RBZ outlines gold coins buying framework

Nqobile Bhebhe, Senior Business Reporter
THE Reserve Bank of Zimbabwe has outlined guidelines for buying the newly introduced gold coins starting Monday next week but temporarily closed out local banking institutions from buying for their portfolios.

The adoption of the much-anticipated Mosi-Oa-Tunya gold coins follows a resolution of the bank’s Monetary Policy Committee (MPC) last month, as a new investment instrument that also doubles up as a store value for local investors.

The coins will be sold using both the local and foreign currency at the prevailing international gold price.

Foreign currencies permitted to purchase the gold coins include the British pound, the Euro, Australian dollar, Botswana pula and South African rand.

Dubbed the Mosi-Oa-Tunya, each coin will have a unique engraved serial number, weighs one troy ounce, have a purity of 22 carats and weigh 33.93 grams.

Financial economists view this as a bold strategy to ease the pressure for the US-dollar and ultimately stem inflationary pressures through exchange rate stabilization and strengthening of the local dollar.

Outlining a series of guidelines for the purchase of 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 RBZ said banks will appoint agents that include authorised dealers, its subsidiaries and foreign banks that will be responsible for selling the gold coins on its behalf.

“Local banking institutions shall not be allowed to buy Mosi-Oa-Tunya gold coins for own portfolios up until such a time as the Reserve Bank of Zimbabwe may grant the permission.

“Thus, for the time being, banks can only receive the coins from the Reserve Bank for onward selling to their customers on behalf of the Reserve Bank,” reads part of the Statutory Instrument on selling procedures.

The central bank said the gold coins would be sold at the prevailing international gold price plus five percent to cover the cost of production and distribution of the coin on a payment versus delivery basis.

The guidelines further add that the gold price would be published daily in the morning and based on the previous day’s London Bullion Market Association (LBMA) PM Fix plus the cost of producing the coin.

Further outlining buying procedures, the RBZ said exporting entities shall buy using foreign currency from their retained export portions.

“Notwithstanding this requirement, exporters whose annual export receipts in 2021 were less than US$1 million, shall require exchange control approval to be permitted to utilise a portion of their surrender portion that is payable in local currency to purchase the gold coins,” it said.

For individual buyers, selected agents are required to ensure that buyers produce national identity cards, valid passports, valid driver’s licence and a birth certificate for minors.

Added to that, proof of residential address of not less than three months but in an event that the prospective buyers have no such proof, an affidavit would be required.

“In cases where a buyer is acting on behalf of another person, the identity of the other person will be verified and the client’s authority to conclude the transaction on behalf of the other person will be established,” said the central bank.

For company purchases, certificates and memorandum of incorporation are required to verify the identities of companies.

However, for listed companies, no verification documents would be required.

Zimbabwe has lately been battling high inflation and the introduction of gold coins is expected to provide an alternative to store value besides the most sought-after United States dollar amid rising inflation, which has driven demand for the greenback to hedge inflation.

Annual inflation surged to 191,6 percent in June this year from 131,7 percent a month earlier, which has largely been the result of local currency depreciation and the negative impact of the war in Ukraine.

In terms of liquidity and tradability, the coin will have liquid asset status, that is, it will be capable of being easily converted to cash, and will be tradable locally and internationally.

It can also be used as collateral.

The central bank said at the discretion of the holder of the gold coin, the bank or its agents will buy back the gold coins after “a vesting period of 180 days in line with the need to promote a savings culture in the country.”

It has been noted by analysts that price stability is an added advantage of buying gold coins for investment and when compared to other investment options in the market, the price of gold never falls by a significant margin and is rather always stable even during a global financial crisis.

Worldwide people look at gold as an alternative to currency, particularly where the local money is prone to losing value.

Gold is viewed as a real physical asset that tends to maintain its value in the market, which, in turn, proves that buying gold coins is a good investment option. – @nqobilebhebhe.