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Only hard decisions can save Zim from cash crisis

Apr 28 2016 07:46
Malcom Sharara

Harare - Tapiwa Ruzvidzo was happy that his all-time dream of driving his own car was finally going to come true. Three months ago, he paid the deposit for a Toyota Alteza with a Japanese second-hand car exporter.

The car was going to be imported to Zimbabwe through the Tanzanian seaport and from there he would have to drive the more than 2 000 kilometre journey back home. He had planned how he was going to introduce the car to his family and friends. He had even planned the songs that he was going to play on his journey back home. He could imagine how proud his mother was going to be of him.

If only if he could imagine what was waiting for him at the local bank.

Friday April 22 was the day he was supposed to pay the last instalment on the car. As usual, he went to his bank to give them an instruction to transfer the $1 000 car instalment.

“I am afraid you will have to think of another way to send that money,” said the bank teller as Tapiwa stood bemused.

“It's a waste of time for us to process the transfer because the Reserve Bank of Zimbabwe has already told us in many similar cases that the importation of second-hand cars by individuals is not a priority at the moment, given the situation on the ground,” explained the teller.

Zimbabwe is currently going through one of the worst cash and liquidity crisis since dollarisation in 2009. Most local banks' foregn currency accounts for settling payment abroad have been depleted, and the waiting list for suppliers still to be paid is growing by the day.

Apart from individuals such as Tapiwa, corporate companies are also in the same predicament as they wait for the Reserve Bank of Zimbabwe (RBZ) to approve their transactions; even after that, they still have to wait for their banks to have enough to pay for their imports.

With the price of international commodities coming down, not much is being exported by the country resulting in a growing trade deficit and depleted foreign currency accounts. The situation has become so precarious that if the RBZ does not enforce drastic measures, the country could end up running out of food, electricity, fuel and other important provisions such as medicine. 

As a stopgap measure, the RBZ has called on stakeholders to reduce imports in order to reduce the money “exported” on a yearly basis. Zimbabwe’s imports currently range between US$6bn and $7bn against exports of $3bn andn$3.5bn, resulting in a negative trade balance of about $3bn.  

While the issue of depleted foreign currency accounts is wreaking havoc with the country’s importers, locally depositors are faced with their own cash crisis. Most banks do not have enough cash banknotes to give to depositors. Workers who receive their salaries through banks are reliving the nightmares of 2008 when banks placed daily cash withdrawal limits.

Its déjà vu again as some banks have stopped loading their ATM machines, while inside banking halls cash withdrawals have been limited to as low as $200 per day. Supermarkets that used to give cashbacks at  point of sale machines have since stopped doing so at worst, or have also placed limits at best.

The Zimswitch facility, which helps depositors withdraw cash from any participating bank, has since been disabled. RBZ governor John Mangudya has confirmed the cash challenge and appealed to the banking public to adopt the use of plastic money to minimise high demand for cash associated with traditional payment dates.   

The question everyone is now asking is how Zimbabwe will deal with both the cash and liquidity crisis which is threatening to send confidence in the banking sector to an all-time low.

On Monday the Manicaland Miners Association was reported to have said that the continued cash shortages at Fidelity Printers and Refiners (the country’s sole gold buyer) are derailing efforts to encourage small-scale miners and artisanal miners to formalise. The association added that the cash shortages will encourage people to deal with black market rates.

Commenting on cash shortages, Finance Minister Patrick Chinamasa claimed depositors are fuelling the country’s biting cash crisis by keeping money outside the formal banking system. But depositors have said they are resorting to “pillow banking” because they could not access their cash from banks when they needed it. 

Chinamasa however said the cash shortages are temporary as strategies being implemented by authorities will ease the situation soon. One of these is the decision by African Export-Import Bank and the RBZ to set up a foreign exchange facility to help provide banks with hard cash and reduce constraints in the banking sector.

Only hard decisions can save the situation

While the RBZ has stringent measures in place on what can be imported, we all know this will only affect the less connected. In its 2016 monetary policy statement the RBZ said bank statistics show that during the period January to December 2015, a total of $684m was remitted outside Zimbabwe or externalised by individuals.   

This means the RBZ has a list of people and businesses that have externalised billions of dollars but, I guess, does not have the courage to call them to book.

When we hear that the United States government is blocking Visa and Mastercard transactions involving dozens of institutions and individuals on a list of “Politically Exposed Persons”, it is hard to feel any sympathy because some of these people have been enjoying the luxuries from foreign lands while the majority of Zimbabweans have been suffering.

These politicians - minus the innocent ones - have been sending their offspring to foreign universities and schools while the rest of Zimbabwe has been left at the mercy of underfunded schools.

On the issue of the cash crisis locally, it will be interesting to find out from the RBZ if businesses owned by prominent government ministers and politicians bank all their proceeds. There is need to know if the funds used to build all the mansions we see in the leafy suburbs of Harare have been channelled through formal banks.

Or better still. if the thousands of cash banknotes we see being donated left, right and centre by prominent people go through the RBZ’s money-laundering processes.

It is only when hard questions are being asked and hard decisions are being made that Zimbabwe will be able to save the current situation. But in the meantime, individuals like Tapiwa are looking at other ways to make their dreams come true.

One such option is to take US dollars in hard currency across the border and make payments at the port of entry in Tanzania, a situation that will drain more notes from the system.

* Malcom Sharara is Fin24’s correspondent in Zimbabwe. Views expressed are his own.

malcom sharara  |  zimbabwe  |  opinion
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