THE issue of gold coins has been topical in Zimbabwe. Many have tried to explain its economic benefits and how it is likely to stabilise the economy.
I understand the economy of Zimbabwe from newspapers, Google and social media. This, l think, is the case with many other Zimbabweans.
I intend to express my fears over the gold coins issue from the perspective I understand. The case of gold coins in Zimbabwe can be likened to the folklore of sekuru gudo (baboon, the uncle) and muzukuru tsuro hare, the nephew).
History has it that, the nephew (muzukuru) planned a party and invited his uncle (sekuru).
He, however, burnt the grass surrounding his homestead. The day of the party arrived and sekuru gudo and his family showed up. They were asked to wash their hands at a nearby stream.
They went to wash their hands and came back, showed their hands to tsuro but the hands were dirty and were asked to go back and wash again.
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This continued as the party progressed. Sekuru was using his hands to walk, so obviously because of the burnt stalks, his hands were getting dirty each time he came back. This went on for the rest of the day until sekuru and his family gave up and left the party.
Had gudo been part of the party planning team, he would have made sure that either the venue was accessible to him as well, or there was water to wash hands on the venue.
This is exactly like the gold coins situation in Zimbabwe. The gold coins party is not meant for everyone. The price for the gold coins is discriminatory.
The gold coins are to be used as a store of value, aid people in saving money who would have rather saved in USD. The very fact that people prefer saving money in USD is an indication that they do not trust the government's currency which continues to lose value daily. How many people can afford to store value in Zimbabwe?
Who are the intended beneficiaries of the gold coins? Do we trust the government enough to expect them to liquidate the coins? How many people do we know personally who have bought the gold coins? We have been called to the party before and spent the entire time washing our hands. In 2018/2019 the government pegged USD at par with ZWL and people lost their savings.
The government of Zimbabwe is the biggest employer in Zimbabwe, it pays its workers in Zimbabwean dollars (Zimdollars) and an allowance of US$175.
The gold coins are currently pegged at US$1 872,36. A government employee cannot afford to buy the gold coins. The introduction of gold coins meant that people would stop buying USD and opt for gold coins if they wanted to store value. The feasibility of this is in high doubt.
Why would a person who once lost USD to the government’s ZW$1:US$1 mantra want to store value in gold coins and not just hold onto their money? What will happen when the government can no longer afford to buy back the gold coins from people?
The government of Zimbabwe introduced the gold coins in the market, which were meant to mop out excess liquidity in circulation. The concept makes economic sense, according to economists. In other countries they use government bonds and treasury bills to mop out the excess liquidity and stabilise the currency.
The gold coins are tradeable for currency after 180 days. The concept if perfectly executed could be useful because the USD has lost 83% of its value since 1974 whilst gold has appreciated 2 692,5% since 1974. However, this is largely dependent on people's trust with the government, which is currently non-existent.
There is a need to rebuild the trust between the government and the citizens. This can be started by not allowing Muzukuru tsuro to wake up one day with a new note, a currency or a term that will be “as good as a gold coin, or as good as the USD” so that one might not be able to get back the money they used to purchase the gold coins. This has happened before.
There is uncertainty on whether the bond coins will work or not, an economist in Zimbabwe, Prosper Chitambara had this to say: “Even the demand for US dollar as a store of value, it will also rise because there are still a lot of uncertainties relating to the convertibility of these gold coins — are (they) internationally tradeable, especially given the trust and confidence issues?”
Corruption has become endemic in Zimbabwe and this concept could fuel the corruption because it creates a gap for arbitrage as some will be purchasing the gold coins at the official exchange rate and then sell them outside the country in foreign currency, the foreign currency will still be brought back into the country and be changed at the black-market rate.
A quick Facebook survey conducted by Harare.com indicated that Zimbabweans are not really interested in the gold coins as they feel it will not help the economy in any way. Most feel like this is an archaic way of dealing with the economy and that the country should move towards fiat currency.
The citizens need to feel included in the policies measures that the government is trying to introduce in order to fight inflation. If there is no buy-in from the citizens, they will be undoing the government's efforts. The government must be seen to be making efforts in including the general citizens when crafting the policies. As it stands, it seems as if the gold coins are meant only for the bourgeois.
- Mutowekuziva is a registered legal practitioner. She has keen interest in human rights, development and governance. These New Horizon articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZES) and past president of the Chartered Governance & Accountancy (CGI Zim). — kadenge.zes@gmail.com and Mobile No. +263 772 383 852