The Sunday Mail
OFTEN, when fear triumphs over expectation and hope, rationale thinking becomes the ultimate victim.
Last week’s announcement by the central bank that it will be introducing bond notes in order to deal with the “paper money” shortages in the economy was met with anxiety, scepticism and outright suspicion from the market and general public. It is important to note that as a matter of fact the country has not run out of money but it is suspiciously running out of physical money for transacting. Well, put simply, the country has not run out of money but is has run out of bank notes. This is hardly surprising.
The United States dollar is a reserve currency that is sought after the world over, including by developed countries. There currently exists a situation where the country has become a pool for individuals and private companies who seek leverage on the greenback as a store of value and volatile currencies in their own countries of origin.
This is exactly the reason why monetary authorities have raised the red flag on externalisation. Official statistics indicate that last year more than $2 billion was externalised, and these are only conservative estimates.
The figure could be more. It is a misnomer that in a country where deposits are more than $4 billion, the country can run out of money to transact.
And it is only sensible that in such circumstances there is a mechanism that seeks to minimise — if not eliminate — the haemorrhage of the hard-earned local currency. Hard-earned in the sense that there are few sectors that are generating the money that we are using on the local market.
In an economy that is importing sundry items such as toothpicks, Brazilian hair, tomatoes, potatoes and plastic wrappers, it is not surprising that forex earnings are coming from artisinal miners somewhere deep down in the heartland of Zimbabwe. Areas such as Uzumba Maramba Pfungwe, Mazoe,Kwekwe, Kadoma, Gwanda and Zvishavane. Ridiculed tobacco farmers are also playing their part. Suffice to say, these are the industries that are doing much of the work.
Unfortunately, the effort of our hard-working white-collar workers, which is mainly administrative, is not bringing in anything. Conversely, some of the sectors that we are celebrated as performing relatively well are merely consumerist sectors that are by definition more consumptive than productive. Worse still, these companies are controlled by multinational companies such as Delta Beverages, which is controlled by SAB Miller. Unsurprisingly, such companies consistently declare dividends that are often cashed in by their foreign parent companies.
This is why Thabo Mbeki, former South African president, is pre-occupied with illicit financial flows. Well, the Panama Papers, which are essentially investigations about unscrupulous individuals who are taking advantage of lax systems in order to externalise, will this week reveal amongst our midst individuals that have been working against this country. Well, in situations where these companies are not declaring dividends, they mostly buy their raw materials and other supplies in foreign lands, which simply means that money continues to leave the local market. In such a situation, it is only rationale that the Reserve Bank of Zimbabwe resort to a system that at least locks in some of the money on the local market.
The only option is to introduce a unit of exchange that is only fungable or exchangeable only on the local market, but of course carrying the same value as the US dollar — the preferred unit of exchange. This is precisely why the central bank has opted to introduce bond notes that are backed by the Pan African, Cairo, Egypt-based African Export and Import Bank (Afreximbank).
So, in essence, locals who want to do reasonable cross-border transactions can easily change their money in banks and bureau de changes — including the central bank controlled Easylink — in order to conveniently do their business.
It simply means that the bond notes, just as the bond coins, will carry the same value as the bond coins that are indexed to the greenback, but they will not be carried across the country’s borders. It is an excellent method of souring the appetite of those who want to externalise physical money.
They simply can’t. In addition, they cannot be discounted. In all the confusion that has mainly been fanned by cyber experts and doomsday forecasters, the real message and import of the central bank has been lost.
In announcing the new dispensation, the RBZ also announced a 5 percent incentive for those who continue to produce and earn the currency that all of us continue to use in our day-to-day lives, including all the money that the greedy amongst us continue to externalise. So, all of the money that exporters earn — while 50 percent of it will reflect in the account and US dollars and 40 percent as rands and 10 percent as the euro — they will be a 5 percent bonus, denominated in the US dollar, that will be added by the apex bank.
This is an effort to stimulate the productive sectors of the economy, a reward for all those that continue to make the economy work – the artisinal miner somewhere in Zvishavane and the unassuming tobacco farmer in Wedza and Rusape.
It is means that whatever he earns is not shipped across borders and seas by the greedy amongst us. Already, Governor Dr Mangudya has assured the market that the central bank will also cover the exchange losses that account holders might incur in the event that there are exchange losses due to the volatile rand and euro, although account holders are not entitled to reward the central bank in the event that there are exchange gains.
There were fears in the market that Government will use the bond notes as a conduit to print more money to cover its back.
The RBZ has also addressed this: Dr Mangudya said the central bank has learned from past mistakes. Judging from his track record so far, you can take his word to the bank.
The bond coins have worked, and consequently prices have gone down, giving maximum value to the transacting public that had become used to be given sweets and trinkets as change.
Non-performing loans are now in the single-digit level, and the Zimbabwe Asset Management Company (Zamco), which buys toxic debts from companies — both public and private — has provided relief to the market.
All banks are now profitable.
So, essentially, he deserves the benefit of doubt. It will work. What, however, needs more intervention on his part are measures that are meant to ensure that plastic money becomes more commonplace and prevalent. Honestly, how can one complain that a $1 000 withdrawal limit in an economy where most civil servants earn an average $500 per month is not enough? Point of Sale machines must be used by most, if not all, the retailers, and, most importantly the charges attracted by plastic money must be reduced from the current $3 per transaction that is mostly used by Zimswitch enabled prices to charges that are at least reasonable for a market where disposable incomes are low.
It will eliminate corruption as there will a digital trail of transactions. Currencies of value usually attract corrupt characters; hence the country must take corrective measures to ensure that there isn’t an incentive to be corrupt. This is why, even in most countries in the US, the withdrawal limit is not more than $1 000. We have come a long way; let’s not be self-defeating, or self-deprecatory.
Let’s give ourselves a chance.
We are the people that we are waiting for.
COMMENT: Bond coins: Let’s give ourselves a chance
The Sunday Mail
OFTEN, when fear triumphs over expectation and hope, rationale thinking becomes the ultimate victim.
Last week’s announcement by the central bank that it will be introducing bond notes in order to deal with the “paper money” shortages in the economy was met with anxiety, scepticism and outright suspicion from the market and general public. It is important to note that as a matter of fact the country has not run out of money but it is suspiciously running out of physical money for transacting. Well, put simply, the country has not run out of money but is has run out of bank notes. This is hardly surprising.
The United States dollar is a reserve currency that is sought after the world over, including by developed countries. There currently exists a situation where the country has become a pool for individuals and private companies who seek leverage on the greenback as a store of value and volatile currencies in their own countries of origin.
This is exactly the reason why monetary authorities have raised the red flag on externalisation. Official statistics indicate that last year more than $2 billion was externalised, and these are only conservative estimates.
The figure could be more. It is a misnomer that in a country where deposits are more than $4 billion, the country can run out of money to transact.
And it is only sensible that in such circumstances there is a mechanism that seeks to minimise — if not eliminate — the haemorrhage of the hard-earned local currency. Hard-earned in the sense that there are few sectors that are generating the money that we are using on the local market.
In an economy that is importing sundry items such as toothpicks, Brazilian hair, tomatoes, potatoes and plastic wrappers, it is not surprising that forex earnings are coming from artisinal miners somewhere deep down in the heartland of Zimbabwe. Areas such as Uzumba Maramba Pfungwe, Mazoe,Kwekwe, Kadoma, Gwanda and Zvishavane. Ridiculed tobacco farmers are also playing their part. Suffice to say, these are the industries that are doing much of the work.
Unfortunately, the effort of our hard-working white-collar workers, which is mainly administrative, is not bringing in anything. Conversely, some of the sectors that we are celebrated as performing relatively well are merely consumerist sectors that are by definition more consumptive than productive. Worse still, these companies are controlled by multinational companies such as Delta Beverages, which is controlled by SAB Miller. Unsurprisingly, such companies consistently declare dividends that are often cashed in by their foreign parent companies.
This is why Thabo Mbeki, former South African president, is pre-occupied with illicit financial flows. Well, the Panama Papers, which are essentially investigations about unscrupulous individuals who are taking advantage of lax systems in order to externalise, will this week reveal amongst our midst individuals that have been working against this country. Well, in situations where these companies are not declaring dividends, they mostly buy their raw materials and other supplies in foreign lands, which simply means that money continues to leave the local market. In such a situation, it is only rationale that the Reserve Bank of Zimbabwe resort to a system that at least locks in some of the money on the local market.
The only option is to introduce a unit of exchange that is only fungable or exchangeable only on the local market, but of course carrying the same value as the US dollar — the preferred unit of exchange. This is precisely why the central bank has opted to introduce bond notes that are backed by the Pan African, Cairo, Egypt-based African Export and Import Bank (Afreximbank).
So, in essence, locals who want to do reasonable cross-border transactions can easily change their money in banks and bureau de changes — including the central bank controlled Easylink — in order to conveniently do their business.
It simply means that the bond notes, just as the bond coins, will carry the same value as the bond coins that are indexed to the greenback, but they will not be carried across the country’s borders. It is an excellent method of souring the appetite of those who want to externalise physical money.
They simply can’t. In addition, they cannot be discounted. In all the confusion that has mainly been fanned by cyber experts and doomsday forecasters, the real message and import of the central bank has been lost.
In announcing the new dispensation, the RBZ also announced a 5 percent incentive for those who continue to produce and earn the currency that all of us continue to use in our day-to-day lives, including all the money that the greedy amongst us continue to externalise. So, all of the money that exporters earn — while 50 percent of it will reflect in the account and US dollars and 40 percent as rands and 10 percent as the euro — they will be a 5 percent bonus, denominated in the US dollar, that will be added by the apex bank.
This is an effort to stimulate the productive sectors of the economy, a reward for all those that continue to make the economy work – the artisinal miner somewhere in Zvishavane and the unassuming tobacco farmer in Wedza and Rusape.
It is means that whatever he earns is not shipped across borders and seas by the greedy amongst us. Already, Governor Dr Mangudya has assured the market that the central bank will also cover the exchange losses that account holders might incur in the event that there are exchange losses due to the volatile rand and euro, although account holders are not entitled to reward the central bank in the event that there are exchange gains.
There were fears in the market that Government will use the bond notes as a conduit to print more money to cover its back.
The RBZ has also addressed this: Dr Mangudya said the central bank has learned from past mistakes. Judging from his track record so far, you can take his word to the bank.
The bond coins have worked, and consequently prices have gone down, giving maximum value to the transacting public that had become used to be given sweets and trinkets as change.
Non-performing loans are now in the single-digit level, and the Zimbabwe Asset Management Company (Zamco), which buys toxic debts from companies — both public and private — has provided relief to the market.
All banks are now profitable.
So, essentially, he deserves the benefit of doubt. It will work. What, however, needs more intervention on his part are measures that are meant to ensure that plastic money becomes more commonplace and prevalent. Honestly, how can one complain that a $1 000 withdrawal limit in an economy where most civil servants earn an average $500 per month is not enough? Point of Sale machines must be used by most, if not all, the retailers, and, most importantly the charges attracted by plastic money must be reduced from the current $3 per transaction that is mostly used by Zimswitch enabled prices to charges that are at least reasonable for a market where disposable incomes are low.
It will eliminate corruption as there will a digital trail of transactions. Currencies of value usually attract corrupt characters; hence the country must take corrective measures to ensure that there isn’t an incentive to be corrupt. This is why, even in most countries in the US, the withdrawal limit is not more than $1 000. We have come a long way; let’s not be self-defeating, or self-deprecatory.
Let’s give ourselves a chance.
We are the people that we are waiting for.
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