Youth Perspectives on Bond Notes, Economic Policy, and Macro-economic and political Stability
A Discussion Paper
Presented to the RBZ Governor, 15 June 2016
We recognise the role Central Banks play in driving economies and societies. Throughout history, policies by Central Banks have set nation-states in either remarkable recovery and transformation or downward regression. The importance of such is that Central Banks have the ability to usher progress or regression to nation-states through economic policy.
In such a background, as the young people of Zimbabwe and cognisant of the fact that we constitute the majority percentage of the national population; we are engaging you on bond notes, economic policy and macro-economic and political stability. We remain committed to a just, fair and inclusive society in which opportunities are availed to all.
In our reimagining of the future, we are convinced that an independent Central Bank is a leading light in terms of social and economic progress in the Republic.
We envision a society in which economic policies are visible in the progress of every Zimbabwean. In our imagining and envisioning process, we are tabling to you, the RBZ Governor, the following matters:
- Accounting for the Cash Crisis
Conventional knowledge indicates that a thorough and accurate diagnosis of a problem is fundamental in developing befitting solutions. However, in the current circumstances, the general public seem not to know the facts as to why we are where we are and what got us here?
It is also our view that the RBZ has not provided a thorough analysis of the causes of the cash crisis. This has led to various actors informing and misinforming the general public resulting in panic. Panic and misinformation exists in the absence of reliable, logical and credible information. As such, we urge the RBZ to publish an account of:
- Cash imported in say the last 2-3years,
- Formal cash outflows from the country (2-3years),
- Money in circulation,
- Total amount of cash which the country cannot account for.
- Bond Notes and Implications
Considering that public attitude towards bond notes is negative as evidenced by massive withdrawals at banks; this raises a number of questions on the feasibility of the new policy. It is common knowledge that our country imports the majority of goods we use for consumption and manufacturing purposes.
Such imports are paid through the banking system. However, with little confidence in the banking system, there is a possibility of the country failing to pay its import bill. How will we negotiate our way in such circumstances? Confidence in the banking system is fundamental in the country’s ability to pay for its imports.
We might find ourselves in a situation where bond notes are the preferred form of currency for banking with the hard currency traded in the black market. How is the Central Bank planning to deal with the possibility of a forex black market?
- Plastic Money
In our understanding, there are three challenges relating to the use of plastic money in Zimbabwe. These relate to the absence of necessary infrastructure, high bank charges and low uptake by the general public. We are fully supportive of the use of plastic money as a transaction tradition and a way of easing pressure of hard cash. We propose that:
- All government institutions should have point of sale machines to receive payments using plastic money (this includes ZRP and Registrar General),
- RBZ should lead a process of perception and attitude change management in which people embrace and use plastic money,
- The use of plastic money and banking of money in retail and wholesale businesses in our major cities (for example in down town Harare known as kumatuck-shops). There is a lot of hard cash which is not banked in these areas,
- RBZ should lead a process of rationalising bank charges as a stimulant to the uptake of plastic money.
- Plan on Illicit Financial Flows
Statistics indicate that Africa is losing billions of dollars through illicit flows. Such money, if accounted for and remains on the continent, will undoubtedly improve Africa’s socio-economic development. Zimbabwe is no exception to this, at least according to the RBZ Governor’s assertions as quoted in various media.
In this vein, what irks us is the absence of naming and shaming by RBZ on people doing behind illicit financial flows in Zimbabwe. When MPs named such businesses, the Governor responded by saying “You are brave”.
Such bravery comes naturally and constitutionally on your job as Governor. We urge you to use powers bestowed in your office to name and shame individuals and companies involved in bleeding our country and economy. Above all, the RBZ should have a plan on curbing illicit financial flows including sanctioning bank executives approving externalisation of money.
- Restoring public confidence in the Banking sector
Since your announcement of the impending introduction of bond notes, the country has witnessed massive and unnecessary withdrawals. Such tendencies signal dwindling confidence in the banking system.
However, no country can progress without a credible and reliable banking system. In light of this, we implore the Governor to initiate and lead a process of restoring public confidence in the banking system. Some advice includes retracting the bond notes statement and beginning a national economic dialogue process comprising of various actors to deal with the cash problem.
- US$200 Million Loan
The Central Bank announced that bond notes will be backed with a US$200million facility. However, what are the terms and conditions of the loan facility? As taxpayers, we are obliged to know such details.
Why not import the US$200million in hard cash as opposed to backing bond notes? As a country reeling from debts mostly incurred without the knowledge and consent of citizens, we suggest the Governor considers publishing the terms and conditions of the US$200 million loan.
- Public trust and defending consistent economic policy
The changes of the 2008-09 era where people with FCA lost their forex due to a RBZ directive conversion to ZW$ is still fresh in people’s minds. Partly, this explains why there is inertia to your policy proposition and massive bank runs. Briefly stated, we do not have confidence in government policy pronouncements, especially on currencies.
We are victims of the past, and wounds are still fresh. However, we applaud your predecessor for defending a policy thrust on maintaining stability in the banking system. Governor, with due respect, we feel that you are not doing enough to protect economic policy and in particular, the banking sector from predatory tendencies within government.
Government and its institutions like RBZ should earn trust from citizens. As we engage, there is need for confidence building measures as no government institution can effectively carryout its mandate without citizen support.
- Dealing with Corruption
We decry the reality that corruption is prevalent in many sectors of the society and that not enough is not being done from policy to practice in order to curb this scourge. However, we point to the banking sector where some evidence is apparent. How do you explain politicians getting huge loans from banks only to be exposed after fall out in the ruling party? Is this not corruption? Was there due diligence in approving such loans?
The public often loses confidence in banking with such banks who give politicians huge amounts of loans without due process. Even during the current cash crisis, some of us with friends in the banking sector are receiving calls and allowed to withdraw the amount one wishes. Of course, in return, one pays a bribe? What is the RBZ doing in such cases?
- Feasibility of joining the Rand Union
An important lesson we have learnt is that it is difficult to sustain the US$ with weak and extractive political and economic institutions. In other words, we do not have the political and economic fundamentals to sustain the greenback.
We were supposed to make a number of concessions on the economic and political front; yet we elected otherwise. As such, we are nearing the cost of using a hard currency in an environment when politics and the economy are receding.
In light of the above, we suggest that Zimbabwe considers joining the Rand union. However, some sections of our society and, in particular, government are still stuck in the 1980s and 90s where we were a regional leader. We are nowhere near that today. As such, it is our appeal to the people and Government of Zimbabwe to humble ourselves, reflect and adopt the South African Rand as a major currency for the nation.
There is economic sense in this as at the present, our businesses operating in a US$ environment are finding it difficult to compete with South African made products. Second, with our vast comparative advantage in human capital, we can at least begin to competitively compete with countries in the Rand union and region at large.
- Innovations over informality
An undeniable feature of our urban areas is ubiquitous informality. There are two main categories of informality in our economy. First, the registered business entities not willing to follow regulations such as paying taxes.
Second, unregistered business entities who are generally conceived as illegal. This means that billions of money circulating in the informal economy. We therefore implore the RBZ to seek innovative ways of tapping into the existing and potential benefits of informal businesses.
Before concluding, allow us to explain briefly on the methodology of coming up with this discussion paper. We believe that everyone matters in public discourses. Driven by that spirit, we crowd sourced ideas and questions from fellow young people via social media platforms. As a result, the ideas presented in this paper are shared by a much larger group of young people than the ones present here.
In conclusion, we argue that the current economic instability, if allowed to continue unabated can degenerate into political instability. Instability is, however, contrary to views, values and dreams of a Zimbabwean society we envision. As such, we implore the Governor to critically reflect and engage on the 10 discussion points raised above.
Thanks you and it is our hope that one day we will meet again discussing about today.
- Maureen Kademaunga (PhD Fellow)
- Davison Muchadenyika (PhD Fellow)
- Rutendo Ndoro (Economist and Young Entrepreneur)
- Stabile Dewa (Heal Zimbabwe Trust Programs Director)
- Wellington Zindove (Zimbabwe Youth Forum Director)
- Happymore Chidziva (MDC-T Youth Assembly Chairperson)
- Lovemore Chinoputsa (MDC-T Youth Assembly Secretary General)
- Yvonne Musarurwa (MDC-T Youth Assembly Deputy Organising Secretary)
- Lucky Kandemiri (Zimbabwe People First)
- Fallon Shamhu ( CA(SA), CA(Z) )
- Tariro Senderayi (Youth Advocacy for reform and Democracy)
- Jimmy Wilford (SAYWHAT Director)
- Deric M. Dube (Investment Banking and Finance)
- Taiona Sanangurayi (Zimbabwe young Voices Network)
- Winnet Shamuyarira (Young Women Activist)
- Darlington Madzonga (Students Solidarity Trust)
- Rutendo Chigudu (Artist)
- Francis Rwodzi (Director Youth Agenda Trust)
- Tracy Gatawa (Youth Forum Zimbabwe)
- Farai Gwenhure ( People’s Democratic Party)
- Moses Manyengavana (People’s Democratic Party Youth Assembly Chairperson0
- Charlton Tsodzo (PhD Maendelo Media Group Director)
- Margaret Mutsamvi- (Savanna Trust)