The Mines and Mining Development Minister of Zimbabwe, Winston Chitando, along with his deputy, Polite Kambamura, face potential dismissal if they fail to secure sufficient mineral reserves to support the Zimbabwe Gold (ZiG) currency. This announcement comes amid broader efforts by the Zimbabwean government to stabilize the nation’s financial system, which includes tough new measures against illegal foreign currency transactions, viewed by the government as akin to money laundering.
Introduced last year, the ZiG currency was designed to be backed by tangible assets, specifically minerals, to bolster confidence and stability. The government mandated that miners pay half of their royalties in the form of the minerals they extract, a move intended to enhance the reserves of the Reserve Bank of Zimbabwe (RBZ). Despite these efforts, the ZiG continues to struggle against severe inflationary pressures that erode the value of public and private incomes, complicating economic activity and consumer spending throughout the country.
The urgency of securing robust backing for the ZiG was emphasized by Kambamura at the Zimbabwe Investment Summit 2024 in South Africa, where he stated, “If we fail to put the required reserves in the RBZ vault, then myself and my minister are gone.” He underscored the government’s commitment to filling the RBZ’s reserves with ample mineral stocks, highlighting Zimbabwe’s rich deposits of platinum and lithium—key resources that can underpin the ZiG.
However, Kambamura also pointed out a significant hurdle: the lack of capital to expand mining production, which is crucial for increasing the volume of minerals available to back the ZiG. This capital constraint poses a risk to the effectiveness of the government’s strategy and the personal job security of the ministers responsible for its success.
In parallel with these efforts, the Zimbabwean government has intensified its crackdown on the parallel currency market. Recent weeks saw the arrest of numerous forex dealers in Harare and other cities, part of a broader attempt to enforce compliance with the new currency regulations and support the ZiG. Finance Minister Mthuli Ncube emphasized the government’s resolve to combat what it views as money laundering activities associated with unregulated currency exchanges.
Ncube explained the unique structure of the ZiG, describing it as a flexible system similar to a currency board but with the ability to adjust the money supply based on the backing reserves. This design is intended to prevent speculative attacks on the currency and stabilize its value. However, experts warn that without comprehensive backing and free access to foreign currencies through formal channels, there will always be a demand for dollars on the black market, undermining efforts to stabilize the ZiG.
Moreover, while the ZiG is now accepted for certain transactions like fuel purchases, it remains unusable for other essential services such as passport issuance, which further limits its utility and acceptance. The official exchange rate is significantly lower than what is used by businesses and retailers, who operate with a higher rate due to market pressures, adding another layer of complexity to the currency stabilization efforts.
The government’s strategy hinges on both tightening legal frameworks to curb illegal market activities and ensuring the ZiG is adequately supported by real economic assets. The outcome of these efforts will not only determine the economic future of Zimbabwe but also the political fates of key ministers like Chitando and Kambamura. As Zimbabwe navigates these challenging economic waters, the global community watches closely, recognizing the potential implications for regional stability and economic development in Southern Africa.
Source: Newsday
