Tuesday, 23 August 2016

BOND NOTES NOT DONE DEAL : GOVT

The government has suggested that it may still be a while before it introduces the much-distrusted bond notes on the market — which are meant to mitigate Zimbabwe’s severe cash shortages — with the Reserve Bank of Zimbabwe (RBZ) revealing in court on Friday that the notes are only at a “planning stage”.

In its opposing papers to legal action against the bond notes that has been filed at the Constitutional Court by former vice president and now Zimbabwe People First (ZPF) leader, Joice Mujuru, the central bank said it also still needed to meet statutory requirements to back the use of the notes, whose introduction is targeted for October this year. 

In her application seeking the declaration of the introduction of the bond notes as unconstitutional — which was filed through 
Hamunakwadi and Nyandoro Law Chambers — Mujuru cited President Robert Mugabe, Finance minister Patrick Chinamasa, the RBZ and its governor John Mangudya, and attorney general Prince Machaya as respondents.

But responding to the lawsuit, Mangudya described Mujuru’s court application as both “premature and ill-founded”, adding, “Indeed bond notes, outside of a policy announced by Fourth respondent (RBZ), are still at planning stage ...”.

“At no point has the (Reserve Bank) stated that bond notes are bank notes or indeed currency as defined in our laws, in particular the (Reserve) Act and the Bank Use Promotion Act (chapter 24:24).

“The entirety of applicant’s (Mujuru) action is premised on bond notes constituting bank notes and, or currency when in fact there is absolutely no basis for reaching this conclusion,” Mangudya added.

However, Mujuru still argued that bond notes were not provided for under the RBZ Act, adding that despite them being said to have the same value as the United States dollar, they were bound to depreciate in value.

“Further, a bond note cannot be the equivalent of any of the foreign currencies it will operate side-by-side with. Accordingly, the mandatory exchange of any foreign currency with a bond note is a prima facie deprivation of property rights.

“Money is property and a bond note, not being money, can never substitute money. There is therefore an infringement of the right protected by Section 71(2) of the Constitution to the extent that holders of foreign currency will be forced to use or hold bond notes in the place of their money,” she said.

“Whatever the respondents may seek to say about the bond note, it is clearly a disguised Zimbabwean dollar that is being introduced through the back door. The law does not allow a back door approach. If they wish to re-introduce the Zimbabwean dollar they must follow the law and call it by name given its demonetisation.

“Just like the bearer cheques of the period before 2009, bond notes will not be worth the paper on which they will be printed, but will make the poor poorer as they will be made to lose the little valuable assets they have, such as livestock, to the privileged few who will be in possession of worthless bond notes,” the ZPF leader added.

But Mangudya said the central bank could not “at this stage be compelled to state the form and nature of these bond notes without having complied with necessary statutory and related regulatory compliances”.

“Indeed, to dispute these averments is to concede that the application is not only premature, but also that there does exist material dispute of fact regarding the form and nature of the bond notes.

“In short, and put in another way, legal arguments cannot be formulated on the basis of unknown facts, as applicant (Mujuru) attempts to do by bringing this patently premature application,” he said.

“It is impossible at this stage for the applicant to complain of an imagined infringement of her constitutional rights when the nature and form of that infringement ... is yet to be ascertained,” the RBZ chief added.

However, central bank deputy governor Kupukile Mlambo told the Daily News last month that the RBZ had covered a lot of ground in preparation for the introduction of the bond notes.

“All I can say is yes, October is still the introduction date. The process is not just printing, it also involves design. So, we are well on track,” Mlambo said then.

The announcement of the imminent introduction of the bond notes has caused panic among Zimbabweans as it revived ugly memories of the 2007 and 2008 economic era which was marked by severe food shortages and hyperinflation.

Zimbabwe has for the past few months been reeling from severe cash shortages that analysts blame on gross mismanagement by the Zanu PF government and the country’s dying economy.

Last Wednesday, heavily armed riot police descended on hapless protesters who had gathered in Harare to protest over the deepening economic crisis, including the planned introduction of the bond notes. The brutal crackdown against the vendors and pro-democracy activists — who included radical pressure group Tajamuka/Sesjikile — followed a similar brutal police action against thousands of unemployed graduates who marched in the capital last month.

This triggered an outpouring of anger from many Zimbabweans who were shocked by police’s heavy-handedness, and which was described as a serious violation of the country’s Constitution which guarantees the right to demonstrate. Daily news

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