The Sunday Mail
Debra Matabvu
THE Reserve Bank of Zimbabwe (RBZ) has stockpiled over 1,2 tonnes of gold in its reserves since the introduction of a law in 2022 compelling mining companies extracting precious minerals to pay part of their royalties using the metal.
In terms of the law, half of the royalties paid by gold, platinum, lithium and diamond producers must be in the form of commodities.
Companies extracting bulky minerals such as lithium are surrendering the cash equivalent of their royalty obligations, which is then used by the central bank to purchase gold for the national reserves.
In an interview with The Sunday Mail, RBZ Governor Dr John Mangudya said: “Our gold equivalence value or reserves currently stand at 1 232kg, which is about 1,2 tonnes.
“For some of the minerals such as platinum, diamond and lithium, they convert them to their cash equivalent.
“As you are aware, diamond prices are not homogenous as opposed to gold, whose prices are homogenous and has an international price which is around US$2 300 per ounce.
“But if you get diamonds, the price depends on who is holding them.
“Also, we cannot store lithium or platinum in their raw form; we take the cash equivalent and buy gold . . .”
The Finance Act and the RBZ Act were amended in 2022 to provide the legal framework for miners of designated minerals to pay half their royalties in the form of refined minerals.
The Government levies a 5 percent royalty on platinum and gold miners.
It is envisaged that the country’s gold reserves will be used to anchor the structured currency the Government is pursuing to stabilise the exchange rate and curb inflation.
In the past, under the gold standard system, a country’s currency was directly tied to the value of its gold reserves.
This meant a fixed exchange rate existed between the currency and gold.
Today, most countries operate under fiat currency systems, where the value of the currency is not directly tied to a physical commodity like gold.
However, Zimbabwe is presently pursuing a new system where the proposed structured currency will be tied to its gold holdings.
Experts say holding a substantial gold reserve can boost investor confidence in a country’s economy and this perception of stability can indirectly positively influence the exchange rate.
In addition, in times of an economic crisis, the country’s central bank can sell gold reserves to buy its own currency in the foreign exchange market, helping stabilise the exchange rate by increasing demand for the local unit.
Dr Mangudya said the central bank was finalising crafting the monetary policy, through which modalities for the rollout of the structured currency are expected to be announced.
He said: “We are expecting the monetary policy anytime soon.
“Currently, we are finalising measures to roll out what the President said in terms of the structured currency.
“This is so that we can have guaranteed price stability and stability of the exchange rate.
“So, the delay (in announcing the Monetary Policy Statement) is that we are working on a structured currency that is well-supported.”
Economist Mr Prosper Chitambara said gold reserves were an important driver of national development.
“Gold is an important asset for nations because it is a safe haven and most nations tend to keep their savings in gold, and the value of gold over the years has appreciated,” he said.
“So, gold has an important role to play, even in terms of maintaining and sustaining macro-economic stability in a country.
“The country with the highest amount of reserves, the US, has more than 30 000 tonnes of gold.
“As a country, we obviously need to build our gold reserves as a way of buttressing and strengthening stability.
“In the event that we come up with a gold-backed currency, having adequate gold reserves will obviously ensure greater stability, greater certainty and helps enhance our economy’s creditworthiness.”
Announcing the regulations compelling mining companies to pay royalties in actual commodities, President Mnangagwa said the Government could use the mineral reserves to securitise borrowings.
“The precious and high-value strategic minerals we accumulate can also be used to securitise any borrowings we may prudently envisage,” he said.
“This raises our country’s creditworthiness and, thus, our ability to circumvent and fend off funding limitations designed against our economy by those who have imposed illegal and unjust sanctions against us.
“Like I indicated, our response to these spiteful sanctions should always show greater resolve and creativity on our part so that what was meant to hit us as an adversity turns to defiant advantage, through the alchemy of inventive policies.”
