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.
16 comments
What paper work do you imagine? Bureau de changes don’t require much paper work, usually it’s just your I.D. and that’s it.
As long as there is a commission to pay, i will just go to a spatheleni
Informal market might be actually bigger than the formal market in Zim in my own opinion. Not sure if the informal market is “left overs” or the “main meal” in the Zim context. Lets wait and see.
Don’t write your articles in a rush. The grammar on here makes it hard to understand a lot of sentences.
What about activating some sort of spell check , or having an Editor proof read before publishing.
100% agree with you, its like techzim write something on one screen whilst playing a game on the other screen
This person has no understanding of market fundamentals
I wonder where the banks will get the forex to trade? I thought that has always been the problem? Much ado about nothing. The real monetary policy is the one on the street and we get ut everyday. Not this long awauted hogwash.
Nick you may be right.Banks dont have enough forex.Otherwise forex is abundant on the black market.Big fishes who were already selling us dollars on the black market will open bureau de changes and continue selling at the current rates or even higher depending on whether banks have forex to sell.otherwise I see banks telling clients that they dont have forex to sell.if forex becomes scarce in banks the black market will take advantage and hike their rates.
Seriously was this written by a 12 year old. Did no one proof read this? Do you not care at all about quality control?
What’s in a language grammar? What is important is the content whether it makes sense or not. Language is just the context. Personally, I agree with those who are saying this mps is much ado about nothing, zero, naught, at the end of the day nothing will be achieved just like the very bond papers achieved nothing inspite of noise generated when they were introduced. The worst loser here is the ordinary human being, povo in popular parlence
What’s in a language grammar? What is important is the content whether it makes sense or not. Language is just the context. Personally, I agree with those who are saying this mps is much ado about nothing, zero, naught, at the end of the day nothing will be achieved just like the very bond papers achieved nothing inspite of noise generated when they were introduced. The worst loser here is the ordinary human being, povo in popular parlence
Clearly no understanding of how the blackmarket forex especially in zim works..
I don’t see much of a change in the black market activities. Mind you, this arrangement is mainly for companies only. What will the small guys do? And the fact that it’s for companies only means you have to present paperwork to prove your company part. At the other end, it has proven that change moneys are cheaper, flexible and very convenient compared to bureau de changes.
Please don’t comment economic issues when you have limited knowledge of economics.
I for one enjoyed reading the article; brief and to the point. I appreciate the author’s narrative. Good job