MARY Majuru, a smallholder farmer from Goromonzi, has been sleeping on the streets of Harare for the past three days. Unlike beggars who have thronged the streets in search of food, Majuru has been forced to sleep on th
e dusty pavements of Harare because she cannot withdraw her money from the bank.
With the planting season fast approaching, Majuru’s efforts to secure inputs are in limbo.
“I have managed to get only $20 000 in the last three days. My only hope is to get enough to buy at least a bag of fertiliser,” says a dejected Majuru.
Her plight mirrors the debilitating impact of the cash shortage that has hit Zimbabwe.
Government’s insistence that the cash crisis can be solved through stop-gap measures such as the introduction of travellers’ cheques has dismally failed.
The shortage of bank notes has impacted on everyone across the social strata. In the last month President Mugabe has used his executive powers to ban individuals from carrying cash in excess of one million. Under the hurriedly promulgated regulations, companies are not allowed to keep more than $5 million. Also in a kneejerk reaction, the Reserve Bank of Zimbabwe last month introduced travellers’ cheques to ease the cash crisis. The cheques have however been rejected by retailers and the public who are sceptical of their worth. Travellers’ cheques are problematic in dealings between individuals who do not have bank accounts. Commuters also cannot use them to pay fares or to buy small items such as newspapers.
The RBZ this week made a U-turn on its earlier directive to ban banks from cashing corporate cheques, a move which analysts say is a clear reflection of government’s confusion in dealing with the crisis. They say the cash crisis could be a death knell for the productive sector that is already battling with the fuel crisis, foreign currency shortages and price controls. Banks, for their part, have been giving individuals as little as $5 000 a day. The amount can only buy five loaves of bread. This has resulted in disturbances in banking halls. In some cases anti-riot police have had to be summoned to quell angry mobs.
The hardest hit is the informal sector, which has sustained the lives of most Zimbabweans who are out of formal employment courtesy of President Mugabe’s economic mismanagement. Unemployment is hovering at 70% while inflation is estimated at over 400%, putting a huge strain on the RBZ’s capacity to supply adequate bank notes for daily transactions.
“We are looking at a vendor whose business depends entirely on the availability of cash. There is virtually no business in the informal sector at the moment,” said Tapiwa Mudhara, a flea market operator in Harare. “If the cash crisis persists the informal sector will crumble. From vendors, the flea market and even those who sell cellphone recharge cards, business is down because people are conserving the little cash they get for the barest essentials. The bottom line is that we are in a fix,” Mudhara said.
Analysts say the blame for the cash crisis lies squarely with the government. Recent reports in the state media reveal that the government last printed money nine months ago. During the period inflation has risen to 400% and looks set to breach the 1 000% mark by year-end.
“The state blames the central bank for the cash shortage yet the directive to inject cash into the system is the prerogative of the government and the Minister of Finance,” said an economic commentator with the Zimbabwe Economic Society. “Unlike in South Africa where the Reserve Bank operates with minimum interference from the government, Mugabe thinks he can arm-twist the Reserve Bank of Zimbabwe. It is this unwarranted political interference that has put the economy on its current disastrous course,” said the commentator.
Formal business is also on the brink of collapse due to the crisis. Eric Bloch, an economic analyst, says the cash shortage has hit the productive and services sector and government has no immediate solution to the problem.
“The catastrophe is that businesses that have managed to withstand fuel shortages and price controls might not be able to deal with the cash shortage,” said Bloch. “The government shows that it lacks the vision to manage the economy effectively. The rising inflation should have been matched by printing of more notes. It is a classic example of how not to run an economy.”
A rough survey shows that Zimbabweans now spend half their productive time in queues of one form or another.
Armitage Chikwavira, chairman of the Bakers’ Association of Zimbabwe, says the impact of the cash shortage has been devastating.
“Our bread sales have been affected. We have reduced volumes since the crisis shortages started,” said Chikwavira.
“At times we accept cheques but we have serious problems when they are dishonoured. The denominations of TCs also make our operations difficult. We get people with a $10 000 TC and they want to buy a loaf of bread and we don’t have the change.” Efficiency in companies has also been affected by the shortage. “Workers either come late or they fail to come at all. Businesses have to send many people to get cash for wages.When efficiency goes down the cost of doing business goes up, leading to additional inflation. In short, it is interfering with volume of trade, which spells disaster for the GDP,” said Chikwavira.
Production targets for most companies are lagging behind as workers pass their working days in cash queues. Apart from obvious productive issues, the cash shortage means that Zimbabwe is no longer a viable option for potential investors. International investors have shunned Zimbabwe because of political violence, lack of rule of law and government’s crackdown on businesses seen as consorting with the opposition.
The government will introduce a $1000 bill and the rebranded $500 notes late this month. However, the RBZ admits that there is no guarantee that the cross-border traders would not expatriate the new bills to neighbouring countries. Speaking in a ZTV interview, RBZ director for financial markets, Stuart Kufeni, said there was no system to curb the expatriation of local currency to other countries. “For as longer there are no proper systems the new notes are likely to end up in neighbouring countries,” said Kufeni.