“I am sorry sir, the dollar notes that I have are all severely torn up, here, try this one and that one,” the cashier said as she summoned all the courtesies she could muster in order not to further incense her customer, who was becoming visibly impatient. “It’s not really your fault young lady,” the gentleman said calmly. “This money has seen better days.”
The gentleman’s change was about $8 and some odd cents. Eventually, after a visible struggle, the cashier managed to shuffle through her cash tray and got what she considered the best looking US Dollar notes, which she put together with a five dollar note and some South African Rand coins. But the ordeal was not yet over.
“There is still six cents left sir, what would you like for it? It is just enough for either these or those.” she says, pointing out some chewing gum and sweets that were conveniently placed in jars next to her.
Such was the reality that shoppers had to contend with every day in Zimbabwe before the advent of the bond coin. The acute shortage of small change and the severely worn out small denomination notes, which have been in circulation since the advent of the multicurrency system was indeed a major problem for commerce.
This was until the Reserve Bank of Zimbabwe (RBZ), on December 18, 2014, brought coins into circulation, chiefly to ameliorate some of these problems.
However, following their introduction, there was immense speculation surrounding the motives for the introduction of the coins. Some quarters even alleged that the introduction of the coins was a clandestine move leading to a wholesale appropriation of bank balances by either the government or the central bank. These proved not to be true.
It is important that the public should be aware that the introduction of bond coins came about after a careful analysis and wide stakeholder consultation on the numerous benefits of the move.
The bond coins were thus introduced by the RBZ after calls from industry and commerce, the banking sector, consumer groups and the public at large, that the unavailability of small change in the economy had been very detrimental to consumer welfare.
Not only had producers of goods and services struggled to accurately define the economic pricing points for their goods and services, resulting in prices of most small items or units thereof being priced upwards at $1, even if the cost of the item should have been say, around 60 or 70 cents. This rounding up of prices resulted in consumers having to pay more than they would otherwise have, for these items.
Furthermore, consumers were severely “short changed’’ literally, with alternatives such as sweets, chewing gum and change vouchers being offered to consumers in lieu of loose change.
Commuters in public transport were also not spared, with many consumers being paired off in twos or fours upon disembarking commuter buses as the conductors had no coins to offer as change.
It is important to realise that there still remains a huge demand for small denomination notes in the economy. Most of the notes that have been in circulation are now soiled beyond a state where they can be repatriated to the United States for replacement with new notes. The economy, through banks has also been importing foreign notes, particularly United States Dollars at huge cost. The country has also been facing cash shortages for some months now.
In this vein, the move announced by RBZ last week to introduce bond notes, is in fact quite timely.
In the same manner that the economy reaped a huge dividend in using coins for small transactions rather than USD small notes, the bond notes will become a useful substitute for small denomination notes, which have imposed a burden on the banking system as they need to be frequently replaced. In a short time, more money will be saved by the country.
The bond notes are therefore a positive step meant to eradicate a number of challenges, including addressing the critical shortage of cash for transactions. Their introduction should make life easier and cheaper for the broader generality of Zimbabweans.
If, like the bond coins, the notes are pegged directly on a one-to-one basis against the United States dollar, and are supported by the $200 million Bond facility negotiated by the RBZ with an international bank, this would effectively mean the notes are “bonded” or “guaranteed” to be purchased back, in United States currency by the RBZ.
The notes will therefore represent a stable value and a very useful medium of exchange. Next week, we will carry a full analysis of how bond notes will be of potential benefit to the economy and consumers.
NewsDay