|Zim’s million-dollar problem|
|Sunday, 13 January 2013 00:00|
Not many people expected the wait to be this long. But, alas, the seemingly endless wait has continued unabated and there are no signs that a solution will be found anytime soon. In a fortnight, Zimbabwe will mark four years since the introduction of the multi-currency regime following the collapse of the local currency, the Zimbabwe dollar.
It was on January 30 2009 when the then acting Minister of Finance, Cde Patrick Chinamasa, officially introduced the use of multiple currencies in an attempt to restore credibility in the country’s monetary system and thwart the menace of a raging hyperinflationary environment.
Furthermore, the Government suspended the local currency on April 13 that year, initially for a year before extending for another three years in January 2010.
Thousands of individuals, companies and institutions had their bank accounts frozen, insurance revoked and investments wiped away during the transition.
Since then most of them have been awaiting for the day when they would finally be compensated for their unjust but necessary losses.
For Mr Shepherd Mufandaidza (69), a retired clerk who worked for over 35 years at Harare Hospital, dollarisation came as a disaster.
Not only did the suspension of the local currency result in the obliteration of his meagre monetary savings and various other investments but it also permanently dented his main source of livelihood — his social security benefits.
Without any meaningful social security benefits the geriatric is now relying on handouts from his children.
“I lost all my saving and investments after dollarisation,” he said.
“All the rainy day savings I had stashed away during my working days were wiped out in the blink of an eye. If it were not for my children, I would probably be living on the streets now.”
Sadly, Mr Mufandaidza shares a more or less similar predicament with thousands of other retirees, who were the worst hit group by the changeover.
In spite of the apparent gains resulting from the switchover, the country also witnessed an unprecedented plunge of public confidence in the banking sector among other negative repercussions.
It is clear from other accounts narrated to The Sunday Mail In-Depth by various locals that the changeover clearly inflicted a permanent dent on the financial well-being of businesses, households and individuals.
Economists argue that some businesses are still closing down as a result of failing to recover from having nearly all their liquid investment wiped out in one swift motion.
However, as the ill-fated inclusive Government inevitably comes to an end later this year, the likes of Mr Mufandaidza have resigned to the fact that the coalition has all but failed to compensate them.
While the Government has been regularly promising restorative action for years now, nothing has come out of the promises, ostensibly due to Government’s liquidity challenges.
In 2010, Finance Minister Tendai Biti proposed to allocate US$6 million towards the compensation of people whose savings were frozen, the money was never released.
He later told Parliament that his ministry would come up with fair compensation benchmarks that would sideline compensating unscrupulous people who used the “money-burning” system.
Nothing has come out of that promise either.
In addition, the Reserve Bank of Zimbabwe Governor, Dr Gideon Gono, told a Confederation of Zimbabwe Industries (CZI) workshop that compensation would take place in the first quarter of 2012.
However, experts argue that the challenge remains coming up with a fair compensation matrix acceptable to all parties.
Harare-based economist Mr Edward Chisamba said the Government had no capacity to compensate those whose money was frozen.
He, however, maintains that it is the sole responsibility of the Government to compensate everyone without precluding those who engaged in speculative tendencies.
“Government has no capacity to compensate people whose savings were frozen,” said Mr Chisamba.
“Although no one knows the exact amount of money that was lost during that time, using the broad-based money supply figures from that time and converting the figure on the parallel market exchange rate that was in use, the money could be anything around US$140 million.
“However, using the official exchange rate at the time, which is the one enforceable at law, the amount falls anywhere between US$4 and US$5 trillion. For a government which generates revenue of US$3 billion, there is no way they can pay back that kind of money.
“Government cannot, however, preclude anyone on the basis that they were speculating, since speculation is not illegal.”
He said if the Government decides to compensate for the loses, it would only end up fuelling inflation.
Surprisingly, statutory institutions charged with the responsibility of safeguarding the interests of the banking public such the Deposit Protection Board (DPB) have been conspicuous by their apparent inaction.
The DPB, established in terms of the Banking Act 24:20, is mandated with compensating the banking public up to the insured amount in cases of bank failure.
However, for the thousands who share Mr Mufandaidza’s predicament, there is still hope.
According to a senior Harare lawyer, Mrs Tambudzai Gonese, dollarisation amounted to an arbitrary seizure of property and can be successfully challenged in the courts.
“The principle at law is that there should be fair compensation and reclamation of value whenever property is seized unlawfully,” she said.
“The challenge arises from coming up with a fair and acceptable rate of exchange.
“Since there is no specific law that guides on how the matter should be handled legally, the courts will resort to using legal principles which note that there should be fair and just compensation for those who suffer unlawful loss.”
As a first step towards implementing restorative measures in the long-drawn saga, last year Government commissioned a study to determine a fair value that insurance firms should pay to compensate their clients for money they contributed during the Zimbabwe dollar era.
According to sources in the Finance Ministry, as an additional measure, Government is also drawing a legal instrument that would compel insurance firms to comply with the results of the study.
The move by Government stems from the argument that most insurance firms hedged themselves against hyperinflation through purchase of assets during the hyperinflation era.
Analysts contend that it is almost impossible to estimate the amount of losses incurred following dollarisation due to the prevalence of speculative activities within the economy.
But chairman of the Parliamentary Committee on Budget, Finance and Investment Mr Paddy Zhanda remains adamant that Government should honour its previous pledges to compensate those who suffered legitimate losses.
Mr Zhanda plans to move a motion calling on Government to compensate those whose savings were frozen when the august House reconvenes.
“I plan to pursue the matter with increased agitation this year. When Parliament opens I will move the motion calling on the executive to see to it that people’s money is returned,” he said.
“It is a difficult exercise, but there is no justification whatsoever to withholding people’s money without fair compensation.”
Minister Biti could not be reached for comment as he was in Canada and questions sent to the acting permanent secretary in the ministry were not responded to by the time of going to press.
Surprisingly, despite all the gloom surrounding the long-drawn issue, some pensioners have refused to give up hope.
“Once things settle down, I do not see a reason why Government should not compensate us. I remain hopefully that the day will come soon enough before I pass on,” said Mr Gomba Muparaganda (66), a pensioner from Glen Norah.
For most pensioners the wait has now become a race against time as most of them are literally on their last legs.