Businesses not banking money sabotaging economy
THE country has been battling an acute shortage of cash resulting in people spending hours in banks waiting to withdraw their money. This has also led to a slump in business across board as people are now reluctant to part with their dollar as they are not sure if they will be able to withdraw any money from the bank if need arises. Although we note that the situation in the past week was relatively better off compared to previous weeks in as far as congestion in banks in Bulawayo is concerned, probably due to the fact that most people had withdrawn their salaries, the issue at hand is that once money leaves the bank, it does not go back as people are preferring to keep money under their pillows at home, and some businesses are also not banking their daily takings, preferring to keep it in their offices or taking it across our borders.
Vice-President Emmerson Mngangagwa summarised it well last week when he said that Zimbabwe had become a fishing pond of hard currency. He attributed the liquidity crunch to externalisation of money by Small to Medium Enterprises (SMEs) as well as foreign owned companies that are shunning local banks. Addressing members of the Confederation of Zimbabwe Industries (CZI), Ministry of Industry and Commerce officials and Zimasco employees in Kwekwe recently, VP Mnangagwa said most companies and small retail shops owned by foreigners were externalising hard cash and circulating it in the informal sector. President Mugabe on Friday also mentioned Chinese owned companies as among those not banking their money, something he said should stop.
“As we were going round and when Laubster (Frikkie, an official of a South African company, Pornex) was explaining why we have this liquidity crunch in the country, he said Zimbabwe was a fishing pond for hard currency. So we are a fishing pond for the Southern African region to acquire and access hard currency. Therefore, we must find some methods to implement to reduce the country from being a fishing pond for the US dollar. One other measure is the introduction of bond notes. This won’t trade in other countries in the region but locally it can trade and facilitate commercial transactions. Bond notes will oil commercial transactions in the country,” said VP Mnangagwa.
It is behind that reason that we applaud the Reserve Bank of Zimbabwe for being proactive and setting up a team to compel all businesses to bank their money in line with a strategy to enhance cash circulation in the formal system. Authorities reason that unbanked businesses are partly to blame for constipated money circulation as they mop up cash from customers but do not inject it back into formal channels, which is in fact sabotaging the economy.
The Sunday Mail reported last week that a crack unit has been assigned to swoop on businesses to check compliance with banking laws, and shut down unruly establishments and the Small and Medium Enterprises sector — which reportedly has US$7 billion-plus and is predominantly unbanked — will not be spared.
Section 11 of the Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24) requires all traders and parastatals to bank their money at the close of business.
“It is an offence not to bank money, and those caught on the wrong side (of the law) risk losing their licences or incurring huge penalties,” said RBZ Governor, Dr John Dr Mangudya.
In addition, the central bank said Point of Sale and Real Time Gross Settlement charges will soon be reduced to encourage cashless transactions, while banks will be greatly involved in promoting the use of multiple currencies.
We also believe local authorities, which handle large amounts of cash as rate payers try to meet their obligations, have to be encouraged to make use of Point of Sale machines so that people do not need to withdraw money from the bank to pay their bills. The same can be done with electricity payment transactions.