Is Menzgold the Lehman Brothers of Ghana, as the nation’s fake economy begins to unravel?

Exactly 10years yesterday, Lehman Brothers, the 4th largest investment bank in the US closed shop.

The collapse reverberated through global markets and sparked the Global Financial Crises – 2008.

In 1850, 3 brothers from Germany converted their small shop in deep south of Alabama into a bank.

In the 1990s, Lehman acquired 5 big mortgage lenders and transformed itself from just another bond￾trader to a massive, full-service investment bank.

LB specialised in highly risky and highly rewarding bridging finance in big real estate deals. Many argued that LB changed from a bank to a real estate hedge fund. In 2006, LB made a profit of $4b, on 15th Sept 2008, it collapsed with a debt of $619b and sent the whole world convulsing.

Is Ghana financial market going to convulse with a meltdown of Menzgold?

A friend asked my opinion on Menzgold few hours ago, and I told her, I knew very little about MG. I then contacted another friend to brief me about MG. I’m interested in only 2 things.

1. What MG invests in.
2. The returns or dividends on investment to its depositors/investors.

I understand MG invests in buying and selling of gold collectibles, and investors get 10% of their deposit as dividend every month. This means, an investor gets 120% (simple, not compound interest) of initial deposit in 12months. This isn’t sustainable. This isn’t investment. This is a Charles Ponzi in Ghana.

Gold is a marathon commodity. It holds its value over a long period of time. You don’t trade in gold and make 10% profit every month. That is why some of us complained bitterly in 1999 when Sam Jonah hedged 11m oz (almost 50% of Ashantis 23m oz reserves) to Lonmin at $300/oz. It didn’t take long for gold to rebound to $1300.

Ghana lost $11b and Sam Jonah became a knight of the Queen.

On 2nd January 2018, the price of gold was $1317.61/oz. At the close of business on 14th September 2018, the price of the marathon commodity was $1193.70/oz. This means the value of gold has fallen by almost 10% in the past 9months.

So how did a business, based on buying and selling of gold give a total of 90% of investments as dividends? Where is the money coming from? Think about it.

What will happen to MG? It’s meant to collapse. The issue is the effect of the collapse. Will it be like the soft ripples of Pyram in1995 or the cataclysmic fits of LB in 2008? The latter scenario is more likely.

In fact, the effects could be worse than LB’s if it’s true that senior military figures are investors at MG.

Instinctively, I feel the new noises about MG operations are all part of a scam to cover up the original scam. The various regulators knew of MG operations, so why now? I’m not accusing any regulator of complicity, but the intervention is to buy time to figure out what to do to tame Hurricane Menzgold.

I really feel sad, especially for new investors. I refuse to imagine the distress hurricane MG will cause.

MG is manifestation of a hopeless state. “Everyone” rushes to anything that gives ‘’hope.’’ How sad!!!

Ghana is a Santa state with a fake economy. An apartment in Accra may sell for $400 000. How can a small unproductive economy of $43b sustain such prices? How can an apartment in Accra cost more than a similar one in Johannesburg or Melbourne? That is how a fake economy operates.

Nothing makes sense. The collapse of MG may start unravelling Ghana’s fake economy, and for the 1st time, Ghanaians will know that, ‘’the world doesn’t work like that.’’ God, you are good, so I pray I’m wrong.

Nii Amu Darko
Founder and President
African Reform Movement...