HomeAnalysisZNCC to hold a breakfast meeting over cash crisis

ZNCC to hold a breakfast meeting over cash crisis

THE Zimbabwe National Chamber of Commerce (ZNCC) is organising a business breakfast meeting on the current cash crisis that has hit the country. The breakfast meeting will comprise a panel of high profile individuals to discuss solutions to the cash crisis besetting the economy. The event will be held in Harare at the Crowne Plaza on May 11.
Reserve Bank of Zimbabwe Governor John Mangudya will be the guest of honour at the event. Representatives from the Bankers Association of Zimbabwe, ZNCC representatives and other stakeholders are also expected to be amongst the panelists.


People queue at a bank in Harare as the cash crisis worsens.
People queue at a bank in Harare as the cash crisis worsens.

The breakfast meeting has come as the crisis has escalated over the past few months, with queues becoming a permanent feature at banks, which have also placed a cap on withdrawals at automated tellers machines (ATMs). Though the cash crunch cannot be solved over night the breakfast meeting’s objective is to discuss the liquidity challenges and bring in ideas on how the situation can be rectified.

Issues to be discussed at the conference, include the liquidity challenges, improvement in the use of plastic money, impact of the cash crunch and solutions to the on-going crisis.

Analysts say the country needs a US$5 billion cash injection to keep it liquid.

Zimbabwe was in the same position during the Zimbabwe dollar era due to the hyper-inflationary environment, which had increased demand for cash immensely as debit cards, cheques and bank transfer payments had all lost favour across the business sector.

Businesses and individuals attempted to cope through barter trade, by exchanging local currency quickly into stable currencies, and by indexing prices to US dollars or dollarising outright. In response to the calamity, stop gap measures such as throttling the cash available on the market through a Z$100 billion (less than US$1) daily cash withdrawal limit at banks, lifting the limit on cheques, and introducing a new Z$100 billion note were applied during the first cash shortage in 2008.

Zimbabwe needs to start producing and exporting as one of the solutions to the situation faced by the country. Importation of basic goods as a result of company closures made the country a net importer since dollarisation in 2009.

The current cash shortage also affects key drivers of Zimbabwe’s economic growth: prices and demand for primary commodities, capital flows and foreign direct investment (FDI) and regional integration. Zimbabwe is currently grappling with twin deficits — the widening current account and fiscal deficits. The crisis threatens to reverse policy reform gains and undermine efforts for poverty reduction. Responding to the crisis requires comprehensive and coordinated actions at various levels to prevent the country from sliding back into economic stagnation and deepening poverty. Thus, the need to create a platform for private sector and financial regulatory boards to discuss and come up with solutions to curb the cash shortage.

The ongoing cash crisis is not limited to the financial sector alone. Its toxic effects have transfused to the real sector of the economy through limited credit supply, falling aggregate demand and declining investment and trade.

The limited supply of credit from the financial sector has created investment and cash flow problems for enterprises that have constrained their operations and growth. The cautious consumers, on the other hand, are reluctant to spend, resulting in less aggregate demand (and hence lower total output and reduced profit). A reduced flow of investments and contracting trade are exacerbating the problems faced by the enterprises at the micro level and national economy at the macro level.

Moreover, this crisis is worsening because of individuals who have egotistical appetite to keep “cash in their pockets.” A survey shows that there are local business people, who do not bank their daily takings, preferring to keep the money in safes at home.

These are critical questions that need to be addressed by the private sector in the region.

The workshop will focus on a number of interlinked issues with the objectives of:
Enhancing the private sector’s understanding of the cash crisis and how to improve the situation.

Widening financial institutions understanding of the implications of delayed Telegraphic Transfers (TTs) to business operations.

This cash crisis has also affected the tobacco farmers as it has happened during the tobacco selling season. Unlike in the past, the industry is now regularised and all farmers are expected to get their money through banks.

Also faced with this challenge are importing companies, individuals, entrepreneurs and banks. The cash shortage has resulted in slow Telegraphic transfers for companies that need to import raw materials and this has caused business to slow down.

Some banks have also suspended the Zimswitch service, a wide area networking service that allows inter-banking, while nearly everyone needs cash: from schools, landlords, service providers etc., there is need to act expeditiously and also think outside the box. The cash shortage has also come during the beginning of a new school term which has seen students being turned away from schools on the first day despite the school authorities’ knowledge of the cash shortage. Now the question is, what measures are being taken to mitigate the crisis?

ZNCC has taken the initiative and invited the central bank governor to discuss possible solutions.

The “voice of business” is therefore inviting entrepreneurs, business executives, individuals, civil society, industrialists and bankers to register for the breakfast meeting and get first-hand information.

Do not miss this meeting on this topical situation affecting our economic activities. For registration contact the ZNCC offices on the following contacts.

To registercontact:

Harare Offices
5th Floor Zambia House
48 Kwame Nkrumah Avenue
Tel: +263 293 55 30/1
0773 596 470/0772 527 665|
0777 489 645
E-mail: kerina@zncc.co.zw/ sabina@zncc.co.zw/ loice@zncc.co.zw

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