Late last evening the RBZ sent out a press statement via Twitter and other channels detailing the much talked about gold coins. As details are finally confirmed we begin to understand the characteristics and utility better. Many questions were brought up by the announcement of the gold coins and some of these questions have been answered. However, more questions have been brought up in the process. We hope these will be answered in the coming days.
So the coins will bear serial numbers and weigh one troy ounce (31.1035 grams) of 22-carat gold. The buyer of a coin will be awarded a Bearer Ownership Certificate and have the option to hold the coin physically or in a secure facility such as a safety deposit box with a bank of their choice. The coin will have prescribed and liquid asset status as well as being used for transactions. It can be used as collateral and the banks will readily buy it back at the request of the holder. Finally, the coins will be available from the 25th of July 2022 and may be bought in Zimbabwean dollars and other legal tender currencies.
The serialisation and certification of the coins are both great additions. This makes the coins non-fungible, one coin cannot replace another. This is an important security feature and also safeguards from concerns of counterfeiting. The option to take custody of the coin or place it in a depository of your choice is also welcome. Many were concerned that buyers may not be allowed custody of their coins. There were even concerns that the coin may not be real gold so clarity on that is welcome too.
The size or weight of the coin is a bit of a head-scratcher. If the concern the coins are meant to address is the demand for US dollars as a store of value then this coin leaves a lot of money on the table, so to speak. Many transactions converting Zimbabwean dollars to US dollars are happening below the US$1800 level. Many Zimbabwean dollar salaries do not convert to that much even at the interbank rate. Understandably the goal is to be a store of value and if it is too small it may become a medium of exchange. Selling the coin for both foreign currencies and Zimbabwean dollars brings up the question of the exchange rate. While the Reserve Bank of Zimbabwe recently made the Interbank rate the official exchange rate there is an arbitrage opportunity opened up if they insist on this exchange rate. People can simply buy coins for Zimbabwean dollars, sell or “use them in a transaction” and get US dollar change and convert the US dollars to Zimbabwean dollars at the parallel market rate and go back and buy more coins. Pocketing a healthy profit in the process. It will be interesting to see how they tackle this.
Arbitrage potential aside the gold coin seems to be decently thought out. At present, it looks like a better option than holding large Zimbabwean dollar balances (is anybody doing that?). The coins present a great way for the authorities to mop up Zimbabwean dollar balances and get the US dollars held in the National Mattress Bank into the formal system. But will citizens see gold coins as a better option than foreign currency? Ultimately an additional asset class is welcome. We have 20 days to go before the Mosi-Oa-Tunya is available to us and we see how it works in practice.