The Sunday Mail
Sunday Mail Reporters
WHILE cash-based informal traders are struggling with adjusting to the new currency, the Zimbabwe Gold (ZiG), transactions in formal retail outlets were seamless by yesterday as payment systems and platforms became fully operational.
Harare’s vibrant street markets, usually a hive of activity, hummed with a different tune last week, as markets adjusted to a new reality.
For many, introduction of the ZiG signified the beginning of a new era and the possibility of a brighter economic future.
Simon Dandira, an informal trader operating in Mbare, Harare, who relies on pushing volumes of small and fast-moving products, most of which cost less than US$1, was struggling to get change for his customers.
ZiG transactions are currently electronic as the new notes and coins will become available after April 30.
“I used to make US$15 after expenses, but I am now incurring significant losses,” he said. “You can’t force someone to buy a US$1 pack of cigarettes or sweets.”
Dandira feels he was blindsided by the announcement of the new currency.
Early hiccups in transition
The first week of transition presented some unexpected hurdles for local businesses.
However, the biggest headache stemmed from the pre-existing gap between the exchange rates for physical Zimbabwe dollar notes and electronic Zimbabwe dollars in banks and mobile money wallets.
The two exchange rates coexisted — a stronger one for cash and a weaker one for electronic transactions.
For instance, on April 5, when the ZiG was launched, US$1 could fetch $6 000 in cash, but a whopping $33 000 through electronic transfer.
Unsurprisingly, this imbalance pushed most transactions in the economy towards digital platforms, like mobile money and point-of-sale systems.
Zimbabwe’s long-standing struggle with cash shortages further accentuated this trend.
With physical cash scarce, its perceived value remained higher compared to the readily available electronic money.
The situation took a turn when the ZiG rollout commenced.
Banks and mobile money platforms paused operations, leaving the market with a limited supply of cash for transactions.
To add to the melee, citizens were instructed to deposit their Zimbabwe dollar notes in exchange for ZiG balances at the prevailing market rate.
This heavily discounted the Zimbabwe dollar cash and made pricing in the same meaningless.
Confederation of Zimbabwe Retailers president Mr Denford Mutashu summed up the challenges the market was facing.
“There has been loss of revenue and failure to pay for stocks in local currency during the transition period until banks completed the reconfiguration,” he said.
“Customers couldn’t transact as local swipe cards and mobile platforms were disabled.
“Currently, the problem of change persists as we wait for ZiG coins and notes.
“The waiting period between policy pronouncement and actual introduction of the notes and coins is too long, given the high anticipation of the new currency in the market.”
Banks back online
By Friday, most banks and mobile money platforms had completed the currency conversion process.
Nearly all services were back in operation, with just a few stragglers finalising the switch.
Reserve Bank Governor Dr John Mushayavanhu attributed the initial delays to the diverse software platforms used by different banks.
In an interview with ZTN Prime on Thursday, Dr Mushayavanhu said: “We have encouraged banks to expedite the conversion, but their core banking systems come from various vendors.
“Some vendors were swift in adapting, while others only completed theirs by Saturday evening.”
As of yesterday, most electronic transactions were flowing smoothly again.
However, the absence of ZiG notes and coins perpetuates the present challenge — the lack of small change.
Despite these challenges, Governor Mushayavanhu remains confident that the transition is on track and is being managed effectively.
“We issued a statement yesterday (Wednesday) saying the old bond notes (Zimbabwe dollar notes) are still legal tender, so kombis should continue to do what they have always done,” he said in the ZTN Prime interview.
“I understand these notes were being used most for change.
“That is what we will continue doing until the market is ready for the ZiG currency.
“I do not know why the notes are being rejected because after April 30, we will take them at the central bank, so I do not see any reason why anyone would not accept them.
“We will get FIU (Financial Intelligence Unit) to engage the commuter omnibus association and other sectors to ensure they accept the bonds notes until they are out of circulation.”
Compliance
Despite initial hurdles, the market is showing promising signs of embracing the ZiG.
Major retailers, like Pick n Pay, have already switched their prices to ZiG, indicating growing confidence in the new currency.
The Reserve Bank’s FIU has noted high compliance rates with price conversions.
In an interview, FIU’s deputy director-general Mr Tichafa Chigaba said: “Cooperation between traders, banks and the FIU has ensured a smooth transition.
“While a few isolated incidents of non-acceptance of Zimbabwe dollars occurred, they were resolved amicably.”
Outlook
Governor Mushayavanhu, however, is optimistic about the ZiG’s future.
“You did say that the market is going to test us,” he said last week while speaking at a monetary policy review breakfast meeting in Harare.
“From next week or even from this week, we are ready.
“My comments for the prophets of doom is, let’s wait for June.
“Come the next Quarterly Payment Dates (QPD), which is June, Treasury has agreed and is going to enforce an arrangement where corporates will have to pay taxes in ZiG.”
Treasury, he said, collects an average US$300 million in taxes in June, with 50 percent being paid in the local currency, representing about US$150 million worth of the local unit.
“Currently, there is only about US$80 million worth of ZiG in circulation and yet we are going to require US$150 million in taxes.
“For those who are going to pay, they have to buy ZiG from banks represented by those with ZiG balances.
“So what is likely to happen is that everyone will be chasing after the ZiG at the central bank, because you will have sold all your ZiG to us.
“And guess what? Maybe we will just keep the exchange rate downward to US1: ZiG10.
“So, by the time we get to the next QPD in September, you will realise that it’s better to start accumulating ZiG now.”
The early signs of market acceptance, coupled with the Government’s calculated interventions, paint an optimistic picture for ZiG.
While ZiG’s journey has just begun, its ultimate destination rests on the shoulders of a nation united in hope.
