HomeOld_Posts‘Let’s take the cash crisis head on’

‘Let’s take the cash crisis head on’

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WE are in the middle of a cash crisis.
The New African of August/September 2017 best describes the situation below.
“The joy of a bumper harvest in Zimbabwe is being threatened by a serious cash crisis where since early 2016 the banks in the country have routinely run out of US dollars and thus have not been able to meet the demands of their customers.
The Government tried to stem the tide late last year by introducing ‘Bond notes’, a quasi currency backed by an Afreximbank US$200m facility but to no avail.
Therefore the second quarter of 2017 has seen a serious deterioration of the cash crisis to the point where people spend hours and days in winding queues at the banks, only to get US$20, US$50 and at the most US$100 or on bad days nothing at all.”
We would like to add that people no longer get US dollars, but ‘Bond notes’ if at all they get anything.
Furthermore, the downside to the cash crisis is the unwelcome emergence of the parallel market which, if allowed to grow, will reach alarming levels.
Now there is nothing as bad for any economy as loss of control by the Ministry of Finance as well as the Reserve Bank over the value of the country’s official currency as the parallel market takes over.
What a ‘parallel market’ does is to practically shift the Reserve Bank from its grandiose building in Samora Machel Avenue to ‘misika’ such as Mbare, musika wehuku in Mutare, Renkini in Bulawayo, Batanai in Gweru, Mucheke in Masvingo, Kwekwe, Kadoma, among other towns and centres.
The Reserve Bank not only relocates to ‘musika’, but also to bus termini and supermarket entrances among other places. Major currency dealers will not be Dr John Mangudya and his staff, but unscrupulous touts who will undervalue and overvalue the currencies willy nilly and in the process, bring the entire monetary system into tatters along with the economy.
To overcome the cash crisis, Government encouraged the use of plastic money.
Now a new situation to undermine the use of plastic money has emerged.
A persistent evil rumour has been doing the rounds: “Money in bank accounts is losing value fast.
If you have any money in the bank, remove it from there if you don’t want to end up with zeroes like in 2008.”
Many companies have fallen for this rumour.
A number of economic analysts believe that the current bull run on the Zimbabwe Stock Exchange which has reached elephantine heights has mostly been due to a lot of companies who are moving their money from banks to shares in conformity with the rumour we mentioned above.
This has had the effect of some companies now refusing plastic money, saying if they are paid by plastic money which is only done through the banks, it means they will be forced to keep money in banks which they no longer trust since they believe money in banks is losing value.
And so plastic money is being undermined.
And with it, the payment system.
For instance, the other day this writer was not able to buy fuel with plastic money because fuel service stations in my town wanted cash only.
There is nothing as bad as ordinary businessmen in any economy creating their own financial rules and getting away with it.
Once the Reserve bank stops running the show on the currency front, it means disaster for the economy.
Where do we go from here?
People have been suggesting once more that we must adopt the rand as our currency to alleviate the present crisis.
Now what does it mean in reality?
It means that we will close down our Reserve Bank.
It doesn’t mean we will pull down that iconic building in Samora Machel.
It means the South African Reserve Bank will be our real Reserve Bank in this country.
Yes it is the South African Reserve bank that will determine the value of the rand we will be using here and South Africa from time to time.
We will have no control over that currency.
The downside to that is, right now in South Africa there is a raging debate on what form their own Reserve Bank should take.
Furthermore we still have some racists down there who control very influential positions in the economy.
These racists will do everything they can to undermine the Zimbabwean economy and politics through their control of the rand.
There is no doubt about that at all.
It is unthinkable that Mozambique and Zambia, who for all practical purposes are smaller economies than Zimbabwe, will continue to be independent economies while ours is reduced to a provincial economy of the South African economic system.
We will never realise our full potential under that scenario. And so it is totally unacceptable.
What then is the way forward?
We must now use our natural resources with a lot of vigour and cleverness from now on.
The Sunday Mail of September 17 2017 says: “Zimbabwe is finalising the sale of at least 1,2 million carats of diamond stockpiles under condition of enhanced transparency and aggressive marketing to ensure increased revenue from the precious stones.
Zimbabwe Consolidated Diamond Company (ZCDC) targets to fetch a maximum US$100 per carat compared to previous prices of just over US$50 per carat.”
This is good news indeed!
This is the way to go!
After all, it was the diamond which brought a lot of US dollars into the country in the first place.
Why should a country like Botswana live off diamonds comfortably while we suffer from a cash crisis and yet we have huge stockpiles of diamonds in our safe houses.
Then China inevitably comes up.
Even the US cannot run away from China.
Nobody can run away from China.
In the present economic set-up of the world, to try and run away from China is like a fool trying to run away from his/her shadow.
China has not been given a real big opportunity to partner us here in Zimbabwe in developing our economy.
Yes, there are Chinese firms carrying out business in this country, but if truth be told, they are only found at the fringes of the economy.
They are not found at the very heart and soul of our economy – manufacturing, big mining projects and big infrastructure projects like trunk roads and railway lines.
Look at what they have done in Ethiopia.
They have helped develop massive industrial parks in partnership with that Government.
They have helped to develop a very modern railway system in that country.
Today Ethiopia boasts a fast speed train.
And yet when it comes to natural resources, Ethiopia is nowhere near Zimbabwe.
The Chinese have also done great wonders in Kenya.
They have helped the resuscitation of the once moribund railway system in the country which today is up and running. The major road infrastructure has not been left out either. Today, Kenya has some of the best modern highways in Africa, courtesy of the Chinese.
Here in Zimbabwe we have engaged the Chinese half-heartedly.
No wonder we are not producing a lot of goods for exports.
It is about time the Chinese partnered us in massive projects. That will ensure that the problem of cash shortages is alleviated with big money coming in during the duration of the projects and then a lot of foreign currency will be generated from exports once the big projects are completed and begin to produce.
We must take the cash crisis head on if we are to overcome.

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