HomeLocal NewsLiquidity crunch: Cash barons prey on desperate depositors

Liquidity crunch: Cash barons prey on desperate depositors

A SEVERE cash shortage has made life difficult for Zimbabweans, forcing them to devise all manner of survival tactics to access the elusive United States dollar as the economy faces its worst crisis since practical dollarisation in 2009, it has been observed.

By Hazel Ndebele

Some depositors now spend nights outside banks as the cash crisis deepens.
Some depositors now spend nights outside banks as the cash crisis deepens.

As the greenback becomes increasingly scarce with some rent-seeking businessmen selling hard currency at a premium of at least 10%, fears of the return of the demonitised Zimbabwe dollar have also fuelled arbitrage and the growth of the black market.

The Reserve Bank of Zimbabwe is this month-end expected to introduce bond notes — a surrogate currency circulating in Zimbabwe only — to ease the cash shortages that have seen desperate people sleeping outside banking halls.

Banks have in recent months witnessed increased pressure on their nostro accounts due to declining exports and foreign currency remittances.

This has resulted in banks being unable to import cash to meet their clients’ demands and properly perform their financial intermediation role.

A snap survey by this paper shows that desperation has driven depositors into greasing the palms of till operators who give them cash. Others give bus fare to security guards manning the bank in a bid to receive a few dollar notes.

Newspaper and airtime vendors in Harare’s central business district now see the crisis as a boon. During the snap survey, they offered to take this reporter to cash dealers who sell money at a 7% premium after pretending to be desperately in need of cash.

While this is happening, the central bank has threatened to crack the whip on those selling cash at a premium, but no one has been brought to book to date.

“I wanted to withdraw US$2 000 from my bank (name supplied), however in order to get the money I had to talk to the people that I know at the bank but of course at a charge of 10% of the amount that I wanted. I paid US$200,” a man, who spoke to this paper on condition of anonymity, said.

“Although the transaction was better than sleeping in the queue, I felt robbed.”

Local banks such as CABS, POSB and ZB have been the hardest hit by the acute liquidity situation with depositors queuing for almost the whole day with the hope of withdrawing as little as US$50. However, many go home empty-handed.

During the survey, the Zimbabwe Independent also observed that there has been an increase in people standing outside supermarket aisles, food courts and petrol stations who negotiate with those intending to use cash at those points, to swipe using bank cards in exchange for cash as people explore survival strategies.

Another tactic being used by those desperate for cash is to approach a friend or relative who has an account at a bank that still allows reasonable cash withdrawals. Money is then transferred via RTGS into the account and easily withdrawn for the benefit of the depositor. Such banks allow clients to withdraw up to US$250 per week — a fortune these days.

Official statistics show that cash withdrawals from automated teller machines dramatically plunged to US$41 000 in June from US$5,7 million in April, while point-of-sale (POS) transactions shot up by 92%.

“We now feel harassed by some of these people, some are genuine individuals desperate for cash, but most of them are black market cash dealers. I am a regular shopper here and these cash dealers harass shoppers asking if they are buying with cash so that they negotiate to swipe for you,” said a lady who identified herself as Sekai and was shopping at a TM Pick n Pay supermarket in the capital.

“What happens is that those who would have negotiated to swipe in exchange for cash then surrender the money to people with bags and calculators and this shows that they are cash dealers.”

The survey also revealed that individuals and companies no longer deposit their money with banks as they fear that it would be stuck there.

There are fears in the market of a proliferation of black market activities due to excessive exchange controls, renewed instability in the banking system and currency inconvertibility problems.

A woman who identified herself as Mrs Chirinda said a Chinese-owned company where she works has resorted to opening bank accounts for all its workers in which they transfer money and send them to withdraw the cash everyday. They are rewarded with at most US$5 per transaction.

Economist John Robertson said the cash shortages had short and long-term effects on the economy and the bond notes would not ease the cash shortages.

“The desperation for cash by individuals such that they are buying the cash at a premium means that the value of the United States dollar is being reduced. One now has to pay more for their own money because of buying cash and it means that one will have less to spend,” Robertson said.

“When one has less to spend, it means that volumes of business will go down, Value-added tax and other taxes will go down, eventually causing shrinkage of an already suffering economy.”

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  1. tell me if the market will accept the bond note at par value with the USD. Shortages lead to hoarding and black market activities! this is an established economic law.

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