Zimbabwe may sell diamonds to launch gold-backed currency

HARARE (Commodity Online): Zimbabwe may sell diamonds for gold, so that it can have a gold-backed currency, according to a recent proposal from the governor of Zimbabwe’s central bank.

The Zimbabwean dollar is no longer in active use after it was officially suspended by the government due to hyperinflation. The United States dollar, South African rand, Botswanan pula, Pound sterling, and Euro are now used instead. The US dollar has been adopted as the official currency for all government transactions with the new power-sharing regime, says Wikipedia.

But the central bank of Zimbabwe—Reserve Bank of Zimbabwe (RBZ)—believes that the US dollar is no longer stable.

According to Dr Gideon Gono, RBZ Chief, the inflationary effects of United States’ deficit financing of its budget may impact foreign countries and would lead to a resistance of the green back as a base currency; cited newzimbabwe.com.

Writing in a blog in New Zimbabwe, Gilbert Muponda, an entrepreneur based out of Zimbabwe has welcomed the proposal of a gold-backed Zimbabwean currency. He has applauded the proposal of the central bank governor to sell diamonds for gold.

The country is a resource hub: It sits on gold reserves worth trillions. It has the world’s second largest reserves of platinum, has got alluvial diamonds that can fetch the nation $2 billion annually and even boasts of chrome and coal deposits.

But the government’s protectionist measures have kept the mining companies at bay. The government wants the foreign miners to sell controlling stake in ventures to local blacks, which is obviously frowned up on by all. The companies, given the uncertain situation, have refrained from investing further in expansion activities in Zimbabwe.

The country cannot access foreign credit as the ZIDERA Act passed by the United States in 2001 blocks US entities from trading with certain Zimbabwean institutions and individuals This has forced the US representatives in lending agencies like World Bank, IMF, IFC, and ADB to take an unfavorable stance when it comes to Zimbabwean credit requests.

Naturally, the risk premium goes up and the banks play it in the back foot.

“The events of the 2008 Global Financial Crisis demand a new approach to self reliance and a stable mineral-backed currency and to me, Gold has proven over the years that it is a stable and most desired precious metal,” the RBZ Chief was quoted by newzimbabwe.com as saying.

Well said!

http://www.commodityonline.com/news/Zimbabwe-may-sell-diamonds-to-launch-gold-backed-currency-2011-05-20-39184-3-1.html

Zimbabwe diamond polishing centre set to open

HARARE - The Zimbabwe Diamond Education College aimed at equipping the locals with relevant diamond cutting and polishing skills is now set for commissioning following the completion of construction work last month.

The construction of the institution which is located in Harare’s Mt. Hampden area was necessitated by the need to add value to the country’s mineral exports.

College director, Mr. Joseph Banda, expressed optimism that the institution will make significant impact in the local diamond industry and confirmed that over 150 prospective students have applied for diamond cutting and polishing courses.

“As a country we have been losing a lot of revenue by export unprocessed minerals particularly diamonds and we are confident that skills to be learnt here will go a long way in transforming the local diamond industry,” he said.

Responding to concerns that Marange villagers are not likely to benefit from such facilities given the distance from the source of the diamonds and the location of the college, Mr. Banda assured the villagers that there are plans to engage responsible authorities to get another license for a similar project in the Marange area.

Some of the registered students who were going through the introductory lessons hailed the establishment of the institution, which they said is critical in aligning the country’s diamond industry with international trends.

Zimbabwe’s diamond industry, which is still in its infancy, has the potential to transform the country’s economy if resources are channeled towards value-addition of the gems.