MONEY stands out as one of the most ancient inventions in the history of mankind.
Although it has assumed many forms since then, its purpose remains unchanged: to facilitate convenience in transacting.
Prior to its use, societies depended largely on the physical exchange of commodities. The main weakness of this system, known as barter, was that it called for a double coincidence of wants.
Anything that is generally accepted as payment for goods and services can be called money. To economists, for something to be called money it should act as a medium of exchange, unit of account and store of value. However, our local currency has in recent times rapidly lost all of these attributes.
Over the past year, the nation has had to transact using different modes of payments. The ever changing monetary system has prompted many calls for the use of a more stable foreign currency, preferably rands or US dollars. Dollarisation, as it is called, has its problems but the obtaining dearth of confidence in the Zim dollar justify adopting it. (We will explore the concept of dollarisation in our next article)Â Â
In early 2008, goods and services sold in the formal market were being paid for in Zim dollars using electronic transfers, cheques and cash. Informally, nonetheless, some transactions were already being consummated in foreign currency. The suspension of electronic money transfers, on allegations of system abuse by foreign currency dealers, saw the business transaction model changing to simply cheques and cash.
The lifting of the suspension failed to make up for the lost confidence in the use of electronic money. Already most economic agents were opting for cash and foreign currency to cheques and transfers.
At the same time barter trade became rife. The most common commodity used in barter arrangements was fuel coupons. Schools, especially those that are privately run, demanded fees in fuel coupons.
Some manufacturers and suppliers only accepted payment in coupons. As the coupons became increasingly acceptable, some employers began to remunerate their workers in fuel coupons. This temporarily provided some relief to the weary workers because they would sell fuel coupons for US dollars or use them as payment for goods and services. Initially, the coupons were quite valuable.
A litre was being redeemed for as much as US$1.50 implying that a 20 litre coupon would fetch US$30. Few coupons would cover monthly basics because then goods and services were still reasonably priced in US dollars. Coupon prices hastily came off as a result of the global slump in oil prices and the increasing volume of fuel coupons in the market. The benefits of holding fuel coupons, outside fuelling the cars, quickly vanished as their values in hard currency terms plunged.
Already there are worries, negligible though for now, that there could be more coupons than the fuel in the country. This, if it is true, will impact negatively on the fuel coupon “monetary” system. Remember the same fate which hit the gold standard after it was discovered that there were more promissory notes than gold to back them. Many were left with worthless pieces of paper.
These concerns, together with the approval of some merchants to sell commodities for foreign currency is prompting growing advocacy for the full dollarisation of the economy.
Already a number of sectors are transacting solely in foreign currency legally or otherwise. The remaining sectors are justifiably lobbying for the privilege to be extended to everyone. It is unfair to expect people and companies alike to continue earning income in Zim dollars whilst most of their expenses are in US dollars.
A few months ago, when “burning” was still vibrant, people would use earned Zim dollars to acquire forex which would cater for their expenses. That, for sometime, kept the wheels of some companies turning, albeit subdued.
Currency deals also helped the workers to continue reporting for duty without pressing their employers for salary hikes despite earning close to nothing. This explains the never ending long queues at banks before the new policy on weekly and monthly withdrawals. Despite earning few millions per month, most low income earners had bank balances running into quadrillions thanks to “kupisa mari”, literally translated “burning money”.
Those opportunities are long gone. The stock market which was a source of Zim dollars for many has not traded for more than a month. Corporates who had turned to using shares as a liquidity management tool are stranded. High inflation had also forced individuals to keep their savings in equity based investments such as unit trusts.
These too are trapped. Equally marooned are employees whose earnings had been tied to the stock market. The market has not traded since November 26 and already market players are pushing for the use of greenbacks when the “sabbatical” is over.
This does not come as a surprise because the economy is quickly moving towards “dollarisation” and besides, some listed companies such as Econet, Innscor and Delta are now operating US dollar businesses.Â Â Â
The demand for the greenback is real contrary to the notion that it is fictitious. Most labour unions are up in arms with employer representatives demanding to be paid in foreign currency. For companies charging their goods and services in forex, paying hard currency salaries should not be a problem.
However, many organisations are not earning forex and there is no way they can pay workers in a currency they do not generate. Every sector now has to be allowed to transact in hard currency to survive. In turn organisations, both private and public, will be in a position to pay their workers living wages in forex. Government will not be left out as it will get taxes in hard currency.
BY RANGA MAKWATA