Gold reserves to anchor local currency

Minister Chidhakwa

Minister Chidhakwa

Walter Nyamukondiwa Chinhoyi Bureau
Government is working on a plan to establish a gold reserve set to anchor the introduction of a local currency when the right time comes for the return to the Zimdollar, it has been learnt.

This comes at a time when the country is grappling with cash shortages and economists believe the issuance of a gold backed local currency would help stimulate economic activity.

Modelled around the $200 million Afreximbank facility, which is backing the current bond notes in circulation, economists believe the local currency will ease liquidity challenges and stimulate aggregate demand.

Plans to create a gold reserve involve investing in the efficient operations of Government’s gold mining firms, including Sabi, Elvington and Jena gold mines.

Sabi Gold Mine resumed operations recently with targets to produce about 25kg of gold per month after a five-year hiatus caused by working capital constraints.

Mines and Mining Development Minister Walter Chidhakwa said the gold reserve would complement the Sovereign Wealth Fund, where a set of minerals would be reserved for future generations.

The legal processes that will give effect to the fund are still before Parliament.

“Naturally, in order to support the future introduction of our own currency, you want to have mineral resources that you hold in reserve,” said Cde Chidhakwa.

“We have discussed this matter with the Reserve Bank of Zimbabwe and what we are doing now, because most of the gold that is currently held is in private hands, we need to get our own companies operating.”

Government has full or part control of Sabi, Jena and Elvington gold mines, which have not been operating in recent years due to lack of capital.

Effort has been expended to resuscitate the companies, which are at varying levels of fruition.

Once all the companies owned by Government start operating, Minister Chidhakwa said they would be required to set aside part of their gold output to be kept as reserve by the RBZ.

He said Jena Gold Mine would soon take delivery of mining equipment to bolster its resuscitation, while other options were being looked at to bring on stream Elvington Mine in Chegutu.

This follows delivery of $7 million worth of equipment to the Zvishavane based Sabi Gold Mine.

Confederations of Zimbabwe Industries president Mr Busisa Moyo said a gold backed currency was a sound economic intervention.

“If it is along the lines of the Afreximbank facility, then it will give a lot of credibility to the currency because there is depressed demand for goods and products as people have no cash,” said Mr Moyo.

Demand, he said, should be at its highest owing to activities at the tobacco auction floors, but shortage of cash had dampened economic activity.

There are reports that some foreigners are taking advantage of liquidity constraints to bring in money and buy gold.

Some gold miners, including informal ones have in recent days been reported to be channelling their gold to the parallel market.

Minister Chidhakwa said contingent measures were being put in place to ensure that miners got their money as soon as they delivered to Fidelity Printers and Refiners.

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  • Sautov

    Somalia hsnt ad. Government since 1991 but they still have and use their own currency

  • Aly

    You sir need a serious education in basic economics and finance. sadly I dont know where you are i wld have walked you through it.

  • Dr

    thank you so much bro. That worries me much every day that we an educated nation bt doing nothing about our own economy. our progeny will curse even our own graves that we have been the worst generation. we are our own enemy. we lack the wisdom of joseph and the courage of daniel. we are very good in building political parties and fighting each other politically bt we cant built our own economy. God Save Zimbabwe We Pray!

  • JESUS the greatest

    Prophet Makandiwa spoke about this kudhara…

  • nelson moyo

    100 trillion note comrade

  • Lodza

    I hear him. And he talks a lot of sense. We are a pathetic lot. Always talking about other people’s currencies and not wanting to reintroduce our own. Even our own bankers, economists and so-called PhDs and professors you hear them belting pathetic arguments for using one currency over another. That naivety exposes us to manipulation by RBZ officials who now lie day in day out about importing US$. And no one even challenges them or probes further how they do that. What currency RBZ uses to buy the forex.
    I have argued here and elsewhere that we need our own currency. We need to start working on structures for its relaunch – which may include draining the swamp of the old guard (at RBZ and even in government itself), working on long-term economic policies; working on revamping our judiciary systems and legislation, property rights, unemployment; ease of doing business; research and development (yes, perception affects currencies); revamping our education systems, road infrastructures, farming, mines, industries. It is no child’s play, the work that lie ahead. We need to get many things into place, a lot of them are outside the realm of finance as we know it. Some of it, is going to hurt us so much in the short-term. That is why ZANU is not doing it in spite of all its anti-west mantra. The humiliation of using western currencies is a far lighter burden than relaunching own currency. We are pathetic and cowardly. Myself included.