Zimbabwe’s business leaders have asked the central bank to shelve its plan to introduce domestic “bond notes”, voicing their distrust of government methods of dealing with an acute cash shortage that has hit the economy.
The central bank last week introduced a five percent export incentive to encourage businesses to sell abroad, but said this token would be funded by the bond notes, which it said would be backed by a $200 million facility from the African Export Import Bank (Afreximbank).
The notes would circulate alongside other currencies.
But the plan has triggered fears that government was seeking to re-introduce a local currency.
At a heated breakfast meeting organised by the Zimbabwe National Chamber of Commerce (ZNCC) yesterday, business executives told governor John Mangudya that he had to shelve the plan to introduce bond notes because they fear that the government, under pressure to pay wages and meet a range of critical spending demands, could force Reserve Bank to print more notes than the $200m allowed under the Afreximbank facility.
“The bond note is not the way to go,” said Ashok Chakravati, who is an advisor to the Office of the President and Cabinet on improving the ease of doing business.
“We can put a three percent import levy across the board and raise $2 billion (annually) for export incentives. I believe the bond notes are not necessary,” he said.
He was backed by other business leaders.
“We do not trust the people you are working with. These are the people who caused the collapse of this economy. We must not print any money before we agree that this is the right time to do this,” Lovemore Mokono, head of manufacturer Mukonitronics, told Mangudya.
Mangudya, however, insisted that the RBZ sees the 5 percent export incentive as the cornerstone for rebuilding exports, and to resolve trade imbalances highlighted by a trade deficit which hit $3 billion last year.
“Countries have to compete for relevance,” said Brains Muchemwa, chief executive officer at Oxlink Capital. “The bond notes must not be imposed.”
Mangudya said at the core of the crisis were cash leakages by foreign-owned firms.
“They are not coming here because they love us,” he said. “They are coming to grab and go.”
The bond notes would only circulate locally and can only work in a dollarised environment, ensuring no leakages, he said.
Mangudya claimed he had received a report that a foreign firm had transported $20 million in bags through borders.
Up to $13 billion is reportedly unaccounted for in the diamond mining sector, he said.
“There is much externalisation in this economy,” he said. “These unscrupulous business people are taking money. We are feeding the looters. You take money from a poor country to a rich country.”
Mangudya said due to international regulations against money laundering, banks were now facing hurdles when importing United States dollars.
He said banks, which apply a principle called due Customer due diligence (CDD) to their customers, were also subject to the same process when they transact on the international stage.
“There are also limitations in importing cash,” Mangudya told the over 200 executives and analysts.
“They are now saying ‘what has happened to that country?’ You cannot just wake up and say ‘I want to import $100 million, Zimbabwe needs US$300 million’. There is something called CDD,” he said.
This week, RBZ said it had imported $15 million to ease the cash crisis, although Mangudya said shortages could hit the markets again today as pensioners start receiving their pay outs.
His comments were supported by the Bankers Association of Zimbabwe (BAZ), which said the more cash banks imported, the more concerns were raised by their corresponding foreign financial institutions from where they imported cash.
“Because of money laundering regulations, the more cash we import, the more concerns are raised,” said BAZ president Charity Jinya. “This affects our ability to deal with international banks.”
