New African Magazine - Mine all mine

Pusch Comey, the prodigal son, returns home with one of the biggest stories of the year he forgot to report - GATAs all revealing gold summit in Durban on 10 May. It is worth every ounce in gold.

Fairtrade?: the fate of gold is in the balance as Western governments and finance houses manipulate the market

Things are happening to Africans that Africans don't understand. The economy suffers without explanation. There are constant layoffs of mine workers in Africa with tremendous consequences - economic turmoil in towns, villages and families. The spin off is crime, poverty, despair, and disease, which are all blamed on a "hopeless continent" that cannot take care of itself.

African currencies increasingly depreciate and nobody really comprehends. The more Africa plays according to the global rules to uplift itself, the more some invisible "hand of God" seems to negate everything,

In the citadels of Western capitals, however, things are happening that explain it all. Things are happening over the table, under the table, around the table, and sometimes they take the whole table itself.

It all began to unravel when GATA (the Gold Anti-Trust Action Committee), a group of Americans, sick of what was, and still is, happening to the gold market and its impact on Africa, came to Durban on 10 May this year and laid bare the massive fraud being perpetrated by some of the world's financial institutions.

I happened to be at the conference but somehow, distracted by some pressing personal matters, I simply kept the information on my hard drive without filing the story.

Since the GATA African Gold summit, every action that has followed with respect to gold has vindicated their stance. When gold rallied in the last week of May this year, the Bank of England announced the sale of 415 tonnes of bullion (60% of its stock), ostensibly to help prop up the Euro (the European Union common currency that Britain has even refused to join).

The recent tragic events on 11 September in New York should have seen a massive rise in the gold price, but after a brief rally the price has dropped. At the time of writing, it was trading at $279 an ounce - from a high of $850 an ounce in 1979.

DATA in Durban

Meeting at the famous International Convention Centre in Durban, Bill Murphy, chairman of GATA, and his team which included eminent personalities and international gold experts like Frank Veneroso, James Turk and Reg Howe presented overwhelming evidence that pointed to massive manipulation to keep the gold price down to the detriment of Africa and the other producing countries.

But perhaps more disturbing was the role of one of South Africa's mining conglomerates, which has several mining operations in Africa.

This giant (whose name is being withheld for legal reasons) has an insider's knowledge of the manipulation scheme, according to Bill Murphy, and engages in hedging (the practice whereby future deliveries of gold is fixed). Thus if the price of gold falls in the future, predicted revenue is unaffected. But you suffer a loss if it rises, with its concomitant effect on your share price.

It is worthy to note that since the advent of black majority rule in South Africa, major companies have been rushing to move their assets offshore and list in foreign markets. This giant in question, and other South African giants have de-listed from the Johannesburg Stock Exchange and shifted their primary listing to London.

Despite the sound economic policies of the South African government that have won worldwide praise, the country's currency - the Rand - has been under constant pressure, leading the astute finance minister Trevor Manuel to throw his books at the amorphous market.

The turmoil of the Rand has often been laid at the doorstep of Zimbabwe (the land crisis there), and at various times on President Mbeki's stance on Aids. Whenever these explanations had been exhausted, one would hear that the reason was the "dollar strength". But since the GATA gold summit, it has all been too explicable.

The dollar gains strength when the price of gold falls and vice versa. This is because gold is seen by investors as a hedge against inflation. Paper currency with no inherent value is now being artificially propped up to replace gold, which is real money. But this has its own history.

As New African reported in September 1999: "For decades gold was used as a measurement of the value of world currencies. Exchange rates were fixed according to the value of gold - this was called `The Gold Standard.

"The situation remained so until 1971 when the US, faced with dwindling gold reserves and a severe balance of payment deficit, came off the gold standard. Other Western countries followed suit, and today the international monetary system is based on the US Dollar - the gold standard literally replaced by `double standards'."

Durban conference

In Durban, on 10 May this year, Bill Murphy showed why any time gold seemed to rally, something seemed to happen to make it fall to the detriment of African economies which produce 25% of the world's gold.

Frank Veneroso, another of the speakers, gave a compelling factual analysis of figures and statements by the culprits. His incontrovertible facts and figures proved the point and had participants sitting on the edge of their seats.

Reginald Howe, supported by GATA, is driving the nail into the coffin. On 7 December last year, he sued in the district court of Massachusetts, the Swiss-based Bank for International Setdement (BIS). Other defendants in the case are Alan Greenspan, chairman of the US Federal Reserve Bank; William J. McDonough, J.P. Morgan & Co, Chase Manhattan Corp, Citigroup, Goldman Sachs Group, Deutsche Bank AG and Lawrence H. Summers, the former US treasury secretary.

In the court papers, Howe contends that the defendants in their operations in the gold market have knowingly violated pillars of American law, including the American Constitution, the Sherman Anti- Trust Act, and the Securities Exchange Act of 1934 (see story on p32)

Back in Africa, many people, for instance, did not really understand the reason why in 1999 the Ashanti Goldfields Company, jointly owned by the Ghanaian government and Lonmin, was doing so well and then suddenly went into a tailspin, almost collapsing in the process. Howe explained it all at the Durban gold conference:

"On 26 September 1999," he said, "15 European central banks - with the European Central Bank, Banque de France and the Bundesbank in key leadership roles - announced without prior warning an agreement to limit their gold sales and not to expand further their gold lending. Unveiled in Washington DC, after the annual meetings of the IMF and World Bank, this agreement is generally referred to as the Washington Agreement.

"According to most European press reports, the agreement was prepared in secret and without the knowledge of American, British or BIS [Bank for International Settlements] officials, although the Bank of England was given and accepted an opportunity to sign onto the agreement just before the announcement.

"The Washington Agreement triggered an explosive rally in gold prices. The fifth wave of pre-emptive selling in excess of two standard deviations occurred in response to this rally as the Fed [the US Federal Reserve Bank], the Bank of England and the BIS struggled to halt and reverse it.

"According to reliable reports, this effort was later described by Edward George, governor of the Bank of England and a director of the BIS, to Nicholas J Morrell, chief executive of Lonmin Plc:

`We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded The US Fed was very active in getting the gold price down. So was the UK'

"A major consequence of the gold rally following the Washington Agreement was the near bankruptcy of Ashanti Goldfields, due to huge paper losses from hedging strategies devised for it by Goldman Sachs apparently on the assumption that gold prices could not rally as they did.

"Goldman's actions with respect to Ashanti were the subject of scathing comment, including allegations of serious conflict of interest, in an article by L. Barber and G. O'Connor [headlined] `How Goldman Sachs Helped Ruin And Then Dismember Ashanti Gold - Financial Times (London), 2 December 1999.

"The principal shareholders of Ashanti, which is listed on the London and New York stock exchanges, are Lonmin and the government of Ghana."

The attendees

Attending the conference were members of governments of Africa, the world media, trade unions and gold mining interests. They sat dispassionately and listened to a most chilling account, some shifting uncomfortably in their seats as they took down copious notes.

But, as usual, the spindoctors of the mainstream media whose links go very wide and deep, tried to pass this all important summit off as entertainment, some even describing the members of GATA as "quixotic".

To the general public, this all-important gold summit went largely unnoticed, tucked away in the inner pages of a few newspapers.

Sooner rather than later, African governments will have to evolve strategies to deal with the constant undermining of all their golden \efforts by a seamless organic entity with various tentacles.

A reliance on the West to bail Africa out as outlined in the much- talked-about New African Initiative (now renamed the New Partnership for African Development), has to be carefully examined. Sometimes the partners do not have the noblest of intentions.

Which brings to mind what the famous Steve Biko said about African development: "Black man, you are on your own". Hill

(For further reading see GA TA's website: www.gata.org).

Hard work: no joy for African miners

Copyright International Communications Dec 2001