‘Trust our intention’: Mnangagwa

Source: ‘Trust our intention’: Mnangagwa | The Financial Gazette October 20, 2016

VICE President Emmerson Mnangagwa has said it was high time Zimbabweans started trusting government’s intention regarding the introduction of bond notes. This comes as negative sentiments over the imminent introduction of the Afreximbank-backed currency are waning investor confidence.
The bond notes are set to be introduced at the beginning of November as an export incentive. However, the cash situation at banks has deteriorated with some of the banks now failing to meet individuals’ daily withdrawal needs.

Cash is now trading at between 10-30 percent while there are concerns that the country could start experiencing fuel shortages.
The cash shortages and the subsequent panic has triggered a mini-stock rally with the Industrials Index gaining 2,7 percent to close at 108,05 on the back of increased trading activity across the board. Turnover was US$1 337 092.74 with foreign buys at US$4 667,97 against foreign sales of US$599 078,14.  The bulk of the money currently getting into the market is from private clients, who are now moving into assets as business is stalling due to the failure to import. Increased activity has also been seen in the property market.
While giving the keynote address at the launch of the Zimbabwe National Competitiveness Report, Mnangagwa said, while the bond note issue was topical currently, this would not be viewed as a way of bringing back the Zim dollar.
“As Zimbabweans, it is now time that we should start trusting each other’s intentions. We want to assure business and the general populace that bond notes are not going to replace the multi-currencies basket. In fact, the notes are coming in as an incentive to our exporters who play the critical role of bringing the US dollar into the economy. The bond notes are backed by a US$200 million Afreximbank facility and should not be seen as trying to sneak back the Zim dollar before the necessary conditions for de-dollarisation are fulfilled,” he said.
There have been calls for government to reassess the bond note project, which has created loss of confidence in the economy and instead negotiate for the US$200 million facility to be used to increase liquidity of the South African rand to the economy.
However at the same launch the Reserve Bank of Zimbabwe has said that Zimbabwe would not going to adopt the rand to ease liquidity challenges as it has its own challenges, chief among them being a likely increase in regional inflation.
“The US dollar is giving us a headache in terms of liquidity, if we adopted another currency except the dollar it is better to pick another currency, but certainly not the rand as it has its own challenges too,” Mnangagwa said.
While some economists suggested that Zimbabwe could become a member of the Common Monetary Union (CMA), RBZ deputy governor Kupukile Mlambo said the country could not do that as it does not have its own currency (a pre-requisite of joining) and that South Africa could not afford to print its currency for the region because it will become inflationary. Although the rand is legal tender in all the CMA states, the other members issue their own currencies. However, these are exchanged at par with the rand and there is no immediate prospect of change. FinX