Does the introduction of gold coins violate the gold trade Act Chapter 21:03?
Since the government announced the introduction of gold coins many in the mining sector and the country at large conjectured if the Reserve Bank of Zimbabwe (RBZ) was not violating the gold trade act Chapter 21:03 which criminalises possession and gold trade without a license.
We spoke to Law professionals and former University of Zimbabwe Institute of Mining Research Chairman Professor Lyman Mlambo who gave us their views.
Mlambo said, “The gold coins are of course clearly a different product from refined gold never mind the percentage of gold in them (whether 100% or less). They are different commodities because the coins are a fabricated product and have applications, as defined by RBZ, that does not at all fit gold that has not undergone such fabrication.
“In essence, RBZ has created one extra use of gold in Zimbabwe and has moved to a higher level of the value chain (the level of application of gold). One of the uses created here is a medium of transaction since the coin can be used for transactional purposes due to its ‘liquidity and tradability’.
“Gold has many other uses and these uses are not covered in the Gold Trade Act. The Act deals with gold that has not yet graduated to the next level of the value chain. It is like arresting people who have pure gold teeth, or pure gold rings. The Gold Trade Act does not go that far in its application. At the stage of a gold coin, gold has been applied to produce a distinct product with different uses and characteristics than the gold coming from a Refinery. There is even value-added through the manufacturing (minting) process. This product is so differentiated from raw gold that the coins even compete with export gold for the same supply source. The factors that determine the demand for the two are different,” said Mlambo
A leading lawyer who declined to be named said should Fidelity Gold Refiners (FGR) trade the coins it will be a different ball game altogether.
“I think given the circumstances in which they are issued out they are to be treated as you would a gold ring in that you don’t need a special permit or licence to own them. It would, however, likely be different from Fidelity trading them as it is clearly a ‘security’. Trading in securities requires licencing,” the lawyer said.
The term “security” refers to a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock; a creditor relationship with a governmental body or a corporation represented by owning that entity’s bond; or rights to ownership as represented by an option.
Another Harare-based attorney who is well versed in Mining law and a former Mines and Mining Development employee, Thammary Brenda Vhiriri added her voice saying once there is a value addition to gold the context changes.
“People wear gold chains and rings but don’t get arrested. It means that once there’s value addition done to the gold the context changes. Unmanufactured gold means gold that’s not value-added, it’s RAW GOLD and anything that contains value-added gold but which is not made for commercial products (chains, rings etc) or artwork or archaeology. But once that value-added gold has been smelted or removed from other artefacts it is classified as gold,” Vhiriri said.
Conclusion
Whilst the government has not clarified the official position speculation is rife. The onus is on the RBZ to give the official position to put the matter to rest as the country awaits the debut of the Mosi-Oa-Tunya Gold coins.