Bond notes under siege

Published: 04 January 2019
The bond note is increasingly suffering rejection from the corporate sector after Delta Corporation Limited went public on Wednesday saying it will be selling its products in hard currency.

Delta said the move was aimed at sustaining its operations in the wake of serious shortages of foreign currency.

Analysts told the Daily News yesterday that the move by Delta has far-reaching implications on the country's tottering economy.

More companies are seen demanding greenbacks for their products, thus pushing the broader workforce to agitate for hard currency salaries.

Already, doctors, nurses and teachers have put their employer on the spot, saying their remuneration should be in foreign currency.

Writing on his blog The Big Saturday Read, United Kingdom-based Kent University law lecturer Alex Magaisa, said it is clear that both capital and labour have rejected bond notes.

"More companies will follow and more workers will take the doctors' route. There is, it seems, an inexorable march towards re-dollarisation and the demise of the surrogate currency," said Magaisa.

"It's going to be a hard year but one in which, I think, the country will be forced to new settings. Because current settings have, quite frankly, become moribund," he added.

It, however, remains to be seen how government will deal with the situation, as it has asked for a round-table meeting with Delta to address the matter.

Industry and Commerce minister Mangaliso Ndlovu has described the move as illegal, despite the fact that Zimbabwe allowed the use of multi-currencies in February 2009.

It was in 2016 when the Reserve Bank of Zimbabwe (RBZ) introduced the bond note as an export incentive.

Its functions were subsequently expanded to ease the liquidity crisis which saw long queues developing in banking halls.

The bond note has been on a free-fall since the introduction of a new fiscal policy framework in October last year which saw the introduction of separate accounts for foreign currency and the Real Time Gross Settlement (RTGS) balances.

This created uncertainty over the future of bond notes, with the surrogate currency suffering heavy losses on the black market.

Yesterday, the Zimbabwe Congress of Trade Unions (ZCTU) said all companies selling their products in US dollars must also pay their workers in that currency.

ZCTU president Peter Mutasa told the Daily News that the main labour union has as far back as 2016 been campaigning against the bond note.

"While Delta has taken a unilateral decision, we understand that it has taken a fair stance which will enable it to sustain its operations. Salaries should be pegged in US dollars.

"If we are to follow Gresham's Law, there are no two currencies that can operate at par. Delta is communicating the message that labour has always been communicating since 2016. It's very unfortunate that all along business has been siding with government," Mutasa said.

President of the Confederation of Zimbabwe Retailers Denford Mutashu, said re-dollarisation will result in price increases for those paying through electronic means.

Mutashu said businesses are now faced with a situation whereby they must consider viability and sustainability of their operations.

"As long as the foreign currency situation remains dire, the problem may persist. Delta has simply been bold to come out, otherwise most suppliers and manufacturers are doing it, including some that receive foreign currency from the Reserve Bank.

"Fuel dealers, schools, school uniform dealers, raw material suppliers etc are all demanding payment in foreign currency. If you look at the Delta model, they have many other suppliers along their value chain and most have been demanding payment in foreign currency both domestic and foreign. It makes the situation dire," Mutashu said.

MDC official David Coltart, said Delta was bringing reality to the fore and that President Emmerson Mnangagwa and his team were out of touch with reality.

"The Mnangagwa regime and its sycophants are increasingly out of touch with the reality of the current economic situation. Fortunately, businesses have to confront this harsh reality and some have to guts to confront the absurd policies of this government. Amhlophe Delta," he said in a Twitter post.
- dailynews
Tags: Bondnotes,


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