Cash burning is returning to Zimbabwe as liquidity challenges persist

Dominic Mhiripiri Avatar
Loans suspension Cash Crisis in Zimbabwe, US Dollars, Hard Currency

Zimbabweans have begun the practice of “burning” cash, as local businesses try to find new ways of coping with the prevailing liquidity crunch in the economy.

The development is currently only hatching but has the potential to spread further across the economy, and is highly reminiscent of the unforgettable events of 2008, the climactic year of Zimbabwe’s economic crisis.

Burning is essentially a form of selling hard cash on the black market to those who are desperate enough to pay a premium for it. If someone has a $1000 in cash, and the next guy wants that cash but is unable to withdraw it from the bank because of shortages or restrictions, the two can make a deal.

The buyer receives the $1,000 in cash and then proceeds to write the same amount, plus an agreed upon premium (a markup), to the seller’s account. Wiring $1100 into the account of the seller would represent a 10% markup. The more transactions the seller gets into (in full-blown crises, these can be dozens of transactions per week) the more profit he makes. Creating money from other money. Hence the term “burning.”

The seller in that case is presumably someone who would not have a problem accessing the cash from their account should they ever need it.

We have received reports from three small business operators in Zimbabwe who have already gotten much-needed cash via burning, all in the past month.

Source A:

“I have been charged 5% and 10% on two separate occasions within the past three weeks. My bank limited my withdrawal to $200 per day, but I needed more than $1,000 at one go, and on the other occasion, $2,000. So I burned.”

Source B:

“I sell gadgets in town, and I have to buy them from outside; it’s difficult for me to use funds in my local bank to purchase good outside Zimbabwe. So a guy with a foreign bank account offered to help me, in exchange for cut.”

A lot of local banks, lacking liquidity at home and stocked-up NOSTRO accounts abroad, are simply unable to be the financial intermediaries when account holders want to purchase goods from other countries.

zimstreetPut in such a corner, the small businesses, such as Source B above, are resorting to burning. The guy with money in a foreign bank account cannot access it as cash in Zimbabwe.

Many of the guys with cash are facing a lot restrictions and difficulty in getting that money to buy goods for them abroad, (especially by means of telegraphic transfers). So the first guy buys good for everyone using his foreign account, receiving cash and a premium for his trouble in exchange.

This – the fact that the liquidity crunch and policies put in place to ease it would hit importing small businesses really hard – is exactly what many observer and analysts pointed out when the central bank announced the forthcoming introduction of bond notes.

The ordinary man will not be spared

In a normal economy, burning does not exist. Where it exists, it is extortionate to those who are forced to access funds they already own at a premium that isn’t a service or transaction fee. The evidence we have seen so far shows that small businesses are the ones already being compelled to get into burning.

But the ordinary Joe (or Nhamo) is not insulated, and will not be spared. We have already noticed that several banks have begun bringing down the withdrawal limits; the average withdrawal limit on most banks today is between $200 and $300 per day, although before the crisis the rates were much higher (NMB have, as of today, reportedly lowered their $200 daily withdrawal limit further down to $100.)

For any transactions where most people will need cash – especially running expenses such as rent and fuel and utilities, let alone the buying of durable goods such as furniture – many Zimbabweans could be forced to burn cash in order to make it.


  1. ggg

    app you hear the CEO of Barclay’s saying that 500 a week is enough tibvire this is someone who does no t stand in a queue and has an executive withdrawal limit. to do this let’s make sure that these guys aew monitored and cab only access said 500 as well

    1. TK

      weekly limit is fair, read full statement from the chairman of BAZ, given that the average salary deposit is just below 500 USD, why would and average Zimbabwean want to withdraw lets say 2000 USD a day ?

      1. musa

        why not? it’s his money isn’t it?

      2. cost per unti

        lets be honest most people dont pay rent and buy food with their salaries how do you think they pay for cars etc. 500 a week is too little was building a shed a my farm and guess what the cost was 3500 and all of it had to be cash after all the companies were charging 10 for a pole i bought $4 by bulk traders using this metric i would used double the amount depleting my capital and only making the bank richer. tibvirei apa and we all know this guy is paid 15000+ a month and how does he cash that ou considering he doesnt have any expenses as the bank comps all of them aka you telling me this guy has since cash shortage have over 25000 sitting in his account???

      3. aware

        do you have to be shackled just because someone else earns less? No wonder we are in doldrums, with this kind of thinking.

  2. Jack Siziba

    Comments from the Barclay’s guy show why no one trusts our banking system. Shamelessly demanding that the law should stop withdrawals of money deposited willingly. They are fine taking 10 000 at one go but once they have it the arrogance begins. This is why EcoCash is moving billions now while they sleep at the wheel.

    1. aware

      well said. if they want to introduce such stupid withdrawal limits they may as well start put limits on deposits. The reason why people bank money is they know that it wll be secure until the day that they need it. And when they need it they should be available otherwise it defeats the point

      1. Come-Lord-Jesus-Come

        That true #Aware, it’s almost a crime that i did banked with a certain bank…who is the Principal in this Principal-Agent , Bank-Client relationship…..I thought it’s me the one who wants his money as and when i need it possibly with some interest but now am forced to live a life of a servant. This country and those in controlling positions must learn from past mistakes

  3. Konfuzd Sitizen

    The rich getting richer and the poor, well you know, heading the other direction Sometimes i wonder, are things going to be better, or ndiwo malast days aitaurwa aye, everywhere varikuchema.

  4. Kweza

    Soon we shall have the problem of parallel pricing where shops charge different prices for cash transactions and that of swipes.
    Idiotic Mangundya created this artificial crisis to force people to accept his bond but his same bond shall suffer the same fate as Zim$

  5. Boyz Musadaro

    Someone should read up on the MPesa system in Kenya and implement in Zimbabwe. Unless it’s being done already.