5 September 2014

Zimbabwe: Coin Supply Long Overdue, Progressive


WHILE almost all Zimbabweans welcomed the switch to the multi-currency regime, effectively making the US dollar the main currency for shopping in the country, the lack of coins has been a nuisance and in some cases has meant prices are higher than they need be. Using US banknotes for most cash transactions but with South African rand coins to make change, at the rate of R10 to US$1, has helped but has created other distortions, largely because the rand-dollar rate is not fixed and because there are not always enough rand coins.

At times, when the rand is worth more than 10c, coins vanish as people realise they can "buy" a rand coin for 10c, but use it in South Africa to buy more than 10c worth of goods. At the other extreme, as at present, there is a profit to be made in the other direction, which helps availability, but still does not create stable change, or adequate change.

Many shops and suppliers, to their credit, have ignored the lack of proper change when pricing items. This means someone doing the monthly bulk shopping can benefit from those US$4,95 specials since by the time everything is added together there is still less than US$1 in change to sort out on the total bill. But this does not help the person wanting to buy just one item. There is a tendency for some products to round prices off to the nearest dollar, or to ask people to buy more than one item. And many of us are tired of having a tube of sweets or a piece of chewing gum added to our shopping.

There have been studies on importing adequate quantities of US coins, just as we import the banknotes. But the high mass and low value of coin imports mean that the import costs can be higher than the actual value of the coins, which means very few would be willing to use them if they had to pay full value.

Now the RBZ wants to regularise everything. It is planning to float a bond for US$50 million to import coins that would be tokens for US cents in denominations from 1c to 50c.

Other countries that use the US dollar for their ordinary internal commercial transactions have done the same. The local coins are obviously backed by real US dollars in accounts, which the RBZ plan appears to automatically implement with the bond issue, and considering the small value of coin transactions the fact that they are tokens rather than real US coins does not matter.

For many years, and this might even still be the case legally, coins were not valid payment for sums over trivial amounts. Shopkeepers could take coins for more than the limit, but they were not obliged to do so.

This stopped someone bringing in suitcases of coins to buy things in a shop. Similar rules now would stop any nonsense of people trying to make money out of having enough change in Zimbabwe.

The RBZ plan has one extra benefit. By sinking cash into US denominated coins it will help persuade the rumour mongers that when the Government and RBZ see no alternative at the moment to keeping the US dollar as the standard commercial currency they mean what they say.

We hope that the RBZ scheme will now be implemented promptly. We cannot continue to pretend that the US dollar economy is just temporary.

It is for real; the authorities have assured us it will remain for some years. So let us do it properly.


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