‘Probe RBZ’s role in Gold Mafia exposé’

LEGAL think tank, Veritas Zimbabwe, has called for a full investigation into the operations of the Reserve Bank of Zimbabwe (RBZ) after senior officials of the bank, and its gold-buying subsidiary, Fidelity Gold Refiners, were implicated in corruption, smuggling, and money laundering in a sensational four-part documentary series titled “Gold Mafia” published by Qatari news network, Al Jazeera.

The Gold Mafia documentary looked at how international criminal gangs are allegedly buying gold in Zimbabwe and illegally exporting it to countries such as the United Arab Emirates (Dubai specifically).

The persons alleged to be carrying on this illegal trade boasted of close links to the central bank and senior government officials.

While the revelations in the documentary series attracted mixed public reactions, largely bordering on political allegiance split between the ruling and opposition parties, it lent credence to previous claims by some officials that the country was losing significant amounts of the precious mineral through smuggling.

Finance and Economic Development Minister Prof Mthuli Ncube and Zimbabwe Anti-Corruption Commission Loice Matanda Moyo are among the high-profile figures to publicly speak about the booming illegal trade of gold, the country’s largest export.

While it cannot be accurately ascertained how much the country could be losing through smuggling, it is estimated that the figure could be roughly US$1,5 billion per year.

Information and Publicity Minister Monica Mutsvangwa told journalists in Harare earlier this month, following the documentary exposé, that the government had since ordered investigations on the matter.

“Government takes the allegations raised in the documentary seriously and has directed relevant organs to institute investigations into the issues raised therein. Any person found to have engaged in acts of corruption, fraud or any form of crime, will face the full wrath of the law,” Minister Mutsvangwa said.

“Boastful behaviour and name-dropping by some personalities featured in the documentary, seeking personal gain and glory, should never be taken as an enunciation of government policy.

“Government (also) takes this opportunity to reaffirm its commitment to upholding local and international laws, including laws relating to financial transactions, the trade of gold and other precious minerals,” she said.

The gangs claimed they had senior managers of Fidelity Gold Refiners, the country’s sole authorised gold buyer, on their payroll to facilitate the issuance of licences to buy and export gold.

Through these links, they claimed, all the processes in their illegal trade in the precious metal, corruption and money laundering were made to appear aboveboard, with the legitimate paperwork issued to authorise the activities. The central bank’s response to these allegations has not been entirely consistent, Veritas said.

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.”

The central bank chief implored the public “to dismiss the false allegations with the contempt they deserve”. “The Bank remains confident that the truth cannot be hidden, and that the truth shall prevail,” he said.

Since then, however, the Financial Services Unit (FIU) of the Reserve Bank of Zimbabwe froze the bank accounts of at least seven persons in the gold smuggling documentary, which Veritas Zimbabwe said suggested there was at least some truth in the allegations.

The Reserve Bank of Zimbabwe Act gives the Bank-wide powers to buy, sell and keep gold.

Following the sensational claims of the central bank’s complicit in the alleged gold smuggling, corruption and money laundering “exposed’ by the Al Jazeera Gold Mafia documentary and in view of the powers vested in the bank to deal in all aspects of gold trading in Zimbabwe, Veritas said a probe should be instituted into the bank’s operations to determine the veracity of claims in the documentary.

The bank is given general powers to deal in precious metals, including gold.
It must keep reserves, including gold, against the country’s international and internal obligations, it has the right to make and issue gold coins, and the Bank can buy, sell and hold gold in order to support the value of the Zimbabwe dollar.

Further, the Bank was given further powers in the Finance(No. 2) Act, 2022 to receive precious metals, including gold, as tax from mining companies. It is allowed to keep these precious metals for its purposes.

“During recurrent economic crises since (the year) 2 000 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,” Veritas said.

The legal think tank said the quasi-fiscal activities were illegal, in that they were not authorised by the RBZ 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 by which the Government took over the debts and gave the Bank a clean start,” Veritas said.

The central bank, Veritas said, was 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.

It opined that the Al Jazeera documentary, coming on top of the Bank’s illegal quasi-fiscal activities, had tarnished the apex bank’s reputation and sown suspicion within financial markets, multilateral 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, Veritas said.

There are at least three ways in which such an investigation could be conducted, Veritas said.

The think tank suggested the Minister of Finance and Economic Development Professor Mthuli Ncube 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.

Veritas also said 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, the think tank noted.

The third option, Veritas said, could be for Zimbabwe’s President Emmerson Mnangagwa to appoint a commission of inquiry to investigate the activities of the Bank and its subsidiaries.

“The 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, multilateral financial institutions, and the general public – are satisfied that the exercise has been conducted thoroughly and fairly,” Veritas said.

Critics believe the figure is much higher.

A lawyer with a leading Harare law firm said the RBZ was not immune to the laws and independent investigations should be carried out on the Al Jazeera documentary claims. “We do have the laws and the laws should be utilized,” the lawyer said. “We have heard about RBZ’s FIU freezing the accounts (of people involved); yes, that is a positive step but we can’t have RBZ investigating itself.

Harare-based analyst Carlos Tadya said, “The documentary has seriously dented the credibility of the central bank and only a genuine investigation will help to restore it.”

Speaking at a dialogue hosted by the Southern Africa Political Economy Series (Sapes) Trust on 13 April, the producer of the documentary James Alexander claimed that the undercover investigation was just the “tip of the iceberg” when it comes to corruption

“Among the documents that we saw, there was plenty of other information, other stories there, certain money trails…In some of the undercover discussions, too, the people that we meet to talk about their involvement in other scams, other money laundering deals, and reveal other things about what happens in Zimbabwe,” he said.

“This is, from our perspective, the beginning of a whole raft of further investigations.”

“I’ve seen figures cited that the illicit gold trade…in Zimbabwe amounts to US$1,5-billion lost a year. I’ve heard people say it’s much more,” said James. He said that gold was an ideal mechanism for money laundering as it maintained its value-ebusinessweekly