Can Africa replace the dollar with gold?

• As more countries choose gold over dollar for national reserve, Tanzania is requiring all miners to remit 20% of their gold output.
• This is part of Tanzania’s shift from U.S. dollar reserves system to the precious mineral since creating it’s national gold reserve last year. 
• Across the continent, Kibali, a gold mine in the DRC remains the largest gold producer in Africa.

Gold is dominating international markets, with soaring demand set to reshape Africa’s gold mining industry. As more countries shift toward trading in local currencies, gold is emerging as a strong contender against the U.S. dollar as the preferred store of value. This raises a critical question—why aren’t African economies, rich in gold, building up their own gold reserves?

Take for instance, the case of Tanzania, a country that ranks between third and fourth largest gold producers in Africa, this wealth of one of the most valuable minerals does not reflect its own gold reserve. Statistics show that Tanzania trails Ghana and South Africa, and accounted for 1.3 per cent of the total global gold production in 2021, reports Trxgold, a global gold output tracker.

“Tanzania’s gold reserves are estimated at about 45 million ounces and Tanzania’s annual gold production stands at around 50t per year,” it states. However, policymakers in the East African country have embraced a growing global trend—shifting from dollar reserves to gold as a strategy to counter forex fluctuations caused by the availability or scarcity of the U.S. dollar. This shift comes just months after Tanzania established its national gold reserve last year.

For Tanzania, the country is simply following in the footsteps of other economies across the world. Statistics show that globally, central banks are increasingly choosing gold as a safe-haven asset against emerging economic uncertainty. “This has resulted in a surge in demand for gold and, subsequently, higher prices,” explains Trxgold.

To realize its ambitions, Tanzania has ordered all miners and gold traders to allocate at least 20 per cent of their gold production to the central bank. According to the Bank of Tanzania (BoT), this strategy aims to help the country diversify its foreign exchange reserves. “By increasing its gold reserves, Tanzania hopes to counter the downward pressure on the Tanzanian shilling,” the banking regulator notes.

Policymakers at the BoT note that this diversification is designed to protect Tanzania’s wealth from currency devaluation and economic instability caused by global shocks.

As it works to grow its own gold reserve, with most of its output meant for export, policymakers in the country face an uphill task. While it’s natural endowment appears huge, the nation ranks as the world’s 18th-largest producer of gold as of 2023. Across Africa, it is Kibali, a mine located in the Democratic Republic of Congo (DRC), that ranks as the largest gold mine in the continent.

According to the report, the Kibali Goldmines SA, recorded an output of 750,000 ounces of gold in 2023 making the largest producer of the continent. “The Loulo Gounkoto mine in Mali held the second-biggest gold production volume, 684,000 ounces,” reads the report in part.

Globally, “no gold mine is as productive or as valuable as the Grasberg mine in a remote mountain region of Indonesia,” the report says and goes in to rank the Indonesian mine as the world’s largest producer to date.

Gold mining in Tanzania

Tanzania’s gold mining industry contributes approximately 4 per cent of the nation’s GDP. “However, most of Tanzania’s gold output is exported, limiting its direct impact on the domestic economy,” decries a recent report by the Digest.

Geita Gold mine in Mwanza, ranks as the largest gold mine in Tanzania, producing approximately 3.54 million metric tonnes per annum (mmtpa). It is owned by AngloGold Ashanti Ltd and is due to operate it until 2032.

To foster sector growth, the government of Tanzania has implemented several growth policies targeted at attracting foreign investment and promoting local participation in the sector. “The government has also taken steps to address challenges such as illegal mining and smuggling of gold,”

At the moment, lack of infrastructure, “particularly in remote areas where many of the mines are located,” continues to be a pain point in the East African country’s mining industry, the report adds. “This has made it difficult for mining companies to transport equipment and materials to the mines and transport the gold out of the country.”

“Another challenge facing the industry is the issue of artisanal and small-scale mining (ASM).” These ventures are a vital source of employment in Tanzania, with an estimated 1.5 million people earning a living in the activity.

“However, ASM is often associated with illegal mining, environmental degradation, and poor working conditions,” the report reveals.

For Tanzania to grow its gold mining industry, the report says, “the government and mining companies must work together to address these challenges and ensure that the industry continues to contribute to the country’s economic development sustainably and responsibly.”

Gold accounts for approximately 90 per cent of the country’s total mineral exports. Currently, virtually all of the country’s gold mining business is concentrated in three regions: the Lake Victoria Goldfields, the Handeni Goldfields, and the Mpanda Mineral Field.

“The Lake Victoria Goldfields, located in the northwestern part of Tanzania, are the most significant gold-producing deposits in the country,” the report says.

Gold mining: Democratic Republic of Congo

Ranking above all others in Africa is the Kibali mine in the DRC. It is the largest gold mine in Africa. Worth pointing out is the fact that, the Kibali gold mine “is now one of the greenest mines on the African continent,” noted Barrick president and CEO Mark Bristow in a media brief.

According to him, “much of the electricity that drives Kibali is already supplied by its three hydropower stations. Once the mine’s new 16 megawatt solar plant and additional battery energy storage infrastructure, designed to back up the hydropower supply during the region’s dry season, are commissioned, it is expected the mine’s overall renewable electricity supply will increase from 81 per cent to 85 per cent, and for six months of the year its electricity demand will be met entirely by renewable energy,” he detailed.

He added, “Bearing in mind that Kibali is also a leader in automation, the mine is a real role model for mining in Africa.”

As the case in Tanzania, Barrick is a long-standing partner of the DRC, effectively promoting the development of the local economy there, Bristow said. “This partnership has been particularly beneficial for the DRC. Our total in-country investment to date in the form of royalties, taxes, dividends and payments to local suppliers amounts to $4.7 billion,” he told press.

Also, the implementation of community development projects supported by Kibali’s community development fund, contributes 0.3 per cent of revenue to such projects, which to date amount to an impressive 44 new projects as of 2023.

“The mine’s new Cahier des Charges scheme, funded by Kibali to the tune of $8.9 million over five years, ” he said, adding, “We’re also continuing our support for biodiversity with plans underway to introduce additional white rhinos to the Garamba National Park,” the CEO announced.

Read also: Will hoarding gold help Tanzania beat persistent U.S. dollar shortage?