Bond notes recap


By Charles T.M.J. Dube

WRITING is just as spiritual as it is prophetic.
All writers are prophets, no matter how much good or drivel they write.
The question just becomes; whose prophet?
The spirit set me to write on mindset change and all my writings are linked to that. My latest instalments have been on the question of integrity and corruption.
There are going to be 12 instalments and towards the last instalments, some people are going to be arrested.
Underlying to this theme is the thesis that business is also spiritual.
No sooner had I written ‘Business is all about integrity: Part Eight’ than something demoralising happened to me.
That will not stop me and we will still get our 12 parts.
I am very clear on where I am headed.
I have complete faith on the future of this country.
It is going to be an industrial powerhouse and a major international hub of commerce. All my personal projects which are national in character demonstrate that faith.
Through my writings on mindset change, I am all but playing my prophetic role in contributing to the ‘hope agenda’ and the rebuilding of faith in the future of this country.
I will therefore this week divert and get back to our Bond notes until the spirit opens up for part eight of ‘Business is all about integrity’.
So finally, Bond notes were introduced in November and there had been many prophets writing for and against these notes.
There were predictions that people were not going to accept Bond notes and that as soon as they got introduced, the shelves would be empty.
There was also going to be the re-emergence of the ‘burning era’ (parallel market trading of the Bond note) and even as it got introduced, the false prophets of doom were already giving reports on transactions at the Roadport, telling of ludicrous exchange rates.
I guess that should have opened the reader’s mind on which prophet serves which god among the writing lot.
There are prophets of doom and prophets of hope.
The choice is the reader’s as to who to listen to, for God has given us freewill.
In my entry into the Bond notes debate, I had written: “The emergence of the US dollar as the most preferred unit of measure and money, given its general dominance as the currency of international trade has raised its own problems.
This has resulted in the emergence of predator nations and international businessmen who have found Zimbabwe an easy source of this valuable currency or green paper gold as it were.
While the negative balance of trade, (with imports surpassing our export proceeds), could have contributed to the current liquidity crisis, to the extent that value is accumulated in US dollars anyhow, the crunch could easily be more related to mopping operations by predators more than the balance of trade.
Even foreign account holders with visa cards, faced with stringent restrictions in their own countries, fly from their countries to draw the dollar in Zimbabwe for usage in their foreign trips and investments.
Let alone those foreign nationals, whom we shall not name, who have found ample leverage in bagging currency to foreign destinations.
It is therefore imperative that such loopholes be closed or at least narrowed.”
The introduction of Bond notes using a US$200 million facility was therefore a necessary response to this situation, and yet, “this US$200 million could still be mopped up by predators the same way this has happened before, if it were to be directly injected into the economy.
The introduction of Bond notes should have been a way of addressing the problem, if not to stop accumulations from internal transactions from finding their way across the borders, but to at least put a disruption and minimise such outflows.
While the policy change in itself seems sound, there is prevarication on the part of the Reserve Bank of Zimbabwe (RBZ) in the light of a seeming backlash from the general public.
Such a backlash is understandable given the populace’s past experiences with the monetary authorities and the past crisis they have had to endure.
And yet it is clear that once we have addressed our economic fundamentals, we will definitely have to move back to our own currency.”
I had also further explained: “To understand Bond notes, one needs to start from the concept of virtual money.
In most developed countries, people carry no cash for effecting transactions.
They use their bank debit cards with which they swipe to effect payments with the actual money remaining within the banking system.
Virtual money transactions are confined to people with bank cards who can swipe and do not use real money.
Because the country has been faced with a shortage of cash due to hoarding and externalisation, the banks have been failing to pay their clients cash on demand.
Consequently, Bond notes are coming in as an extension of virtual money to the unbanked.
Instead of the usual card for effecting payments, they will be accorded the use of Bond notes, representing the actual currency in their banks.”
It is important for the reader to know that Zimbabwe is not the first country in the Southern African Development Community (SADC) to use a Bond currency.
Lesotho and Swaziland did it first, followed by Namibia at independence, with the introduction of the Maloti, Emalangeni and Namibian dollar respectively.
These countries’ currencies operate at par with the South African rand and trade only in their countries.
They are all part of the rand monetary area and for all international transactions they have to convert to the rand.
In these countries, trading is done in the local currencies with the rand inter-changing freely, the same way we have been doing with the US dollar for two months now.
In one of my contributions on this debate, I demonstrated that banks were able to create money from your initial deposits with the expansion in money supply by commercial banks restricted to a maximum determined by the money multiplier which can be expressed as M= 1/R , with ‘R’ as the reserve ratio.
The reserve ratio is the money the banks are not allowed to lend beyond and where the reserve ratio is say 20 percent and US$1 000 has been deposited, banks are able to increase money in circulation up to US$5 000.
The reader should therefore understand how, when he and all depositors want to withdraw all their money at once, there is supposed to be a cash and banking crisis as the balances reflecting on your accounts will have originated from money that was not there in the first place.
The popularisation of virtual money (plastic money) is therefore a necessary condition to stabilising our liquidity and the banking sector.
The general public will need to be patient as steps are being taken to attain this result through restricted withdrawal levels.
Banks and other financial institutions will need to incentivise the banking public through attractive interest rates and reduced bank transaction costs.
Our dilemma is the parallel agenda which I have written so much about.
Banks want to grab as much of the depositor’s funds as they can lay their hands on.


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