ZiG coin, note use requires mind change

14 Jun, 2024 - 00:06 0 Views
ZiG coin, note use requires mind change ZiG

eBusiness Weekly

Last Word

While the stability of the ZiG over more than two months, with the average interbank exchange rate yesterday at 13,48 showing just how stable the exchange rate is with its small daily ups and downs in bank trading, there are still problems with its full use as has been seen this week.

Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu has been meeting first a good slice of the main kombi associations and then the Retailers Association of Zimbabwe to try and get both to use the new ZiG coins and small notes as the small change in US dollar transactions, a sort of minor currency mixing.

But this will require some changes of attitude, particularly among the generations that have not really ever used coins very much, and certainly not multiple coins in a single transaction.

There will also need to be acceptance in the business world where everything from VAT payments onwards put pressure on a retailer to use a single currency in a single transaction.

Coins were standard cash for small transactions for decades right from the days of pounds, shillings and pence, when coins ranged from the halfpenny to the half crown or two shilling and sixpence, through decimalization when it was the half cent to the 25 cent coin and then as inflation bit the 50c and $1 coins and finally the $2 coin.

During hyperinflation coins were introduced twice, the same coins in fact thanks to a decision to knock a pair of noughts off the currency in the early days of hyperinflation, but both times they then disappeared as their value sank to almost zero, or for all practical purposes zero.

With dollarisation there was a period when the R1 coins acted as the 10c piece, although the slow downward drift of the rand against the US dollar ended that experiment. People could make money by collecting them and taking them over the Limpopo and so they did.

The RBZ then, after a pause, issued bond coins, and those were the first time most children and teenagers, and even younger people, had used coins for more than a few months at a time. That is about the only memory many have of coins, and importantly those coins were fractions of a US dollar, so in effect it was a single currency.

When the wheels came of dollarisation the coins lasted a bit but the inflation in the resumed Zimbabwe dollar quickly eliminated them from the market place and it was back to notes.

And then inflation made US dollar notes the main transaction for cash, although Zimbabwe dollar notes, but not coins, were used as change and bus fares.

They were still in use right up to the ZiG, at least the Z$100 was, in bundles of 30, as a 50c token in buses, kombis and to buy drinks and sweets on pavements.

But the major point was that for several years no one, or hardly anyone, was getting Zimbabwe dollar notes from banks.

Sometimes, it was possible to get cash-back at a supermarket, but more often it was dealers on the pavement with bundles of notes in their hand and accepting phone money or US dollars to buy the notes, at a premium.

Dealers hung around bus terminuses selling the local notes needed for bus fares. Even when the Z$100 notes appeared, they were on the streets not the banks, or at least not often for ordinary people.

The result was that for local currency transactions, at least outside the kombis, everyone switched to debit cards and phone money, preserving banknotes for cheaper vendor goods and transport. And that is the position we are now in.

ZiG transactions are generally electronic, not cash, and with the upgrade in systems just before and during the ZiG conversion, so are more and more US dollar transactions.

The absence of effective local currency for around a month meant that this was reinforced, with kombis and buses and vendors just rounding off fares and prices upwards to the nearest US dollar.

Agreed, the Zimbabwe dollar notes were still legal tender, but no one accepted them and while they could be swopped at banks, for many people the odd small bundle they have is now in the same drawer than used to hold the bundles of the old bond notes after dollarisation.

Dr Mushayavanhu is driven by logic. And it is logical that the ZiG1, ZiG2 and ZiG5 coins, and the ZiG10 and ZiG20 notes would be used as the small change, for the small transactions, for change in US dollar transactions, and for bus fares.

But hardly anyone went to their bank to collect, even though the banks bought ZiG55 million between them from the Reserve Bank.

Incidentally it would be useful if it was stressed that the Reserve Bank did not “issue” coins and notes but that commercial banks made the electronic transfer and received the coins and notes. That thinking removes the slack thinking that the Reserve Bank is printing money.

Right now the complication is that people need to rethink and change their concepts of money, and that includes the kombi drivers and shopkeepers.

And the rethink involves using in many cases two currencies when using cash rather than electronic money, ZiGs for small change and US dollar notes for larger payments.

Shopkeepers, after the legal changes that demanded that VAT was paid in the currency accepted at the till, became fairly rigid about not accepting a purchase in multiple currencies. They would obey the law and accept either, but each transaction had to be in just one.

Kombi and bus conductors would accept a 50c “token” but tried to arrange it that the tokens they accepted equalled the tokens they paid out, and in any case for any fare above 50c they wanted US dollar notes.

It took time for DR Mushayavanhu and others in authority at the Reserve Bank and the Government to know what was going on, or not going on, and the same would apply to bank managers and above in the banking sector.

For a start they do not use public transport and secondly they almost certainly make all payments for goods and services electronically. So it took a month for them all to find out that the ZiG cash was not in serious use.

We also need to recognise that the ZiG coins are not useful fractions of a US dollar. It needs at least two coins to make the equivalent of 50c for a bus fare, and it has been around 25 years since the last time anyone needed two coins for a bus fare, although in the bond coin days sometimes a passenger would use two 25c coins to make the 50c, but even then that was simple.

The other hassle is that most people do not want vast sums in coins and small notes, and queuing at a bank for ZiG100 or less is not attractive.

People will want their few coins or notes in change so the burden falls on shopkeepers and kombi conductors and vendors, and even they will probably want to use change from customers rather than get a float from the bank, although larger shops will be more willing to look at floats, at least once they are assured that this will not breach VAT regulations.

One leader of kombi associations did suggest Banks had a change counter at bus terminuses, and that was a good idea and a practical idea, and perhaps supermarkets could even volunteer as “cash back” providers for small amounts, which they might have to get from their banks. The cash back might well need to be coins and notes.

There is that additional complication of the two exchange rates, the interbank rate and the till rate with its premium of up to 10 percent. It is a pity that the premium still exists but it does.

Kombi operators also need to be willing to accept ZiG7 as the equivalent of a 50c fare, and practically that needs conductors to have a purse rather than just hold the notes in their left hand as they do these days.

The reality of the marketplace can sometimes be shot down over as simple a point as that.

The main effort now is to get the coins and small ZiG notes into circulation, and the use of the ZiG10 note as a 50c token is being used but it is the wrong token, a more precise number being essential.

The Reserve Bank will need to keep up the consultative pressure, and that means bank officers will need to walk around the market places and even take the odd kombi trip.

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