HomeAnalysisBond notes: Sense of déjàvu envelops nation

Bond notes: Sense of déjàvu envelops nation

If you have $1 000 in bond notes sitting in your bank account, the real value of your money in dollar terms is not
US$1 000, but anything between US$500 and US$650. While you were in bank queues, the other $350 to $500 has vanished into thin air.

Candid Comment Brezhnev Malaba

There is a common myth in Zimbabwe that when lightning strikes a place, it is bound to return with a vengeance for a second bite of the cherry. Lightning, according to folklore, does not strike once.

If 2008 symbolises the first lightning strike, then 2017 may very well be the second bolt. These are turbulent times for ordinary Zimbabweans. From the comfort of the Reserve Bank — the country’s tallest ivory tower — monetary officials are still peddling the idea that the bond note and the US dollar are at parity.

Not so long ago, some politicians were gloating that the bond note is Africa’s strongest currency. Where are we now?
The rally we have witnessed on the Zimbabwe Stock Exchange in recent months has been interpreted in all sorts of ways by different economists and market commentators.

One obvious factor behind the bull market is the fact that in this country today, there are not many investment options. With the bond note losing value in a frightening manner, what hope is there for someone whose money is stuck in a bank account?

Let us imagine for a moment that you have $200 000 in bond notes sitting in your account. You can either sit back and accept the meagre $50 weekly withdrawal limit set by your bank or seriously explore ways of preserving the value of your hard-earned money.

One solution for most people who find themselves in such an unpleasant situation these days is to seek refuge in the stock market, preferably through the purchase of fungible stocks. These cross-listed shares — such as Old Mutual — are providing a viable exit strategy to desperate Zimbabweans, whose catastrophic memories of 2008 are still fresh.

This week, I met panicky retailers who told me shocking stories about the blood-curdling nightmares that make it impossible to enjoy a good night’s sleep. Picture this: you are operating a chain of stores selling imported goods.

To re-stock, you must have foreign currency, in the form of either the rand or US dollars. How on earth will you lay your hands on this scarce forex? The black market seems to be your best bet, considering that the central bank is unable to allocate forex to every company that applies for it.

Once a company sources forex on the black market, which comes at a hefty premium, it becomes inevitable that the cost will be passed on to consumers. Such a retailer will soon find it suicidal to accept payment from the public in bond notes. This explains the three-tier or four-tier pricing system that has been adopted by retailers as a survival strategy.

As more and more retailers reject bond notes, we can expect the value of what began as an “export incentive” to continue sliding. The tragedy in all this is that there is no solution in sight from the authorities. Lightning is about to strike twice.

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