What we have been witnessing is that if you go to your bank, the maximum withdrawal limit – for those banks which are still sound is $500 per day. Some are giving as low as $20 a day, such that the average withdrawal limit in the banking system is about $100 a day. People are losing productive time going to the banks to withdraw money for their day to day transactions. We are losing a lot of economic value because people are making journeys to banks.
Those who need to pay RTGS to external suppliers are finding it very difficult to pay their debts. Schools fees are a problem for those with school going children because they cannot transact using the RTGS. Internally, people cannot settle their transactions because the amount of interbank RTGS is also limited. Some banks are actually running out of cash, as you all know.
The premium on the parallel market has emerged. There are now barons who are emerging and charging parallel market rates to give cash. If you go to the parallel market wanting cash, say $1000 – you are given that $1000 cash and you have to make a RTGS to the bank account of the supplier on a premium of about 10% to 25%. The parallel market has emerged. Companies and individuals are defaulting because of the cash flow problems. In fact, the bad loan accounts of banks is increasing because people cannot settle their accounts. The ordinary person is suffering from the cash crisis. Those who are renting properties cannot find cash to pay for their monthly rentals and so on and so forth.
I have tried to paint the picture of the complications caused by the shortages of cash in our banks. I want to move on to the fundamental causes or the reasons why we have no cash because it is one thing experiencing these problems, but another understanding where it all came from. In my research I have identified ten reasons why we have got cash shortages in our banking system.
The overall reason is confidence crisis. Money markets operate on the basis of confidence. If confidence is reduced we get problems. I am going to unpack the issues around confidence which have triggered a run on the cash in the banks. These are policy ambiguity and inconsistence, debt service, budget deficit and continued borrowing, illicit financial outflows, trade deficit and weakening of the Rand, depletion of the nostro accounts, sluggish growth in the economy, low national savings, non-usage of plastic money and liberalisation of the capital account. I have come up with ten solid reasons which led to confidence crisis and triggered cash shortages on the financial sector.
I now go to unpack these reasons. I will start with policy ambiguity and policy inconsistence. You will recall that in December 2015, two Government Ministers contradicted each other on the policy of indigenisation and economic empowerment. They were at cross purposes, that is, Hon. Minister Chinamasa and Hon. Minister Zhuwao in interpreting the indigenisation policy. Hon. Minister Chinamasa was of the view that indigenisation must be carried out sector by sector, taking into account the specific features of each sector. Hon. Minister Zhuwao was of the opinion that the indigenisation policy must be implemented wholesale. He threatened to withdraw licences of those companies that had not complied with indigenisation, even banks included.
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