The Sunday Mail
Kuda Bwititi Chief Reporter
Bankers have assured depositors of a “smooth roll-out” of bond notes, with small-scale farmers and artisanal miners expected to emerge the biggest beneficiaries. The two groups will receive a five percent bonus from earnings backdated to May 2016, while large corporates will receive a 2, 5 percent gratuity from the export incentive.
Bond notes will start circulating in the coming weeks to encourage production and exports, triggering increased foreign currency earnings.
Only export good producers’ accounts will be credited with the notes, which will then reach the public via open market transactions in US$2 and US$5 denominations.
Bond notes can be used as an alternative to cash or plastic money, and will complement the multi-currency system, ultimately easing current US dollar cash shortages.
Bankers’ Association of Zimbabwe President Dr Charity Jinya told The Sunday Mail, “Banks will take all the necessary steps to ensure a smooth roll-out of the instruments in line with the regulatory authorities’ expectations once all the features and operational modalities of the bond notes are finalised and advised by the RBZ.”
Reserve Bank of Zimbabwe Governor Dr John Mangudya, who was optimistic that bond notes will transform Zimbabwe’s economy, told this paper last Friday that “comprehensive safety nets” are in place.
“The levels of 2,5 percent and five percent of the incentives scheme are essential for giving the ceiling or limit of the value of bond notes to be printed and distributed in the national economy. That’s the safeguard of bond notes. When there are no exports, there will be no bond notes in the market.
“The distribution framework will be through normal banking channels in line with commercial bank requests for the bond notes to fund the incentives in their books.”
Dr Mangudya also said, “It is, therefore, a demand-driven incentive scheme as bond notes will not be supplied in the market when no one has exported. Receipt of export funds in Zimbabwe through normal banking channels is, therefore, the trigger mechanism for issuance of bond notes.
“This is a very watertight policy intervention which is going to transform the economy. Criticisms of this policy are not based on economic considerations, but are, instead, based on the understandable fear of past and sometimes emotive considerations.”
Deputy RBZ Governor Dr Kupukile Mlambo chipped in, “The incentive will be five percent for small-scale players who include tobacco farmers and gold miners, for example. For larger companies such as your renowned large-scale producers, the incentive will be pegged at about 2, 5 percent.
“The rationale for this is obviously to encourage production among small-scale players who are the majority in terms of numbers, while large corporates are already established.”
Dr Mlambo said bond notes will ease pressure on nostro accounts, which are bank accounts held in a foreign country by a domestic bank mainly to facilitate settlement of exchange and trade transactions.
“Nostro accounts are, in general, used to pay for imports. We also use nostro accounts to import notes. If we have bond notes of US$50 million, for example, it means we don’t have to bring in US$50 million in cash, but we can bring in, say, US$45 million.
“By so doing, we reduce pressure on the nostro accounts. Bond notes also cannot be externalised so through bond notes, we hope to have a facility that will stabilise nostros.”
Dr Mlambo went on, “There will not be a lot of bond notes on the market to allow for activities such as ‘cash burning’. They will only be in US$2 and US$5 notes, so there will not be a flood of these notes on the market.
“We have repeatedly said that bond notes are not coming to replace the US dollar, and people need to really understand this point. Also, there is no need to panic because statistics have shown that (bank) deposits have remained the same.
“We acknowledge that long queues are there, and this is not convenient to the public. The figures we have from banks show that deposits are still steady.”
Regarding public awareness campaigns, he said, “We are going to have vigorous engagements with stakeholders such as retailers, commuter omnibus operators and others.
“We have already engaged them, but we are going to intensify this engagement once the bond notes are in circulation as it will be easier to explain when the notes are in use.
“What people should basically understand is that the concept of bond notes is similar to that of bond coins.
‘‘They are going to come in small denominations of US$2 and US$5, which means they can be used for miscellaneous transactions.”
