HomePoliticsCash barons ignore Gono

Cash barons ignore Gono

Paul Nyakazeya/Bernard Mpofu

BLACK market barons that Reserve Bank of Zimbabwe governor, Gideon Gono, said would burn their fingers in the pending currency change have

emerged as the major beneficiaries of the current cash shortage.

Gono last week said black market dealers who were keeping money to fund parallel market deals risk making huge losses if they hang on to large volumes of cash. He said the currency change was imminent and warned people against keeping large volumes of cash.

He refused to intervene in the current cash shortage saying the central bank would rather “watch the situation and see where it will end”. He also refused to give a specific date for the introduction of the new currency insisting that the plan was to catch the barons unawares.

The problem is however that the barons have become so sophisticated that they are always a step ahead of Gono. It is unlikely that the barons will lose a cent even if the new currency was to be introduced today because they have found a way to beat the system.

Gono’s threat seems to have had very little impact on the parallel market dealers. In instead of suffering, those who have been hoarding cash are now making huge profits from the cash shortages.

It emerged this week that dealers were taking advantage of the shortages to sell cash at premiums of up to 25%.

Companies and individual write cheques or wire the money through the RTGS system for cash. The barons then make a 25% profit on the deal.

Officials in the banking sector are normally part of such shoddy deals as they are paid to fast track the transfers and clearance of cheques.

“It’s back to the 2003 case where the local currency was being sold on the parallel market. This cash shortage has created a new business for us. Now I deal in both forex and Zimdollar,” said a parallel market dealer based at corner Third Street and Robert Mugabe Road.

Companies that handle large amounts of cash like supermarkets have also found a way of making a profit through either buying foreign currency or selling it.

“This trend has been found manifest in almost every sector. Cash rich establishments have seen their bank balances grow and profits increase with no meaningful trade. Billions and even trillions have been made ahead of the scheduled currency change through such underhand dealings,” Economic consultant, John Robertson said.

The Zimbabwe Independent this week observed how retail outlets and furniture shops were reporting brisk business as individuals with cash rushed to beat the RBZ’s plan to change the currency. Under normal circumstances such a rush would have meant that Gono’s plan was working but the problems is that the cash will not find its way back into the banking system because it is used to buy foreign currency. The other option is to sell the money to the barons for a premium.

Analysts said the crisis will persist until interest rates in the banks are attractive enough and inflation has stabilised. They said the idea of buying money was also being done to avoid questioning by the Reserve Bank if they are to make huge deposits when a deadline is finally established.

The central bank last week said as from tomorrow, individuals would be allowed to deposit a maximum of $50 million in cash without having to justify the source of their money. Businesses will be allowed to deposit $200 million a day while wholesalers and other large cash handlers have a cash limit of $1 billion daily.

Gono said individuals and business wishing to deposit more than the set limits after December 1 would be required to produce evidence to prove that their income is from legal business activities.

Gono said over 52% of all the money in circulation was missing. This translates to $28 trillion out of an issued $58 trillion.

Gono had earlier revealed that he was sitting on $20 trillion of uninsured $500 000 bearer cheques which he would not issue. The end result has been cash shortages reminiscent of 2003. The latest figures beat last year’s record when 22% of the country’s bearer cheques disappeared from the system on the eve of Sunrise Part 1.

In a statement on Tuesday, Morgan Tsvangirai faction spokesperson Nelson Chamisa said the cash crisis was an open provocation to the people of Zimbabwe to make them spend nights outside banks as they seek to withdraw their hard-earned cash.

“It is criminal for any government to be the source of the people’s agony and tribulations. People simply want to withdraw their hard-earned money so that they can buy food, uniforms and other basic commodities for their families. They want to buy maize seed and fertiliser.

“They want to maintain their dignity. They do not want to negotiate for what is supposed to be an ordinary service,” he said.

The cash crisis comes after the Reserve Bank said it had injected $10 trillion into the market through the Basic Commodities Supply Side Intervention Facility meant to help revive businesses affected by a government-sponsored price blitz in July.

The cash situation worsened this week with some banks not having cash at all while some were allowing maximum withdrawals of $5 million for individuals and between $15 and $20 million for corporates. Central bank officials this week said the date for the launch for Sunrise Two was being kept a secret by Gono.

But many people remain sceptical about the “imminent” launch of a new currency, pointing out any new currency would soon be eroded by galloping inflation. Gono is blaming cash barons on the black market for hoarding cash, and warned those who did not take his announcement of the imminent launch of Sunrise II that they would only have themselves to blame when their cash becomes worthless.

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