RTGS$ introduction inflicts further pensioner prejudice

Source: RTGS$ introduction inflicts further pensioner prejudice – The Zimbabwe Independent April 5, 2019


Martin Tarusenga: Economic analyst

MANY pensioners now being paid in Real-Time Gross Settlement (RTGS) dollars against their will have reported a drastic reduction in the purchasing power of their pensions.

The RTGS$ is a new name given to bond notes, coins and electronic money (bond notes), in February 2019 after the Monetary Policy Statement then, and the enactment of Statutory Instrument 33 (Presidential Powers — Temporary Measures).

The bond notes themselves had been introduced in November 2016, the value of a bond note being proclaimed by the Reserve Bank of Zimbabwe (RBZ) to be equal to the US dollar.

They were introduced to ease a liquidity crunch that had crept up, apparently caused by externalisation and by the government’s unrestrained borrowing.

Instead of the US dollar that economic agents had placed in banks and in other investments, economic agents were issued with bond notes on withdrawal, with all outstanding US dollar bank balances being re-denominated to bond notes — all this being done on the pretext of the parity of the US dollar and the bond note. That meant that all transactions,
purchases, etc, were, from then on, to be carried out in the bond note.

The parity between the bond note and the US$ was guaranteed by the RBZ on the back of a US$200 million facility that it assured the public was made available by Afeximbank.

Economic agents and the public in general were however not convinced that the bond note would be equal to the US dollar, given the many deceptions they had suffered at the government’s hands — the promised equitable land redistribution that never was, promises of competent management of the economy that has seen Zimbabweans lurching from crisis to crisis, and all these things.

Public suspicions were heightened when restrictions were placed on US$ bank withdrawals, and by reports that the RBZ was apparently coercing banks to buy its Treasury Bills and on-lending to government. Government, in turn, was using these RBZ-sourced funds to pay its huge and unproductive civil service by RTGS (See Professor Steve Hanke’s Zimbabwe:

From Disaster to Disaster). That meant Zimbabwe was back to the 2008 situation, with increasing electronic money (rather than bond notes), pushing inflation up.

Not trusting that the bond note value would be maintained as promised by the RBZ, economic agents took away the US$ from official circulation and kept it to themselves as a store of value. From then on the US dollar would be hard to get from banks and the so-called parallel market began to thrive again. Prices of commodities and services in bond note began to rise. In the event, the demand and supply of the US dollar on the black market, relative to the demand of the bond note for transactions (only) and supply by the
RBZ of the bond note, were such that the value of the bond note would begin to fall against the US dollar.

Within two months of its introduction, someone requiring US dollar from the black market needed between 1,05 to 1,18 bond — that means the bond note was worth between 95 cents (US$0,95) and 85 cents (US$0,85).

A year later, just before the “soft” coup that toppled Robert Mugabe, as much as 2,5 bond were required to get a US$, that is the bond was now only 40 cents (US$0,40). The value of the bond improved dramatically after the military take-over and resignation of Mugabe, buoyed by hopes that any incoming leadership was bound to correct the brazen ills of the country.

Later, when the public arrived at the conclusion that President Emmerson Mnangagwa was not going to make any changes on the running of the country, even on things most obviously not working properly, the parallel market value of the bond note began falling again against the US$ until the fateful October 2018 MPS, when in the aftermath it was vacillating between US$0,25 and US$0,30 (that is between 3,5 bond and four bonds were required to buy US$1).

A pensioner being paid out monthly US$100 just before the introduction of the bond note in November 2016, was losing US$5 of their pension by the beginning of 2017, earning the equivalent of US$95 in bond notes, and was losing US$60 of their monthly pension by the time of the coup in November 2017, essentially being paid an equivalent of US$40 that the 100 bond note was worth. There are at least 100 000 pensioners in Zimbabwe, assuming an average of 50 pensioners per occupational pension scheme, and considering that about
2 000 occupational pension schemes had been recorded by the early 2000s — this excludes pensioners invested in individual insurance schemes.

Assuming an average monthly pension rate of US$100 just before the introduction of the bond notes in 2016, pensioners in Zimbabwe have been prejudiced at least US$100 million in just over a year, by the government, as it seeks to pay the wage bill of an excessively huge and unproductive civil service — this includes those salaries for Finance ministry officials suspected of meddling with the Justice Smith Commission of Inquiry, with the commission report and with the regulator, the Insurance and Pensions Commission

The prejudice inflicted by insurance companies, as clearly abetted by Ipec, which the Justice Smith Commission of Inquiry was meant to resolve, has not even been fully revealed. Apart from pensioner prejudice, many more citizens could be suffering similar RBZ exchange rate-induced machinations (under the veil of monetary policy statements), prejudice running into billions of US dollar, at the hands of the government — a current case in point being farmers who are forced to receive niggardly RTGS$ prices for their tobacco, and now fears that aid for Cyclone Idai victims is at risk of being looted.

Now Section 3 of the Constitution of Zimbabwe on the founding values and principles, particularly those in Subsection 2, requiring “(e) observance of the principle of separation of powers; (f) respect for the people of Zimbabwe, from whom the authority to govern is derived; (g) transparency, justice, accountability and responsiveness”, could not possibly allow for any provisions, let alone RBZ powers, any presidential powers that allow citizens to be robbed — the constitution would be contradictory, serving no meaningful purpose to Zimbabweans, therefore requiring urgent amendment.

As the Parliamentary Portfolio Committee on Finance deliberates on pensioner compensation, for ultimate debate in the National Assembly, pensioners humbly appeal to political parties and their MPs to actively check on the powers of the executive and prevent such wanton robbery of pensioners, of tobacco farmers and other citizens, and ensure
pensioners and other citizens are urgently compensated in US dollars. Otherwise political parties and their MPs will be considered complicit in such robberies.

Tarusenga is general manager of Zimbabwe Pensions & Insurance Rights Trust. — martin@zimpirt.com, (024) 279 7020, Mobile; 0772 889 716. Opinions expressed herein are those of the author and do not represent those of the organisations that the author is associated with.


  • comment-avatar
    kutambura hakuperi 3 years ago

    This term RTGS is fast gaining it’s definition to mean exactly similar to bearer cheques of 2008. Prices are changed upwards daily in shops in defiance of its value just in the 2008 trend.
    Surely going back to 2008 with your eyes wide open? This is poor governance to its breaking point. It is easily seen. How can a headmaster be both internal and external auditor for his school accounts like it’s his home? rural and urban councils, town clerks, company managers and directors, as well as ministers to name a few. These positions are held by highly qualified practitioners but there is no one enforcing the legal and economic part to keep these practitioners under checks and balances. That’s why they automatically become bosses of their own. Not even one among people holding such positions did the law take to prison for financial mismanagement since the dollarisation of 2009. Do you want us to believe they were faithful hard workers? No. Although media is awash with purported accusations, there has never been meaningful convictions. Today it says Hwange rot to the core, but there will be never any conviction if you follow this story. Please put in place deterrent measures, otherwise bosses will continue to destroy our country as they go unchecked.

  • comment-avatar
    ace mukadota 3 years ago

    RTGS money is simply a mickey mouse surrogate currency trying to fool us (pretend) all that it was worth a USD.
    Inside ZW banks there were 10 billion USD on 31 Jan 2019(also worth 10 billion RTGS on that same day)
    Today the RBOZ – 5 April 2019 those very same 3.09 RTGS are equal to 1 USD.
    Therefore the RTGS has suffered a devaluation of 68 per cent since 31 January 2019.
    Greshams law of 400 years ago has been proved correct today, in ZW.
    Moral of the story comrades – hold onto those USD at all costs.

    As far as RBOZ is concerned they & their ZANUPF masters have just pulled off the biggest heist of the 21 st century – those original 10 bn USD inside ZW banks are to day only valued at 3.2 bn USD according to the RBOZ