Nevanji Munyaradzi Chiondegwa
The monetary policies that are being crafted by the Reserve Bank of Zimbabwe are causing untold suffering to the ordinary transaction citizens as they are leading to the erosion of the value of their earnings.
The central bank’s policies in the new dispensation have been centered on fighting the parallel forex exchange market which they blame for causing the rapid loss of value of the local currency.
Unfortunately, the apex bank is losing the war in all fronts. Every legislation they put in place to control the activities in the black market worsens the situation. The failure by the central bank to stabilize the value of the local currency has seen many people questioning the capabilities of RBZ Governor John Mangudya to continue in his office as he seems like a person who has run out of clues on how to take this country out of the mess he created by introducing bond notes.
All he has been doing in the recent past is to impose policies that are only worsening the situation. It is an undeniable fact that the success of any national measures, policies or plans depend on citizens having confidence on those policies. Without their support or confidence, the measures or policies will not work and this may lead to the suffering of the people. The laws will either be resisted or circumvented by citizens resulting in the failure of the laws to achieve their purpose. Command Economics have never worked anywhere in the world, be It in the Soviet Union, China and Cuba.
Laws that are imposed on businesses and people without consultations do not work because they will be resisted. People will always find a way to maneuver as is the case in Zimbabwe where every monetary law which has been imposed by the central bank to contain the black market is being maneuvered.
RBZ has been for the past few years focusing on measures to curb the rampant and prolific trade of foreign currency on the parallel or black market. Most,if not all of its measures have spectacularly failed to yield results or made the situation worse. At times, the apex bank is forced to reverse or scrap its policies as they fail to yield results. The RBZ constantly blames the proliferation of the parallel forex trade on mobile money operators, “unscrupulous” business people, citizens and even “demons” when the bank is actually the one to blame for bad policies which do not inspire citizen confidence.
In 2018, the bank instructed mobile money agents to close certain agent lines which they blamed for the spike of black market rates of the United States Dollar. They also froze the accounts for certain companies and individuals and accused certain players of being responsible for the spike. The bank even claimed that it was carrying out investigations on those individuals but nothing materialized. Recently, the apex bank came up with other bizarre restrictions which ordered mobile money operators to suspend again certain agent lines and place a cap on the amount of daily and monthly transactions on mobile money. They also extended these caps to banks. There are also other measures which were put in place that we will not dwell on. The focus of this article is to try and show the real causes and the unintended consequences of their actions.
It was RBZ Governor Dr John Panonetsa Mangudya who first introduced bond notes. This enabled it to trade with forex which was in the basket currency. Calling bond notes equal to USD was not only criminal but a desecration of the very tenets of money and Economics because the move led to a situation where bad money drove out good money and within a short period of time, the USD notes disappeared from the formal market. They were now available on the informal market and the rates spiked from there.
The central bank tried to scrap the 1:1 trading value between the bond notes and the US dollar to try and bring the USD back into the formal system but it failed. They also came up with a policy to separate accounts, a move which saw people who had their savings in forex losing the value of their money. This damaged the relationship between the public and the banks and worsened the forex flight from the formal market to the black market. The appetite for forex had to be satisfied and that need created a demand, the demand created a spike in prices on the black market of forex because the supply was limited. This has continued to date.
Mobile money agents and demons have not created these problems, but the issue emanated from inconsistent monetary policies. The monetary policy regimes being set by the apex bank are making things worse. The announcements on tobacco prices, gold retention funds, exporters retentions funds, the closing of the interbank and the introduction of a fixed exchange rate by the RBZ have all led to the worsening and widening of the gap between the official rate and the black market rate.
RBZ has tried to put punitive restrictive measures, but people have continuously found ways to continue trading on the black market. Closing mobile money lines and capping their transactional limits is failing to lower exchange rates as they continue to rise. Market forces have defied their intentions. The demand has still outstripped supply. The only people that have suffered are the genuine transacting businesses and the public. Mobile money platforms are methods of payment used everywhere in Zimbabwe. They provide an alternative means of transacting given that the money supply in notes is below or around five percent against the standard of fifteen percent worldwide. Again this falls squarely on RBZ. Had they simply supplied enough notes, people would not even have been fleeced of their hard earned money by mobile money agents to get money for premiums.
Those whose money was initially stripped of value continue to suffer from paying premiums because they cannot find money in the banks. This again is RBZ’s fault. Now they cannot even make payments using alternative methods such as mobile money and ZIPIT. I do not known if RBZ is run by Luddites or they just get into the Luddite mode when they want to enact a policy to make the transacting public suffer. The unavailability of forex on the formal market where it is needed especially now that the bank has allowed people to use it for formal trading means that the forex will be obtained from the black market. But the bank imposed caps and closed the methods of payment for it. This only spikes the rates further, making everything more expensive.
Now it is only the public that suffer even more. The fat cats will simply find other ways to access forex and indeed they do get it from RBZ at a fixed rate of 1:25 and then take it to the black market to sell it at exorbitant prices. Meanwhile, RBZ is asking those with retained forex to eliminate their balances within a month. Literally, they are forcing people to spend their money or lose it at their funny rate. They actually think this would improve the supply of forex in the formal system. But the truth is the move will only encourage smuggling and racketeering.
People will find a way to circumvent that draconian control measure.
Business people who pay their stuff via mobile money are no longer able to do so because of the scarcity of mobile money. Those who manage to get mobile money cannot use it to buy goods and services as they are now being charged in US dollars. It is now very difficult to access forex in the streets because the apex bank has put caps on transactions. Who in their correct senses in the 21st century goes against technological advancies? Other countries are even adopting crypto-currencies and we are busy trying to take back our country into the 19th Century?
Honestly, whoever does the thinking at the Central Bank ought to be informed that technology is the future, it is here to stay. You can not say people must not advertise forex rates on social media. They will simply do it using other means. Besides, a line on social media may not even be the none an individual uses. What is to stop one from using say their old grandother’s ID, get a line,register it and use it on social media to advertise? There are several ways to circumvent that but what it means is that it is the public that continue to suffer from the ill-advised measures of the Reserve Bank.
Bottom line, Command Economics bring suffering and do not work! There will be no prosperity and Zimbabwe will not be Open for Business with such a policy regimes. RBZ! Wake up and smell the coffee!