Africa Economy: Zimbabwe banks hit by new round of cash shortage

A new round of cash shortage hit Zimbabwe in recent weeks as banks started to limit withdrawal amounts and the central bank is calling for a reduction in imports to curb the money exodus.

Zimbabwe has 14 commercial banks, with Barcklays, Stanbic, Standard Chartered, Ecobank, BancABC, MBCA being foreign owned. Some have reportedly starting to limit maximum withdrawals to 500 U.S. dollars per transaction while Automated Teller Machines (ATMs) regularly report "technical problems" each time people wanted to use them.

A middle manager at one commercial bank said some people would take advantage of the Zimswitch facility and cash out at different banks after finding out that their banks were giving limited funds.

"We had to go off Zimswitch because we were not benefitting with clients from other banks making use of our ATMs," the manager said.

Motor mechanic Tapuwa Chungu told Xinhua that he had sensed that there was something amiss when he and a colleague were given 500 dollars in one dollar notes from two different banks.

"You may say that I got all the money I needed and so there is no cash shortage, but how do you explain getting all of it in one dollar notes? It's like they have collected the funds from a toll gate," he said.

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has acknowledged the shortage of cash in the country but hastened to say banks continued to import, although this was not an overnight event.

In an interview with The Herald newspaper, he attributed part of the shortage to the current payment of bonuses to government employees and appealed to the banking public to use plastic money as opposed to cash transactions.

The government started paying belated end of year bonuses for 2015 to its employees at the end of March.

Mangudya also blamed some people who opted to keep their money from banks for causing the shortage.

"There are local businesspeople that do not bank their daily takings, preferring to keep the money in safes at home, fuelling cash shortages," he said.

However, many people still need to be reassured that the financial system is now robust enough to stay afloat and protect their deposits after the collapse of Zimbabwe dollar in 2009, with some receiving compensation they regarded as paltry and "insulting".

Some supermarkets which used to offer cash-back facilities to customers using Points of Sale cards have also stopped the practice.

"The confidence that had been slowly building within the banking public is now being eroded again. I should get my money on demand but being limited to certain amounts tells a different story," Chungu added.

A similar cash crisis hit the country in late 2014, also largely because of bonus payments, but the situation eased as the new year progressed with wage bills getting back to the lower levels.

Mangudya said he had requested the Afreximbank to put in place a nostro and export support facility to mitigate the cash shortages.

Deputy RBZ governor Kupukile Mlambo had also called for a reduction in imports, saying that the country was exporting about 3 billion U.S. dollars in cash every year as a result of the imports.

"Some of the things that we import, like water and cereals, are manufactured locally so in actual fact we are sending out money unnecessarily and that is a problem because we do not print the U.S. dollar. There is need to do things which bring money in the country than things which send money out," he was quoted as saying.

According to the Zimbabwe Statistics Agency, the country had a trade deficit of 3 billion dollars for the 11 months up to Nov. 2015 with imports standing at 5.5 billion dollars while exports were worth 2.5 billion dollars.

Among the imports were chocolates which accounted for 7 million dollars.

Economic analyst Clemence Machadu said Zimbabwe was surviving on hand to mouth as an economy.

As long as local industrial capacity utilisation remained low, people would continue to import more and there would be less to export, which meant that trade deficits would be inevitable.

"Reindustrialisation is not an end in itself but a means to an end. It has to be accompanied by measures that are mainly earmarked at promoting the growth of factors that stimulate market liquidity, as well as vigorous strategies that encompass competitiveness and an immense promotion of the Buy Zimbabwe agenda," he said.

The Buy Zimbabwe campaign calls for consumers to buy locally manufactured goods in a bid to boost production and reduce imports.

However, consumers have often argued that locally manufactured goods are more expensive that imported ones.

Machadu said the factors that influenced market liquidity were mainly composed of banked export receipts, international remittances, external loans, income receipts and foreign investments.

"If we do not cultivate these factors and rejuvenate them, liquidity challenges will continue to be the order of the day," he said.

RBZ also recently instructed tobacco farmers to open bank accounts into which their earnings would be deposited, in a bid to control the flow of money and reduce impulse spending.

Farmers have been known to go on spending sprees soon after being paid their dues at the auction floors, including buying ramshackle vehicles and spending some with commercial sex workers.

Senior economist for the Bankers Association of Zimbabwe Sanderson Abel called for the use of plastic money in the form of credit, debit and pre-paid cash cards because there was usually no need for people to have cash on them.

"In the current globalized economy, purchases across the globe can be made through mail, telephone or via the internet. These purchases can only be possible through the use of credit cards," he said.

Mobile banking can also play a major role in mitigating the cash crunch with clients making pre-payments and then making electronic transactions for various services. Endit