#MondayBlues: Why The Zim Bond Notes Will Fail

If there is anything that was created to embarrass the Zimbabwean government, then an investigation should be done to probe the brains behind the so called surrogate currency , running under the  moniker bond notes. This is nothing but a time bomb in the making.

While we have questioned the purpose of the bond notes,  Zimbabwe cash crisis continues to bite, even against the introduction of the bond notes, the future of plastic money is much more brighter as this is the only way to keep real currency in the system, against the newly introduced greenback imitation.

By  Toneo T Rutsito. 

Unfortunately, The Reserve Bank of Zimbabwe was fooled by the success of bond coins, to think that they can as well introduce bond notes into the market, yet technically the bond notes cannot serve the same purpose the bond coins were serving.

 

 

The bond coins were only lucky that when they were introduced, Zimbabweans were already resisting the south African 5 rand coin, because the 10 rand had fallen on the international market, hence two south African coins were no longer equal to the $1.

This is the same time when most traders and commuter operators were changing 3rand coin for any 10 rand note, and Zimbabweans were desperate for anything including paper tickets from commuter operators , as change for another return trip.

 

This is the reality that the RBZ should accept that there did not create a currency that brought confidence, but technically, they were smart opportunists who introduced a currency when the rand was being resisted and yes the bond coin was a resort of choice.

 

However there is a huge difference from the bond notes, Zimbabweans are not looking for the bond note to solve any crisis, in fact the only reason why they need the bond notes is because the RBZ has failed to support the real money in the RTGS system to back Nostro balances .

 

Zimbabweans who have been queuing daily for their hard earned money will now take anything from the bank that is available, not as form of acceptance, but as a form of barter trade to allow local transactions to move on since this is a daily demand to life, and this must never be misconstrued as acceptance of the bond note.

Simple economics suggests that for money to called money, it should have these basic six characteristics which include acceptability, durability, portability, divisibility, uniformity, and limited supply.

The only genuine characteristics which the bond note has is probably the element of portability and the artificial limited supply, which is not as a result of balanced economics but artificial lack of supply being directed by the RBZ to create artificial demand on the desperate market.

 

It is not questionable that the bond note has not been acceptable, but rather people are using It simply because they have no any other currencies available, so its not as a matter of choice, but forced out only option.

As for durability, the currency failed the litmus test on day number one, as some few genuine rains from heaven messed up the currency which bled all the poor quality green back paint, a case which never happens to any real and genuine currency.

 

All the $2 bond notes released on the market have slightly different marks, which made many people to think that they are using fake currency, yet all the fraternal bond notes were genuinely released by the RBZ and are all technically fake currencies .

 

Thus said this does not serve any purposes for the most critical sector in Zimbabwe that is the importing sector, which is more than 60% of what sustains the Zimbabwean economy.

 

Of course this is the only reason why the government fought hard earlier on to try and ban imports of basic commodities across the South African borders as they know there is not any much real money in circulation to keep crossing the border.

If a local player needs to import basic commodities like groceries or even for car dealers or those bringing various technological solution, they are still demanded to use real money to settle the transactions.

What this means is these players have no option but to drive the black market and buy foreign currency using bond notes since the formal market is now dry.

bonds-notes

Already the black market is paying $70 USD for any $100 bond notes and the set is going to get uglier.  The simple forces of demand and supply will force this figure to go even higher a genuine business players seek to replenish their stock.

 

The black market will be driven higher so long as the banks do not provide a solution for importers who are genuinely transacting to run and keep their business on.

The only way to save the bond note would to create a national reserve exchange centre that allows any genuine player to redeem the bond notes for Rands or US dollar if he/she needs to import anything .

 

This will bring confidence to the bond notes as many people see them as a scheme by government to draw away real currency from the system, as there is no clear way of getting any other currency exchange once you get the bond notes.

 

Since the bond notes are officially not the national currency, the RBZ has not pronounced what will happen to them and when they will cease operation, The central bank has also not mentioned what happens to them after they cease operation if at all they will cease as a temporary reprieve.

If this is not done, I can sure assure you by January next year the bond note will be trading less than 1:2 even on the formal market because it cant work and its unsustainable in an importing economy.

This is the simple advice that the Zanu Pf government should have received not to introduce the bond notes or at least have a formal way to redeem them to serve for importers otherwise, like it or not the bond note will simply die a natural death.

When this happens, this is not the right political message any party needs, and you don’t need this towards a national election, that is the only reason why I think the person who introduced bond notes is the real enemy of Zanu Pf government waiting for the time bomb to take off.

In the mean time the only way to keep real value from the currency is to keep it on the RTGS system, through card swipes. Money on the electronic system is still genuine money and can even be accessed outside of Zimbabwe, at least for now.

 

 

 

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1 thought on “#MondayBlues: Why The Zim Bond Notes Will Fail

  1. No economy is sustained by imports. Imports are the real problem in Zim. The purpose of bond notes is to curb these imports.

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