Feature - Consumers hurt by cash shortages

Samson Maponga, a small-scale farmer from Zimbabwe's Mashonaland East province, clutched a brown card on which was written "240". The number indicated his position in the long queue outside a building society in central Harare where people were hoping to be able to withdraw money for the weekend. Maponga had arrived at the building society at 4:00 am on Friday, and it was already afternoon. His hopes of making it into the banking hall and at last to a teller were fast disappearing. Since the branch opened for business in the morning, less than a hundred people had been served. The building society officials had not bothered to explain, but what most people realised was that there was not enough cash to cover the transactions. "I have been coming to the city for the past three days and have only managed to withdraw Zim $10,000 [US $13]. I joined three different queues yesterday and each time I was told that cash had run out," Maponga explained. He told IRIN that his workers on the farm needed to be paid, and the Zim $10,000 he was able to access was not going to go very far. Besides that, his family needed to eat, the truck he uses on the farm required fuel and he needed to buy inputs to use during the current winter farming period. "My daughter came back from boarding school because she has malaria. Even though I used my medical aid scheme to take her to a private hospital, I cannot buy the prescribed drugs because there is no money," Maponga said. He is just one example of Zimbabweans from all walks of life who are reeling from the impact of the country's acute shortage of bank notes - the latest scarcity to hit Zimbabwe, where basic consumer goods, fuel, electricity and foreign currency are all in short supply. The Reserve Bank of Zimbabwe (RBZ) initially said it did not have the foreign exchange required to import the special ink and paper needed to print money. "The acute local currency shortage is, for Zimbabwe, the ultimate form of shortage," John Robertson, an economic analyst critical of government policy, told IRIN. "Money requires money to produce and with all the shortages, particularly that of foreign currency, that the country has been facing over the years, cash shortages were inevitable." The shortage of bank notes became apparent in November 2002 when the circulation of the biggest bill, the Zim $500 note, dropped sharply as the Christmas festive season approached. The bill has now almost completely disappeared. Small notes such as the Zim $10 and Zim $20 bills, which had become rare, have resurfaced to form the basis of money transactions. Banks which used to provide a maximum of more than Zim $100,000 per transaction, have sharply reduced withdrawals to a maximum of Zim $20,000. Most automated teller machines no longer work. With inflation now at 270 percent and threatening to shoot beyond 300 percent before year-end, the limits imposed by the banks can leave consumers short of cash for essential purchases. The banks' defence is that they used to receive between Zim $70 million and Zim $90 million a day from the RBZ, and are now having to manage with as little as Zim $10 million. Anxious to attract cash into their coffers, they are reportedly approaching cash-rich businesses and individuals, including black market traders, to persuade them to deposit their proceeds. The banks offer these non-clients premiums ranging from three percent to five percent and waive deposit charges for customers offering large amounts of cash. "We do not have a choice," said one bank manager, "since we desperately need to satisfy our clients. The cash shortages have negatively impacted on our business, since we now have to fork out more than was budgeted for in order to maintain a semblance of normalcy in our day to day transactions." The cash crisis has been worsened by people stocking up ahead of a week of protest action called by the opposition Movement for Democratic Change (MDC), aimed at pressing President Robert Mugabe to step down over allegations of political and economic mismanagement. Even though some banks opened in the morning on Monday, the first day of the protests, they were not giving out cash - they were hoping clients would deposit money. Tapiwa Mashakada, an economist and MDC legislator, said people were stashing money at home because they lacked confidence in the country's financial system. Recently, the official The Herald newspaper reported that people were holding more than Zim $100 billion in their homes. Critics have attacked the RBZ for the shortages. Samuel Undenge, a pro-government economist, accused the central bank of inefficiency. "Serious cash shortages have been created by the Reserve Bank of Zimbabwe," Undenge said in a statement. "Individual banks are not allowed to by law to print money and so, who will, if the RBZ fails to do so? The banking sector in Zimbabwe is lacking in efficient and effective leadership from RBZ management." He added: "This [cash shortage] is a serious matter which the top management of RBZ must correct without delay, as it is causing pain to innocent people, who want to withdraw their money in the ordinary course of business." When the cash shortages began, the RBZ blamed cross-border traders whom it said were smuggling large sums of money, saying it would not print more to replace the cash that had been taken out of the country. The central bank also said printing additional money would fuel inflation. But the RBZ has made an about turn. Central bank governor Leonard Tsumba said on Thursday last week that the RBZ would print about Zim $24 billion worth of Zim $500 notes by the middle of June and would introduce a Zim $1,000 note before the end of November. He told journalists that bank note printing paper had started arriving in the country and the RBZ's printing company was working at "full capacity".