All money belongs to the government anyway

David Chapfika, who was chairman of the Parliamentary Budget and Finance Committee in 2003 when cash was so short that supermarkets were selling it to business, said there was no need for anyone to carry huge sums of money because all the money belonged to the government anyway.

At the time, police had taken to arresting people found with large sums of money and confiscating the money. They suspected that these people were involved in illegal transactions.

The United States embassy said it was surprised by Chapfika’s statement as he had failed to run a bank.

Full cable:

Viewing cable 03HARARE1339, ZIMBABWE CASH CRUNCH TIGHTENS

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This record is a partial extract of the original cable. The full text of the original cable is not available.

011446Z Jul 03

UNCLAS SECTION 01 OF 02 HARARE 001339

SIPDIS

NAIROBI FOR CNEARY

E.O. 12958: N/A

TAGS: ECON ETRD ELTN ZI

SUBJECT: ZIMBABWE CASH CRUNCH TIGHTENS

¶1. Summary: The shortage of local currency continues to

worsen despite assurances by the Reserve Bank that more

money is being printed. This, in addition to other

widespread shortages in the country, has added to the burden

of most Zimbabweans, who now need wads of low-denomination

bills to procure basic necessities. It is apparent that

most people prefer to keep their cash at home to avoid the

disappointment of not getting any at the bank or being

restricted to amounts as little as Z $5,000 (US $2.12) per

withdrawal. End summary.

————————————–

ILLEGAL TO CARRY LARGE AMOUNTS OF CASH

————————————–

¶2. In another Alice-Through-the-Looking-Glass application

of the law, some policemen are arresting people and

confiscating the money of those who are in possession of

large amounts of local currency. The police are arbitrarily

demanding that people account for their money on mere

suspicion that they could be involved in illegal

transactions. The police seem oblivious to the fact that

the local currency has lost so much value that US $100 now

exchanges for Z $235,000 — and is often only available in

$50 and $20 notes. MP David Chapfika, the Chairman of the

GOZ’s Budget and Finance committee, was quoted stating

“there is no need for anybody to be carrying huge stacks of

money,” and that all money belongs to the government anyway.

We note for the record that the bank Chapfika once headed

collapsed from insolvency in 2001.

¶3. The much-looked-for infusion of more than Z $2 billion

in Z $500 notes, originally slated for the end of June, has

not yet materialized despite GOZ-daily headlines to the

contrary. Commentators across the board note that the GOZ

should be printing $1,000 (or even $5,000) notes. Some

reports indicate that a $1,000 note may be introduced by

November 1. Those reports also hint, however, that upon its

introduction, all existing $500 notes must be converted

within a prescribed time period, after which they will no

longer be legal tender. One local economist warns that if

the GOZ limits the amount that an individual can convert (as

has happened in other nations’ banking catastrophes), the

public stands to lose millions in capital while the GOZ

stands to gain an immense windfall. The possibilities for

corruption under such a scenario boggle the imagination.

———————————–

MOST TRANSACTIONS NOW ON CASH BASIS

———————————–

¶4. While a few banks use the availability of cash through

their ATM machines as an incentive to account holders, even

those sources have largely dried up. Commercial bank ATMs

which previously offered maximum withdrawals of up to Z

$90,000 (US $38.30) have been empty for the past week.

Further, many of those banks which provided large amounts of

cash through ATMs are commercial banks which cater to an

upscale clientele. Due to structural differences such as

transaction fees and minimum balances, most Zimbabweans hold

accounts (and receive their paychecks) through building

societies and the Post Office savings bank, which are more

on a par with US homestead or savings & loan institutions.

Unfortunately, it is these institutions — which service

the majority of the population — that are struggling most

with the cash shortage, since they have less access to cash

than the commercial banks. During the past few weeks, it is

routine to see queues of several hundred people lined up at

each building society branch by 6:00 am. When the doors

finally open at 8:00 am, the patrons are often limited to Z

$5,000 to Z $10,000 (US $2.13 to $4.25) apiece.

¶5. Many businesses, including doctors and pharmacies, are

now demanding cash instead of checks because of the

downstream problems associated with withdrawing money from

the banks. More and more shops and restaurants display

announcements that checks are not accepted. Almost all fuel

for individual motorists is now sold on the black market,

and on a strictly cash basis. Public transport — whether

through commuter omnibuses or ride-sharing with a helpful

motorist with extra seats — is available only to those with

cash. Commercial banks now request their clients to make

prior arrangements to withdraw large amounts of cash, which

may take days or weeks to process. Traditionally, cash has

become short at the end of the month as many employers

process their payrolls on a monthly basis, with uniformed

services drawing their pay first and civil servants last.

At the end of the month, the queues grow longer, the cash

supply becomes tighter, and the tempers of even normally

placid Zimbabweans grow short.

——-

COMMENT

——-

¶6. The burden of the cash shortage falls primarily on

ordinary Zimbabweans, and disproportionately on those least

able to afford it. Many of the more affluent, including

diplomats and other expatriates, are shielded to some

degree, but even the Embassy’s American employees are

limited in the amount of cash they can obtain on a weekly

basis. This week’s accommodation exchange through the

Embassy was US $50; last week’s was US $40 (which is still

more than many Zimbabweans make in a month). While this

constitutes an inconvenience for Embassy employees, many

locals are making the hard decision between spending their

scarce cash on healthcare, food, or transport. It remains

to be seen whether this situation is an aberration, rather

than a new order of business, in the quagmire of the

Zimbabwean economy.

Sullivan

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