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The launch of Zimbabwe’s own gold coin, the Mosi-oa-Tunya, last week went off very well and was highly-successful with the Reserve Bank of Zimbabwe’s monetary policy committee reporting on Friday that 1 500 were sold in the first week, so another 2 000 were going on sale this week.

The same committee reported that around 85 percent of the coins sold last week were bought with Zimbabwe dollars and the other 15 percent with US dollars.

This means that a little over $1 billion returned to the Reserve Bank, along with a little over US$400 000, minus whatever commission the Reserve Bank pays the bankers who sell most of the coins, but that in any case would come out of the 5 percent extra added for minting and distribution.

The Bankers Association of Zimbabwe reported that the bulk of sales last week were to corporate customers, and considering that $1 billion plus and US$400 000 plus was spent that would make sense.

The coins were launched for two primary purposes, first to offer those with large sums of cash sloshing around their bank accounts something tangible, tradable and legal to hold the value of their spare cash.

But the second reason while not overstressed at the beginning, was to mop up some of the excess local currency liquidity still slopping around and being used to maintain pressure in the black market.

That $1 billion pulled out of circulation last week is not just reducing the local currency money supply, but reducing a critical part of that money part, the part that was most likely to be pumped into the black market to buy US dollars, so keeping pressure on the exchange rate, before something better came along. A lot of local currency is needed in ordinary household and business activity and circulates through private and company bank accounts as people get paid, buy groceries, bank the daily takings, order more goods, fill the shelves and pay the staff. This sort of money is never going to be spent on buying gold coins.

What is being spent is those large sums that were spare, just sitting in a rich person’s private account or far more likely in the corporate accounts of some company.

It has been established that these large corporate accounts, with Government contractors in the lead in many cases, were seeking to convert these local currency balances not needed for immediate use into US dollars.

That meant they were entering the black market and with the sort of monthly inflation we were seeing in the second quarter of the year ready to pay almost anything that the sellers asked. These were people who were not that desperate to arbitrage or play other silly financial gains, but were just trying, in an inflationary environment, to preserve value.

Now at least some of that money is going into gold instead of the black market and that should have major knock-on effects.

With one sizeable block of buyers of black market foreign currency now happy to buy gold instead, the demand pressure in the black market will be significantly reduced.

The supply, mainly diaspora remittances, remains. At the very least this should slow down the decline in black market exchange rates, more probably stabilise them, and at best start seeing the local currency firm in the black market, although that will probably require a range of other measures.

We need to remember that besides those wanting to preserve value, and reluctantly breaking the law, there were a lot of other people who were trying to get rich by manipulating currency and other financial markets, and who could make money simply by holding onto foreign currency for a few months, even with the 40 percent margin the black market charges between street buy rates and the final ask rate when all the bits and pieces have been accumulated.

But with supply remaining and demand falling these games will be harder.

There were those worried about this with the Mosi-oa-Tunya, that people would figure out arbitrage markets. Two factors make this more difficult and a third does make it possible.

First borrowing to buy gold coins is almost impossible, since banks are supposed to block speculative loans, but even if someone were to get through that check an interest rate of more than 200 percent a year makes this expensive.

The factor that does create some openings is the fact that coins can be bought for local currency and sold for foreign currency, but the Reserve Bank has thought of dampening this by demanding that coins are held for six months before they can be sold back to the bank.

Any private sales simply change the holder of the coin and shuffle ownership of a coin and a bunch of US dollars, without adding to either pile, so do not change any financial equations.

Some have wondered whether minting of Mosi-oa-Tunya is sustainable. Well Zimbabwe is a gold producer. The 1 500 sold last week amounted to almost 47kg of gold. The 2 000 this week will come to 62,2kg of gold. This is a small portion of our gold production.

In fact if we were minting 2 000 a week we would need a little over 3 tonnes of gold a year, a modest fraction of our total production.

A more interesting question is what happens to the money the Reserve Bank earns from the sales. Obviously the US dollar sales go into the general pool so the question is really what happens to all those billions of local currency that will be emerging into the Reserve Bank accounts over the next few weeks.

There will be strong lobby for this cash to be quarantined, just not allowed to circulate, with the coin minting and sales an easy way to mop up a good slice of the surplus liquidity that still bedevils our economic calculations.

And with other measures, such as the tight fiscal discipline in Government switching off the State liquidity tap, and now the heavy pressure on banks to turn off the private liquidity taps, removal of excess pools of liquidity should have some immediate positive effects.

There is not, and never has been, a single magic bullet to fix Zimbabwe’s monetary concerns. But the range of measures, including now the golden bullet, that have been introduced should continue to make it easier for the productive to function and harder for the speculator and arbitrager to mess things up.