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How Blockchain Can Help Africa’s Gold

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Being one of the world’s most valuable commodities, there is often a lot of danger associated with mining gold, especially in Africa where it has been linked with armed conflict and militia activity. Yet, simply giving up on gold mining could have devastating effects on communities whose economies depend on it.

Fortunately, blockchain has been making strides in enhancing practices in the African gold industry, much in the same way that artificial intelligence has benefitted both energy and mining industries in the region, as we covered in ‘The Impact of AI on Industries’. From ensuring a safer mining environment to enabling tracking and monitoring along the supply chain, here are just a few benefits blockchain can bring to Africa’s gold industry.

Responsible gold

With blockchain, Mining Review Africa details how tracking the transport of gold from its origin to the vault is now easier than ever. The technology allows for responsibly sourced gold to be tracked from gold mine to refinery, to vault and then digitised into G-coin tokens, which act as digital certificates for the title to the gold. Investors then buy these tokens, to easily transfer wealth or make payments, which are also redeemable in exchange for physical gold. An additional benefit is that it cuts down on operational expenses as well by reducing the need for middlemen and additional fees. Currently, only Emergent Technology Holdings (EmTech) – in partnership with companies like Yamana Gold Inc., among others ¬– offer and apply this to their supply chain for mining and tracking responsible gold.

Of course, tracking gold also cuts down on gold smuggling, a practice that The African Exponent blames for taking billions out of the continent, with the bulk ending up in the United Arab Emirates’ (UAE) gold trading capital, Dubai. Imported gold declared by UAE customs officials, for example, does not match those declared by African mining firms. This clearly points to illegal trade that unlawfully takes money that could be used for development. Blockchain’s tracking capabilities might just be the solution that finally removes this issue from the local industry.

Buying and trading ethically sourced gold

Blockchain’s transparent and methodical nature also means that illegally mined gold will now be easier to spot, with Engineering News claiming this is one reason why investors are lining up for the technology. Incidentally, this also serves to let buyers know that the gold they’re buying comes from a mine that promotes ethical practices, with EmTech managing director Matthew Keen stating, “for the first time, ethically minded investors can trade G-Coin tokens to access gold’s classic portfolio diversification attributes.” Investors have always seen gold as a safe haven investment and unlike stocks it offers perceived stability. It’s why a post on FXCM about gold trading notes that the commodity will always be a key component of investment portfolios as it is a good way to diversify risk in times of turmoil, peace and prosperity. In line with this, empowering companies with ethical practices become increasingly important in ensuring the safety of miners and the precious metal.

What’s next for blockchain?

Given the examples above, it becomes clear that blockchain brings numerous benefits to the gold industry in Africa. In fact, countries like Rwanda have already used the technology to woo investors, using it as a security guarantor for other resources that have traditionally been marred by conflict like tantalum and cobalt. Even De Beers is using the technology to guarantee that their diamonds are free from conflict or child labour.

In fact, blockchain combined with developments like the opening of Nigeria’s first gold refinery, due to open later this year, could set a whole new standard for the gold industry in Africa. With many advances on the horizon, it’s only a matter of time before conflict driven by the need for labour and resources become a thing of the past.

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