Financial Gazette (Harare)
1 November 2008
Harare — BANKS were last week beginning to show signs of failing to cope with the re-emergence of zeros on the country's currency with Stanbic Bank moving to de-base client account balances by four zeros.
Inflation, which topped 231 million percent in July, has wreaked havoc on the country's new currency introduced four months ago.
Since the unveiling of the new currency in July, prices have gone up exponentially, resulting in retailers and other service providers reviewing their prices twice daily, early in the morning and at mid day.
At the time the Reserve Bank of Zimbabwe (RBZ) introduced the new currency, the bank had done so by knocking off 10 zeros.
The first time it removed the zeros was in September 2006 when the RBZ slashed three zeros off the troubled currency.
Barely three months down the line, the zeros have resurfaced with a vengeance, forcing the lender of the last resort to introduce high-value notes to avoid inconveniencing bank clients, who are spending long hours queuing for cash.
In the first clearest sign that the IT systems in banks can no longer cope with the galloping inflation, Stanbic Bank of Zimbabwe - owned by Standard Bank of South Africa - last week re-denominated client accounts in what might see other banking institutions, particularly those using the same banking software (Globus) following suit.
The bank said it has had to debase account balances by six zeros in view of the hyperinflationary environment. It later revised the figure downwards to four zeros.
"With effect from October 27 2008, your account balances with the bank will be re-denominated with figures rounded off to the nearest 1,000,000. Your account statement will show figures rounded off, for example, $276,145,857,558.65 will be presented as $276,145.86. Any subsequent transactions through your account will be rounded up to the nearest million.
"Please note that this measure does not affect the manner in which you are currently issuing instructions to the bank. All transactions should be issued showing the full values.
"This debasing exercise (removing six zeroes) will be done over the weekend of October 24 to 26 2008. During this time all our ATMs, VISA, ZIMSWITCH and POS (Point of Sale) systems will not be functional.
"Our CATS system will continue operating in the same manner. However overall SFI single file totals should not exceed $99 trillion," reads a letter signed by the bank's account executive, Isabela Nyoka-Kasambara.
Bankers Association of Zimbabwe (BAZ) president, John Mangudya said the sector was contemplating lopping off zeros, which were overloading the IT systems.
The BAZ president said a political settlement between the country's major political parties is the only way forward.
"We are going through a critical moment. We have said the country is bleeding, all what we are seeing is a tip of the iceberg. We have noticed with concern that the blame is on the banks. Banks have become the soccer way where the blame has been played.
"The amount of cash (on the market) is not significant enough to meet the demand, and there have been arbitrage opportunities that have been created such as 'burning'. After you have 'burnt' your money the zeros come back. And the volume of cheques in banks has increased.
"Our staff are sleeping late trying to work on the cheques. We are in a difficult situation. In the global crisis the problem has been (the credit crunch) but in Zimbabwe we have so much liquidity because of 'burning', and we have created a vacuum. People have found ways to survive. We believe the unlocking of value in our country is the political settlement," said Mangudya.
On Tuesday, RBZ governor Gideon Gono said the printing machines at Fidelity Printers and Refiners cannot cope with the huge demand for bank notes.
"Even our oil pipeline, the Beira-Feruka Oil pipeline can carry a certain amount of oil," he said. "Fidelity has physical limitations to what it can print per day. Fidelity was put up in 1957. Some critical equipment belong to these years, with the newest coming in 1980/83. You know what it means as industry," Gono told delegates at the Confederation of Zimbabwe Industries congress.
In his fist quarter monetary policy statement in April, Gono said inflation remained the country's number one enemy, which enemy must be destroyed through focus on production, foreign exchange generation and food security.
"The food category contributes 32 percent of the CPI (Consumer Price Index) basket and in this regard a decline in food output exerts an upward pressure on overall inflation," he said. "Food inflation poses the greatest challenge to efforts to tame inflation. The situation has been exacerbated by projected lower than normal output of grains as a result of incessant rains experienced during the first half of the season and the very hot and dry weather experienced between January and February 2008," added the RBZ boss.
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