Most Government departments, parastatals and State-owned enterprises have embraced transactions in multiple currencies, while plastic money accounts for 80 percent of transactions in urban areas. This is expected to relieve pressure on the United States dollar whose high demand domestically and regionally has seen its circulation diminish in Zimbabwe.
State bodies account for roughly 60 percent of all local economic transactions, but were only accepting the US dollar and side-stepping other currencies.A June 30, 2016 ultimatum by Finance Minister Patrick Chinamasa now compels them to embrace the entire multi-currency basket adopted in 2009.
Authorities have also been actively advocating electronic payment transactions like the point-of-sale, an innovation likely to curtail cash demand and smoothen its circulation; while export incentives linked to bond notes that are yet to be introduced are expected to further ease the situation.
The South African rand, euro, British pound sterling, Botswana pula, Japanese yen, Chinese yuan, Australian dollar and Indian rupee are legal tender in Zimbabwe alongside the US dollar.
Minister Chinamasa told The Sunday Mail in Harare last Wednesday that,”The deadline (for embracing the full multi-currency basket) still stands. Therefore, we are giving Government departments, parastatals and State enterprises time to comply. And in any case, we expect them to comply come June 30, 2016. If they do not, we will then have to cross that bridge when we get to it.”
A survey by this publication in the capital last week showed that the Registrar-General’s Department and Parirenyatwa Group of Hospitals are accepting payments in both the US dollar and South African rand. The Zimbabwe National Road Administration has introduced POS machines at all tollgates and plans to introduce pre-paid toll fee cards. Major urban councils have also installed electronic payment systems, enabling rate-payers to settle bills using debit cards and bank transfers.
However, Zesa and the Zimbabwe National Water Authority were only taking US dollars, though accepting electronic payments. This newspaper also established that POS and plastic money transactions account for 80 percent of daily retail shop sales.
Reserve Bank of Zimbabwe Governor Dr John Mangudya said: “The central bank’s fair assessment of the cash crisis is that it is a symptom of two challenges of narrow fiscal space and the deficit on the current account of balance of payments.
“The narrow fiscal space needs to be dealt with through fiscal consolidation whilst the deficit on the trade of balance account needs the country to increase production and to reduce import dependence. Firstly, given these challenges, the use of plastic money is critical to reduce the demand of physical USD cash in the economy.
The central bank is encouraging traders and businesses to bank proceeds to avoid haemorrhaging the economy, to enhance business continuity, and to ensure that money circulates.
“By this cashless economy, we can effectively deal with capital flight. We also need measures to deal with fiscal consolidation, reduce the cost of doing business, improvement of the investment climate and the promotion of free banking is, therefore, necessary to promote production and confidence within the economy.”
Dr Mangudya said fiscal consolidation will require gross reduction of Government’s wage bill, adding: “It puts too much pressure on the system; therefore there is need for the transfer of the burden to the financial service sectors. Certainly, the burden should be shared across (financial) sectors.
“On the long-term solution, all we need is to produce, produce and produce goods and services so that we can export to other countries and satisfy local consumption. This will allow us to deal with our trade deficit of around US$2,5 billion annually since 2009.
“All we need is to have a good investment climate and ease of doing business policies to lure investors to our country, which has so much potential in terms of investments. The whole formula needs to be re-set for meaningful production to take place and if we provide all these solutions, we are home and dry.”
Confederation of Retailers Association of Zimbabwe president Mr Denford Mutashu said plastic money uptake has continued to surge following the reduction of electronic transaction charges.
“There needs to be more education in terms of the multi-currency system. Most people do not even know what the yuan looks like. Therefore, the RBZ needs to carry out countrywide educational campaigns to educate the people on the multi-currency system and other initiatives they are working on.
“What (the surge in plastic money use) simply means is that of the daily sales on average, only 20 percent will be cash and 80 percent is attributable to POS machines/plastic money.”