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Forex dealers rule the roost amid cash crisis

by Staff reporter
09 Aug 2017 at 12:48hrs | Views
ILLEGAL foreign currency traders - popularly known as osiphatheleni - are flourishing in Bulawayo, as desperate Zimbabweans flock to them in attempts to access cash.

While police descend on the money dealers almost on a daily basis, lately, the illicit traders have operated freely on pavements in the CBD, openly carrying hordes of the much sought-after cash.

While banks have reduced withdrawal limits to as low as $30 per day, the streets are awash with cash, where clients are able to access thousands easily.

In the city, osiphatheleni hot spots include, TM Hyper, Tredgold and 5 Avenue, otherwise known as the World Bank due to its fame as an illegal forex dealing hub.

However, it is the new lease of life that seems to have been given to these illegal money changers following the introduction of the bond notes.

A survey by the Daily News this week revealed a sharp increase in the numbers of the illicit money dealers.

To get US$100, one needs to have at least between $106 and $107 in bond notes - a six to seven percent premium.

Recently, the Reserve Bank of Zimbabwe deputy governor, Kupukile Mlambo, admitted that the introduction of the bond notes last year gave life to the trade that had somehow been subdued during the multi-currency regime.

"But more alarming is the rise of the black market that we are seeing now," he said while in Bulawayo.

"If you go near the Tredgold Building in Bulawayo there is a huge market that is going on there. If you go to Roadport or Eastgate in Harare, you see people holding huge amounts of bond notes and dollars," Mlambo said.

As a result, he said, illegal foreign currency trading on the parallel market has resurfaced, further hindering the central bank's efforts to clear the backlog of foreign payments of close to $200 million.

Economist, Butler Tambo, acknowledged the upsurge of the money changing business in the second capital.

"What has made osiphatheleni thrive in a difficult market where there is a serious cash shortage in the country is that when the bond notes were introduced, there was no confidence in the market over their use," Tambo said.

He added: "With massive government borrowing from the domestic market as seen by the issuing of Treasury Bills to the tune of US2,1 billion, bond notes began to be discounted against the US dollar and rand and with the cash shortage persisting, the black market has arisen for cash being sold as people fail to access hard currency in their accounts."

He further noted that all this, coupled with a lack of domestic production, poor exports and a huge import bill, has compounded an already bad situation.

"This has led to the current case of osiphatheleni coming back on the streets in full force," he said.

Affirmative Action Group regional chairperson Reginald Shoko also noted the effects of the bond notes in the market, in relation to the upsurge of osiphatheleni business.

"The parallel market is thriving due to a number of reasons ranging from indiscipline in the economy to survival tactics. Since the introduction of the bond notes a number of the foreign currency dealers has increased as seen at the Tredgold and other hotspots.

"Initially, the bond notes traded at 10 percent against the dollar but of late you hear rates of up 25 percent," he said.

"It seems the traders get the forex from the formal system mainly from cash-driven businesses like service station retailers, fast food outlets at a premium and they sale it off at a profit to either companies and individuals who can't wait for central bank allocations or they want to purchase services and goods not on the priority list of the central bank."

Another analyst, Mandla Tshuma, said regardless of their practice being illegal, osiphatheleni has now become more relevant than ever because they offer people services which banks are failing to offer.

"Talk of rands, US dollars, pounds and so forth, you can get them from osiphatheleni at reasonable rates. DStv subscribers also now depend on osiphatheleni for the US dollars required to pay for their subscriptions," he said.

Source - dailynews