SOUTH African banks have blocked their Zimbabwe counterparts from importing United States dollars as a measure to mitigate the risk associated with dealing with Harare-based institutions, a senior Reserve Bank of Zimbabwe (RBZ) official has said.
RBZ deputy director for financial markets William Manimanzi said the move by South African banks would give headaches on where to source the greenback, mostly needed to pay small-scale gold miners, from.
Manimanzi said the lowering of the forex retention threshold for small-scale miners from 70% to 50% was mainly informed by the fact that traditional sources of USD cash had shut their doors on Zimbabwe.
“Let me come to the most fundamental issue that most of you are interested with. It’s important to note that gold from small-scale miners is paid for in USD cash. What it means is that we have to import that cash and we got to earn foreign exchange first. We need to bring the foreign currency in the country and give to whoever is responsible of buying gold,” Manimanzi said.
Zimbabwe adopted the USD as a transacting currency among a cocktail of other currencies in 2009 to avert runway inflation, which had rendered the local currency worthless.
“I think you are all aware that we are not officially dollarised. When I say officially dollarised, I mean we don’t have an agreement with the United States that we were going to adopt their currency officially; we just unofficially dollarised. What that means is it’s very difficult to bring cash (USD) in this economy. Where do we get our cash (USD) from? Ordinarily, we import from South Africa and most of the banks due to what is called risking issues, have now given us notice that they can no longer provide our own local banks with cash. So we are in a catch 22 situation. The only bank remaining was FNB and they gave notice in December that they will no longer supply our own local banks with cash,” he said.
Manimanzi said the country had a lot of USD circulating, mostly in the informal sector due to lack of confidence in the formal banking system.
“But do we not have enough cash in this economy. I am not sure, but the only challenge is that when cash gets out of the system, it never goes back. Why? It is because of confidence issues. Where does the cash go to? Under mattresses in homes? If you go to the informal market, you will be amazed with the amount of US dollars circulating there. So we have enough cash, but that cash is not circulating in the formal sector,” he said.