ghanaian who would pay any monies to any unscrupulous self made pastors, thinking that they will go to heaven by that. In fact, most Ghanaians will not complain when their rights are being abused. Even when these infractions are reported to the Police or to EPA nothing is done about them.



This is tantamount to lawlessness since anyone does whatever he/she feels like doing unlawfully. For if institutions, mandated to implement the law cannot do so then why do they exist?

These two examples set the tone on the actions of institutions like EOCO, the Bank of Ghana and SEC. I am sure that these institutions are aware that organizations cannot operate a pyramid or ponzi scheme without finally collapsing and causing a lot of distress to unsuspecting Ghanaians. Even though such organizations might have licenses, these Regulators, especially EOCO must realize that such organizations are bound to fail and when they do, several Ghanaians will suffer. Such institutions must, therefore, act to save Ghanaians from unscrupulous people and organizations.

Menzgold has operated for at least 3 years. Have the three Institutions and the licensing organization bordered to find out whether the company is operating a genuine business or operating a ponzi/pyramid scheme? If they did not find this out, then they were not doing their duty.

I am putting the blame at their doorsteps because they have stepped in when they have waited for that long. The Bank of Ghana came in but did not ask the company to cease operation. It is SEC that asked them to stop operation and by their actions caused panic to the investors. If they had not caused that panic would anyone had rushed to Menzgold to demand their moneys.

My argument is that SEC or any of those institutions does not have to wait that long before doing check on the company. If they did and found that Menzgold was operating a ponzi scheme, the best action to take was not to cause panic. Any company will collapse if a panic is created by such high institutions. The reason is simple. The SEC knows that Menzgold does business with the investments from people. Hence no one should expect all the monies paid by people to be sitting at Menzgolds’ offices. Menzgold invests most of them. The proportion kept with the company will depend on the operations of the company.

When that panic was caused, people who had contracts with Menzgold to pay them returns in future rushed to the company to demand not only their return but all their investments. Menzgold could not obviously meet such demand because it was not planned. This then causes unnecessary further panic. The SEC should have issued a public statement curbing the fears of investors with their order but did not.

If the three institutions convinced themselves that Menzgold was involved in a pyramid or ponzi scheme, then they should have acted discreetly behind the scenes to protect the interest of the investors by letting Menzgold continue their business but stop the company from further selling of gold to new customers.

This would not have caused any panic.

The three institutions cannot tell me that they did this background search a long time ago and that Menzgold did not budge. I am not referring to the media war that we witnessed a few months ago. No institution addresses security issues in the media. If Menzgold was invited by the agencies and did not respond and nothing was done about it, then it means it was above the law but no institution is above the law of this country. All that is implied here is that all negotiations can go on behind the scenes without the media and without panic.

Concern about Menzgold Activities

I am sure that the concern about Menzgold’s activities was based on the fact they were offering a high rate of return of 10% a month that people thought it was not possible and that it was a pyramid scheme. People think that it is not possible to invest in a profitable venture and receive a return of over 100% a year. This can only be investigated and this was what the 3 institutions ought to have done long ago.



What people fail to realize that it is possible for people to deal in minerals such as gold, oil and gas and make profits of over 100%.

This writer also initially had such a conviction of a possible pyramid scheme until about 2 months ago. I did a simple analysis of the activities of the company. I realized that considering the world price of gold and what was paid to investors, it was possible to give that margin.

Cooling of Heads

From what has been discussed above, I am of the view that this is what the three institutions are engaged in. If it is found that Menzgold is operating a genuine profitable business what is needed is to have its activities strengthened.

A strengthening of the company’s activities could include asking Menzgold to have a strong board composing of capable people; accountants, economists, finance, etc who would ensure that prudent management is followed. Of course, such a board could have a representative or nominee from the investors.

Such a board would have a forward-looking strategy of the company venturing into processing since that will further create jobs in Ghana. These and other activities by the regulators will assist the company to be a giant in future.

Ghana has not benefited from Exploitation and exports of oil and minerals
In 2011, I did a research work for the Institute of Economic Affairs (IEA) that came out with a paper on the real benefits of gold, timber and cocoa production in Ghana over the years. The results showed that about 95% of all exports of cocoa came to Ghana as income to Ghanaians, (income tax, fat salaries to COCOBOD employees, incomes to farmers, etc.)

For timber, the less said it the better. We do not have any timber again to export. What we export is nothing to write home about. The only good aspect about timber was that although most of the big timber companies were foreigners, there were several small Ghanaians timber companies.

For gold, it came out that an average of about 27% of all exports of gold came to Ghana as income to be spent. The rest went to foreign companies. If Ghana took into consideration environmental damage (water, air and land degradation, mosquito infestation, etc.) the net income to Ghana from the export of gold will be less than 20% of its annual earnings. So Ghana is losing by exporting gold in its raw state. (I can send a soft copy to anyone who wants to read the Paper).

Most communities from where minerals have been exploited are some of the poorest in Ghana. Three Ghanaians, all Fantes, who founded Obuasi gold mine around 1880s are Joseph Smith, Joseph Biney and Joseph Brown. They later sold the mine to a British Company. I am sure they were cajoled into selling it to the British Company. Anybody who knows the deplorable economic state of Obuasi and surroundings will not believe that this is an area where billions of dollars of gold have been taken out for over 150 years. It is only the companies and their Ghanaian collaborators who have benefited from the mining activity there.

Gold Jewelry Firms

Gold jewelry firms existed in almost every village in Ghana in the 1960s. Now that we exploit several times the gold that was exploited in the 1960s all the firms are almost dead. Many ordinary families had gold before independence but now very few Ghanaians have ever seen gold. Many women in those days had gold earrings, trinkets, bracelets, necklaces, etc. Ethiopia has only about 30% of Ghana’s gold but processes 80 times the gold Ghana processes.

Conclusion

For the second time since 1960s, ordinary Ghanaians have seen, bought and invested in gold and are benefiting from that gem. If Menzgold is doing a genuine and profitable business, the institutions in charge must assist the company to grow as I have advocated above.

I am sure this is what the SEC and other relevant institutions are doing. If Menzgold were to venture into processing, it will be the second time since the 1960s that Ghanaians will have the opportunity to benefit from gold exploitation.

The nation will be the final benefactor through value addition, jobs and incomes. Let all proceed with caution.