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This is how the cash gets onto the black market

01 Dec 2019 at 06:11hrs | Views
The question is, how on this cursed land is money that the Reserve Bank of Zimbabwe (RBZ) is busy printing getting onto the black market in such huge amounts? The answer is, it's taking quite a team — a smart and sneaky one — to tango.

Basic issues first. As part of its statutory mandate, RBZ prints money. Fake money, as represented by bond notes and coins, or real money, as in the new notes, it doesn't matter. It prints the money through Fidelity Printers, that infamous mill that will soon be running 24/7 as we ratchet towards another hyperinflationary lap post-2008.

The RBZ then dispenses the money to the banks. In practical terms, the central bank reserves some of the money. Listen to this carefully because it will be handy if you care to understand how big-cash leaks happen here in Zimbabwe. The banks then pay depositors, cash upon controlled demand. "Controlled", because there is such a crazy limit on what the depositors—both individual and institutional—can get in a given week. The magic figure, currently, is $300 a week, an amount that won't buy you a crate of cheap beer.

Listen to the following carefully too, because it's priceless detail. It's the RBZ that sets withdrawal limits. John Mangudya, the head-boy at RBZ, recently confided in us, though, that banks use their discretion on what amounts they can dispense to depositors. That followed hard on the heels of a combined $59,000 leakage to the black market,, when the new currency was introduced slightly more than two weeks ago.

As the central bank, the RBZ is at the centre of money circulation. Not only does it preside over the printing and allocation of cash. The law also requires that it monitors and controls the movement of money. One tool it uses to do that is the Supervision and Surveillance division. This unit directs banks on cash limits and gets daily returns on cash transactions. That means the division is, or must be. in the know of who has done what. On a daily basis. And there are chaps who hustle in the morning traffic to get to the office to do just that. They get paid for doing the job, so there is no excuse for anything.

Where banks don't comply with RBZ directives, corrective action must be taken against the offenders. It follows, therefore, that if the central bank doesn't take action, it's sleeping on duty or committing a crime by omission. Worse still, it's aiding and abetting negligence and criminality. But more about this later.

Here is how the cash that the RBZ dispenses moves. Banks receive it and wait for customers. Rather, the depositors wait for the banks because they sleep in queues to get little money and are always back in the overnight queues to get more. Put the depositors in their proper categories. There are ordinary individual depositors. Then there are "special" individual depositors. There are ordinary and special institutional depositors, respectively, too.

The ordinary depositors get what the RBZ says people and organisations must withdraw on a daily or weekly basis. And what the apex bank says they must get is, as already said, very little. The "special" depositors, predictably, get more than what the RBZ says clients must get on a daily or weekly basis. As Mangudya told us, it's not as though they are breaking the law, because the discretion is with individual banks.

Of course, there is a stinking contradiction in that. What's the point of setting cash withdrawal limits if the banks are the ones that are going to decide what to give or keep? It's either you set limits and ensure that they are respected or you let the banks do the deciding. Any other approach is not only inconsistent and contradictory, but an absurdity too. Again, more on this later.

There is another link to the local cash movements. The forex dimension. There are ordinary Nostro account holders, just as there are "special" depositors. And the "special" depositors, as in the case of the local currency, proceed at the "discretion" of the banks. They know no limits because the banks can give them what they want. And this privilege family of depositors can get forex from all other corners too.

Now, how then is the cash leaking onto the black market? Let's get it clear going forward. The ordinary depositors are out of this, absolutely. Even if they were to combine their withdrawals and run a Roadport or Ximex Mall of their own sort, their money would never come close to what we see on the black market.

Not that it's possible for them to do that kind of merger. What they get at the individual level per week is hardly enough to buy three watermelons from Spar.

That leaves the special depositors to account for their sins. We already have anecdotes of this. What happened with the leakages half a month ago colourfully illustrates this. The privileged depositors walk into a bank, get what they want and offload it onto the black market. But this is an apologetic and modest way of putting things across. Quite often, they don't even come to the bank. They fill in withdrawal slips, sign them and give them to the bank tellers and managers at the bar in an upmarket restaurant or hotel.

The bank officials don't do them a favour for free, of course. It's the same old stuff about getting lunch without paying for it and then giving your pot or plates to the benefactor. It's that transactional, and it's called corruption. But then, how come the majority are getting $300 a week and these "special" depositors are getting thousands a day, if not millions, in connivance with the bank officials.

It's RBZ, stupid! More precisely, the chaps that work in the Supervision and Surveillance division. They know what's happening, down to the dot. Because they have the records every day from Monday to Saturday. If you are a pathological optimist, you would want to say these RBZ officers are not doing their job. But then, pathological optimism is a no, no here. The reality is, these officers are part of the syndicate. They connive with the depositors, bank managers and tellers. So, they never follow up on what the "special" depositors use the huge amounts they withdraw on. Deliberately, naturally.

And you don't want to quickly remove Mangudya from that matrix. On a scale of one to 10, the RBZ was forced to issue a statement claiming that it was investigating the allleged Ecobank-CBZ scam by the social media leaks of pictures of the new currency doing business on the black market just after the new notes and coins were dispensed. If the pictures had not leaked, nothing was going to happen. In any case, it's not sure that anything has happened to the bank officials and the depositors. Such press statements are a crisis management shenanigan, always.

And for Mangudya to then publicly announce that banks can use their discretion stinks high and low too. It's a clever — but futile — way of trying to give a smokescreen to the cash scams, one. Two, it gives you the possibility that someone is directly in the know of the scams, at least. At worst, he is also a beneficiary of the cash leaks. Him and his political handlers.

Nothing surprises you about that if you remember the Gideon Gono era. The RBZ was running the cash-churning printer nonstop prior to 2009. Why, because it needed to use the worthless cash dollar to buy foreign currency. And it made no apologies about, sending its officers onto the black market to offload the Zimdollar and buy forex in broad daylight as in the evening and night. That's on record. And it's highly possible that, out of the money that RBZ is printing, a good chunk is being reserved for things similar or equivalent to what Gono was doing. Taking money straight onto the black market and getting forex as a supplement to raiding innocent nostro accounts.

Forget about the boring rigmarole above. Just fast-forward to the fulcrum of the matter. When you hear about black market cash leakages, start with the RBZ. It's at the top, literally.

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Tawanda Majoni is the Information for Development (IDT) national coordinator and can be contacted on tmajoni@idt.org.zw.

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