BY HARRIET CHIKANDIWA IN KARIBA THE resilience of gold as a store of value pushed the Reserve Bank of Zimbabwe (RBZ) to introduce gold coins last month, a central bank official said yesterday.
Azvinandava Saburi, director of financial markets at the RBZ, told legislators from the Parliamentary Portfolio Committee on Mines and Mining Development during a mining workshop in Kariba that the yellow metal had proven ability to defy geopolitical tensions and headwinds that have mostly ended in currency crashes.
He, however, noted that while the central bank was confident in gold’s ability to defend value, this did not mean that there were no risks in trading in the metal.
He said authorities had taken steps to reduce the risks as they rolled out the coins, the latest of many that have been introduced and are trading in many countries.
“The prices of gold are always changing,” Saburi said.
“That is why I said you are taking a risk (in buying gold coins). We have reduced the number of risks, but the price risk that is on the gold and the volatility of the gold price is lower compared to other commodities,” Saburi told the Members of Parliament.
“There is a school of thought that says when there is tension in the world, the only safe haven is gold. So, a lot of people are actually going for gold because of what’s happening in the geo-politic. A lot of people are not comfortable holding currencies because they are more volatile than gold. They see gold as a safe haven because it has more stability than currency, which is affected by politics.”
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Amid scepticism from a market desperately seeking solutions to protracted currency battering in the past year, RBZ governor John Mangudya released the first US$3,6 million worth of gold coins on July 25.
His strategy was to encourage the market to swing from buying foreign currency, mainly United States dollars, on the black market to acquiring gold coins which they can keep at home and release when they want cash.
The move has cooled off the domestic currency’s depreciation in the past three weeks and momentarily threw black market kingpins off balance.
But authorities are still battling to convince Zimbabwe’s markets that this could be a concrete solution to a protracted crisis that bounced back in 2019, a decade after forcing Harare to ditch its haemorrhaging currency in 2009, as annual inflation hit 500 billion percent, a record in many generations.
Economist Francis Mhere said the gold coin might not be a solution to Zimbabwe’s myriad crises.
“Using the gold coin for hedging does not stabilise the economy,” he said.
“But we are being cushioned against instability and losses that can result from such instability. Gold coins alone will not exhaust production,” Mhere added.
Meanwhile, Fidelity Gold Refinery general manager Peter Magaramombe told MPs in Kariba that gold deliveries in the country had improved.
He indicated that Fidelity would ensure that timely payments were made for all gold deliveries, while cash would be made available at all gold-buying centres to avoid leakages.
On gold smuggling and leakages, police told MPs that it was difficult to deal with the vice due to incapacitation and lack of equipment like scanners at ports of entry.
Police Deputy Commissioner-General Learn Ncube said the law enforcement agency had been coming up with operations to arrest those contravening the Mines and Minerals Act.
“There are porous border lines and there is no form of barricades, resulting in minerals such as gold being smuggled through such informal entry points. Unscrupulous individuals are taking advantage of the porous borders,” he said.
“The unfavourable legal framework which controls mining activity in the country has several loopholes. We believe that amendments to mineral laws will be able to plug some of the identified loopholes, for example, the Gold Trade Act, which does not explicitly define possession, and does not provide restriction of gold movement in the country.”
While pointing out that Chapter 21 of the Mines and Minerals Act impedes the police from curbing gold leakages, Ncube admitted that unregistered gold hammer mills and plants are sprouting countrywide and are not regulated or monitored, making it difficult to account for all the country’s mined gold.
Zimbabwe Anti-Corruption Commission (Zacc) spokesperson John Makamure said: “As defined by the Criminal Law (Codification and Reform) Act, smuggling and fraud are non-mandatory offences and Zacc refers these matters to the police.”
