© A leading South Africa precious metals dealer African Medallion Group (AMG) has proposed to the Reserve Bank of Zimbabwe (RBZ) the launch of a digital currency backed by physical gold, with an aim to increase the use of bullion as an accepted form of electronic money.
AMG said in an October 18 letter to Reserve Bank of Zimbabwe governor John Mangudya that the introduction of a gold-backed currency would be the best option available to Zimbabwe today.
The Johannesburg-based AMG – which is in a coin dealer agreement with the South African Mint Company, a subsidiary of the South African Reserve Bank – said it has capacity to launch the new currency backed by gold.
AMG, which was founded by Zimbabwean tycoon Frank Buyanga, said it currently holds gold reserves in excess of US$1 billion.
"I am writing to you to requesting that you allow us to create a formal gold-based currency that will be used as legal tender in Zimbabwe.
This will be great relieved to the economy and the people of Zimbabwe," said Buyanga in his letter to Mangudya.
He said given the situation in the country, gold was more acceptable as a form of currency by combining its appeal as a store of value and a much more efficient medium of exchange.
"My executives are immediately available to start discussions on the creation of a new currency. We have done extensive research and are convinced its time for us to introduce out gold backed currency in Zimbabwe. Every Zimbabwean is a shareholder in the progress of their nation." Mangudya was unreachable for comment.
Buyanga told the RBZ a gold-backed currency was only the way to "take our country forward."
"Mr governor, as you may be aware, I am the founder of AMG with our headquarters in Dubai. We have in the past engaged in several exchanges with the RBZ. Our record in fighting for a better Zimbabwe, speaks for itself and our support for deals that will make us prosper as a nation is unquestionable."
He said his proposal would be following the example of successful, developed countries. The timing is spot-on, as investors flock to gold as a safe haven from economic turbulence.
"Sir, Abu Dhabi recently installed one of the first gold ATMs, allowing customers to withdraw fiat currency in terms of everything from one-gram nuggets to larger gold bars. It is possible for Zimbabwe as well with our assistance and guidance."
The AMG boss said it was "ready for this and willing to share the framework we envisage for a better Zimbabwe."
A few years ago, then central bank governor Gideon Gono mooted adopting a gold-backed Zimbabwean dollar warning that the US greenback’s days as the world’s reserve currency were numbered.
Persistence Gwanyanya, an economist, banker, financial advisor said it only makes sense for the country to leverage on this and other precious resources now, hence the argument for a gold-backed currency, given the dire cash challenges that confront the country.
"Clearly, there is need for measures to boost confidence in the economy, and backing bond notes with gold could be one such measure," Gwanyaya said.
"Its major advantage would be to contain inflation, through limited supply, and maintain a stable exchange rate — all if which are the broken promises of fiat money.
"By linking the bond notes to a fixed amount of gold, it would be possible to maintain the 1:1 exchange rate with the US dollar, as the bond notes could be redeemable to gold in the event of loss of confidence in them."
Zimbabwe’s central bank is moving to introduce a new currency next week, which will circulate alongside the bond notes and coins in a move was supposed to ease shortages of cash that pushed most of the economy toward debit and credit card operations and put heavy strain on digital commerce platforms.
A new currency would consist of $5 notes and $2 coins will begin circulating on Monday to “make the payment system more efficient and facilitate commercial transactions”, the central bank said in statement. The largest of those incoming bank notes, equivalent to about $5, is a third of the price of bread.
President Emmerson Mnangagwa blames the nation’s economic predicament on sanctions by the US meant to force him from office.
His critics say the collapse was caused by incompetent management that squandered hundreds of billions of dollars in gold revenue and other minerals.