Generally speaking, well-managed gold mining operations have never had much difficulty getting the dollars needed to begin and sustain their efforts. Gold is highly liquid and easily turned into cash, so getting cash loans by pledging future gold production is a straightforward financing technique. But nothing is ever quite so simple in Zimbabwe.

The Zimbabwe currency was turned to scrap paper years ago through hyperinflation. Since then, Zimbabwe has financed itself through a hybrid of dollarization and Chinese direct foreign investment. But that still leaves local businesses under the thumb of the central bank, which controls who receives whatever dollars might be available.

This article reveals the extent of corruption and shortsightedness in that process. The Zimbabwe gold miner RioZim had an understanding with the central bank that dollars received from its gold sales would be available to RioZim — 50% by direct deposit to a RioZim account and 50% upon application to the central bank for good cause shown. Instead, RioZim received only 14% of the dollars available.

As a result, RioZim cannot pay its bills and has now had to shut down three mines. Of course, this only makes the situation worse because the gold from those mines is no longer available to generate dollar proceeds for anyone.

Zimbabwe is in desperate condition and no doubt needs every dollar it can lay hands on. But depriving your top exporters of working capital is like cutting off your nose to spite your face. It seems the likely outcome is that China will provide the needed working capital — in exchange for shipping the gold produced straight to China.

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