The GMA Token: An Example For Zimbabwean Business To Follow.
By Reuben Machinga
Goldma Zimbabwe is offering a coin, the GMA token, in order to finance expansion of our Sunrise mine in Chakari. ICOs are not the norm in Zimbabwe. As a matter of fact, we’re the first company to do so.
This route of financing has several advantages to both us as a company and to the Zimbabwean economy at large.
Why conduct an ICO?
Firstly, offering our own coin, the GMA token, allows us to raise money in Ether, Bitcoin, as well as several other common cryptocurrencies. Doing this allows us to ease pressure on the external obligations that the Zimbabwean financial system has to bear.
If you’re sitting in a country with healthy foreign exchange balances, this may seem odd. But, picture this: internally, Zimbabwe has bank deposits that are nominally greater than US$8billion[i] yet the total balances that Zimbabwean banks hold outside the country, as well as the stock of cash within the country, are significantly lower than this. What this means is that our central bank, the Reserve Bank of Zimbabwe, has to borrow in order to facilitate international payments.[ii] Unfortunately, this money is not enough, and it is rationed out in accordance to a foreign exchange priority list.[iii][iv]
Although dividends paid out to foreign investors are recognised as ‘High Priority’[v], the RBZ has been faced with a growing backlog of international payments (dividends included).[vi]
Issuing the GMA token affords Goldma a path to work around these challenges. The token is paid for in cryptocurrency and the royalties accrued from holding the token are also paid out in cryptocurrency, Ether, to be specific. As a result, investors will receive their 5% royalties on time, as promised.
Also, raising money in the form cryptocurrency allows this capital to be ring-fenced. Conversion to local fiat currency happens only when need arises, and this allows the remaining funds to be reserved for productive international purchases. Our Sunrise mine should never experience abruptions in operations caused by delays in honouring international obligations.
Crypto to save fiat?
Instead of merely easing pressure on the current account, Goldma actually helps improve its health! Under Zimbabwean law, the government, through Fidelity Printers and Refiners, has a monopsony, or, is the sole buyer of gold. When it buys gold, it refines the gold and sells it on the international market. Since these transactions are settled in United States Dollars, Zimbabwe earns greater reserves of foreign exchange. Without putting too fine a point on it, let me reiterate that cryptocurrency is, in this case, being employed to produce more gold which Fidelity Printers and Refiners will sell and, therefore, increase the quantity of money, mostly United States Dollars, within Zimbabwe.
At times, cryptocurrencies are spoken of to be in competition with fiat currency. In this case, however, the two are complementary.
[i] https://263chat.com/zimbabwe-banking-sector-deposits-26-47-up/
[ii] https://www.herald.co.zw/rbz-draws-450m-from-nostro-facility/
[iii] https://www.herald.co.zw/rbz-draws-450m-from-nostro-facility/
[iv] https://www.techzim.co.zw/2017/01/here-is-the-rbz-forex-priority-list-which-ranks-university-payment-and-car-purchases-pretty-low/
[v] Ibid.
[vi] http://www.financialgazette.co.zw/forex-backlog-worsens-rbz/
