Let's embrace bond notes

HARARE - As one of Zimbabwe’s most prominent business persons and lifelong advocates of the advancement of the indigenous people through affirmative action and a member of the ruling party Zanu PF, it is important that I make a clear and unequivocal statement on the importance of a recent decision by the Reserve Bank of Zimbabwe (RBZ) to introduce bond notes into the economy in order to bolster our export base and potential thus assisting to ease circulation in the economy.

Contrary to the skeptical views and the ambivalence by other segments of society, I believe that bond notes have taken off to a good start despite concerted efforts to discredit this novel move at a critical juncture in our battle to breathe life into our economy.

Bond notes are a supply side policy tool that is designed to enhance the production of exports through giving an incentive of up to five percent of export earnings.

This is a necessary intervention in order to stimulate export production just like what is happening in other countries, including South Africa, where the incentive is 14 percent.

Over time,  bond notes shall reduce queues at banks when the bond notes are banked thereby circulating in the economy.

Currently, the circulation of US dollars is limited by the fact that the greenback is more of capital than a trading currency and over capital flight.

All Zimbabweans need to embrace bond notes.

Everyone can see that although we still have people queuing for withdrawals, the net effect is that the situation is markedly a lot better today than before this intervention.

The results are already visible. Queues are fast disappearing from banks, cash is now finding its way to the banks.

Productivity will increase as people now find time for production unlike before where most of the time was spent in bank queues.

A medium of exchange only works when there is confidence in supply and demand matrix. Suppliers should be willing to accept the medium of exchange offered by the customers. It therefore calls for confidence in the Zimbabwean banking system, once there is confidence bond notes will do wonders for the economy.

Exporters needed incentives to generate foreign currency for the economy. It is imperative to understand the economics behind incentivising exporters. The world over exporters are supported by their respective countries.

The support granted to exporters enhance their competitiveness on the global market. Some countries even go as far as supporting exporters who are exporting their commodities at cost, at times even below cost.

Such circumstances will lead gross disparities in the global pricing structures resulting in prices from exporter supported countries being significantly less than those exporters without support.

Low-priced commodities usually disappear from the shelves first. There is therefore need to even the playing field to enable growth in exports.

The incentive will draw more players into exporting their commodities as there is a guaranteed return through the five percent rebate.

As our export capacity and performance expands, the five percent rebate will generate revenue that will allow for expanded expenditure resulting in more money being available for use by both the ordinary public and business. At this stage, it is important to note that the bond notes are only part of a wider policy framework directed at dealing with the broader economic challenges.

It is a process and therefore will take some bit of time to realise the full benefits.

The greenback is in high demand the world over, it is actually a commodity in addition to being a trading currency.

Its presence attracts a host of problems with all sorts of activities going on just to lay hands on the greenback. We have been a victim of poachers who poached and exported the greenback we had in circulation.

Others have not exported it but took it out of formal circulation. I believe there are lots and lots of US dollars in Zimbabwe, stacked in safes, pillows, under beds etc…

The bond notes have come at a time when we needed a solution the most. Suppliers should accept bond notes. There is no place for you in Zimbabwe if you reject bond notes.

Comments (3)

I agree with the columist that we all need to embrace bond notes. But I disagree where you say ques are now disappearing from the banks. Dont lie. While bond notes are going to ensure availability of cash in the short term, they will give more problems than solutions if managed recklessly. Bond notes will not help ease international payments head ache, bond notes are local and will not help cross boarder traders skip boarder to go and buy from down SOUTH. Bond notes are not currency, and can be classified as bad money. According to Thomas Gresham, when 2 kinds of money having the same denominational value are in circulation, the intrinsically more valuable money will be hoarded and the money of lower intrinsic value will circulate more freely until the intrinsically more valuable money is driven out of circulation, bad money drives out good money.

DZIMBABWE - 8 December 2016

Ndiyani akamunyorera zvese izvi,anozviziva here?

James Bondnote - 8 December 2016

Ndiyani akamunyorera zvese izvi,anozviziva here?

James Bondnote - 8 December 2016

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