Zimbabwe’s new bond notes to smooth liquidity crunch
FOR nearly seven years, the bustling parallel market in Zimbabwe had almost disappeared. Without a currency of its own, Zimbabwe turned to the use of a multicurrency system: US dollar, South African rand, British pound and Botswana pula.
That switch dealt a blow to forex dealers in the parallel market — accustomed to a life of pegging the exchange rate of the local unit against foreign currencies.
Its long hiatus appears set to end. Next month, Zimbabwe will introduce its local version of the US dollar — the bond note.
The Reserve Bank of Zimbabwe hopes the bond notes, in values of $2 and $5, will help ease the liquidity crunch of the past nine months.
On the streets of Harare, forex dealers await the issuing of the bond notes with glee — and not for the same reasons as the RBZ, the issuer of the currency.
In Roadport, the heart of Harare’s popular spot for forex dealers, Winnie Makota expects roaring trade once the local currency is issued next month.
“Pfekera, pfee [We are in],” she said. “We are back in business. The government should have pushed the bond notes earlier . . . It is sort of a godsend as business has been low, but I am sure our fortunes are likely to change with volumes increasing soon. People already tell us they don’t trust these bond notes and personally I can’t wait.”
Makota flashes wads of US dollar bills and South African rands to try to lure potential customers.
The high anticipation over the bond notes is the same across other spots in Harare where forex dealers ply their trade.
Forex dealers at the “White House” along Albion Street and the popular Copacabana bus terminus are also rubbing their hands in expectation.
“Remember, once bitten, twice shy. People are wary of the bond notes and no longer have trust in banks considering what happened in 2008,” said Gumisai Chikowore, a forex dealer in Copacabana.
For some time Chikowore had stopped trading in foreign currency, because of business being slow, but has made a return ahead of the bond notes.
The “excitement” over the bond notes is not only in the capital.
Along Fort Street in the second-largest city, Bulawayo — it is dubbed “The World Bank” — forex dealers also have high hopes of cashing in.
“It’s back to business once again,” said Siphiwe Mhlanga.
But ordinary Zimbabweans are fearful that the bond notes mark a full-scale return to the defunct local unit.
Finance Minister Patrick Chinamasa said in his midterm fiscal review policy that the country had no intention to do away with the multicurrency system, and ruled out a return to the Zimbabwean dollar.
A bank executive at MBCA bank, a unit of Nedbank, who declined to be named, said this week that if the bond notes were used properly there would be no problem.
“It’s just a wait-and-see approach now. Let’s wait and see how they are received,” he said.
Davison Norupiri, president of the Zimbabwe National Chamber of Commerce, said the central bank had to increase awareness of the bond notes to minimise the panic and resistance from the public.
He ruled out a predicament for South African businesses operating in Zimbabwe which accepted use of the bond notes. Companies such as Pick n Pay and Tiger Wheel & Tyre have operations in the country.
“I don’t see much in terms of impact — businesses will thrive more as there will be liquidity. If people don’t change goalposts and the bond notes are used for what they are meant for, it will be beneficial.
“It will mean more shopping, as people have more disposable income and South African businesses will also benefit from this,” Norupiri said.
Joice Mujuru, president of the Zimbabwe People First opposition party, stepped up her court challenge of the bond notes this week.
In her application to the Constitutional Court, Mujuru said the Reserve Bank of Zimbabwe Act did not make provision for the bond notes.
She said that despite being valued at par with the US dollar, the bond notes risked depreciating over time.
If the bond notes were used properly there would be no problem