Why Zimbabwe needs to discard the bond note currency for the South African Rand

The first time I went to Zimbabwe post Robert Mugabe’s era was on Sunday 10 December 2017 and I arrived in rural Mutoko late afternoon on the following day. It is normally very dangerous to openly discuss politics in that part of the country. I was in familiar company and people were worried that ever since Mr Mnangagwa was inaugurated as the new president, their living conditions had not changed for the better and prices of basic goods were now going up. I tried to explain the economic theory to them and how he is making the right noise internationally when it comes to investment protection, trimming government expenditure, goodwill from the west etc. Obviously to the common man in the street who continues to toil and suffer this brings little consolation. Recently there was a letter circulated from Innscor to say bread price is going up and now the Ministry of trade and industry has called for a meeting of the stakeholders to try and reverse this increase. There might even be an ill-advised attempt to re-introduce price controls. In my view the whole underlying problem is the bond note currency that was introduced by Finance Minister Patrick Chinamasa last year during Robert Mugabe’s era. There is a saying that says, “A wise man changes his mind, a fool never will”.  The government should scrap the bond notes. There is honour in admitting that the government made a mistake with the bond note currency.

There is so much goodwill for the new president Mr Emmerson Dambudzo Mnangagwa. I saw this goodwill on Saturday 18 November 2017 the day hundreds of thousands of us marched along 4^th street Harare on the way to State House to demand Robert Mugabe’s resignation. It was clear that the incoming president would be Mr Mnangagwa and I saw a number of urban voters of all races who in the past have previously mostly supported MDC since 2000 elections holding placards of Mr Mnangagwa and General Chiwenga. Speaking for myself a staunch MDC- T supporter, I was resigned to the fact that Grace Mugabe would become the Vice President of Zimbabwe and there was nothing that anyone could do about it. As I took the flight to Harare from Johannesburg on the morning of the march, I was very grateful for the personal sacrifices that the army leadership had taken to make sure that the reign of Robert Mugabe comes to an end. As I have written before, even if the devil himself had come forward and said he was taking over from Mugabe, I suspect we would still have marched in support as well as we were very desperate to see Mugabe’s back. Now as the new president spelled out in his inaugural speech it is now time to rebuild the economy. I wish the president success in that endeavour as his success will be my success. I would have liked to see a transitional government for a few years to sort out the economy. At this rate if the elections are held in a worsening economic environment I do not see the incumbent winning a free and fair election as people are not seeing the changes a month after the march.

The unemployment level in Zimbabwe is estimated at around 95%, which means that the majority of gainfully employed Zimbabweans are currently employed outside the country in countries like New Zealand, Australia, United Kingdom, Canada, South Africa, Botswana, Mozambique, Zambia, Namibia etc. It is very important that the government engages foreign direct investors to come to the country and revive the industry, equally the government should not forget the millions of Zimbabweans based outside the country who are on average earning much higher incomes than those obtaining back home. As the finance minister had previously shown in the national budget how significant the remittances from the diaspora are in earning the country foreign currency. It is my strong belief that to eradicate the current liquidity crisis, the country must immediately start using South African Rand as the primary currency in the short to medium term until production in the country increases then we can revert to our own currency.

Currently there are approximately over 400 000 Zimbabweans working legally in South Africa on work permits, permanent residency permits or have acquired South African citizenship. There is an estimate of an even bigger number of Zimbabweans who are not documented mainly working informally but still being able to earn decent incomes every month e.g. there is a lot of motor mechanics, builders, plumbers, domestic workers, waiters, carpenters, petrol attendants, security guards, drivers, welders, painters, tilers, farm workers, informal traders etc. in South Africa. Also there are several thousands of Zimbabweans working in other Southern African Custom Union countries i.e. Botswana, Swaziland, Lesotho and Namibia of which the South African Rand is the anchor currency in all these countries except Botswana. There is also tens of thousands of Zimbabweans in Mozambique, Malawi and Zambia of whom South Africa is one of their biggest trading partners and these countries accept the Rand. One should count the huge number of buses leaving Johannesburg every day for various parts of Zimbabwe to see the level of integration between South Africa and Zimbabwe.

From my experience, I have failed to see the sense why we can’t adopt the South African Rand. In 2016 to 2017 farming season, I decided to grow tobacco back home in Zimbabwe. When I had to buy fertilizer at Omnia fertilizer shop along 4^th Street in Harare, I had to exchange my South African Rands first to Bond notes at the illegal money dealers at Roadport and then buy the fertilizer. This did not make sense to me as that fertilizer that I bought was being offloaded straight from haulage trucks coming from South Africa. So I come with Rands and go to illegal money changers were they change the money at a premium, I then go and pay with Bond notes. Now when Omnia now wants to go and replenish the stock, they go and line up for scarce foreign currency at the Reserve bank or go to Roadport and buy forex at a premium when they could have simply sold the fertilizer for Rand and then not bother the Reserve bank. The people who were helping us in the tobacco fields preferred that we buy groceries for them instead of giving them cash as the prices of groceries in rural areas are always inflated. So we went to Mahomed Mussa Wholesalers and when we wanted to pay for the groceries using South African Rand, they were quoting us ridiculous rates of $1:16 when the official rate was below $1:13 and we were forced to go to the illegal money changers where we got rates that were even better than the official bank rates. The irony is that when you go into Zimbabwean supermarkets the majority of the products on the shelves are from South Africa or the raw materials are from South Africa. They refuse to accept the Rand which they can use to import the products themselves without joining the queue at the Reserve bank or going to the parallel market to devalue the bond note further and then having to increase the prices of goods.

A lot Zimbabweans who were raised in the country unlike our children still have an emotional attachment to the country and they think of returning to the country one day. A lot of urban councils are failing to raise revenue when they could easily develop residential stands and sell them on instalments to the millions of Zimbabweans in the diaspora who can afford and raise the much needed revenue and foreign currency for the country. This will bring extra income when people pay rates to the councils and also generate employment and business opportunities among the builders, electricians, labourers, hardware stores etc.  Another issue is the uncompetitive prices in tourism due to the US$. South Africa used to be the biggest source market for Zimbabwe tourism but now with the rates being quoted in US$ the prices are ridiculous and this is very surprising when you note that the workers in those sectors do not earn that much, who is benefiting?

 I remember towards end of 2012 my first work permit was expiring and I had applied for a permit renewal as well as permanent residency. I was not sure that my permit would be renewed and so in December 2012, my family went back to Zimbabwe. We had finished our two bedroom cottage at the end of 2010 and we then started construction for our main house. Like many parents, I worry about the quality of primary and secondary education in South Africa and it has always been my wish that my children also get the highly regarded Zimbabwe primary and secondary education. We then enrolled our two sons in a small private school where we were paying $3 000 per annum for the two kids. I remember then I was living frugally in South Africa and having to send most of my salary earnings back to Zimbabwe to pay the builders, buy building materials, pay living expenses, pay school fees etc. During my visits to Zimbabwe, I would also meet many more Zimbabweans who were in a similar situation to mine. After the 2013 election went the way it did, I decided to bring my family back to South Africa and stopped the construction and then concentrated on South Africa. My builder, the labourers, the school that my sons were going to, our local supermarket and indeed the country lost my modest monthly income. Imagine if say thousands of people in a similar situation to mine took the same decision of turning their back to the country what is the impact on the country. I know when the government considers foreign investment they are only looking at big companies but as individuals the cumulative incomes that we can potentially bring to the country is quite substantial.

 Whilst I understand the rational why the west imposed targeted sanctions on the country's leadership, their impact are actually felt by all of us. I remember when Makro became part of Wal-Mart; they had to close their two outlets in Harare and Bulawayo due to the American sanctions. Another reason why the sanctions are not desirable is the fact that Mr Munangagwa is my president even though I am an MDC supporter. With sanctions hanging above his head, will he be able to go and sign bilateral agreements with the countries that have sanctioned him? Imagine someone telling me that he has only sanctioned me and not my kids and this is dishonesty of the highest order. If you sanction me, then you have indirectly sanctioned my family as well as I provide for them. So the sanctions must be removed. At the same time, leadership should not use those sanctions as a scapegoat for their mismanagement of the country's economy, they should continue with the reforms and proper management of the country so that we can prosper as a country in spite of the sanctions.

As the new government looks around for investments, I suggest they prioritise South Africa. Most South African companies stuck with Zimbabwe even when the economic environment was not favourable. Also the fact that South Africa has not introduced sanctions on our leaders means it will be easier for a South African company to directly invest in Zimbabwe than say an American company that will fear having to pay huge fines back home. South African companies are also reported to be sitting at hundreds of billions of Rands and we must aggressively court them as the first port of call. I remember companies like Woolworths tried to come to Zimbabwe a few years ago and they ended up closing down and the same with Shoprite that was only maintaining one shop in Bulawayo waiting for the right time. I also need to talk about my profession the insurance industry. With the problems we have had since 2000 a lot of Zimbabwean assets are now directly insured externally and this not only takes away our much needed foreign currencies but it takes away jobs in the insurance sector out of the country to South Africa. A lot of Zimbabwean informal traders in neighbouring countries are not banked because they are not documented, channels such as Ecocash can actually bring them on board if we adopt a credible currency and their families and the Zimbabwean economy in general can potentially access this forex that can run into tens of millions of Rands. This can help to cut the very high commissions being charged to send money to Zimbabwe from neighbouring countries plus the exchange rate losses when the money is changed from Rands to US dollars. As we speak more and more diasporans are now shunning the official channels of sending money to Zimbabwe due to the bond note distortions.

As we speak now this bond note crisis where transfer rates can go up as much as a premium of 80% means that the salaries of workers in Zimbabwe have effectively been halved and it seems we are going back to the undesirable period of 2008 inflation levels. In October 2017, I was offered tobacco seedlings enough for 2 hectares and when I looked at the price of fertilizer, increased costs of other inputs and the devaluing bond notes, I decided against growing tobacco again until the currency issue was resolved. In the last farming season, I brought in tens of thousands of South African Rands for tobacco farming and the Reserve bank governor had promised payment in forex. When we sold the tobacco all we got was bond notes. To access those bonds notes my cousin and his wife had to queue for weeks to access the money. At least at that time the rate was still 1:1 with the US dollar. A lot of Zimbabweans are making the journey back home for the holidays right now, why are they not allowed to bring in 1 or 2 bags of fertilizer to give their families back home. The current prices of fertilizer in Zimbabwe will affect the current farming season. As a pig farmer in Zimbabwe, I worry about the price distortions brought about by the bond notes, corrugated iron sheets that we use for constructing pig shelters that costs around R65 in South Africa, are being sold for around $21 in Zimbabwe. At the same time one is not allowed to bring in those roofing sheets without an import permit and people are forced to smuggle them into the country. Another irony is that with the way that the bond note has devalued against the Rand, petrol is now cheaper in Zimbabwe than in South Africa even though fuel is heavily taxed in Zimbabwe than in South Africa!

Despite the political differences, I wish our new government success and hope the economy turns around and that the standards of living of our people starts to improve. For that to happen, we need to get a stable currency and improve liquidity, this will certainly enable proper running of businesses and make sure that workers don’t spend productive hours queuing at banks. We need to bring dignity back to our people both inside the country and outside the country. It is hard being a foreigner and we hope by working together we can grow our economy from wherever we are so that those who want to come back home and can come back to a prosperous Zimbabwe.

 

God bless Zimbabwe!