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RBZ Governor Dr John Mangudya has been on a charm offensive to convince Zimbabweans to continue using bond notes and coins at par with the US dollar. The bond notes are backed by a US$200 million facility availed by the Cairo-based Afreximbank

Lloyd Gumbo Mr Speaker, Sir
Bond notes came and were overwhelmingly embraced by Zimbabweans despite spirited attempts to cause their rejection by those who want the country to “burn” for political reasons. In fact, depositors are now desperate for the bond notes. As was announced by the Reserve Bank, the bond notes have the same value as the dominant US dollar. Mr Speaker Sir, the introduction of bond notes has dominated discourse over the past few months, with political sceptics arguing they will bring back inflation while advocates say they will stablise the economy given the liquidity challenges that the country has faced of late.

It was expected that introducing US$200 million worth of bond notes in small denominations would address liquidity challenges particularly for local trading while the basket of foreign currencies would be useful for imports.

The situation was getting bad due to externalisation, as the dominant US dollar was running out since early this year and for that reason there was need to arrest the problem, which influenced the introduction of bond notes.

Now that the bond notes are here and accepted at the same value as the US dollar, there are fundamentals that need to be addressed if they are to maintain their current value.

Mr Speaker Sir, it should be noted that from the beginning, the issue was never about the introduction of the bond notes, neither was it about their value but how to maintain the value of the same.

It is obvious that critics want the bond notes to lose value, they don’t want to see them working with their value at par with the US dollar.

It is a bitter pill for them to swallow when they see service providers accept the bond notes at the same value as the US dollar.

As to how long that will last, we wait to see.

But for the bond notes to maintain their current value, the central bank has to be on top of the situation; they should always be proactive than reactive.

It is a given that political critics will throw everything under the sun to sabotage the bond notes and it is important that the central bank puts mechanisms in place to stop such sabotage.

First, we have to acknowledge that at the moment, most of our goods particularly food, are coming from outside the country and for that reason, traders should access foreign currency when they need it.

It is important that Government through the central bank returns the goodwill that service providers have exhibited so far by accepting bond notes. When the same service providers request for foreign currency to replenish their stocks, they should access it. Failure to avail the foreign currency will result in the service providers taking the bond notes to illegal money changers for forex.

This will be done at a cost, which will be the genesis of rating the bond to the US dollar, a development that will result in service providers passing on the cost to consumers.

Once we have reached that stage that will be the demise of the bond notes. It is therefore critical that the central bank ensures that financial institutions have sufficient foreign currency to exchange bond notes to give to service providers when they request them.

For instance, fuel traders must be able to get the US dollar and exchange it with bond notes at equal value to import the precious liquid.

It was gratifying to hear Vice President and Leader of Government Business in Parliament Emmerson Mnangagwa indicating that when one requests any of the currencies from their bank, they should be able to access them.

This is the only way to keep illegal money changers at bay.

That way, it will be difficult for them to rate the bond, which means people can continue to use the bond notes and coins at par with the US dollar. Mr Speaker Sir, if the central bank cannot guarantee this, then we have serious problems facing us. Secondly, it’s common knowledge that the foreign currency that we have or ought to have in our nostro accounts is a product of exports that we make.

Unfortunately, we import way more than we export, which leaves our nostro accounts in the negative. This means we should strive to match our imports if the flow of foreign currency is to continue.

But for us to boost our exports, it means we have to identify areas that can give the country quick returns. Following the introduction of Statutory Instrument 64/2016, we are told some companies, particularly in the food industry, have started operating at maximum capacity utilisation.

Mr Speaker Sir, it is those companies that need Government support so that they can export some of their products to our neighbouring countries beyond the bond notes incentive that the RBZ has been going on about.

But for them to export, there is need to make their prices competitive against South Africa, which has become a hub of the food industry in Southern Africa. This can be done by reducing the cost of production here, which will attract more players into the sector.

There is also need to move away from focusing on minerals as the only source of foreign currency and focus on other goods that we have a competitive advantage over others. For instance, what stops Zimbabwe from exporting its Mazoe Orange Crush and Cherry Plum to the whole of Africa when countries such as Ivory Coast are making a lot of money from exporting edible fruits, peels of citrus fruit, melons and nuts to India?

What stops Zimbabwe from exporting its organic food products that have a ready market in the whole of Africa and beyond?

These are some of the simple things that need to be addressed if the current bond notes interventions are to be meaningful. There is a lot that the RBZ needs to do to maintain the current value of the bond notes.

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