Business

Gold coins now in circulation

The Reserve Bank of Zimbabwe yesterday released the first batch of Mosi-oa-Tunya gold coins worth US$3,6 million onto the market and indicated that it would introduce smaller denominations to cater for the lower end of the market.

In a bid to save the local currency from collapse and also halt soaring inflation, the central bank last month introduced the gold coins, described by critics as an elitist looting scheme.

RBZ governor John Mangudya yesterday told a media briefing in Harare that:  “The bank has today released the first batch of 2 000 Mosia-Tunya gold coins into the market. The local agencies commenced selling the gold coins on an agency basis at an initial price of US$1 823 per gold coin or $805 745,35 using the willing-buyer willing-seller rate.”

The gold coins will also be sold in the British pound, the Euro, Australian dollar, Botswana pula and South African rand.

“Within a month from now, we will be able to do the lower denominations of gold coins,” he said.

The release of the first batch of the coins saw local agencies commencing the sale of the gold coins. The agencies for the gold coins are in all the commercial banks, Aurex Zimbabwe and Homelink.

The government hopes that the gold coins will stabilise the exchange rate and absorb excess liquidity on the market.  They will also be used as collateral if one wants to borrow money from banks.

Mangudya said the first batch of the coins was minted outside the country using external agencies. However, going forward Fidelity Printers and Refiners shall be minting the coins, he added.

He said he had started receiving inquiries from foreign banks which wish to participate in the gold coins sale.

The RBZ chief, however, said the coins would not be used to relieve blocked funds as the bank has a mechanism in place for that.

Responding to questions on the sustainability of the gold coins, and how to close arbitrage opportunities, Mangudya said: “It is sustainable because not everyone will afford to buy the gold coins. The limiting factor is the quantity of money at the central bank which belongs to the banks and the excess balances that you got yourselves as individuals and corporates. Therefore, it is not more about us just minting gold coins. For example, a tonne of gold will give you more than 30 000 pieces of gold coins and that will take away all the Zimdollars in this market.”

He added: “The limiting factor is the value of banks at the central bank.  If you go to a bank and purchase US$1 million worth of gold coins, it means you need to debit the bank account here at the RBZ. The maximum that you can get today is $30 billion a day and so all banks will be dry.”

Mangudya said if the banks were going to give overdrafts, they would be putting themselves in jeopardy as they will be unable to settle all the transactions at the central bank.

According to the RBZ guidelines for the purchase of the gold coin, all sales of the gold coins, weighing 33,93g by the agents would be subject to normal know-your-customer principles in line with international best practices, which include declaration of the source of funds.

The gold coins shall be sold at the prevailing international prices of gold plus 5% to cover the cost of production and distribution of the coin on a payment versus delivery basis.

The guidelines also prohibit banks from buying the gold coins for their own portfolios, unless permitted by the central bank.

Meanwhile, Zanu-PF bigwigs are reportedly divided over the gold coins along factional lines.

There are reports that the faction led by Vice-President Constantino Chiwenga was not consulted.

President Emmerson Mnangagwa and Chiwenga are reportedly battling to control the party ahead of the 2023 elections.

Insiders in the ruling party yesterday said the gold coins were another looting scheme by Mnangagwa’s faction.

“The introduction of the gold coins is a way of looting by Mnangagwa’s faction. Chiwenga is against the idea because previous policies which were introduced were benefiting Mnangagwa’s faction,” the source said.

He said Chiwenga’s faction was aware that it would be difficult to fight Mnangagwa’s faction which has financial muscle.

It is alleged that Chiwenga’s faction was kept in the dark about the gold coins.

Zanu-PF political commissar Mike Bimha said the matter was never discussed at party level.

“We have never discussed the issue and it has never been a problem to us. What you are saying about factions is actually very new to me,” Bimha said.

CNRG director Farai Maguwu said:  “The biggest responsibility of the Finance ministry and RBZ is to work together and come up with a policy, but there are also critical stakeholders who might make these policies succeed or fail, for example, the chamber of commerce and the Chamber of Mines and the grassroots should have been consulted.  The issue of gold coins was not properly handled to get the people’s views.”

Back to top button