Lean times for Zimbabwe as cash crisis bites

Harare – Nothing is going right for Zimbabwe right now. After so much turmoil for more than 15 years, there seems no end to the never-ending drama in Harare.

There is virtually no cash in the banks and millions of people are more hungry this year than at any time in the last 20 years.

“Zimbabwe faces one of the most severe lean seasons in the last few decades,” according to the Famine Early Warning Systems Network (FEWSNET), which monitors food production and food prices in many countries.

The body says Zimbabwe is suffering from the impact of last season’s El Niño-induced drought – which was a second consecutive dry year – as well as “macro-economic challenges”.

The financial “challenges” it refers to is the lack of cash in the banks, as Zimbabwe has run out of its most popular currency, US dollars, and this week, in particular, banks reduced even further the amount it could release to customers. Many people sleep in the streets outside banks, hoping to be first in the queue, so they can withdraw their salaries or pensions, but the banks have severely slashed the amount they can release.

To ease the current shortage of cash, Zimbabwe says it will release small-denomination, specially prin-ted “bond notes” later this month. These can only be used in Zimbabwe. No one is sure where the notes will be printed.

At Old Mutual’s Central African Building Society (CABS), tellers at its most prestigious branch, north of the city centre, said this week they could only release $50, mostly in “filthy” notes, to its VIP customers. The teller at one branch on Wednesday said he was only able to serve 10 customers that day, and expected to run out of notes by mid-morning.

One customer said: “We suspect the Reserve Bank of Zimbabwe (RBZ) is scooping up as many dollars as possible so that the shortage is even worse than usual, as this will make the new bond notes much more acceptable.”

Many are worried that the bond notes will become the only currency, and prove to be as worthless as the Zimbabwean dollar was when it was abandoned eight years ago.

RBZ governor John Mangudya has been on a nationwide tour, and has allowed more journalists into his city centre office than any of his predecessors, and funded a huge publicity campaign to explain the bond notes.

He says the cash is a financial instrument, and doesn’t signal the return of the Zimbabwe dollar. He adds that the new notes are backed by $200 million from the Cairo-based African Export-Import Bank (Afreximbank), of which Zimbabwe is a shareholder.

Well-placed banking sources said Afreximbank has recently released $150m into the international accounts of some of Zimbabwe’s main banks so they can pay for key imports such as medicines, food and fuel.

Mangudya says he will resign if the new cash goes the same way as the Zim dollar, which the central bank printed in ever-higher denominations until it had no value and had to be abandoned in late 2008 when civil servants went unpaid, supermarkets were empty, children had no teachers, and state hospitals could not function. Anyone with a pension fund lost it and savings accounts were wiped out.

The battered economy, which began to rebuild after the inclusive government came to power in 2009, adopted the US dollar and rand, but deteriorated sharply after Zanu-PF returned to power with a massive, if disputed electoral majority, in 2013.

Many Zimbabweans pulled their dollars from the banks and Mangudya says he understands why many people are suspicious of the bond notes: “Many lost everything and were traumatised at that time,” he told Independent Media.

Mangudya says he knows that some people and companies took massive amounts of dollars to South Africa as they scored well when the rand was collapsing in the past couple of years.

Zimbabwe imports far more than it exports and its economy is, literally, on its knees, according to a wide range of economists and bankers.

Finance Minister Patrick Chinamasa is looking for international loans and, in his quest to secure them, paid off Zimbabwe’s debt to the International Monetary Fund (IMF) last month.

However, plans to raise new loans have so far failed, and the IMF now says there is little chance of Zimbabwe raising cash to rebuild infrastructure because it has not managed to fulfil the reform agenda it committed to in Lima last year.

The EU, which is a huge humanitarian donor to Zimbabwe, said last week that part of the deal for Zimbabwe to rejoin the international financial world was that land invasions would end so that the agriculture sector could rebuild.

Several key farms used by productive white farmers, in business with small-scale farmers, have recently been invaded.

One, a highly productive and profitable banana and tomato farm in southern Zimbabwe, was destroyed last month by invasions carried out by the Zanu-PF Women’s League, which is led by the country’s first lady, Grace Mugabe.

“The Zanu-PF Women’s League was allocated that farm,” said Zanu-PF Senator Tambudzani Mohadi earlier this week. “I didn’t take it. I have my own 3 000 hectares.”

Her husband, security minister Kembo Mohadi, also took a farm post-2000.

Phillip van Damme, EU ambassador to Zimbabwe, said in a statement released this week that the continuing invasions of productive farms was a violation of the reform agreement that Zimbabwe signed up to with the international financial world in Lima last year.

Van Damme said that all EU countries agreed that the country’s post-2000 land-reform programme could not be reversed, but accepted Zimbabwe’s commitment to “bring to an end the land-reform process”.

Both Mangudya and Chinamasa said in Lima last year that Zimbabwe’s land grab was over, and that the country would rebuild agriculture to boost the economy.

Zimbabwe never had food aid before 2000 as it produced more than it consumed until land invasions began in 2000. Even in previous droughts, such as 1991-92, Zimbabwe was able to fund imports of food.

But the World Food Programme, mostly funded by the US, is delivering emergency food aid to millions in Zimbabwe, and FEWSNET says the situation will be worse in the early months of next year, before the harvest.

It predicted rains into next year would be below average.


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25 Trackbacks & Pingbacks

  1. Mnangagwa insists there is no way Zimbabwe will overprint bond notes because this is a tri-partite arrangement - Zimbabwe Consolidated News
  2. Bond notes run out as crisis deepens - Zimbabwe Consolidated News
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