The Sunday Mail
The Reserve Bank of Zimbabwe this Thursday rolls out a new regime of bond coins amid expectation from business of quick elimination of shortages in change and marginal price reductions, but experts warn the central bank against releasing large quantities of the metals without carefully monitoring market reactions.
The country joins Panama, East Timor and Ecuador which have successfully used bond coins alongside the United States dollar.
RBZ Governor Dr John Mangudya has ruled out the return of the local currency saying he “personally fears the return of the Zimbabwe dollar”.
This comes amid some suspicion that a batch of bond coins to be released this week is part of a scheme to return the local currency, abandoned in 2009 after experiencing a decade of hyperinflation.
“There are no fundamentals to bring back the local currency. We have no appetite to do so, and we can’t be careless to do so and we won’t do that. I am a businessman, I also fear the Zim dollar return, why would I want to hurt myself?” asked Dr Mangudya. “The problem is we are our worst critics, the bond coins are just (for) change.”
RBZ Governor Dr John Mangudya recently said the central bank had arranged a US$50 million bond coin facility to be released in tranches with the first US$10 million worth coming this week.
Rand coins will remain in circulation with about US$30 million more expected to be imported next year.
The amount of coins being injected this week represents just over two percent of total bank deposits which have increased by 8,3 percent to US$5,2 billion in the first 10 months of 2014 from US$4,8 billion in the comparative period.
The coins, to be issued in denominations of 1c, 5c, 10c, 25c with 50c will buttress the multiple currency system and the RBZ says they are not a precursor to the Zimbabwe dollar return as claimed in some circles.
Experts say since 80 percent of transactions in Zimbabwe are conducted in the US dollar, it is imperative to introduce coins that are at par with that currency since the South African rand (ZAR), also in circulation, is volatile.
Zimbabwe National Chamber of Commerce deputy vice president Mr Davison Norupiri urged the RBZ to maintain US$10 million worth of bond coins in circulation to avoid flooding the market.
“We want the RBZ to maintain the US$10 million and assess the response from the market before issuing more bond coins,” he said. “The good thing about these coins is that they are bonded, meaning the Reserve Bank has put aside money that is equivalent to the coins.”
Mr Norupiri was optimistic that the coins would see prices coming down, but more importantly arrest the sale of imported goods such as corn snacks which had been strategically positioned near supermarket payment points due to shortages of change.
The snacks are given in lieu of change.
“The price of bread is high in Zimbabwe because there are no coins. Fuel prices are coming down, but commuter omnibus operators can not reduce the fares because there is no change,” he said.
“It is also important to note that some of the goods found near the payment point in shops are imported and the coins will block their artificial demand. So this dovetails with pronouncements made by the Finance Minister (Patrick Chinamasa) in his 2015 national budget,” said Mr Norupiri.
Minister Chinamasa introduced a raft of measures to protect the local industry from rising volumes of imports — including cakes and frozen dough — they had resulted in over 55 000 jobs being lost locally since 2011.
The country’s biggest industry representative body, the Confederation of Zimbabwe Industries also expressed optimism that the bond coins would trigger price reductions.
“CZI welcomes the introduction of bond coins as they will improve the ease of transactions at retail level and will reduce the need for rounding-up of prices of consumer goods,” said CZI president Mr Charles Msipa.
“Once retailers and consumers are able to transact using bond coins, the need for forced and unplanned purchases of sweets, pens and use of credit vouchers will fall away and manufacturers of such commodities will need to adjust to fulfilling ‘real’ market demand rather than artificial demand created by the need to use their products as change.
“The greater divisibility of currency that bond coins will provide will be a positive development as consumers will still be able to purchase goods and commodities that they require — including sweets — rather than be forced to accept such items in lieu of change.”
While some industrialists are concerned that the bond would hurt the artificial demand for smaller consumer goods, Mr Msipa was adamant that the benefits for the overall economy outweighed any adverse impact.
Grain Millers Association of Zimbabwe chairman Mr Tafadzwa Musarara on his Facebook page last week wrote: “Maize-meal and bread are, in many instances, bought as individual purchases separate from the usual grocery shopping.
“The absence of coins forced the consumers to buy additional goods such as sweets and maputi in lieu of change. For example, an ordinary household that failed to get its actual coin change amounting to US$15 per month since dollarisation in February 2009 up to date (70 months), was prejudiced of US$1 050.
“This is equivalent to, for a family of six, (about) 8,7 years supply of 20kg per month of maize meal.”
However, Mr Norupiri urged Government to act on rumours that the coins signal the return of the Zim dollar saying such reports might discourage depositors from using the formal banking system, resulting in serious cash shortages.
“We want everyone, including Government, business and ordinary people to spread the message that the introduction of coins is not the return of the Zim dollar through the back door.
“Remember that the Minister (of Finance) and RBZ Governor have said the Zim dollar is not coming back any time soon,” said Mr Norupiri.
Mr Givemore Mesoemvura of the National Bakers Association of Zimbabwe also said: “I don’t think this could be the return of the Zim dollar because we were assured and reassured by the Finance Minister that the Zim dollar is not coming back any time soon as long as the required conditions for its reintroduction are not in place.”
