Reserve Bank of Zimbabwe governor John Mangudya said the gold coins set to be released on 25 July will likely reduce demand for the US dollar as a store of value and stop the depreciation of the local currency.
Speaking in an interview with State media, Mangudya said the gold coins, which are known as Mosi-oa-Tunya, can only be redeemed for cash after 180 days. He said:
Because of hyperinflation and past experiences, people in Zimbabwe have increased the demand for foreign currency as a store of value.
So, in order to provide an alternative product for those who want to store value, including those with excess balances and those who have foreign currency under their pillows, we have introduced the gold coin.
Its first positive impact is that it provides a safe and secure investment for those living in perpetual fear of hyperinflation and losing value.
Mangudya however, refused to reveal the number of gold coins that are going to be released in the first batch. He added:
However, they are sufficient. We will only be able to give you information after the beginning of the first week.
The Mosi-oa-Tunya coins will be sold at a price based on the prevailing international price of gold plus a five per cent mark-up to cover production and distribution costs.
The coins will also be traded through commercial banks, Fidelity Gold Refinery and RBZ-accredited agents.
The central bank said on redemption, buyers will have an option of receiving cash in either Zimbabwe dollars or US dollars.
More: The Sunday News
This is new fine print that will factor in people decision-making Why delay releasing this vital info? How will this condition be enforced when buyers have possession of the coins and the earlier info said the coins are exportable? Are the terms and conditions be figured as they go and not clearly thought-out during the feasibility study? This is a red-flag that one cannot trust the RBZ to have done properly it’s homework and can inspire confidence in the dependability of their promises. Definitely we can expect new undisclosed material conditions that can definitely dissuade people from wanting to buy the coins. There would be no point in placing the 180 days condition unless there is a mechanism for enforcing it – and that could make the coins altogether undesirable for some of people who would have deterred by the extra undisclosed conditions. Will the RBZ forefit the possession and exportable conditions and now say buyers of the coins will have possession after 180? Will they say it is an honor system that buyers will follow the 180 days condition. Why make conditions if you don’t intend to enforce them ot lack the capability to enforce them? And why has the ramifications of the 180 days condition and the undisclosed enforcement mechanism been clearly communicated by now?
Figure it as you go along is the management style at RBZ. 180 days is a huge burden that dampens the attractiveness of the coins