Politics and Society
Zimbabwe’s Escalating Cash Crisis
Besides the United States, Zimbabwe is the only other country that uses the US dollar as its primary currency. But a new currency known as “bond notes” might be on the way to correct this anomaly, writes Kudzayi Zvinavashe.
Overworked and underpaid – this phrase sums up the fate of many Zimbabweans. The nation’s woes began at the turn of this century and show no signs of coming to an end.
The latest issue is the cash crisis, which has resulted in many people sleeping outside banking halls so that they are first in the queue to access their money when the bank opens the following day.
The cliché “cash is king” has never been more true. The scarcity of cash in the Zimbabwe has prompted banks to limit cash withdrawals. The limit varies from bank to bank but the past few months has seen banks reduce their withdrawal limit from USD10 000 to a paltry USD100, sometimes even less.
Not that the banks are complaining about this inconvenience, which has turned out be a boon for them. Each transaction attracts a bank charge of about USD2,50 and, of course, the more you go to the bank, the more the bank’s shareholders smile.
File picture. Customers wait in a queue outside of a FBC bank branch in Harare, Zimbabwe, 01 November 2016. Zimbabweans woke up to Statutory Instrument 133 of 2016 that has been promulgated by President Robert Mugabe for the bond note ‘surrogate currency’ that is expected to hit the market this November. Photo: ANP/ EPA/Aaron Ufumeli
Take the case of Obert Masaraure, the president of the Rural Teachers Union of Zimbabwe (RTUZ). He teaches at a school in Wedza, a rural district over 120km south of Harare. As a teacher, like many civil servants, he earns about USD350. Masaraure has to spend USD30 to travel to the capital, a trip he has to do about three times, to withdraw most of his earnings. Sometimes there is no cash at the bank and his travels would have been for nought. Masaraure’s plight is no different from that of the majority of his compatriots.
“Kukiyakiya”, Shona slang for “making do,” is an important word in Zimbabwe’s lexicon. For instance, it is now normal to be approached by a stranger in a supermarket, offering to pay for your groceries with their bank card in exchange for the cash.
The cash shortage has bred corruption. Take, for instance, EcoCash, Zimbabwe’s top mobile money service. Most EcoCash agents have become corrupt and demand more money from its users who want cash. For example, an agent will instruct the customer to withdraw USD20 but the customer will be given USD18 in cash. This has been happening despite the mobile operator that hosts this service advising people to report such cases.
Cash crisis cause
The cause of the cash crisis emanates from Zimbabwe’s trade deficit – the country imports more than it exports. This leaves very little money in circulation as most of the money leaves the country to settle financial obligations abroad.
Zimbabwean traders using USD in lieu of Zimbabwean dollars before the bond coin was introduced. Image: AP Photo
Why cash instead of plastic money?
Many may wonder why Zimbabweans need to get their hands on cash instead of using plastic money. Well, unlike functional economies, Zimbabwe’s is still a cash-based economy. Public transport is paid for in cash. The same goes for your drink at your local bar, a shave at the barber shop or buying groceries at your local supermarket.
There is, to be sure, a great deal of businesses that take plastic money but a major disadvantage is that banks levy as much as USD2 for every transaction.
Pondering solutions
In a bid to solve the cash crisis, the Zimbabwean government has resorted to introducing what they call “bond notes”, a currency that will only be valid within Zimbabwe. The Reserve Bank of Zimbabwe has arbitrarily ruled that it is equivalent to the US dollar.
“Many Zimbabweans consider the bond notes as a return of the Zimbabwean dollar, the joker (or the joke) of currencies.”
Many Zimbabweans consider the bond notes a return of the Zimbabwean dollar, the joker (or the joke) of currencies. Zimbabweans, naturally, have cast their minds back to2008, when the inflation rate shot through the stratosphere and into outer space. The Zimbabwean dollar’s tenure became so untenable that it had to be mothballed, and in came the US dollar, pound, euro, rand and other currencies.
A man wearing a hat decorated with worthless note bearers’ cheques during a protest against government plans to introduce bond notes — a local token currency equivalent to the US dollar, and unemployement on August 3, 2016 in Harare. Photo: ANP/ AFP Zinyange Auntony
The solution left many victims in its wake. Money held in banks belonging to pensioners and account holders was wiped away. Millions retired without a pension and some people had to go back to work to survive.
“The Zimbabwean dollar’s tenure became so untenable that it had to be mothballed, and in came the US dollar, pound, euro, rand and other currencies.”
The average Zimbabwean is dismayed at the surrogate currency. Some economists argue that despite the crisis, the announcement of the bond notes has triggered an appetite for cash as people race to withdraw their money in the US dollar currency.
Typically, the Zimbabwean government has been inconsistent on exactly when the bond notes will be in circulation. The bond notes (inventive Zimbabweans have dubbed them ‘bondage notes’) were due to be introduced in July but the central bank has kept on postponing the launch, to this day.
A public relations blitz to familiarise Zimbabweans with the notes is under way but whether Zimbabweans will accept them is another conundrum altogether.
