15 January 2013

Zambia: Rebased Kwacha 14 Days After Launch

ON JANUARY 23, 2012 the Zambian Government announced to the public its intentions of rebasing the Zambian Kwacha.

Between January and December 2012, modalities were put in place on how this national exercise was going to be executed.

The Bank of Zambia (BOZ) set January 1 , 2013 as the change-over date for the rebased currency to become a legal tender.

However, the introduction of the new Kwacha notes and ngwee coins have been received with mixed reactions across different sections of society.

Two weeks after the introduction of the new bank notes, there are still traces of people still experiencing difficulties in the conversion of figures from the old to the rebased currency.

This is actually normal whenever change is taking place and such kind of hassles are inevitable commonly referred to as teething problems.

This comprises mostly the old mentality and issues of acceptance which are very much at play now.

Bertha Moonga of Lusaka's Chilenje Township believes that the new notes on face value are not easily distinguishable from each other.

"I think the KR50 and the KR10 are not very distinguishable because of similarities in the features of the two bank notes", she said.

Despite the massive sensitisation by BoZ on the new notes and coins retaining the same value as the old Kwacha, people like Bertha still feel that it would take some time before the public can get used to quoting figures in the rebased currency.

Another example is Pa Chanda tavern in Garden Township, where regulars at the spot have accused the bar tender of resisting change because of his preference in transacting in old notes as opposed to the regulations set out by BoZ that the rebased and old Kwacha would run side by side until June 30 this year.

One of the regulars at this tavern Mike Mwachinda said that three days after the introduction of the new currency, the bar tender remained adamant about transacting in the rebased currency for fear of being "cheated".

"This meant that a few of us who were in possession of the rebased currency could not access the usual services at the tavern because the bar tender was not sure about the conversion of figures," he said.

Agness Munkombwe of Chaisa Township said it would take time for the aged to get used to the features of the rebased currency.

This can mainly be attributed to the slow pace at which the elderly have to cope with new technology being so much used to doing things the same old way.

Mrs Munkombwe, who is now in her early 70's, said she had remained sceptical about being given change in the rebased currency for fear of being cheated out of her money.

Mrs Munkombwe expressed fear that unscrupulous people were likely to take advantage of this transition period to counterfeit the new currency by taking advantage of the fact that the general public had not acquainted themselves with the security features of the rebased Kwacha.

Brian Mweemba of Northmead area in Lusaka holds the view that the old currency looks much more attractive than the new notes.

"I think the new notes appear lighter in texture, while the old currency is richer in colour and texture," he said.

He expressed concern about the new notes easily getting soiled because of the lighter texture.

While others think that the rebased Kwacha is not as attractive as the old notes, others are of a contrary view.

Natasha Mwape, a pupil at one of the high schools in Lusaka, believes that the new notes are a marvel to hold and look at.

"I think the new notes look very neat. For those of us who never had the opportunity to use coins, the new ngwees are great to have. At least I can now boast of having used coins at one point in my life," she said.

Still on the confusion in the conversion of figures, in a stroke of luck, Pamela Mwila of Lusaka's Bauleni Township, who was using the new coins for the very first time, paid a bus conductor four five ngwee coins as her bus fare from Kulima Tower bus stop to Bauleni, which in the old currency would cost K4,500 and she was amazed at the convenience of the whole transaction although slightly confusing.

Upon giving the bus conductor the coins, Pamela and the conductor were not sure how much the coins amounted to, therefore, neither the conductor nor herself could tell whether or not the transaction was complete.

"It was not until I got home and asked my husband how much a five ngwee amounts to that I realised that had unknowingly cheated the bus conductor out of his money," she narrated.

"Now I know that if I do not take keen interest in understanding the conversions, I might just fall victim of being cheated myself," she said.

These are some of the many experiences that ordinary people have encountered following the introduction of the newly rebased Kwacha and ngwee.

However, experts and technocrats have their own views.

Economist Mwilola Imakando said the timing of the rebased Kwacha could not have come at any better time than now, against the backdrop of Zambia's growing economy, coupled with low inflation in single digits for six years in a row and favourable macro-economic conditions.

He emphasised that the importance of the long overdue process of handling some of the losses that Zambia had gone through as a result of many years of economic malaise are finally coming to an end.

"There is indeed consensus among many professionals that it is time to deal with the long-term loss in the value of the Kwacha as a result of the many years of economic stagnation and high inflation rates," he said.

Dr Imakando said some of the benefits Zambia stands to gain from the rebasing of the currency include efficiency gains in money transactions and book-keeping functions.

Examples of these include easy counting and recording of figures, less cumbersome encounters in carrying and storing money and the possible easy use of vending machines.

However, a major national exercise such as the rebasing of Zambia's currency cannot go by without any notable challenges and risks.

Dr Imakando outlined some of the risks involved such as rising inflation, the loss in the Kwacha's buying power and the possible erosion in the value of economic assets and savings.

"In this preliminary stage, people in remote areas of Zambia and those from outside the country, stand the risk of being cheated by unscrupulous money changers," he said.

He said while it may be too early to give a preliminary indication of the effects of rebasing the kwacha so far, there were fears that there might be a general rise in the prices of some foodstuffs arising from price adjustment challenges.

The psychological and emotional values attached to some commodities for many years will have the effect of forcing prices up; a natural inclination arising from the usage of large values of money for many years.

Currency rebasing involves the dividing of the currency unit by a defined denominator and adopting that rebased currency to every amount expressed in notes and coins.

The Zambian currency rebasing exercise, therefore, entails dividing the currency by 1,000.

A national currency is rebased because of the need to address costs associated with accumulated loss in the value of the currency that undermines its basic functions as a store of values, medium of exchange and measure of value and this exercise is normally carried out by countries during periods of low and stable inflation.

This loss is usually as a result of high inflation rates over a prolonged period of time.

Some of the benefits of rebasing the currency include the easier facilitation of business transactions through the use of smaller units of money.

It also tends to simplify accounting, and eases the expression of monetary values, thereby minimising errors associated with inputting of financial data and time spent on reviewing such data.

Rebasing of a currency also improves the public confidence in the currency, and the culture of the re-introduction of coins whose use is more durable.

Clearly, there is need for BoZ to continue with its sensitisation programmes especially in the rural areas and a general information sharing programme on the rebasing of the kwacha to calm the general public's fear that the purchasing power of their money, and the value of their assets and their savings will not be eroded with the rebasing of the Kwacha.

For those who are innovative it is time to capitalise on the presence of the coins by making satchets which could be selling like hot cakes as an easier mode of carrying the coins around.

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