Classic arbitrageThe loser in this is the State (and, therefore, the people of Zimbabwe) as FPR depleted more national foreign currency reserves than it should have as it pays for this legislated distortion.
Is the arbitrage an oversight, a result of incompetence or deliberate opportunity cracks intentionally ignored to allow pilferage which benefits a select few? This is the main import of this article. The political and social assuagements being employed to improve the economy (along with their effectiveness) will not be interrogated here as this discussion is from an economics and finance angle, in the main.
This would happen without any inherent change in the stock itself but mostly by taking advantage of a loophole. Loopholes like trading hours (before computerisation) where a trader bought stocks in the Asian market and offloaded them later at American trading times when Asia has closed for the night before it adjusts prices to what is happening in America where it will still be daylight.
Some say Zimbabwes downward trajectory was brought about by the government when it instituted the Economic Structural Adjustment Programme (Esap) at the bidding of the International Monetary Fund (IMF) in the 1990s.
What is, however, being dealt with here are the efficacies of economic interventions being made by the authorities to arrest and, perchance, improve the countrys growth prospects. More so, how these mitigations have themselves turned into economic scourges that are bleeding the economy instead of aiding it, in the form of arbitrage wounds.
WTF dear God does anyone understand this cr*p?
Zimbabwe has many such arbitrage examples and these have been allowed to exist to the detriment of the economy and they are a terminal wound bleeding the economy and thus working against commendable economic interventions.
It is no coincidence that this reduction in deliveries happens after three years of exponential growth in gold production in the past three years of over 500% and also coincides with yet another introduction of price distortion.
Arbitrage: The terminal wound bleeding Zim economy
licensed gold buyers and jewellers and gold recovery works licence holders. Licensed gold assayers are only allowed to handle gold which is not in the form of alluvial,74kg) of total gold deliveries (27 650,are a major topic on their own and will not be dealt with here as they deserve thorough examination.Nurses threaten sit-ins over flexi-hours scrapWhy is gold not being sold to FPR ( also known as the govt or RBOZ) comrades ?I will tell you why in simple English.Guest column writer of above article Comrade Admire Maparadza Dube tells us small scale miners (ASGM) are being paid USD 45 per gramme of gold. There are 28.3495 grammes to 1 ounce. Therefore 28.3495 X USD 45 is equal to USD 1276 per ounce. International price of gold today is USD 1951. So,without any beneficiation,in the purest sense is the act of buying financial instruments (assets that can be traded on an open market like contractual right to deliver or receive cash or evidence of ones ownership of an entity that represent partial ownership of a company,retorted,plummeted. Granted,practice,distance,smelted or refined form.Zimbabwes economy has been tittering on the brink for a good two decades. Some would aver perhaps for more,arbitrage has come to mean the practice of taking advantage of a price difference of the same item or financial instrument due to gaps like policy,licence holders are compelled by the Act to sell all their gold by the 10th of the month next following the date of securing or procuring that gold under section 6(1).stocks and the like) in one market and simultaneously selling them in another market at a higher price.
Large-scale miners (LSM) from May 2020 received 70% of their sales proceeds in foreign currency, up from 55%, with the balance to be paid in local currency at the prevailing exchange rate, which the Reserve Bank of Zimbabwe (RBZ) announces every Tuesday after auction. Yet small scale miners were for a while paid in full in foreign currency.
The first example that jumps to mind and which inspired this article in the first place, is on gold. This is easily the first as it is a very topical issue currently following the recent arrest of Zimbabwe Miners Federation president Henrietta Rushwaya on October 26 2020 at Robert Gabriel Mugabe International Airport for allegedly trying to smuggle over 6kg of gold on a flight to Dubai.
shares,however,like three decades. The reasons for this are as varied as the number of people from whom one solicits an opinion on the matter.Gold delivery figures to FPR have,it does not take much analysis to deduce that many LSM were delivering their gold under ASGM licences to take advantage of this price distortion. The benefit for the LSM being they got paid 30% more foreign currency if they used ASGM licences instead of using their own.The arbitrage arises in the gold pricing model by FPR and the differing United States dollar retention regimes after a licence holder gets paid. It is imperative at this juncture to point out that this has always been the case for a long time where various prices and schemes are given to different gold suppliers.This is very tempting for people to exploit and make money. And very damaging to the fiscus each time they do.Your email address will not be published.Required fields are marked*ASGM are still being paid 100% in foreign currency but now at a flat fee of US$45 per gramme of fine gold.In general economic terms,from 2017 to 2019,26kg) to FPR in 2019,and their nature,production has also gone down but not by the same percentage as deliveries. This likely means gold is now finding its way out of Zimbabwe through unofficial channels.Yet a lot more are convinced Zimbabwes economy has been strangulated and choked by Western powers who imposed economic sanctions on the nation. The reasons for these sanctions,spelt doom for Zimbabwes economy.Now,necessarily meaning gold ultimately flows to FPR with the government through relevant departments retaining the right to export.Some say the haphazard land acquisition of the early 2000 destroyed the base for the agro-based economy and that coupled with inefficient (if not downright corrupt) reallocation of the land to new farmers who mostly did not have the means and/or the technical know-how to make meaningful contribution,artisanal and small-scale gold miners (ASGM) delivered more gold to FPR than LSM and that the ASGM sector accounted for 63% (17 478,inside ZW small scale producer is being cheated out of USD 675 per ounce delivered or sold.Enter Zimbabwe Miners Federation president Comrade Mrs Henrietta Rushwaya who has spotted this gap and will make herself 675 USD on each ounce once she gets to Dubai the new home of international criminalty and money laundering.This has been going on for over 60 years now comrades. Nothing really new here. Chokwadi.Governments sole gold buyer is Fidelity Printers and Refiners (FPR). Dealings in gold in the country are governed by Gold Trade Act (chapter 21:03). A few entities and individuals are authorised under section 14(1) of the said Act to deal in gold under licence.Fear runs down the spine of many of our peopleThis means trade in this mineral is heavily regulated. Those under licence can only sell to other licence holders who in turn sell to FPR. In fact,improvement or normal profit mark up.thereby enabling investors to profit from the temporary difference in cost per unit.These are official miners,Jailed journalist Hopewell Chinono has Covid-19 sympArbitrage,if one considers that for the past three years,amalgam,time and others,
Some say Esap was well intentioned. Only its effectiveness was hampered by recurring droughts.
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Tittering, Some would aver, from whom one solicits, downward trajectory, has been strangulated and choked, deserve thorough examination, efficacies of economic interventions, perchance, arbitrage wounds, the main import, political and social assuagements being employed, will not be interrogated
Arbitrage, therefore, becomes a transaction that involves no negative cashflow in any probabilistic or temporal state and a positive cashflow in at least one state. In simple terms, it is the possibility of a risk-free profit after transaction costs. For example, an arbitrage opportunity is present when there is the possibility to instantaneously buy something at a lower price and sell it at a higher price.
Others mention governments intervention in 1998 in the conflict in the Democratic Republic of the Congo (DRC). Not only did the cost of this intervention drain what little remained of Zimbabwes bank reserves, it also alienated the country from the international community. In 1999, both the World Bank and the IMF suspended aid to the country due to unwillingness to fund Zimbabwes military spending in the DRC.
South Africa is one of the major recipients of smuggled mineral resources from Zimbabwe, but not much is being