Black market firms in Zimbabwe as dollars get scarcer

An illegal foreign currency trader poses counting notes at a local bus station in the capital Harare, Zimbabwe, November 18, 2016. REUTERS/Philimon Bulawayo

HARARE,– Black market in Zimbabwe is gaining popularity as cash shortages persist, with many people moving onto streets in search of the now elusive U.S. dollar.

Among the busiest spots is a trans-border bus terminus to the east of the Central Business District and around a shopping mall in the city center, where dealers wave wads of foreign currency to potential clients.

As at Friday morning, 107 dollars worth of bond notes were buying 100 U.S. dollars while the same amount of bond notes fetched 1,200 South African rand.

Other dealers charge up to 15 percent of the needed cash and require clients to transfer funds electronically into their accounts before they give them hard cash.

The U.S. dollar and rand remain the most commonly used currencies in Zimbabwe.

The Reserve Bank of Zimbabwe (RBZ) introduced bond coins and notes, which were supposed to trade at par with the U.S. dollar, between 2014 and 2016 in a bid to improve liquidity, but the continued flight of dollars has stirred up public concerns.

The interchangeability of the surrogate currency with the U.S. dollar remains a thorny issue with only the banks maintaining it while some retailers and traders have found subtle ways of charging a premium for the use of bond notes.

An illegal foreign currency dealer told Xinhua that many people were coming over in search of foreign currency for various reasons ranging from financing their businesses to paying tuition and accommodation fees for their children who are studying abroad.

“They come here, get their U.S. dollars and go to the bank where they deposit the money in their children’s visa accounts,” she said.

RBZ in 2016 established a list for foreign currency disbursements that leaves college fees payments at the lowest rung of priorities, so the parents have devised other means to send money to their children, including using mobile money transfer platforms.

Also falling into that category are cash depositing clients in the retail and wholesale industry and other borrowing clients engaged in the importation of non-strategic goods.

Donations, capital remittances from disposal of local property and from cross-border investments, funding of offshore credit cards, importation of goods and services readily available in Zimbabwe have been declared non-priority areas.

As a result of the priority list, the black market has found ready clients as people go for the elusive foreign currency, some of which they are reportedly hoarding.

In a previous interview with Xinhua, economic analyst Clemence Machadu said it seemed the U.S. dollar now had sub currencies as the black market took advantage of cash shortages.

“Bond currency may have come as a savior that will decongest demand for the greenback and ensure that some domestic transactions happen in bond notes, relieving the hard currency to meet imports,” said Machadu.

“However, the challenge is when it comes to exchanging bond notes for hard currency by those who may now want to import more supplies. It is obvious that hard currency won’t be conveniently available and that will create an arbitrage whereby a premium will be charged to exchange bond notes for the greenback,” he said.

The Zimbabwe dollar became moribund in February 2009 and made way to a multiple currency regime dominated by the U.S. dollar and, in the initial stages, the rand.

The others are the Australian dollar, British pound, Botswana pula, euro, Indian rupee, Chinese yuan and Japanese yen, but these have hardly been in use.

RBZ governor John Mangudya earlier this week blamed the emergence of the black market on indiscipline and general lack of confidence in the market.

He said 102 million dollars worth of bond notes and coins were now circulating in the economy, accounting for 1.8 percent of deposits in the banks.

The bond notes and coins are supported by a 200 million dollar facility supported by Afreximbank meant to inject liquidity into the market after the central bank realized that the country had run short of the U.S. dollar.

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