The Sunday Mail
Africa Moyo —
SOARING demand for foreign currency to finance imports coupled by strict rationing by the Reserve Bank of Zimbabwe (RBZ) is spawning a growing market trend where retailers have a dual pricing system for goods.
The system is however rigged to force customers to opt for cash payments, which attract significant discounts of as much as 20 percent as compared to non non-cash payments.
But electronic payments are levied an additional charge of between US$1 and US$5 purportedly to cover for “withdrawal costs”.
Monetary authorities have been lobbying citizens to embrace plastic, electronic and mobile money for payments to reduce pressure on bank notes, which have been in short supply since March last year.
Plastic money refers to the use of credit or debit cards as an alternative for cash in making payments for goods and services.
Last week, the Reserve Bank of Zimbabwe (RBZ) reported that the value of transactions through Point of Sale terminals grew by 23 percent to US$550 million in December from US$446 million a month earlier.
However, the demand for physical cash still remains high.
Bargain-hunting local consumers, the majority of who have low disposable incomes, often prefer to transact with cash in order to avoid additional costs.
Traders who spoke with The Sunday Mail Business last week said they have a dual pricing system because of the challenges associated with offshore payments for raw materials as the country’s nostro accounts remain depleted.
Nostro accounts are accounts held in a foreign country or foreign bank on behalf of local banks and are used to facilitate foreign exchange and trade transactions.
Said one of the traders: “We need cash to purchase raw materials, so if we sell using plastic money only, the danger is that transfers for raw material purchases would be difficult and in some cases they take long to be processed.
“But when we have cash and deposit it with our bankers, they will make the payment for us, which will be faster.”
On January 8, the Sunday Mail Business reported that wholesalers who trade in the Pure Oil brand had indicated that they had been instructed to charge for the product in cash, particularly US dollars.
Though the company denied giving the directive, it noted that it badly needed cash to settle payments for raw material imports.
As a result, cash sales were helping banks settle some of the company’s foreign currency obligations.
RBZ’s circular number 5 of August 31, 2016, says banks can make foreign payments matching 1 to 1 for every cash deposited by cooking oil producers.
The Sunday Mail Business has since established that top liquefied petroleum gas (LPG) traders are rejecting plastic money and electronic payments for the product as that also affects the frequency with which they get new stocks.
Confederation of Zimbabwe Industries (CZI) vice president Mr Sifelani Jabangwe confirmed that complications associated with payments for raw materials were necessitating the dual pricing system.
Mr Jabangwe said the absence of paper money has bred middlemen who are now offering to import raw materials for businesspeople that do not have cash and charge them a 20 percent commission.
“This is happening because our nostros are underfunded,” said Mr Jabangwe.
Banks reportedly charge their clients anything from 1 percent to 2 percent for processing foreign payments on behalf of their depositors.
No comment could be obtained from Bankers Association of Zimbabwe president Dr Charity Jinya last week as she was not picking her mobile phone.
Economist Mr Persistence Gwanyanya said traders require cash because electronic money is “virtual money” circulating locally via the Real Time Gross Settlement (RTGS).
He said for producers to make foreign payments, there are two things required: “either a nostro account or taking the money by air and deposit it directly in a bank’s nostro account to facilitate payments”.
It is understood that when a depositor credits an account, the cash is taken to the RBZ where an instruction to fund the respective bank’s nostro account is generated.
“The RBZ is in a good position to take the money and deposit different banks’ nostro accounts because it is not economical for individual banks to do so.
“When the money has been deposited, then payments can be made,” explained Mr Gwanyanya.
The absence of meaningful exports has adversely impacted on the country’s nostro position.
The RBZ has since engaged the Africa Export-Import Bank (Afreximbank) to provide US$215 million to stabilise the nostro accounts.
The Afreximbank has already provided US$150 million.
Despite the nostro account challenges, plastic money is at the centre of transactions in most parts of the world.
In a 2012 research paper, University of Zimbabwe lecturer Dr Nyasha Kaseke revealed that the card has become the “new cash” in China and India, as an increasing number of consumers buy everything from train tickets to antiques with credit and/or debit cards.
