THE scene outside banks does not inspire confidence. Depositors have this week been pushing and shoving in dense queues outside banking halls in a bid to withdraw cash.
If there is no queue at a bank it is probably because bank staff have advised their clients that they were not expecting cash that day from the Reserve Bank.
For banks such as Barclays, CABS, Beverley and FBC Building Society their banking halls have been virtually clogged with people since Monday.
“It will probably take three weeks to clear queues at banks following the latest cash withdrawal limit review, but once prices respond to the limit, the queues will resurface and will become much longer,” a commercial bank executive said.
“What is urgently needed is to increase production to contain inflation to reduce demand for cash. Cash reviews are just stopgap measures in a hyperinflationary environment.”
There has been increased demand for cash of late because shops are refusing both personal and bank cheques and overprice goods when one pays using the real time gross settlement (RTGS) system or an ATM card.
Economic analysts this week blamed the business community for contributing to cash shortages as they were demanding hard cash for transactions that should ordinarily be settled by cheque.
“Business has demonetised cheques as a form of payment. Itâ€™s the manifestation of rising inflation which has not been supported by production,” an economist who asked for anonymity said.
“Uncertainty over the cost of the same goods the following day is forcing most outlets to reject cheques.”
The economist said some businesses preferred to be paid through the RTGS system because their charges were “ridiculously high”.
Bankers Association of Zimbabwe president John Mangudya said many banks had long queues probably because of the transitional period that took place on Monday morning when the Reserve Bank was distributing new notes to the banks.
“I am sure that the situation will improve. Whenever there is a maximum cash review queues become longer,” said Mangudya.
Reserve Bank governor Gideon Gono also assured the nation that the cash situation would improve significantly over the next few days as demand progressively eases while efforts to tame the challenge have been stepped up.
“We were never under a misconception neither did we expect that the backlog in the demand for cash would be cleared in one day, as there is naturally a physical and logistical limit to what can be achieved in one day by the cash-dispensing banks,” Gono said.
“With the best will in the world, it is just impossible for the banks to satisfy all their clients in one day. What is certain though is that we expect the banks to have cleared all queues by mid to end of next week.”
The situation on the ground however seems to suggest the opposite and the public expected Gono to explain how foreign currency dealers had got bags of the new $20 000 and $10 000 notes by Monday morning before most banks had received their allocations.
The Reserve Bank has in the past attributed the massive shortages of cash to the accumulation and hoarding of money by those dubbed “cash barons”.
The cash barons comprised, in the main, those engaged in the unlawful purchase of foreign currencies, either in order to externalise assets, or to fund imports, and others engaged in cross-border trading operations.
Other cash barons were retailers who found that they could realise substantial profits by not banking their sales receipts, but instead accumulating the cash to sell it at a premium to those in desperate need.
Economist Eric Bloch recently said the root cause of cash shortages was the rampantly spiralling hyperinflation.
“A consumer required over 300 times as much money to buy exactly the same goods, in exactly the same quantity, as he or she needed to have only one year earlier,” said Bloch.
“Extrapolate that increased currency need by several million purchasing consumers, and the total cash needed by that buying population exceeds all currency in circulation.”
He added: “Admittedly, some customers pay for their purchases by cheques, or with credit cards, but the masses of the low-income earners and those who reside in rural areas cannot access or afford banking facilities.
“Therefore, it must be realistically assumed that at least a half, if not more, of the total currency that was in circulation was, at any time, in peopleâ€™s wallets, purses, handbags, pockets, or homes, solely in order to fund ordinary consumer needs.”
He said the most virile part of the Zimbabwean economy is the informal sector. With unemployment being endemic, the majority of the population has little or no alternative but to resort to foreign currency deals.
The magnitude of the money held by the general public, for no untoward reasons, and by informal sector operators, would undoubtedly have considerably exceeded the sums held by banks, as people have lost confidence in banks as prices of basic goods and services continue to increase.
Independent economist John Robertson said: “The Reserve Bank is fighting a losing battle. As long as the inflation remains high, cash shortages will persist. There is need to address the inflation by increasing production so that too few goods do not (cost) a lot of money.”
Most banks on Monday struggled to meet depositorsâ€™ demands for cash withdrawals, while foreign currency dealers had the new notes.
Only FBC Bank, Stanbic Bank, Kingdom Bank and Standard Chartered Bank had the new notes by Monday morning.
Other banks either started issuing the new notes after lunch or on Tuesday.
Economist and investment analyst Lance Mambondiani said the cash crisis needed urgent reforms that promote production to ensure goods are readily available on the formal market.
“All this is a result of high inflation. When the country is indebted to the extent of 100% of gross domestic product, and 90% of the tax revenues going towards debt servicing, the current fiscal policy measures will have to be restructured,” Mambondiani said.
He said to achieve that, the country needed to increase domestic savings, carry out pragmatic tax reforms, turn around state enterprises towards profitability, boost agricultural productivity, revive industry and promote austerity measures.
“Pervasive corruption within the civil sector should be an important focus in arresting state leakages and improving investor confidence,” he said.
He said these measures should provide a framework on which a substantive economic recovery plan can be constructed to arrest inflation.
“The implementation of the economic recovery plan will not be without its challenges. Some sectors of the international community have already raised concern that the architects of the economic implosion are still in their positions.
“As a result, neither generosity nor austerity will be delivered as enthusiastically as might have been a fresh start,” said Mambondiani.
MDC deputy treasurer-general Elton Mangoma this week said the long queues at banks were an indictment of government policies.
â€œThe repercussions of keeping peopleâ€™s money in banks while inflation erodes value are far greater than simply increasing the daily limit,â€ Mangoma said in a statement.
â€œThe restrictions on daily maximum withdrawals have spawned corruption, crime and petty theft as people resort to other means of raising a quick buck to sustain their families.â€
He said with the critical humanitarian situation in the country people needed money to feed their families.
â€œEven the Bacossi programme has dismally failed to address the massive starvation that has swept across the country. It has failed because people need more than just cooking oil, beans, soap and mealie meal which are covered by this programme. They need to pay school fees for their children,â€ Mangoma said.
He suggested that the Reserve Bank regulations to allow selected shops and wholesalers to sell goods in foreign currency will cause more havoc in an economy already teetering on the brink of collapse.
â€œIt is unclear where ordinary Zimbabweans will be expected to access the foreign currency to buy these goods without resorting to the parallel market.
â€œIt is also unclear how a majority population getting its salary in local currency will be expected to take advantage of these shops,â€ said Mangoma.
Mangoma said the MDC hoped Zanu PF would move away from its intransigent position on the distribution of key ministries so that a new government begins to address the peopleâ€™s basic needs.
By Paul Nyakazeya