By Shame Makoshori
The worsening liquidity crisis is costing the formal sector at least US$40 million on a monthly basis, which means that a cumulative US$500 million would have been lost by the end of the year, as employees spend long working hours queuing at banks in the hope of getting the elusive cash.
A study by Industrial Psychology Consultants (IPC), a human resources consulting firm, this week hammered home the hemorrhagic stroke inflicted on companies during paydays as workers abandon their workstations in order to access cash from banks.
Many a times, the workers spent weeks on end without accessing any.
Titled Productivity losses as a result of bank queues survey report, IPC estimates that US$40 million is being lost monthly in wages paid to employees who are not productive.
A median wage of US$520 per month was used to arrive at the figure.
“This will translate into slightly below half a billion per year if the cash shortages continue at the current rate.
“If we use an average minimum wage of US$250 per month, the loss goes down to half. This will translate into slightly below half a billion per year if the cash shortages continue at the current rate,” said IPC, which is led by top HR practitioner, Memory Nguwi.
For more than two years, Zimbabwe has been bruised and battered by a cash crisis that has seen banks limiting cash withdrawals to as little as US$20 per week.
The liquidity crisis is principally a result of a serious mismatch between the country’s imports and exports, whereby the financing of the former is sucking liquidity out of the domestic market.
With banks struggling to dispense cash on demand, queues are now the order of the day outside their banking halls.
It is no longer uncommon to see clients worn out by the punishing queues putting up outside the banks’ premises for the night in order to beat the queues the next day.
In some cases, this is straining relations as couples spend long hours separated by economic circumstances, which some might even take advantage of in order to quench their earthly desires.
And once they get the cash, it is hardly expended on basics.
IPC noted that police fines were taking up nearly 77 percent of the withdrawn cash.
Lately, the police have increased their presence on the country’s roads as they clampdown on vehicles that are not roadworthy and other misdemeanours.
Also chipping away a significant portion of the withdrawn cash are expenses related to payments for domestic workers, facial and hair treatment for those who want to look good.
Asked how frequently they visited their banks, 13,75 percent of the respondents said they go to their banks on a daily basis; 40,38 percent said weekly; and 45,88 percent interface with their banks monthly.
When further asked to rank three top reasons why they would visit a banking hall; 80,74 percent of the respondents ranked cash withdrawals on number one; 17 percent put cash deposits on number one; 19,58 percent would be out to submit bank transfers; and 14,86 percent visited their bank to submit international bank transfers.
This is evidence of the transitory nature of deposits reaching banks, which cannot be deployed towards investments of a long-term nature that are critical for the achievement of economic growth.
For a lot of companies, the long hours spent in bank queues signify income going down the drain since the employees would be paid for doing nothing.
Even for those companies that pay their salaries and wages strictly in accordance with the hours worked, they still lose out in lost productive hours.
In an environment where demand for products and services is at an all-time low, the wage bill has been sticking out like a sore thumb for most companies as revenue continues southwards.
The result for most employers has been to shave off the salary bill by way of retrenchments or introducing a shorter working week.
It is estimated that over 4 500 companies shutdown between 2011 and 2014 alone, throwing into the streets about 55 000 workers.
Most of these workers have found their way into the informal sector, which hardly banks its revenue for fear of drawing the taxman’s attention.
Estimates indicate that well in excess of US$7 million is circulating in the informal sector.
To stimulate demand and abate the cash crisis, the Reserve Bank of Zimbabwe (RBZ) introduced bond notes last November, which are being injected into the monetary system in drips and drabs to avoid stoking the inflation fires.
But with the elections appearing on the horizon, it is going to take a lot of discipline on the part of RBZ governor John Mangudya and his team to resist pressure to run the printing machine in order to meet the huge demand for cash synonymous with polls.
In its latest study, IPC noted that a significant number of the respondents do not have confidence in bond notes, especially their ability to mitigate the liquidity crunch.
“When asked about their feelings on bond notes, 47,8 percent of the participants said they have (had) a negative impact on the economy. (About) 38,49 percent said (they are ) not good, but necessary given the current economic conditions while 5,33 percent said they are good and the remainder did not express any views,” reads the report.
A total of 1 062 respondents participated in this survey.
Reacting to the survey, the country’s largest industrial representative body, the Confederation of Zimbabwe Industries (CZI), said its members were feeling the heat hence there was need for government to heed calls for the adoption of the South African rand as the country’s medium of exchange.
“Although we have not done research on the impact of the bank queues, we feel the losses are significant,” said CZI president, Busisa Moyo.
“That’s why we have been saying we need more rands and less bond notes in the banking system. Even with the South African rand, queues will not disappear but it will help improve the situation,” he said.
The cost of absenteeism due to bank queues goes beyond productivity, according to the Zimbabwe National Chamber of Commerce (ZNCC), which acts as the voice of commerce.
“It is costing companies in terms of efficiency and not productivity alone because even if they are at work, employees are now engaging in personal deals. For every dollar in the bank, people are spending US$30 to withdraw (it). This affects efficiency. It costs the nation,” said ZNCC chief executive officer, Christopher Mugaga.
The cash crisis is not new in Zimbabwe.
At the height of the hyperinflationary crisis in 2007/08, individuals and companies had perfected the art of dealing with cash shortages and it seems they are using the same tactics again: Hoarding cash and demanding the most stable and secure form of payment for their goods and services.
“The authorities, like they did before, (are) responding with regulations and threats but all these failed before and it’s likely they will fail again this time around. The economy needs trust and people do not trust the banking system anymore,” said IPC.
“In other countries, policy pronouncements change the course of business, in Zimbabwe nothing changes. Everyone, business and individuals, are on the defensive.
“The authorities must create the right environment and confidence to allow ordinary people and businesses to take their money for banking. No sane person would go and bank US$100 cash which they would struggle to get from the bank when they need it. It is that simple,” added the report.
While the use of plastic money has come as a welcome relief, most businesses across the country hardly have point of sale machines and largely prefer cash.
IPC said the mode of transacting used more frequently in banking are the Automated Teller Machines, with 92 percent of consumers using them, mobile banking (57 percent), and internet banking (44 percent). Financial Gazette