Ordinary Zimbabweans suffer as businesses reject lower banknotes
Zimbabwean currency disrespected, has no value in parallel market where decisions made regarding its use, says economist
Mark Simango, a banana farmer from Honde Valley located 309 kilometers (192 miles) east of the capital, sells his wares at Mbare Musika, the country’s biggest fruit and vegetable market in Harare.
Only returning home once his bananas are sold out, he makes at least US$250 a week. But lately his earnings have been declining as the ZW$10 notes he has been receiving from customers are being rejected by illegal money changers.
The illegal foreign currency dealers in Mbare, a southern suburb of the capital Harare, are demanding more Zimbabwe dollars for each US dollar in the event that one is trading with ZW$10 notes.
As a fruit farmer, he cannot turn back customers with lower denomination banknotes, although when he then intends to exchange them for greenbacks, they are being rejected.
“It all started about two weeks ago, when the Reserve Bank of Zimbabwe (RBZ) introduced the new ZW$50 notes. To me as a farmer, I felt relieved,” Simango said.
“However, when I then decided to change my money to US dollars, the moneychangers informed me that they were no longer accepting ZW$10 notes.”
He said he had to pay extra Zimbabwe dollars to get the amount of money he wanted in US dollars and that meant a reduced take-home pay.
Another farmer, Evelyn Chiwa, is facing similar challenges with the ZW$10 notes and has decided not to accept them or pass on the cost of accepting them to her customers.
“When I bring my bananas to the market, I would be targeting a certain amount of money as profit per load. Now when I sell and accept ZW$10 notes and my profits are reduced, it’s no longer business for me. Hence, I had to change as well,” she said.
From their sales, these farmers earn money for things such as fertilizer, seeds, pesticides, and transportation, which are accessible in US dollars.
Shops making it hard to use ZW$10 notes
John Chirinda, a sugarcane farmer, experienced similar challenges regarding the rejection of ZW$10 notes.
“Last week, I went to buy irrigation pipes using local dollars. Unfortunately, it was a mixture of lower and higher banknotes, and that cost me dearly. Instead of charging me ZW$1,300 per length of pipe, I was asked to pay ZW$1,800 just because there were ZW$10 notes,” he said.
To verify the claims of the farmers, Anadolu Agency visited a lighting shop near Mbare and the shop assistant mentioned three prices for a solar bulb.
“It is US$6. But if using a bank card or cash excluding ZW$10 banknotes, it is ZW$840 at a 1:140 exchange rate, whereas when using cash with ZW$10 included, it’s ZW$1,080 at a 1:180 exchange rate,” he said on condition of anonymity.
“This is meant to discourage the use of ZW$10 notes,” Chirinda said.
Some shop owners who spoke to Anadolu Agency revealed that each time a higher denomination banknote is released, it weakens the value of the lower banknotes.
“We sell our cash to these illegal moneychangers daily, and they are the ones who determine the daily exchange rates against the US dollar. They also determine the rules of the game, and when they feel the ZW$10 banknotes are no longer needed, we follow that in our shops as well,” said one shop owner.
Control of money market
According to the Reserve Bank of Zimbabwe, ZW$10, ZW$5, and ZW$2 banknotes are still legal tender even though they are being rejected in the market.
The ZW$5 and ZW$2 banknotes are no longer in circulation, an indication that even the country’s central bank is following the dictates of the parallel market.
The latest development which has now affected ZW$10 banknotes is not just affecting farmers and vendors but also the general populace.
Anadolu Agency caught up with one elderly man in Harare’s central business district who expressed concern that the ZW$10 notes were being rejected.
“When I got my salary at the end of June, I withdrew from the bank ZW$20 and ZW$10 notes, and a week later, the same notes I received from the bank were no longer being accepted by commuter omnibuses,” he said.
“I wish I had control of what they give at the bank. But from my observation, the RBZ has since lost its relevance if rules are dictated by other people in the informal market.”
To avoid being arrested for flouting the exchange control laws, formal retail shops increased their prices, anticipating new exchange rates owing to speculation.
“Most of these businesses are rejecting the small cash denominations, as they are participating in the illegal cash parallel market. They withhold all the cash they collect from customers and channel it to the foreign currency black market to buy US dollars,” said Denford Mutashu, the founder and president of the Confederation of Zimbabwe Retailers.
According to renowned Zimbabwean economist John Robertson, “the banknotes being rejected are very small in terms of value and are not worth handling for money changers. The ZW$10 note is smaller than the ZW$50 note, which also is just a fraction of the US dollar.”
“All these conditions then mean these banknotes cannot create respect in the market,” he added.
Robertson advocated for the introduction of bigger value banknotes such as ZW$1,000 and ZW$5,000 notes to deal with the problem.Anadolu Agency website contains only a portion of the news stories offered to subscribers in the AA News Broadcasting System (HAS), and in summarized form. Please contact us for subscription options.