Faced with a collapsing currency and the world’s worst inflation rate, Zimbabwe’s government has unveiled an unusual new weapon: a 22-karat gold coin worth more than US$1,800 that can be used for retail purchases. Zimbabwe last week issued 2,000 of the gold coins, bearing the image of Victoria Falls, the largest waterfall in Africa. Each coin contains one troy ounce of gold. The coins were snapped up quickly – but the shops haven’t seen them. Instead, they were mostly bought by investors and currency speculators. Store employees laugh when asked about it. “Oh, no, no, we haven’t received any gold coins from any of our customers,” said Lina Muchero, an assistant at a clothing store in the upscale Westgate mall in Zimbabwe’s capital, Harare. Not even common people have seen the coins. “They will benefit the rich and the political elite,” said Laurence Muswere, an unemployed university graduate selling winter socks and woolen hats on the pavement outside a supermarket in central Harare. Inflation is rising sharply across Africa this year, partly because of the Russian invasion of Ukraine. But the price crisis is particularly severe in Zimbabwe, where external pressures have been compounded by years of economic mismanagement and corruption by an authoritarian government that has failed to find a stable currency for the country. Zimbabwe was devastated by hyperinflation in 2008 when the central bank issued the local Zimdollar in banknotes of up to 100 trillion. It finally abandoned the currency and switched to the US dollar in 2009. The government revived the Zimbabwe dollar a decade later, but the Zimdollar today has sunk to an unofficial rate of 800 to the US dollar on the illegal street market. Just three months ago, the rate was 400 per dollar. To discourage speculation and prop up the currency, authorities have experimented with a series of desperate measures, including a ban on all bank lending in May. The ban was lifted 10 days later after widespread complaints. Inflation, meanwhile, continued to worsen. The official annual inflation rate rose to 257 percent in July, up from 192 percent in June. US economist Steve Hanke, who tracks inflation worldwide, estimated that Zimbabwe’s inflation in July was 595 percent, the highest in the world. The World Bank reported last week that Zimbabwe’s food price inflation rate is the second highest in the world, behind Lebanon and ahead of Venezuela. In another bid to curb inflation, the central bank more than doubled its key interest rate to 200 percent last month. Gold coins are the bank’s latest tactic. While they are considered out of reach for the vast majority of Zimbabweans, the central bank has promised to introduce them in smaller quantities in the future. The central bank said the coins sold out quickly within a week at most banking locations where they were made available. It plans to release another 2,000 gold coins this month. However, interviews with The Globe and Mail suggest that the coins were popular mainly among wealthy investors, financial firms and speculators. Many were taking advantage of the fact that the coins could be bought in Zimdollars at the official exchange rate, well below the street rate. The traders described how they changed US dollars into Zimdollars on the open market, used the Zimdollars to buy gold coins, then sold the coins to banks for US dollars and returned to the street market to repeat the process, making a profit along the way. Others use the coins to absorb their zimdollars and convert them into US dollars at a profit. “I unload all the local currency I get from my transport business and my three supermarkets,” said businessman Nicholas Midzi as he waited outside a state gold refinery where the coins are sold. “I get the coins before the majority of people start to realize that there is fast money in their trading.” A woman who gave her name only as Nelia, who said her husband owned a liquor bar in Harare, said she planned to buy and sell several of the coins. As long as informal exchanges remain on the streets, gold coins will be profitable, he told The Globe. The wage earners were less impressed by the coins. “I didn’t bother to find out much about them because their price has already put me off,” said Mirirai Hoto, a 37-year-old secondary school teacher in Harare. “I will never have enough money to buy a gold coin.” The state-run Herald newspaper reported that the coins had sparked a “gold rush” and “overwhelming” demand. He predicted that the currencies would gain value faster than the US dollar. But an opposition activist, Elvis Mugari of the Citizens Coalition for Change party, said the coins would only benefit a few insiders with connections to the ruling ZANU-PF party. “The poor will continue their poverty as the rich get richer,” he said. Our Morning Update and Afternoon Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.
