Traders reject bond coins

Traders reject bond coins
Published: 02 May 2018
SOME retail shops are now rejecting bond coins as the surrogate currency introduced by the Reserve Bank of Zimbabwe (RBZ) in 2014 continues to lose value on the parallel market.

Confederation of Zimbabwe Retailers president Denford Mutashu said retail outlets, mostly foreign-owned and unregistered shops, were no longer accepting coins.

He said the trend was linked to the foreign currency parallel market where dealers do not accept bond coins.

"It is a sad reality and we have notified the authorities asking them to take action," Mutashu said.

"There is indiscipline in the market arising from market distortions premised on shortage of foreign currency and the non-acceptance of the coins on the parallel market.

"Their reason is that they will need paper money to buy foreign currency to replenish stocks and to import raw materials.

"I am sure it is the market forces at play. The parallel market cash traders, who have become the only reliable foreign currency sources, seem to be leading the rejection of coins."

Bond coins were introduced by the RBZ in 2014 to ease the problem of change in United States dollars.

By December 2017, the central bank said $331,94 million worth of bond notes and coins were in circulation.

Since supply of the greenback has dwindled over the past year, bond notes and coins have been the only available currency.

However, bond coins appear to be the only available money around especially as banks are disbursing mostly coins and very little paper money to depositors. The average daily maximum withdrawal at most banks is $20 to $50.

Africa Round Table CEO Kipson Gundani said some of the reasons coins were being rejected were that they were not user-friendly.

"You will see that when you go on the parallel money market, you won't see coins," he said.

"The reason is that coins are inconveniently too bulky to handle. So you will find the appetite for coins gets naturally low. That would be the major reason," he said.

"Secondly, I think that the other reason is the gap between the bonds or real-time gross settlement (RTGS) versus the United States dollar is kind of plateaued at around 150% thereabout.

"If you look at the small retailers, you will find that most of them import the bulk of their wares, and so they are less inclined to accept the coin, which is too cumbersome to handle when they go out to seek foreign currency.

"That is despite the fact that the 'owners' of the foreign currency also have no time for bond coins."

Persistence Gwanyanya, a financial expert, said bond coins had a low premium, hence traders preferred other strong currencies.

"Remember there is now a lot of currency trading in Zimbabwe such that one would normally prefer a currency with higher cash premium to a less rewarding one," he said.

"The order of preference is United States dollars, South African rand, bond notes and lastly bond coins.

"At a cash rate of around 50%, any rational person would prefer the United States dollar compared to the rand and ∕ or the bond note which currently trades at 10%.

"The bond coin, meanwhile, no longer attracts any cash premium and therefore trades at par to RTGS."

He said the rejection of coins by traders showed that the multi-currency system was becoming dysfunctional and it was high time Zimbabwe considered introducing its own currency
- the standard
Tags: Coins,


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