A CASH crunch that has forced banks to reduce withdrawal limits is
worsening, despite assurances from the Reserve Bank of Zimbabwe (RBZ)
that the crisis would abate.
Analysts warned this week that the situation was likely to intensify, blaming a catalogue of economic circumstances for aggravating the situation.
The cash crisis, which initially hit smaller banks but has spread to bigger financial institutions, has been blamed on the increasing demand for cash as well as the reluctance by Zimbabweans to use plastic money.
Imports, which have skyrocketed against the backdrop of a shrinking export base, are also to blame for the depletion of cash in the economy.
Zimbabwe ditched its own currency in 2009 to escape hyperinflation that afflicted the economy after the demise of the country’s agricultural sector which followed a chaotic land redistribution exercise.
“This situation is likely to be with us for a long time to come; it’s far from over,” an executive with a financial services group told the Financial Gazette last week on the sidelines of the opening of a Green Zone centre in Bulawayo.
The country’s trade deficit last year hit US$3 billion, as imports continued to surpass exports despite a raft of measures put in place by government to bridge the gap.
Foreign direct investment, which could result in the injection of capital to boost liquidity in the economy, has been too low due, largely, to government policies, which have discouraged foreign capital.
The mining sector has been afflicted by low international commodity prices, resulting in lower-than-expected export receipts from the sector.
Independent economic consultant, John Robertson, said a firming United States dollar had compounded the country’s cash woes due to the fact that tourists from South Africa and other countries with weakening currencies were now finding costs in Zimbabwe too high.
The greenback anchors the country’s multiple currency regime.
“The State has watched over the collapse of agriculture, while its indigenisation policy is discouraging foreign investment. Its mining policies are hard-line. What is left is what we can earn from tourism, but we have a strong US dollar-driven economy, and that makes it difficult for tourists to come here as it is expensive,” said Robertson.
Last month, Youth Development, Indigenisation and Economic Empowerment Minister, Patrick Zhuwao, gave foreign-owned companies up to April 1, 2016 to transfer majority ownership to blacks, saying firms that failed to comply would be forced to close.
Although his directive has failed to get support from Cabinet colleagues, it nonetheless triggered investor fears and battered confidence in the frail economy.
President Robert Mugabe’s threats last week to kick out the remaining white farmers from their land and give it to ex-liberation war fighters may worsen confidence in the economy and affect bank deposits, analysts said.
The Commercial Farmers Union estimates that there are only 300 white commercial farmers remaining in the country, after over 4 500 of them were forced off their farms by a controversial land reform, which started in 2000.
Japhet Moyo, the secretary-general of the Zimbabwe Congress of Trade Unions, said workers were suffering most from the cash crunch.
“It is our members who are most affected, as it appears that we are sinking and are sinking very fast as a country,” he said.
“It’s a very unfortunate situation. In fact, it is a double-edged sword for our members who go for months without salaries and when they do receive the salaries, they find (withdrawal) limits. The cash crisis is a problem we are likely to have for the foreseeable future,” Moyo said.
Zimbabwe Banks and Allied Workers Union secretary-general, Peter Mutasa, agreed with Moyo, saying: “It’s a crisis of huge magnitude and its more than panic that is taking place behind the scenes even though authorities may present a straight face to the public.”
“The problems don’t come from the banks alone; they are entwined with the high import bill, low aggregate demand and low capacity utilisation in the country. So no one person has the capacity to address all these issues,” Mutasa said.
“Indications are that with the start of the tobacco season, the situation may ease, but after the tobacco season things will deteriorate again…”financial gazette