The illegal foreign currency dealers in Mbare, a southern suburb of the capital Harare, are demanding more Zimbabwe dollars for each US dollar in the event that one is trading with $10 notes.Some traders are now rejecting the ZW10 Note.
According to the RBZ, $10, $5, and $2 banknotes are still legal tender even though they are being rejected in the market.
The $5 and $2 bank notes are no longer in circulation, an indication that even the country’s central bank is following the dictates of the parallel market.
The latest development which has now affected $10 bank notes is not just affecting farmers and vendors but also the general populace.
According to renowned Zimbabwean economist John Robertson, “the banknotes being rejected are very small in terms of value and are not worth handling for money changers. The $10 note is smaller than the $50 note, which also is just a fraction of the US dollar.”
“All these conditions then mean these banknotes cannot create respect in the market,” he added.
Robertson advocated for the introduction of bigger value bank notes such as
$1 000 and $5 000 notes to deal with the problem.
MARK Simango, a banana farmer from Honde Valley located 309km east of the capital, sells his wares at Mbare Musika, the country’s biggest fruit and vegetable market in Harare.
Only returning home once his bananas are sold out, he makes at least US$250 a week. But lately, his earnings have been declining as the $10 notes he has been receiving from customers are being rejected by illegal money changers.
As a fruit farmer, he cannot turn back customers with lower denomination bank notes, although when he then intends to exchange them for greenbacks, they are being rejected.
“It all started about two weeks ago, when the Reserve Bank of Zimbabwe (RBZ) introduced the new $50 notes. To me as a farmer, I felt relieved,” Simango said.
“However, when I then decided to change my money to US dollars, the money changers informed me that they were no longer accepting $10 notes.”
He said he had to pay extra Zimbabwe dollars to get the amount of money he wanted in US dollars and that meant a reduced take-home pay.
Another farmer, Evelyn Chiwa, is facing similar challenges with the $10 notes and has decided not to accept them or pass on the cost of accepting them to her customers.
“When I bring my bananas to the market, I would be targeting a certain amount of money as profit per load. Now when I sell and accept $10 notes and my profits are reduced, it’s no longer business for me. Hence, I had to change as well,” she said.
From their sales, these farmers earn money for things such as fertilizer, seeds, pesticides, and transportation, which are accessible in US dollars.
Shops making it hard to use $10 notes
John Chirinda, a sugarcane farmer, experienced similar challenges regarding the rejection of $10 notes.
“Last week, I went to buy irrigation pipes using local dollars. Unfortunately, it was a mixture of lower and higher bank notes, and that cost me dearly. Instead of charging me $1 300 per length of pipe, I was asked to pay $1 800 just because there were $10 notes,” he said.
To verify the claims of the farmers, TechnoMag visited a lighting shop near Mbare and the shop assistant mentioned three prices for a solar bulb.
“It is US$6. But if using a bank card or cash excluding $10 bank notes, it is $840 at a 1:140 exchange rate, whereas when using cash with $10 included, it’s $1 080 at a 1:180 exchange rate,” he said on condition of anonymity.
“This is meant to discourage the use of $10 notes,” Chirinda said.
Some shop owners revealed that each time a higher denomination banknote is released, it weakens the value of the lower bank notes.
“We sell our cash to these illegal money changers daily, and they are the ones who determine the daily exchange rates against the US dollar. They also determine the rules of the game, and when they feel the $10 bank notes are no longer needed, we follow that in our shops as well,” said one shop owner.
Control of money market
“When I got my salary at the end of June, I withdrew from the bank $20 and $10 notes, and a week later, the same notes I received from the bank were no longer being accepted by commuter omnibuses,” said an elderly man expressing concern.
“I wish I had control of what they give at the bank. But from my observation, the RBZ has since lost its relevance if rules are dictated by other people in the informal market.”
To avoid being arrested for flouting the exchange control laws, formal retail shops increased their prices, anticipating new exchange rates owing to speculation.
“Most of these businesses are rejecting the small cash denominations, as they are participating in the illegal cash parallel market. They withhold all the cash they collect from customers and channel it to the foreign currency black market to buy US dollars,” said Denford Mutashu, the founder and president of the Confederation of Zimbabwe Retailers.