Al Jazeera, a television news network based in Qatar, has broadcast a four-part documentary series entitled “Gold Mafia”. The series looked at how international criminal gangs were buying gold in Zimbabwe and illegally exporting it to countries such as the Dubai. The persons alleged to be carrying on this illegal trade were shown boasting of their close links to the Reserve Bank of Zimbabwe and to senior government officials, up to and including the President and his wife. They said they had the Governor of the Reserve Bank “on speed dial” and that senior managers of Fidelity Printers and Refineries, a subsidiary of the Reserve Bank, were on their payroll to facilitate the issue of licences to buy and export gold. Through these links, they claimed, all the processes in their trade were made to seem aboveboard, with legitimate paperwork to authorise their gold exports.
The Reserve Bank’s response to these allegations has not been entirely consistent. The Governor of the Bank issued a statement calling them “sensationally wild, false and malicious” and saying:
“It is unbelievable that such bizarre claims, allegedly made by private individuals who have no relationship with the Bank whatsoever, have been elevated to gospel truths and published with reckless abandon.”
He concluded by advising the public “to dismiss the false allegations with the contempt they deserve”, adding:
“The Bank remains confident that the truth cannot be hidden, and that the truth shall prevail.”
Since then, however, the Financial Services Unit of the Reserve Bank has frozen the bank accounts of at least four persons portrayed in the series, which suggests there is at least some truth in the allegations.
The Reserve Bank of Zimbabwe
The Reserve Bank of Zimbabwe is currently established by section 317 of the Constitution, though predecessor institutions have existed since well before Independence. Section 317 gives the Bank the following objectives:
- regulating Zimbabwe’s monetary system
- protecting Zimbabwe’s currency in the interest of balanced and sustainable economic growth, and
- formulating and implementing monetary policy.
The Reserve Bank’s organisation and activities are regulated by the Reserve Bank of Zimbabwe Act [link]. The Bank’s policy is set by a board of directors and its day-to-day management is under the control of a Governor and one or more Deputy Governors.
The Reserve Bank and gold
The Reserve Bank of Zimbabwe Act gives the Bank wide powers to buy, sell and keep gold. For example:
- It is given general power to deal in precious metals, including gold (section 7)
- It must keep reserves, including gold, against the country’s international and internal obligations (section 49)
- It has the right to make and issue gold coins (section 43)
- It can buy, sell and hold gold in order to support the value of the Zimbabwe dollar (section 47)
The Bank was given further powers in the Finance(No. 2) Act, 2022 [link] to receive precious metals, including gold, as tax from mining companies. It is allowed to keep these precious metals for its purposes.
Very little is known publicly on the state of the gold reserves kept by the Reserve Bank, nor how much gold has been bought from miners, nor how much is exported in each financial year.
During recurrent economic crises since 2000 the Reserve Bank carried on quasi-fiscal activities in mostly unsuccessful attempts to promote economic growth. The activities were not confined to the financial sector but to all sectors of the economy such as health, infrastructure, education and agriculture. The Bank funded the farm mechanisation programme, for example, and gave loans at concessionary rates to resettled farmers, companies and statutory bodies outside the national budget. The loans were never audited and were seldom repaid.
The quasi-fiscal activities were illegal, in that they were not authorised by the Reserve Bank of Zimbabwe Act or any other law. They saddled the Reserve Bank with enormous debts so in 2015 Parliament passed the Reserve Bank of Zimbabwe (Debt Assumption) Act [link] by which the Government took over the debts and gave the Bank a clean start. The identity of the debtors, the amount of their indebtedness and what steps have been taken to recover the amounts they owe, have never been clear. But what was clear was the resentment of tax-payers who ultimately had to bail out the Bank.
Forensic Audit or Investigation of Reserve Bank
The Reserve Bank is a vital cog in the country’s economy and it is essential for it to maintain a spotless reputation for competence, fiscal responsibility and probity. The Al Jazeera series, coming on top of the Bank’s illegal quasi-fiscal activities, have tarnished its reputation and sown suspicion within financial markets, multi-lateral financial institutions and the general Zimbabwean public.
In the interests of transparency and accountability an investigation should be undertaken to ascertain precisely what the Bank and its subsidiary companies have been and are doing and whether their activities have been lawful. There are at least three ways in which such an investigation could be conducted:
- The Minister of Finance and Economic Development could order an investigation into the Bank’s activities in terms of section 38 of the Reserve Bank of Zimbabwe Act. The section gives persons conducting an investigation power to demand documents and answers from all officers, employees and agents of the Bank; anyone refusing to supply such documents and answers on demand can be imprisoned for up to three months.
- The Auditor-General could be directed to conduct a forensic audit of the Bank’s financial statements and the financial statements of its subsidiaries. Section 309(2)(b) of the Constitution says that at the request of the Government she must carry out a special audit of the accounts of any statutory body or government-controlled entity. And section 6(1)(a) of the Audit Office Act [link] gives her the function of auditing the accounts of public entities on behalf of the National Assembly. So she could conduct a forensic audit at the direction of either a government Minister or the National Assembly.
- The President could appoint a commission of inquiry to investigate the activities of the Bank and its subsidiaries.
An audit or investigation conducted in any of those ways would have sufficient legal authority to uncover wrongdoing on the part of the Reserve Bank and to override any right to secrecy conferred by section 60 of the Reserve Bank of Zimbabwe Act.
The audit or investigation could be done in partnership with reputable international audit firms or agencies so that all stakeholders – international markets, multi-lateral financial institutions and the general public – are satisfied that the exercise has been conducted thoroughly and fairly.
However it is done, a thorough investigation should be conducted if our country’s reputation is to be upheld. As the Governor of the Reserve Bank himself said, “the truth cannot be hidden and … the truth shall prevail”.
Veritas makes every effort to ensure reliable information, but cannot take legal responsibility for information supplied.Post published in: Business