ZIMBABWEAN banks and individuals are behind the current shortage of the United States dollar by withholding the currency which has become a form of investment.
BY TATIRA ZWINOIRA
Since the introduction of the bond notes in November last year, the dollar has slowly become elusive. The surrogate currency is at par with the dollar and is backed by the $200 million facility from the African Export-Import Bank.
The shortage has spawned a parallel market, with businesses coming up with different prices for the same goods where they offer discounts for United States dollar users.
A survey conducted by Standardbusiness showed that depositors have lost trust in banks and as a result are keeping United States dollars at home.
Others said they were now relying on cashback facilities offered in stores, EcoCash and other platforms such as Meikles MyCash.
“I try as much as I can to do cashbacks so now I only shop at places that offer cashbacks such as supermarkets, but most of them only give you a maximum of $100 per day,” said Angie Maphosa, a former hair salon owner.
Maphosa used to run a hair salon for kids in Mutare and back then, in 2014, she would withdraw money at will from her bank. Her life was transformed after she was forced to close her business because she was no longer getting as many clients owing to financial constraints.
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“Recently, I went to the bank intending to withdraw US dollars from my account but I was told that the bank did not have any dollars. I do not trust banks anymore,” said Maphosa, adding that she believed the dollars were available but the banks just did not want to disburse them.
ZB Financial Holdings CEO Ron Mutandagayi last week said his bank was disbursing a lot of money onto the market but none of it was coming back into the bank.
“You got to make a distinction of the liquidity among financial institutions. Based on the numbers that I have presented, our liquidity ratio is 75% which is extremely liquid, but it is a different story when it comes to bank notes themselves,” he said at an analysts briefing on the release of the group’s 2016 financial results.
“Those bank notes are generally imported and the authorities have been redistributing to the market to the extent that the authorities are not able to help us so our network will obviously be starved of bank notes.”
Through its banking unit, ZB Bank, the group imports an average $5 million per month.
According to statistics from the Bank of International Settlement (BIS), deposits held by Zimbabweans in offshore banks was increasing, going above $600 million, signalling an increase in the externalisation of funds, thereby starving the market of foreign currency.
BIS is a bank for central banks.
In his 2017 monetary policy statement, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said externalisation or capital flight of this nature was attributable to the use of mobile capital (foreign currency) as a medium of exchange.
“The lack of confidence within the domestic economy has a net effect of robbing the country of its hard-earned foreign exchange,” he said
A 2014 Finscope Survey found the informal sector to have $7 billion floating in it and that 53% of players in this space were keeping their cash at home. It is estimated that the informal sector constitutes 60 to 70% of the economy.
Findings of the ease of doing business using the rapid results approach showed that banks were stifling manufacturers in making foreign payments despite the existence of the import priority list which gives top priority in the importation of raw materials.
Recently, Eagle Italian Shoes director Li Song told Standardbusiness that her company had been struggling to remit payments from their bank since last year.
The company sold products worth $1,8 million to a buyer in Angola and the money was transferred into their bank account. The company was, however, struggling to make a foreign payment of just $5 000 from that account.
According to the Confederation of Zimbabwe Industries (CZI) manufacturing sector survey 2016 report, 44% of manufacturers found the financial sector to be unresponsive to industry needs.
This has seen the body inundated with requests for support from local manufacturers, with CZI president Busisa Moyo hopeful of progress after a series of meetings with the central bank in recent weeks.
“We have engaged the Reserve Bank, Bankers Association and the ministry of Industry on the issue. The RBZ has availed a $70 million nostro stabilisation facility which will make a big difference to manufacturing companies under Statutory Instrument 64 of 2016 and other critical manufacturing support sectors,” he said.
Financial expert, Persistence Gwanyanya said it was important to remember that shortage of dollars came from low exports, the country’s main source of liquidity and was made worse by a high cash demand.
“Of course the cash shortage has been compounded by market indiscipline. The high level of externalisation is partly attributed to this market indiscipline, which calls for banks to pitch in by strengthening their compliance mechanisms. It seems that it is the RBZ’s concern that some financial institutions are not strictly adhering to the priority list in respect of foreign payment backlogs,” he said.
“Whenever there is a shortage these things tend to happen. I do not think the banks’ problem is big enough for them to carry the biggest blame. But as you know, in all situations where there is a market failure, possibility is that you may not distribute fairly in the eyes of everyone.”
