It’s exactly 8 days after the Finance Minister announced the introduction of a new tax whenever we transact on electronic platforms. He of course made the announcement at the same event where the Governor of the Reserve Bank of Zimbabwe announced the separation of bank accounts into a dedicated RTGS funds account and another for hard currency deposits.
The chatter that resulted from these two announcements has been just crazy. Everything was said from the legality or illegality of one or both of the announcements to partisan debates that profit nothing to just sighs of resignation across the country. Besides the debate though, real changes have ensued. Prices are now going up by the hour or less when they were going up daily just prior. It feels a lot like 2008 2.0.
President Mnangagwa has commented on the 1 October pronouncements and essentially described them as bitter medicine. He might as well have quoted the Shona proverb that says, “Muti unovava ndounorapa (it’s the bitter herb/root that heals effectively)”
Here’s the president’s statement:
Last week, Minister of Finance Mthuli Ncube, drawing on his vast experience as chief economist and vice president at the African Development Bank (AfDB), announced a series of measures to reform and revive our economy, and put us on the path to steady economic growth. Cognisant of the scale and urgency of the challenges facing us, our plan is bold and far-reaching, and will have the desired effect.
I have read your comments and understand the difficulties many face, and Government will do all in its power to minimise them. We are already taking the lead by cutting back on unnecessary spending. The only way to a stronger economy is to restructure, rebuild and reform. We must all be realistic. Whatever some may claim, there are no silver bullets or quick fixes. There is no need to panic, and Government is guaranteeing the availability of all essential commodities, including fuel. We are on a shared journey to a better and more secure future. The road is long, winding and at times bumpy, but there is no other way. This is the road to a middle-income economy, and if we travel it together, with patience and purpose, we will realise our vision.
We sincerely hope that the president is right.
Of course, to get a clear understanding how the electronic transactions landscape looks like in Zimbabwe, buy the Techzim Insights Report that covers this. It’s only $4.99 via EcoCash below:
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7 comments
Why dont you allow the US dollar to come in freely and deposited in banks as before with a realistic exchange rate for those wishing to convert? That way all the diaspora currency will come into the banks and you will have forex
The FCA will serve exactly that purpose from my point of view. Here is what used to happen before: You had one account which meant whenever you deposit any money, whether in the form of bond notes or the Forex, when withdrawing that money you would get the BOND notes, but right now, if you deposit the bond, it goes into the RTGS account, but if you deposit any Foreign currency, its placed in the FCA and any withdrawal will be in forex, that way it will improve the banking culture in those who receive forex from the diaspora.
The challenge I have with believing that is that the sole reason this separation of accounts is happening is so that the government retains USD in people’s accounts and so that it even ‘borrows’ this money. If people want to withdraw what has been remitted to them from the diaspora immediately after it hits the account then still what the government wants will not be achieved. Once that happens, the government will introduce all sorts of restrictions on accessing that FCA account and we will be back where we are right now.
This is what happened with Bond Notes. The idea was thast we use these instead of USD soi that the government ‘borrows’ our USD. The resulkt was that although the inital promise was that you could get to the bank and demand your withdrawal in USD. This didn’t happen did it? What good would have the bond notes been if we still continued to demand and get USD?
What is motivating this move is what tells me that the wheels will come off. The incentives of government, banks and depositors are not aligned
I donot know whether Mr Ncube realises that they are fighting a losing battle. The tax will only discourage the market from using certain transfer systems, and with the introduction of the exceptions to the tax, the Minister has given people a way to avoid the tax altogether. By waiving the tax on forex transcations, government has only raised the level of demand for forex. Eventually i foresee businesses preferring and insisting on forex payments in order to avoid the tax. Higher demand for forex will hurt the “Zimbond dollar” there by fueling inflation as the local currency falls through the floor.
I say to all Zimbos , time to organise a real “revolution” and rebuild our beloved Zimbabwe. Every second we wait, the deeper we fall, eventually we will be in so deep it will be impossible to climb out of this hole .
Here we go again …. The Mugabe Legacy lives on. They don’t know of any better solution than getting rich themselves and making 99% suffer, just like the Mugabe Cabinet did after 2009.
Correction should be after 2013
And just where is the average person supposed to get the force to buy anything now that most companies want to be paid in US $, or they convert it at some exorbitant rate for rtgs/bond payment. All this does is encourage the black market for US $ AND sends our cost of living rocketing!