We are Fools: How dumb neocolonialists can’t think through

Menzgold

By Sam A. Obuobi twitter @SamAObuobi

Kwame Nkrumah warned us of Neo-Colonialism, the Last Stage of imperialism. The

irony is that he was the same that took over from the Brits, and his own civil service
continued and upheld their legacy. Today, we drown in a bloated civil and public service
whose wages and salaries alone consume 60% of our tax revenues; our constitutions
have been plagiarized from Westminster and morphed with the US. The Brits lauded
our Traditions, Linguistics, Culture and Polity as civilized and effective; and yet in writing
our constitution, our neocolonialists sidestepped everything that was intrinsic with us,
and adopted the views that said, government resided in Guggisberg’s office. We seem
so pitted in our neocolonialist mindset that we are lazy to think with originality or
innovate. Menzgold could well have come out with a new line of investment product,
that is based on hedging with gold and traded on the GSE. Why can’t our regulators
think with originality and help engineer an investment product that they can regulate?

But let me delve down into what makes us fools.

First, the colonialists divided our peoples right through the center, mixed tribes together
and imposed on us the language that was alien to us. In our territory, Ewes were etched
from their kin and attached to Ghana which was predominantly Akan. The Akan was in
itself divided into two and a section now live as Ivorians who speak French and see us
as Aliens. Now the colonialists are long gone - My question is: how come the black man
has not been able to re-align his boundaries to mitigate the bad effects of tribalism in
our politics, governance and economy?

The blackman has still not been able to design and operate an economic system that
frees itself from the clutches of Guggisberg plan which basically makes us exporters of
primary produce, including gold. We slave in our own land, destroy our forest reserves
and rivers, just so we can galamsey and send refined gold to be stored in vaults in
Europe. So give yourselves a hundred more years, and we’d have successfully
transferred all the gold God gave us into Europe - and then what next?

Even more disturbing is that we don’t get any benefit from the Gold that we mine here,
as of today. Last three years I visited Akim Oda and spoke with a boy that works in
some pit doing galamsey. He told me that a Chinese company had actually built in the
bush an air-strip that aircrafts use to ship out the refined gold. There is no consumer
gold market in Ghana as we speak. In the old days there were goldsmiths in practically
every village or town. Our families rich or poor kept heirlooms of gold trinkets and
goodies that hedged value for them as well as for fashion. Today, there’s no consumer
gold market in Ghana - perhaps except Menzgold.

I got to know about Menzgold just about a year ago when NAM1 bought his aeroplane. I
sought more information about the mode of their gold business but clawed at straw. I
kind of had some gut feeling that if I were building up some novelty market, perhaps I’d
be more cautious in my expenditures and not sprawl my interests that wide. My gut
feeling took me to the time of SEEL Ghana Ltd in the mid 90’s where one of the most
successful telecoms, commodities and media house company crashed for similar
reasons. That’s how I wrapped up then on Menzgold - until I recently learned that the
SEC sanctioned Menzgold to halt its operations. Menzgold immediately could not honor
its obligations to its clients.

I do not intend to say that Menzgold operated a ponzi scheme for that’s the “elephant in
the room”. What is correctly reported is that it exported gold legally, was in the top
league of gold exporters, and in the early five months of 2018 exported about $60million
worth of it. (said by Mr. Opare Hammond of the PMMC). The modus operandi of
Menzgold seemed to be like a “combo service” trading house. Customers bought gold
which they invested in the trading house for monthly returns that were obviously higher
than obtainable from the traditional banking sector or from Treasury bills, or even from
the stock market. Essentially, the monies that the customers paid were used to fund the
purchase of gold from the so called “small scale” mines. The gold is exported through
the PMMC and proceeds are used to pay the huge dividends. Menzgold paid dividends
timeously until the day their operations were halted by the SEC.

I have questions for the SEC. What is the difference between the operations of the
stock market and what Menzgold did. Over the 4-5 years in which Menzgold operated,
did the SEC undertake a research into their modus operandi? What is the difference
between the operations of the Stock Market and that of Menzgold. The Stock market
operates on confidence and sentiments.

The stock market operates as a virtual market, that is regulated to some extent.
Customers place in their monies, and bet that the values of companies would fall or rise
based on sentiments, valuations and technicals that are not certain. To say that the
markets are predictable are a mirage. Sometimes the shares are bullish in which there
exist euphoria to buy more shares; and other times the market bears down or even
crash out. Then there are the derivatives market which are about futures or options.
These are traded by hedgers, speculators, margin traders and arbitrageurs. Think about
that.
Our SEC regulates the stock market, so why can’t the SEC regulate Menzold’s modus
operandi which is hedged by gold. It is not the duty of the SEC to engineer business
strategies, but the SEC should be smart enough to be innovative in its reach to help
business and the financial sector to grow, in new realms, new paradigms and in a ways
that allow the investor to understand the risks that they take - the higher the returns, the
higher the risks. That’s the disclaimer on the stock market right? You could enter the
stock market with 10K today and end up with zero the following day right? The
disclaimer is that you are aware of your risks and rewards. The decision to enter the
market is left with the customer.

In my opinion, Menzgold is the only company since independence to build a domestic

consumer gold market which seems to use sophisticated hedging instruments. Their
actions grew the market considerably in a way that $200 million confidence money was
been invested in an otherwise non-existent consumer gold market. If I were the boss at
SEC, I would have set up a whole department with R&D to research the innovation and
helped Menzgold to refine and align itself in a way that meets the standards of stocks
trading and hedging by gold - And in a way that Menzgold would be regulated as
providing a new type of product on trading and investment based on hedging by gold.
Why can’t we be that original? Why do we always have to refer to what’s already written
in textbooks from Wall Street and LSE? Why do we continue to prove how dumb we are
as Africans without any originality of any sort. Why can’t we be innovative for once. Are
we indeed fools?

This brings to mind gold as an investment: All over the world and even from biblical
times, people and investors have bought gold as a way of diversifying risk through the
use of futures contracts and derivatives. It is the most proven safe haven of all precious
metals having hedging properties that have empirically hold true for centuries and over
so many countries.

So there’s an obvious confluence in using gold in futures and derivatives and

investment. I believe that that’s what Menzgold sought to do. My inkling though is that
NAM1 and his aids were probably not that orthodox with Harvard or LSE degrees, nor
were they burnt in Wall Street sophistication; but somewhat had an operable concept
that worked for them for 4-5 years. Unlike the UK, there is gold everywhere in Ghana.
Therefore, this is my thought. Our state regulators must shirk their neo-colonialist
mindset which says that “we only mine gold for export”. The SEC must set up
mechanisms that effectively coalesce the strength of gold trading, and encourage
distributive gold ownership by citizens. The result will be a new vibrant financial sector
for gold hedging and futures in Ghana whose markets would be even less virtual than
the stock markets they continue to hail.