Gold has potential to transform countries, communities – PwC

8th October 2013 By: Martin Creamer - Creamer Media Editor

JOHANNESBURG ( – Gold has the potential to transform countries and to boost communities, World Gold Council (WGC) director of gold for development Terry Heymann said on Tuesday.

Heymann, who was speaking to Mining Weekly Online from London, was commenting on a 50-page study just released, which shows the colossal potential of gold to boost the macroeconomics of countries as well as play a major role in the development of communities.

Produced by PwC, the WGC-commissioned study, calculated that gold had directly contributed more than $210-billion to the world’s economy in 2012, roughly equivalent to the gross domestic product (GDP) of the Republic of Ireland, Czech Republic or Beijing.

“The size of the figures are very significant and you think of that being equivalent to a city the size of Beijing and the tens of millions of people living in it,” Heymann said.

However, the $210-billion figure was in actual fact a highly conservative number in that it dealt solely with gold’s direct contribution, without taking into account the significant multiplier effect of its many economic linkages.

The new findings pave the way for further research examining the total economic contribution gold makes, covering both the direct and indirect economic impacts such as secondary employment, additional taxation and the funding of third-party support services.

The report deals mainly with gold’s "macroeconomic magic", highlighting its generation of vital foreign exchange earnings to a range of particularly developing countries that export gold.

For example, in 2012, gold provided 36% of all Tanzanian exports and 26% of the exports of Ghana and Papua New Guinea.

Consideration was now being given to a follow-up study that would also take into account gold’s indirect benefits, including its extremely far-reaching multiplier effects.

“We’re certainly interested indirect impacts,” Heymann told Mining Weekly Online, adding that the WGC had already done work on the wide range of indirect impacts in specific countries, one of them being Peru, where the impacts of only four large gold mines proved colossal.

Not only were the macroeconomic benefits of foreign exchange earnings and GDP contributions taken into account, but also the creation of businesses and the development of a "priceless" entrepreneurial culture.

In the rural parts of Peru in question, there had been negligible economic activity beyond basic agricultural sustenance.

But as a result of gold mining, new companies sprung up to supply the gold mines with products and services ranging from equipment to catering services, construction and a wide range of linked businesses.

“Some of those indirect impacts are very important when you take into account the jobs and the taxes the employed people are paying. Those numbers are highly significant, which is an important part of the overall story,” Heymann told Mining Weekly Online.

He hoped the study would serve a platform for further research and discussion.

“We’re looking forward to hearing from all participants in this conversation about where to take this next and what research is going to be helping to make sure that gold can fulfil its ability to contribute very significantly to economic and social development.”

The study further estimates that large-scale gold mining alone made an economic contribution of more than $78.4-billion to the economies of the top 15 mining countries in 2012.

The recycling of gold made up 36% of global supply in 2012 and the economic impact of global gold recycling is estimated to be $25-billion.

Demand for gold, including investment purchases of small bars and coins, gold jewellery fabrication and consumption, generated $110-billion across the top 13 gold-consuming countries.

“From mining and refining, to fabrication and consumer demand, it is clear that gold makes a positive contribution to economic growth along the entire value chain,” Heymann reiterated.

With the global mining sector facing challenging times and increasing costs, transparency is seen as vital.

“This research is important as it examines the economic value generated by gold and where that value is created,” PwC UK mining leader Jason Burkitt said.

The prime evaluation metric used was gross value added (GVA), which measures the contribution to GDP.

GVA measures the industry’s economic contribution to individual national economies, in direct comparison with GDP.

Employment figures and taxes paid were also analysed.

The 50-page PwC report contains supporting statistical data on aspects of the economic contribution of the industry and global gold supply and demand.