It is high noon in Harare and a young woman in strappy stilettos confidently walks out of a banking hall along First Street clutching an od...
It is high noon in Harare and a young woman in strappy stilettos confidently walks out of a banking hall along First Street clutching an oddly looking rustic small 2kg plastic bag.
She appears unfazed by the din around the once prestigious street which has been invaded by vagrants, street preachers and vendors peddling their wares in front of up market shops.The young woman counts herself lucky as she has just withdrawn US$100, albeit in 25 cent coins, and quickly jumps into a waiting red Toyota Vitz parked at corner First Street and Jason Moyo.
Outside Central Africa Building Society (CABS) bank, a building society which is just a stone’s throw away, hundreds of people are not as lucky as the unidentified young lady.
They are waiting patiently in a long queue tired, frustrated and hungry. They have been in this predicament for hours, hoping to lay their hands on cash that has become elusive in Zimbabwe.
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| Terrible News - Zimbabwe Is Fast Becoming A Nation Of Coins |
“We have been reduced to this level; we are now hunters and gatherers of cash. At my age, how can l live such a miserable life,” said 90 year old Jeremiah Makura, a former postman in the then Salisbury (now Harare) who has not bathed nor has had a decent meal for the past three days he has been on the street.
And this is the crisis that everyone who uses the banking system to access cash in Zimbabwe is exposed to. The landlocked Southern African country, wedged between the Zambezi and Limpopo rivers, is facing a severe liquidity crunch that has caused misery to families, and led to the collapse of many businesses. So bad is the situation that people sleep in queues for days in order to get cash, small rationed amounts.
A total of $100 is the maximum for individuals per day but cumulatively they can only withdraw US$300 a week. That means a depositor with $1000 in the bank would need to visit a bank nine times to access his money.
Many a times though, the banks would not have any cash to dispense, so the visits would be in vain.
Zimbabwe adopted a multi currency system in 2009 after hyper inflation peaked at 231 million percent. Worthless billions, trillions, quintillions and sextillions being common place on the currency that ended up with 25 zeroes.
Life became so tough in Zimbabwe as public services collapsed and basic such as sugar, bread and milk disappeared from supermarket shelves. Millions of Zimbabweans left the country, many of them finding refuge in South Africa, Botswana, UK, Canada and America.
The adoption of the US dollar, proved a master stroke, but problems soon re-emerged in Zimbabwe as companies and banks, which could not cope with new dollarized environment, collapsed under the weight of bad debts.
Unemployment soared and shortages of the greenback started to emerge, badly hurting companies that need foreign currency to pay for imports.
Last year, the blame game started with the Reserve Bank of Zimbabwe governor John Mangudya attributing the cash shortages to unscrupulous business people who were externalizing large amounts of the precious dollars abroad.
Over US$350 million in cash was said to have been siphoned out of the banking system.
For months, the governor then advocated for the introduction of the bond notes, attracting widespread criticism from citizens fearful that government was planning the re-introduction of the Zimbabwe dollar, disguised as bond notes.
On November 28 2016, after a sustained publicity campaign, the Central bank introduced bond notes under an export incentive scheme guaranteed to the tune of US$200 million by the Afreximbank.
The surrogate currency was hyped as a panacea to cash shortages as it could not be used outside Zimbabwe. Government also crafted a legal instrument that ensured the bond would trade at par with the US dollar, whether in banks, shops or in the streets.
However less than six months later, after US$102m worth of bond notes were pumped into circulation in $2 and $5 denominations, cash shortages have actually worsened and people are now starting to carry satchels of coins for their daily transactions.
Even ladies’ handbags are starting to assume a new meaning –carriers of 1, 5, 10, 25 and 50 cent bond coins that are being issued by the banks.
On Friday, the Central bank evoked the Bank Use Promotion Act (Chapter24;24) to order manufacturers and suppliers of goods not to demand cash for goods supplied, but rather be paid using plastic money.
It also set the cash back limit at US$20 for wholesalers and retailers and instructed them to bank cash in 24 hours.
These measures showed the situation was getting out hand as banks, started dispensing large amounts in newly minted bond coins in small denominations.
Currency dealers, who had disappeared after the Zimdollar was consigned to history books, have re-emerged on the streets and the bond note has started trading poorly on the blackmarket.
Fears abound that further injection of the bond notes by the RBZ into the market could fuel inflation.
This state of affairs has heightened calls, even from the RBZ itself, for the quick adoption of the South African Rand.
Recently, RBZ deputy governor Khuphukile Mlambo said at a seminar in Bulawayo, the second largest city, that the rand was the way to go now, echoing what President Mugabe had said at his 93rd birthday celebrations in February in Matobo.
Economic advisor to Robert Mugabe’s Government, Ashok Chakravarti said recently the cash crisis was a result of having one of the world’s strongest currencies, the USD, as the anchor currency.
“I have said this before; we need a weaker currency, the weaker the better for us. As South Africa has just been downgraded, this is an opportune time for us,” he said. However not everyone believes adopting the rand is the panacea to Zimbabwe’s liquidity problems.
Leading economist Brains Muchemwa says hoping the Rand can turn out to be a magic bullet to currency problems is not only erroneous, but very misleading and should never be given policy consideration.
“And with South Africa now having its own challenges and the subsequent credit rating downgrades, one wonders how adopting the rand will insulate Zimbabwe from the economic headwinds associated with SA’s volatile currency,” he said.
Economist Godfrey Kanyenze recently noted cash shortages will not be plugged by bond notes.
“Balances in the nostros (estimated at US$250m), are not sufficient to meet external obligations. This means we are going to have the liquidity crunch for a long time to come.”
In his January monetary policy statement, RBZ Governor John Mangudya said nostro balances were at US$250m and cash at banks were US$120 million.
“This measure (introduction of bond notes) is essential to ensure that bond notes continue to trade at par with the USD and to reflect the fact that bond notes are supported by the US$200m offshore facility to support the demand for foreign currency attributable to bond notes,” Mangudya said in his statement.
Even the Real Transfer Gross System has slowed, seriously affecting business transactions, and citizens have sad stories to tell about how this is inconveniencing their lives.
Farai Matambanadzo, a mechanic at local garage in Bulawayo, was locked up for 24 hours at a local police station, not because he had not paid maintenance, but the US$180 he pays for three minors had not reflected in the ex-wife’s account, three days after transfer.
Matambanadzo was picked up at Izandlazonke Night Club in New Magwegwe.
An opposition party, the Morgan Tsvangirai-led faction of the Movement for Democratic Change said in a statement the cash shortages were an indictment of Mugabe’s failure to govern the country.
“Only a legitimate and democratically elected government will be in a position to extricate millions of Zimbabweans from the life penury and deprivation that they are presently experiencing.”
Source: Fin Gazatte
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