As of yesterday alcohol sales have been banned in all retail outlets countrywide. This comes into effect as a means to mitigate the spread of the Covid-19 pandemic. Currently Zimbabwe has 9 reported cases and 1 death from Covid-19. While globally there are 1,016,401 reported cases with 53,160 deaths recorded.
The ban was put in place to allow shops to sell essential products during this 21 day lockdown while minimising social disorder.
The national police spokesperson Assistant Commissioner Paul Nyathi said the measure had come into place as people were defying social distancing practices.
Police have been deployed to take action on shops that defy the ban. We will see over the next week if this is enforced or if the Government does a U-turn on this decision?
“The lockdown measures were clearly stated and in light of ensuring that we fight Covid-19, there will be no sale of alcohol at any point in places like bottle stores and supermarkets. This comes as we have realised that people who buy alcohol at supermarkets are giving us challenges. They buy and drink as groups, be it either in their vehicles or places of residence thereby defying social distancing,” Assistant Commissioner Paul Nyathi.
“Action will be taken on all those who will defy the order and sell alcohol at any bases. The police today (yesterday) started to take full action and will be visible on the ground throughout the lockdown.” Assistant Commissioner Paul Nyathi.
“People should take heed of Covid-19 and put their health first and that of every citizen in the country as the pandemic is affecting all of us,” he said.
This comes at a time where Delta’s revenue is under massive strain. We are in a situation where disposable incomes are either falling or becoming zero in the extreme case where people are losing their jobs due to the pandemic.
First things first; we promised to update you once the SI Instrument (85 of 2020) was published to confirm the return to multi-currency. It has since been published and boy were we right! Goodbye mono-currency and all the best to ZWL is what we can say for now.
Back to today’s business. Treasury has since published a statement on ‘Economic Mitigatory Measures to contain COVID-19.”
We have seen how other governments have responded to help resuscitate their struggling economies. Ours is such a big yawn. The statement is all over the place and lacks details. Only ZWL500m explicitly mentioned (USD20m at the fixed 1:25 rate). There is also a ZWL200m proposed monthly transfer. How much is that per individual? Even assuming a conservative 1m affected people, that’s like ZWL200/person/month. How much ZESA does it buy? Loaves of bread? The rest remains a wish list.
Companies and individuals expected more concise direction from Treasury. Tax breaks maybe? IMMT waiver? Corporate tax reduction? These are extraordinary circumstances. Money has been wantonly printed before for agriculture. This is a nationwide pandemic which needs all hands on the deck!
For now we are really on our own. This was a perfect opportunity for gvt to ramp up whatever resources, even through the printing press, to help companies keep afloat.
BREAKING DOWN THE AMBIGUOUS RBZ STATEMENT
As everyone (Since all Zimbabwean’s are economists now) already knows the RBZ yesterday released a loaded, but ambiguous statement ‘in response to the COVID-19 pandemic.’ There are a lot of questions that we still have and had hoped the anticipated SI was going to clear a few questions up. In the meantime, we try and break it down according to our understanding, at this stage. Once the SI is out, we will send an update.
COVID-19 & FREE FUNDS USAGE Free
Honestly the two are not directly related. We don’t see how the use of any hard currency to transact helps reduce the spread of COVID. If anything, most of the USD is held as physical cash by individuals and not electronically. This was just an excuse by government to bring back the multi-currency regime and at the same time save face. Remember the ‘no going back, Mono-currency here to stay’ statements?
DIGITAL FINANCES, GOLD & TOBACCO
This could be the crux of the issue. Zimbabwe is having a serious FX crisis with gold production plummeting (not helped by an unfavourable retention regime), tobacco season opening uncertainty and the little issue related to the closure of the only certified refinery to deliver gold to major international banks in South Africa. The only way to access FX would be to allow it to be used formally and hopefully have more of it circulating.
We are not sure if majority of our “free funds” will be transacted digitally as users still don’t have confidence in the financial system and the regulators. As a gold, tobacco or cotton player why would I trust that what is deemed as USD in the system is really USD. Can I use it to pay offshore? If so can I withdraw some of it as hard cash? Or if I don’t spend it will it be swept at 25:1 after 30 days?
Another U-turn reversing the managed float announced some weeks ago! This, in our view, is for the privileged select few that will continue to access USD at this artificial non-market level. We think retailers and service providers will price in such a way that it makes sense for you to pay in hard currency, so they can restock, etc. You cannot have a multi-currency regime with a weak currency that is fixed. There is only one conclusion, ZWL will fail as it will be shunned by users.
SO WHERE ARE WE?
In short, mono currency regime is gone. We are back to multi-currency with the ZWL as part of the basket at a fixed rate. It’s a clever 1:1 regime, except users are (or rather, should be) more the wiser now. There is no coming back from here, de-dollarisation is history!
On Friday the Reserve Bank of Zimbabwe made another proposed policy change regarding the operations of Bureau De Changes in Zimbabwe. Apparently the Central Bank is mulling a series of measures that they claim will “capacitate” the neutered exchanges which have been a non-event in the forex market for months.
Below is a full text of the RBZ notice:
EMPOWERMENT OF BUREAUX DE CHANGE TO ENHANCE THE OPERATIONAL EFFICIENCY AND EFFECTIVENESS OF THE INTERBANK FOREIGN AND EXCHANGE MARKET
Pursuant to the deliberations of the Monetary Policy Committee and representations from various stakeholders on the need to enhance the activities of bureaux de change on the interbank foreign exchange market, the Reserve Bank will capacitate bureaux de change and enhance their buying and selling activities under a comprehensive compliance framework.
This arrangement will culminate in improved visibility of bureaux de change and improve their contribution towards an effective and efficient interbank foreign exchange market.
J P MANGUDYA GOVERNOR
6 March 2020
Why not just let Exchanges have free reign?
Bravo to the RBZ’s attempts to “capacitate” exchanges however here is a thought: Why not let exchanges have free reign and operate freely? Better still: Why not make the interbank open to all, and use a transparent trading system, then there will be no need for Bureaux De Change’s to play such a big role?
The only reason why these exchanges have virtually become useless is all thanks to the central bank’s measures and unparalleled desire to drive the rate down. Last year in September they issued a set of measures that required these exchanges to offer rates within a 7% band of whatever the interbank rate is.
Given how artificially low and opaque the interbank rate is, that was a death blow which mortally wounded these exchanges. A mortal wound from which they haven’t recovered. In the meantime, the interbank rate, far from being the thriving market which we were promised, has become a mere vague number used in official government calculations.
By the Bank’s own admission very little foreign currency is traded at this rate.
About the Author:
Garikai Dzoma is a business-tech blogger, you can find more of his ramblings at zimpricecheck.com