The Sunday Mail
Reserve Bank of Zimbabwe Governor Dr John Mangudya and Finance and Economic Development Minister Patrick Chinamasa deserve hearty congratulations for demonitising Zimbabwe dollar notes and coins as per President Mugabe’s Statutory Instrument 70 of 2015 and the RBZ Act’s Chapter 22:15.
This was overdue, though it had been mentioned on numerous occasions since 2009.
I guess it’s better late than never.
The current multi-currency regime has its roots in the concept of Foliwars (Foreign Currency Licenced Wholesale and Retail Shops) introduced in November 2008 at the peak of basic commodity shortages, occasioned mainly by Western-imposed illegal sanctions.
At that time, the authorities reasoned that our Zim dollar would continue alongside a basket of hard currencies, dominated by the US dollar and South African rand.
This was formalised by then Acting Finance Minister Chinamasa in his January 2009 National Budget Statement, which clearly mentioned this intention.
Then came the inclusive Government in February 2009, which made the unwise announcement in April 2009 that the Zim dollar was “dead and buried” with some apparent sense of pride, accomplishment and satisfaction, but without even bothering to effect the barest of legislative measures to make this a reality.
This, to me, was a result of misguided zeal.
The unrealised, unnoticed and unanticipated result of this gross omission and reckless negligence on the part of the dysfunctional inclusive Government was Zim dollar notes and coins remained legal tender.
The considerable confusion that this has caused from a legal perspective, particularly on labour disputes and the immense prejudice to some of our citizenry, should be a subject for debate on another day.
I, however, wish to comment on SI 70 of 2015 and suggest a way forward.
Clause on money issued before 2008: In my view, this clause should have only related to notes and not coins issued before 2008 at this initial stage, for reasons that will become clear hereunder.
It should be mentioned at the very outset that though this fundamental measure was completely ignored by the concerned operatives in the inclusive Government both before and after their announcement of the alleged death of the Zim dollar.
It should be mentioned that the exclusion of notes and coins issued before 2008 os also a contentious issue given that these were legally tendered by the RBZ itself.
Clause on calling in certain tender: This should also have related to notes only at this stage and, again, my rationale behind this will also become all too obvious soon.
However, all is not lost as the inclusion in these clauses of coins can be taken care of or rectified in about six months’ time by which time the SI would have run its full course and would be due for confirmation or amendment by both the National Assembly and Senate.
It is most unfortunate, though, that Zimbabweans may by then have lost considerable “value” on the concerned coins and/or notes.
Clause on payments for certain tender: This is welcome and, as mentioned earlier, was long overdue.
The major downside to this, however, is that people, in my view, are being grossly under-compensated and prejudiced by reason of the use of the United Nations exchange rate.
It should be made clear that the RBZ has a legal obligation, in my view, to compensate at fair value for notes and coins it previously issued in good faith.
To put things into perspective, we are attempting to compensate with US$20 million about US$5 billion representing bank balances, and another US$5 billion outside the banking system.
A classic case is that of a Bulawayo rancher. He sold three bulls, hoping to build a town house. He deposited his Zim dollar sale proceeds in the bank. He has now been compensated a mere US$5 for these three beasts.
He obviously feels insulted, abused and short-changed and undoubtedly, there are numerous others with similar stories.
I can only agree and sympathise with such fellows.
This UN realisable exchange rate of US$1:Z$250 trillion (2008) and Z$250 (2009) was just but one of the numerous parallel rates.
Use of the UN rate does not make it “holier than thou”.
We are guilty of trying to correct an illegality by using an illegitimate instrument, much to the considerable loss of value on the money and prejudice to citizens for reasons of no fault of their own.
The most equitable scenario to citizens, in my view, was the official exchange rate of US$1:10SAR:Z$20 after the last 12 zeros on the local currency were dropped in November 2013.
Obviously, this could have resulted in a massive increase in financial burden on Government, but would achieve fairness and equity for the affected people.
The increased financial burden need not have been met and satisfied by a one-bullet payment, but could have been spread and budgeted for over, say, six to 10 years in line with the period it has taken the Zanu-PF Government to clear the mess created and left behind by the inclusive Government.
From an accounting perspective, old Zim dollar bank accounts should have merely been reactivated (not closed) and credited with the requisite US dollars over that period.
Such action has the collatary advantage of achieving the desired levels of financial inclusion, which suffered a severe dent following loss of confidence in banks on dollarisation and closure of some financial institutions before and after dollarisation.
Running concurrently with all these events would have been the reintroduction in the financial matrix system (primarily for change purposes) of ZimDollar coins, which would be pegged at par with US dollar coins, ie Z$0,01:US$0,01.
To avoid confusing the transacting public, all other coins (except bond coins) will need to be phased out at the earliest opportunity.
Clauses on payment for Zim dollar accounts: I have to a very large extent addressed all these important matters above, suffice to say it would be iniquitous to expect the general populace to pay certain bank charges on some of the above transactions, as they arose through no fault or desire of their own and should, therefore, not be made liable or accountable.
However, banks ought to be given leeway for cost-recovery as they are equally not entirely to blame for the scandalous and inconvenient position they found themselves in.
Having attempted to address the ZimDollar notes debacle, our monetary authorities should, in earnest, also address the plight of pension funds and insurance sompanies.
These suffered the same, if not worse, predicament and fate when Zimbabwe improperly dollarised in 2009 and the inclusive Government also defaulted on its obligations on prescribed assets/liabilities.
Some pensioners and insurance policy-holders are now late, but others still stand traumatised and heavily prejudiced by the events of 2009.
They can still be assisted and rescued; again, it is better late than never.
I offer no apologies for suggesting that such aspects of our domestic debt, as outlined above, plus amounts now owed and due to local entities by Government deserve prioritisation way ahead of the much-talked about (to the point of frustration and annoyance at times) foreign debt overhang of about US$10 billion.
These foreign debts are owed and due to Western countries, the very same countries, which imposed illegal sanctions on us, thereby seriously constraining and compromising our capacity to service and honour these same debts.
Edmore AM Ndudzo was the first black treasurer of the City of Harare and was lead consultant in compilation of the Public Finance Management Act of 2010.
