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South Africa has its Krugerrand, the United States has the American Eagle, Australia has the Australian Kangaroo, Canada has the Maple Leaf and now, Zimbabwe has joined the ranks of gold coin production with the Mosi-Oa-Tunya. Weighing in at one troy ounce with 22 carats purity, this gold coin is the product of a resolution of the Monetary Policy Committee of 24 June 2022. According to the Reserve Bank of Zimbabwe Governor J. Mangudya, the purpose of the gold coin is to tackle inflation by stabilizing the exchange rate resulting in a ripple effect, which will see the price system go down, stabilizing the economy.
Currently the cold coin can be purchased from the Reserve Bank of Zimbabwe or its agents at the value US$1823.80 per gold coin and can be purchased with multiple currencies. The price of the gold coin is based on the prevailing price of gold on the international market.
It is not clear whether the gold coins are regulated by the Reserve Bank Act, specifically section 43 and 44 that set out the nature and legal tender of coins as under these sections’, unlike the current mosi-oa-tunya the coins stipulated in these Sections have denominations and are legal tender. For the mosi-oa-tunya to be classified as legal tender, is not feasible, as one gold coin currently amounts to US$1823.80 or ZWL 820 071.67, and the ordinary citizen is not walking around with that amount of money in their pocket to carry out day to day transactions. On 18 July 2022, the Reserve Bank released guidelines for the purchase of the gold coins under Exchange Control Directive RX 20, issued in terms of Section 35(1) of the Exchange Control Regulations, Statutory Instrument 109 of 1996.
The Pro’s and Con’s of the gold coin
The advantages of gold coins are that they are
- easily transferable as they are tradable locally and internationally,
- prescribed investment that can be used by institutional investors such as banks and insurance companies to meet regulatory requirements,
- can be used as security for loans and credit facilities,
- are a hedge against inflation as they do not lose value
The disadvantages of the gold coin are that they are
- Not affordable to the average Zimbabwean
- Not feasible as most Zimbabweans are traders who operate on a daily basis
- Not easily divisible
- Their primary use is limited to collection and investment, and most Zimbabweans are not looking to save money at the moment
- Purchaser intending to resell the coin can only do so within three months
- Certificates are registered under the name of the original purchaser and not under the current purchaser, there is the issue of reregistration costs and procedure
- There is no interest on gold coins
Given that countries have preceded Zimbabwe in gold coin production is reassuring, it is not yet clear how gold coins will reduce inflation as prices are still on the rise. Furthermore, given the past history of adaptability, many Zimbabweans remain skeptical when new monetary policies are introduced. However, one cannot rule out that efforts are being made by the government to restabilize the economy, whether the same will eventually happen remains to be seen.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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