Mutare vendors juggling Rand coins

MUTARE - With US coins scarce, trade in South African coins is proving to be brisk business for locals.

And Mutare’s vendors are the city’s unlikely but most aggressive Rand coin dealers — twisting local business maths.

A US dollar note has been trading constant to eight Rand on the black market for years now and it’s on this rate that vendors have built their empire.

A cigarette costs one Rand, and eight Rand will buy you eight cigarettes with the same eight Rand if converted to a dollar which can now buy you 10 cigarettes and earn you two Rand change.

At Mai Gogoya’s Tuck Shop in Dangamvura, five eggs cost a dollar while an egg will cost you two Rand so six Rand will buy you three eggs but she will give you five eggs for eight Rand.

“They make it a point not to use the Rand which we earn before converting them to US dollar notes as they risk making losses as some of their merchandise will only make them profits because of the exchange gains,” Liberty Kariati a local vendor said.

“We want access to Rand coins, which we will then exchange for US dollars notes to top up our profits with an exchange gain to complete our transactions before starting the cycle all over again,” Kariati said.

Zimbabwe has been saddled with change problems since the introduction of multi-currencies in February 2009.

Retailers are offering consumers credit notes, tokens and even sweets to settle small change.

Even airtime vendors who buy juice cards for $0,92 each are willing to sell them at eight Rand with the hope of recovering their profit on exchange to the US dollar.

“I accept eight Rand but I cannot use it to purchase airtime so I will either have to use it for transport or exchange it for a US dollar note,” said Lyn Gwenzi an airtime vendor.

The vendors, like true scavengers pounced on the opportunity after an epidemic of vouchers which most transporters were dishing out like confetti often as a way of holding on to clients while yet others would sneak into routes they normally do not ply, dish out vouchers and disappear for good, a cursory investigation revealed.

With a route like Dangamvura —town with more than 90 registered vehicles plying it was a rich hunting ground for crooks and scoundrels.

“Vouchers were used to defraud many people here but we may never be able to tell how much locals lost in the scheme but its substantial,” Pamela Hanisi, a student said. 

The biggest problem with vouchers was that they were not acceptable across transport operators which meant they had no value except to the issuer apart from the risk of them getting lost.

“I would rather buy my children a packet of biscuits or sweets on my way home and use the coins I receive as change for my fare than to risk being given a voucher which will only be accepted by that one transporter,” Cathrine Girazi, a local, said.

For many, buying sweets and biscuits from the vendors that line the pavements on ranks gives them a sense of control over their purses even though it’s often forced due to unavailability of change.

And the vendors’ favourite merchandise are things that cost a Rand or two Rands each — things they feel people get an impression they can spend on without straining their budgets.

“Most vendors are being sustained as long as there is a shortage of change,” Kariati said adding that he was going to do his best to ride the wave while it’s still there through financial discipline.

“We are playing at the edge of a cliff with regard to our profits and losses and it calls for a lot of discipline,” Kariati said.

Government has been grappling with the problem from as far back as 2011 when former Finance minister Tendai Biti said in his budget statement that government had engaged the United States Federal Reserve over possible provision of coins to ease small change problems in the country.

“I am pleased to advise on the fruitful interactions with the US Department of the Treasury which stands ready to facilitate access to acquisition of smaller denominated coins and replacement of soiled notes through the US Federal Reserve and commercial banks,” Biti said.

“I will, therefore, be finalising on this in conjunction with the banking system, that way resolving the matter of challenges with change and coins.

“The availability of both US dollar and Rand coins will do away with the challenges posed by the current need to apply cross rates in giving change in Rand coins for transactions undertaken in US dollars,” Biti said.

“Whilst this problem should be alleviated by electronic payment systems, the large size of the informal sector and the lack of infrastructure for electronic payment systems in rural areas necessitate the availability of large volumes of small denominations.”

But the plan was stymied by transportation problems. Because the coins were bulky, there was a crisis over how to transport them to Zimbabwe, and attendant security concerns.

While there is political will to tackle the problem, there are insurmountable challenges, and the problem of change could be here to stay for a while longer, for as long as US dollars remain legal tender.

Comments (1)

Ecuador also uses US dollars since they gave up their own currency, the sucre, as a result of runaway inflation. However, the Ecuadoreans have minted their own coins from 5c to 50c (and maybe $1). There is a mint in Bulawayo - why cannot Zimbabwe do the same? It doesn't really matter if the coins aren't backed by anything as the amount any individual is going to hold will always be very small.

Keith Potter - 31 December 2013

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