Africa is the world’s largest regional gold producer, accounting for some 27% of global gold production in 2022. However, as a global consumer of the precious metal, how does the world’s second-largest continent rank? For insight to this question, Modern Mining spoke to John Reade, senior market strategist at the World Gold Council.
“As Africa’s population and economies grow, the continent has the potential to become an important gold demand story. From a gold production point of view, Africa is growing in stature; however, as a significant consumer of the precious metal, it remains on the backfoot, as it is the poorest continent on earth.”
Reade expects that given the continent’s population growth, which currently stands at close to 1,5 billion people and growing rapidly, and its strengthening economies, it could, in the not-too-distant future, emerge as a strong consumer of gold. China and India are currently the largest consumers of gold.
“I am keenly interested in the long-term potential of gold demand from Africa. We have already noted that countries in Africa have burgeoning populations with some countries also delivering decent economic performance. Looking ahead, I foresee jewellery and investment demand becoming increasingly more important in Africa. In fact, I am interested in commissioning research into current demand for gold in countries such as Nigeria. As it is, we don’t spend enough time evaluating the demand potential for gold in Africa – not so much for the short-term but certainly for the longer-term – over the next ten to twenty or even thirty years, this as Africa’s economies gain traction. I believe that Africa’s story is not only one of gold supply, the continent has the potential to become an important demand story as well.”
Gold production
Although mine production increased steadily over the past three decades peaking at (3 347 t in 2018), the makeup of gold producers changed from 1995. Prior to 2007, South Africa held the number one spot as the top gold producer in the world, but by 2014, the country had dropped to sixth place and produced just 110 t in 2023.
“While South Africa’s gold production declined steadily over the years, countries on the African continent have increasingly been supplementing gold production. Over the past six years, China emerged as the largest gold mining country and, within the African continent, Mali and Ghana have surfaced as two significant gold producers. Moreover, there has been growth in gold production from around the world, including Australia and Russia, which are in joint second place with just over 300 tonnes of production each. Canada is the fourth largest gold producer with the US holding the fifth position,” says Reade.
While there opportunities exist to bring new gold mines into production globally, progress in discovering, permitting, financing and developing new gold mines has slowed.
Explains Reade: “Mines are not like factories; they can’t produce indefinitely. Eventually, they run out of gold to mine profitably, and the mines shut down. So, explorers constantly need to be searching for and developing new gold mines.”
Although gold production peaked in 2018 at 3 347 t, production has since declined and in 2023 only 3 000 t of gold was produced globally.
A combination of factors, including production interruptions, safety stoppages in China, strike action in South Africa and other countries, coupled with the impact of Covid, have all hindered the global gold industry’s ability to grow beyond the peak production of 2018.
“Based on forecasts from our data partners, Metals Focus, barring any major incidents from around the world, we expect that 2024 will mark a new high in gold mine production. However, one of the significant trends that has emerged, is one of plateauing of new mine supply. The prospects for the next few years show limited growth in gold production. In essence, the years of rapid gold mine growth that we saw between 2009 and 2018, have come to an end.”
Africa’s potential as a future gold producer
In terms of future potential and probable discoveries of gold and other crucial minerals, Africa offers large and under-explored potential with the continent already emerging, over the past two decades, as an important gold producer.
“With the exception of South Africa, which is tracking gold production declines, several countries in Africa are emerging as significant gold producers. I expect that to continue as long as the investment landscape within African countries remains attractive to international large-scale investors. Although at times the relationships between host countries in Africa and mining companies have become a source of tension, in general, gold mining companies have done well in Africa, and so have the countries in which they operate. I believe there is tremendous potential for more discoveries, more production and growth from Africa that is probably unrivalled around the world. In fact, over the past two decades, Africa has offered some nuggets in terms of gold mining success stories especially from Mali, Ghana, the Democratic Republic of Congo and Tanzania,” says Reade.
Gold demand trends
From a gold demand point of view, the most significant change that has emerged over the last few years, has been the major increase in demand for gold from Central Banks.
According to Reade, Central Banks have purchased gold every year since the global financial crisis.
“Between 2009 and 2021, Central Banks averaged about 473 tons of gold purchased every year and in 2023 alone, Central Banks acquired 1100 tons of gold. They have more than doubled their rates of purchases in the last two years, which is a massive change in the market, especially if one considers that mine production is roughly 3 650 t and about 1 300 t is from recycled jewellery. The total size of the market is only about 5 000 tonnes and Central Banks have added another 500 tonnes to their purchases, which has resulted in a big change in the portfolio of the gold market.”
Looking ahead, Reade, expects Central Banks to continue their gold buying spree, “possibly at the same high levels seen in the past two years”.
Moreover, given the heightened geopolitical factors, investors see gold as a safe-haven asset and continue to acquire the precious metal.
“Higher geopolitical risk and growing recognition from investors on the benefits of having a large proportion of gold in their portfolio, translates to strong investment demand going forward. Perhaps the one area that has pleasantly surprised us this year has been the strength of the jewellery market. Although gold prices hit record highs in every currency around the world, except the Swiss Franc, jewellery buyers, who normally hold off from purchasing gold, did not do so last year. In fact, jewellery demand in 2023 was unchanged from 2022. I believe this demonstrates that buyers of gold around the world continue to value jewellery and gold jewellery in particular, despite the higher prices, which is a pleasant surprise.”
Critical metals legislation and gold
The hot topic currently related to metals and minerals, is what constitutes a critical mineral. There are several definitions that have been tabled, including those related to ‘critical’ from an energy transition perspective or critical in terms of dependence on one or a few countries for the source of supply.
“While this debate is extremely important for some minerals and metals, it is not so for gold, given that the precious metal is produced and refined in many countries around the world. There is no danger that the industry will fail to produce gold when it is required. As such, gold is not classified as critical mineral by the United States, for example, nor as a critical mineral by the European Union. However, gold is essential to modern life, especially in its applications in technology. All electronics goods contain gold, even if in minute quantities. Gold is essential to the 21st century way of life and is the lifeblood for many economies in which it is produced. So, whilst gold is not critical, in terms of the formal definitions from the United States and the European Union, it is both essential and vital to the modern world, and to the countries that produce it,” concludes Reade.
