[Zimbabwe] Manufacturers and retailers optimistic of positive effect of bond notes to economy
October 25, 2016
Reserve Bank of Zimbabwe Governor Dr John Mangudya has said bond notes are backed by a $200 million facility from the Egypt-headquartered African Export-Import Bank.Dr Mangudya also said bond notes were not a way of re-introducing the Zimbabwe dollar.
Top retailers such as OK Zimbabwe Limited and Meikles Mega Market (MMM), and oil expressers said that although bond notes were new territory for local businesses, they would likely spur growth as long as they did not become the dominant currency.
OK Zimbabwe CEO Mr Willard Zireva said if bond notes were introduced on a staggered basis, at levels which have been stated by the apex bank, they would not have a negative impact on operations.
“The assumption is that the country will continue operating using the current multi-currencies as the dominant units. However, if (bond notes) become the dominant ‘currency’ then there could be negative consequences as the market will likely give them a lower value than the stated one bond note to US$1, thereby creating a parallel market with the usual negative impact,” said Mr Zireva.
The RBZ has said that a measured approach is being adopted to gradually increase the total stock of bond notes to almost US$75 million by the end of 2016.
However, Mr Zireva warned that if demand for goods rose on the back of increased liquidity due to bond notes, there could be shortages of products if manufacturers failed to access foreign currency to import raw materials.
MMM general manager Mr Panganai Ngorima said while the use of plastic money had grown to about 80 percent of all transactions, some trade had been lost due the absence of hard cash as a significant portion of the population was unbanked. Research shows that about 5,4 million Zimbabweans have bank accounts.
And Mr Ngorima believes that the unbanked could be bailed out by the coming of bond notes, which in turn will see a spike in transactions.
“There is need for a currency for transactional purposes, a medium of exchange; be it bond notes or a Zim dollar.
“(The) USD has become very scarce and has gone underground or outside of the country. The absence of cash has had a severe and adverse impact on trading,” he said.
Similarly, Oil Expressers Association chairman Mr Sylvester Mangani said since bond notes would primarily be an export incentive, and would be limited to the US$200 million Afreximbank facility, they would not harm the economy.
“(Bond notes) should reward exporters and this should see that sector growing, which is a positive thing. As the bond notes will be for local use, this should release foreign currency for importers and limit leakages of foreign currency which was a cost to our economy; this also is positive.
“Convertibility of the bond note to US dollars for this purpose at the 1:1 ratio will be the deciding factor. Real backing for the bond notes will need to be demonstrated to give the market confidence,” said Mr Mangani.