Ailing banks start demanding IDs before citizens can draw cash from ATMs and suggest curbing weekly withdrawal limits
The battle for scarce cash is intensifying in Zimbabwe, with some banks requiring depositors withdrawing money from cash machines to present their ID first, and finance institutions are now required to import only smaller denominations of the US dollar, which is widely used in the country.
Finance Minister Patrick Chinamasa has also said that government would engage the World Bank, the African Development Bank and the African Export-Import Bank (Afreximbank) on local currency introduction.
The local bond notes currency will be equal in value to the US dollar and will be backed by a $200 million (R3 billion) facility availed by Afreximbank.
The government’s bid to engage the international and regional finance institutions is aimed at ensuring that the use of local bond notes would not backfire on the struggling economy.
Panic withdrawals had hit the Zimbabwean banks, among them units of Nedbank, Standard Bank, Barclays, Ecobank and Standard Chartered, said bank executives.
They are also now required to import smaller denominations of the US dollar as a measure of dealing with cases of cash being smuggled out of Zimbabwe.
A banking industry executive said: “We are struggling to meet daily demand for cash. There are fewer banks that are importing the US dollar into the country and this is coming at a premium, leaving the banks stretched. We commend the efforts to encourage usage of other currencies, such as the rand.”
Chinamasa said President Robert Mugabe’s government was “consulting Afreximbank, the International Monetary Fund (IMF), the African Development Bank and the World Bank to explore mechanisms that could be put in place to ensure there was no abuse in the issuance of bond notes, and that they were issued relative to the quantum of exports” generated in the economy.
Zimbabwe’s export sector is struggling, with the country procuring stock for most of its raw materials and finished products mostly from South Africa and Zambia.
Government sources told City Press this week that Treasury was speaking with industry executives about having them increase their capacity for some commodities, such as cooking oil, or risk government restoring import permits.
Economists say the net importer status of the country has worsened cash shortages in the country, with “all the foreign currency generated inside the country taken outside the country” in buying finished products and raw materials.
Business leaders and economists have spoken out against the introduction of the bond notes, while bankers say withdrawal limits should be curbed at $500 a week because the average salary in Zimbabwe is less than $400 a month. However, the battle for cash has worsened in the past few weeks, with bank queues now a common feature, especially at the locally owned banks in Zimbabwe.
South African exporters to Zimbabwe will also now have their accounts credited in rands for export receipts after government said exporters would be paid in the currency of the export destination. Banks have had to limit cash withdrawals and ask depositors to produce identity cards when taking money from ATMs, and most finance institutions are stopping real-time gross settlement payments and withdrawals from machines operated by rivals.
A real-time gross settlement is a payment platform that allows depositors at one bank to transfer money into accounts of depositors at other banks. For example, a transfer from Nedbank to Standard Bank. Transfers done in this way usually take 24 hours.
“Kindly note that with immediate effect, ID verification will be carried out at all our ATMs countrywide to ensure that only card owners transact,” said Standard Chartered Zimbabwe in a message to depositors this month.
The IMF has said that it would assess the effect of the introduction of the banknotes by Zimbabwe, while the World Bank said that the country’s economy would grow by 1.4% this year. The World Bank flagged political uncertainties and softer commodity prices for the expected slowdown in economic growth in Zimbabwe and other subSaharan African countries.
The Reserve Bank of Zimbabwe said this week that it was introducing new forex regulations aimed at having exporting companies in the country “gradually adhere to the principle of 75% local content [retention] by the resource-based sectors of the economy and so that the economy could benefit from the liquidity derived from the export of its natural resources”.