Confusion reigns as Zim introduces bond notes

IS IT illegal to sell two US dollars cash for more then a $2 dollar Bond Note? The Reserve Bank of Zimbabwe says the two notes are equal in value, and the second one, the Bond Note is not really cash, it is a financial instrument, a “surrogate currency”, and it’s legal tender, but it’s not really cash even though it can be used to buy things. Get it? No? Well, many people in Zimbabwe also don’t get it and this is their first day when they can choose to pay for goods in three ways: cash, Bond Notes or plastic.

The first of Zimbabwe’s new (surrogate) currency, called Bond Notes, hit bank accounts yesterday.

Zimbabweans have been down this kind of road before. They know about currencies, black market, sometimes called the parallel market etc.

But the market finds its own level. So a small black market, or a “parallel market” re Bond Notes has emerged in recent weeks.

“The shortage of cash has created dual pricing for cash and electronic transactions as traders scrounge for the elusive United States dollar which quickens the process in foreign payments to raw materials suppliers.” That explanation was carried in Sunday’s Standard Newspaper

Traders, according to The Standard, and other sources, are giving discounts of about 10 percent for cash transactions. Some say the “trend” of dual pricing started in the fuel business – but has spread as traders traders give incentives to customers who buy with cash. Now there is a third way of paying, Bond Notes, and no one is yet sure what discount it will attract.

Fuel operators are giving between 2 to 6 cents discounts on US dollar cash sales, The Standard said. But other suppliers of other goods, traders say, will give a 10 percent discount for cash. US dollar cash that is. Not Bond Note cash, although the central bank says the Bond Notes are cash.

According to any business person in the retail and manufacturing sector, the discount on cash transactions is growing because many companies are struggling to make foreign payments to their suppliers – mostly South Africans – since the central bank produced an “import priority list” earlier this year.

A banker said: “Electronic dollars have clearly less value than real dollars. Retailers want cash because with cash you can still pay for imports either at the bank (direct payments against cash deposits) or through runners (you give runners cash and they go out and bring stuff for you).

“When you receive RTGS (Real Time Gross Settlement System) dollars as a business, you still have to join the import payment queue at the bank,” the banker said.

“It’s clear that electronic payments have to be accounted for, whereas some retailers don’t bank cash and eventually avoid paying taxes such as VAT on cash sales.

“With electronic payments, you cannot hide them because they go onto the bank statements so VAT has to be paid.

“This phenomenon also suggests that Bond Notes will introduce a third price and very soon people will be faced with a United States dollar cash price, plastic money price and Bond Note price,” a banker said.

Get that? No, well most people won’t. Yet.

But the Bond Notes will take time to emerge into the retail trade as they were deposited yesterday morning into exporters accounts as a 5 percent bonus.

The bottom line, as one banker said in Harare late Sunday: “We are broke. Very, very broke.” – ANA