DURBAN, South Africa, July 6 (AFP)
Southern African political and industry leaders warned Monday of disastrous consequences if a planned sell-off of gold reserves by the International Monetary Fund (IMF) goes ahead.
The warning came as Britain began a partial sell-off of its gold reserves and follows the G7”s authorisation of the IMF to proceed with a sell-off to fund relief for Heavily Indebted Poor Countries (HIPC).
South African Finance Minister Trevor Manuel criticised the sell-off as being damaging to the very countries that the sales are ultimately aiming to help.
“Too many countries in Africa survive from export revenues, primarily from commodities, and this will impact very directly,” he told a press conference on the sidelines of the World Economic Forum southern African summit in Durban.
“So it doesn’t make sense to say we’re going to weaken your economy by lowering your export revenue and then we’ll compensate you by way of debt relief which doesn’t even make good your losses.
“There’s just no rationale to it,” Manuel added.
The 14-nation Southern African Development Community (SADC) was “speaking with one voice on this issue, and that is “Stop the IMF Sale,”” according to Patrice Motsepe, executive chairman of mining group African Rainbow Minerals, at the end of the two-day summit.
“We have to communicate what the impact of this good intention is. The good intentions of the IMF may just kill the economies of the people they are trying to help,” said Bernard Swanepoel, chief executive of South African mining group Harmony.
Swanepoel warned that his company would have to contemplate job losses if the price of gold, which has languished at 20-year lows — around 260 dollars an ounce — ever since the British central bank dropped its selling bombshell in May, fell further because of the sell-offs.
Manuel said that although the Swiss, British and IMF announcements of a planned gold sell-off had hit the price of gold, he believed that the effects had already been discounted, and the gold price would hold up.
South Africa had reluctantly supported a limited sell-off of five million ounces to fund debt relief at the spring meeting of gold-producing countries, Manuel said, “but now we’re dealing with a different paradigm” because of altered price ratios.
“We’ve got to guard against something that would see the uncontrolled sale of gold,” said Manuel.
“It’s the sale at a number of different times in a number of different circumstances that creates the havoc,” the South African minister added.
“The unmanaged sale at this stage would be disastrous for the future. Part of the difficulty is if decisions are now entrenched, we’re not going to get change in the future.
“So that if the US Congress takes a decision against the sale of gold it’s likely to be a permanent decision,” Manuel said.
The leaders of Britain, Canada, France, Germany, Italy, Japan and the United States agreed last month on a plan to slash billions of dollars from the debt owed by 40 of the world’s poorest nations.
“I think there’s too much uncertainty, and here in South Africa where so many of our mines are marginal, I think we have to take a lot more pressure. Ore bodies (gold-bearing rock) are much deeper (in South Africa), and that changes cost ratio,” said Manuel.
“We need to take a long view of gold because there’s too much riding on it, too much by way of jobs and too much by way of export revenue still,” he added.
All Over the Globe is published by IPA House.
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