When John Mangudya announced that he was going to introduce bond notes in addition to the already circulating bond coins back in 2016 people were not amused. In fact, there were protests and individuals like Evan Mawarire came into infamy and were arrested and charged with all manner of crimes.
The bone of contention
At the heart of it all was the fact that the RBZ was claiming that bond notes would be issued at par with the USD. The so-called 1:1 claim. People rightly felt that the government would pillage their bank accounts and forcibly take away their USD and leave them hanging with worthless bonds. The government gradually and systematically proceeded to do that.
Not long after the bond note appeared the foreign currency black market, a relic of the dreaded 2008 era, re-merged. At first, there was hardly any difference. USD notes were still coming out of a lot of ATMs and trading at a meagre 2%, then it was 5%, at the beginning of last year it was now a very noticeable 25%.
Then the government ordered the separation of FCA RGTS and Nostro accounts and it all went to hell. The rate skyrocketed up to 600%, shops like KFC shut their doors as they took a wait and see approach, prices rose exponentially. Eventually, the dust settled and the exchange rate lot fell on 300% or thereabout.
Head in the sand approach
During all this time the government via its Monetary and Fiscal authorities decided to stick their heads into the sand. They preached 1:1 and fair winds at every opportunity even as reality made their words sound increasingly incredulous. All the while the black market thrived and despite a few minor arrests none of the famed cash barons was ever arrested let alone convicted. This led some to conclude that the Big wigs were in on it, something the Big Wigs denied.
Jecha on the black market
In the latest and long-awaited Monetary Policy, just presented the RBZ governor has essentially poured jecha on the foreign currency black market. By floating the bond note and RTGS and embracing the market exchange rate he has essentially eliminated the need for the black market.
Like a zombie the black market will live on
Notice we said he poured jecha and not he killed. According to the latest policy forex will be sold on a willing buyer willing seller basis using an interbank rate of sorts. I call it bureaucracy most small scale traders will continue to operate seek the services of the black market which does not demand mountains of paperwork.
So, in essence, the black market players will now thrive on scraps beneath the table. Given the size of Zimbabwe’s informal market that is a lot of scraps. So like zombies, the black market traders will continue to roam their usual enclaves.