Zimbabwe corruption threatens bond notes
FOR a country experiencing its second most deadly cycle of cash shortages, to see groups of young men and women waving wads of foreign currencies on street corners as they hunt for buyers, is the strangest of ironies.
But for Zimbabwe, such paradoxes have become commonplace.
Economic experts are forever baffled by the events that keep emerging in a country that once recorded the world’s highest inflation rate in the 21st Century, which was officially last recorded at 79,6 billion percent in mid November 2008.
And things that keep happening in Zimbabwe can best be described as stranger than fiction.
Five years after the country dumped its own currency, after it had been shredded out of existence by runaway inflation; the southern African nation is bracing itself for yet another new season of uncertainty and surprises.
On the horizon is the arrival of some kind of currency called bond notes, which have caused so much consternation in the market that their proposed introduction has triggered a major stampede by citizens to hoard as much United States dollars as possible before the notes land in the country.
“What is now left in abundance is the (South African) rand. We have stashed away all the US dollars because that is the real money that you don’t want to play around with,” one money dealer told the Financial Gazette this week.
For the streetwise money dealers, news of the introduction of the bond notes, a follow-up on the bond coins that were introduced last year to ease problems of change during transactions, simply offered new avenues for wheeling and dealing.
“This is a chance for us to try something else because currently the market is tight. That (the Reserve Bank of Zimbabwe governor John) Mangudya has taken too long to bring the bond notes has spooked many people,” said another money dealer plying his trade along one of the streets in Harare’s central business district.
“By the time the bond notes come they won’t last long on the streets. Mangudya is different from (the former governor Gideon) Gono. When Gono announced new currency denominations, the money would have been printed already and he would waste no time dishing it out,” he added with a hearty laughter.
He, however, confessed that at the height of the hyperinflationary period of 2007 and 2008 keeping money overnight, like they are now doing with the South African rand, was very risky because of the speed at which inflation galloped.
During that period prices of commodities, albeit being scarce, were increasing by the hour. And as Mangudya prepares for the introduction of the bond notes, now set for October, black market money merchants say they have already mapped their strategies on how to make money out of the bond notes whenever they come.
“Let them (bond notes) come anytime, we are ready for them,” declared yet another dealer canvassed for his views in central Harare.
However, according to the central bank governor the bond notes would not be traded on the streets because they are targeted at exporters to stimulate exports by extending a five percent export incentive.
The incentive is backed by a US$200 million African Export Import Bank facility through what the Reserve Bank of Zimbabwe (RBZ) said would be a “self-control funding mechanism in that the appex bank would release the bond notes on a gradual basis in line with receipt of export proceeds as well as the limit of the auditable facility amount of US$200 million”.
While the RBZ has assured the nation that the bond notes would be printed outside Zimbabwe to “safeguard against abuse of the facility” — and also that the notes would not cause inflation and give rise to parallel markets, indiscipline and corruption pose the greatest threat to the facility’s success.
Corruption has largely bred the prevailing state of indiscipline across the market and many wonder how the bond notes would be guaranteed of success in a country where US$15 billion in diamond revenue reportedly disappeared into thin air.
The RBZ has had to enact the Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24) of 2004 to stem the scourge of corruption that has seen companies scaling down their bank deposits while banks have been facilitating above normal withdrawals.
While withdrawal limits are currently pegged at US$1 000 for individuals and US$10 000 for corporates, reports suggests that banks are colluding with certain clients to facilitate withdrawals beyond these limits.
As a result, the majority of their clients are accessing cash amounts well below the set limits.
Indications are that individuals are now accessing as little as US$100 per day while companies are getting an average of US$300 as the cash crisis worsens.
The Act compels companies to bank all their cash at the close of business each day.
Corruption has become so endemic in the political, public and private sector that the general public doubts whether the bond notes would trade long on the market.
Moreover, very few of the country’s citizens really understand the issue of bond notes.
“Government should go back to the people and properly explain what bond notes are and how they are going to help the people. They should again engage the media and get the message out there on what the bond notes are about,” said the Zimbabwe National Agreement Platform spo-kesperson, Ancelimo Magaya.
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