admin
WHEN the Reserve Bank of Zimbabwe introduced bond coins at the end of last year, the move was met with a barrage of criticism, with many critics claiming the Government was trying to re-introduce the Zimbabwean dollar via the back door. However, with the volatility of the South African rand against major currencies in recent weeks, bond coins have become the most prized possession to Zimbabweans, with the majority of businesses now turning away customers intending to pay using the South African rand.
While the status of the US dollar as the most sought after currency in the country ahead of other currencies since the country adopted the use of multi-currencies in 2009 has its own pros and cons, what has become clear is that the introduction of bond coins is paying dividends.
The majority of businesses now prefer to trade in US dollars and bond coins have come in handy for change, replacing rand coins, as the business community moves in to protect itself from the uncertainty of the value of the rand.
No one wants to remain with a bucket full of rand coins, which might fetch a far less value on the global market if the rand continues to fall.
The economics of the bond coins is that they have the same value of the US dollar, and were introduced to buttress the multiple currency system through the provision of change, especially for the US$ notes which have a smallest denomination in circulation in Zimbabwe.
When introducing the bond coins, RBZ said it expected that the introduction of bond coins would necessitate correct pricing for goods and services which hitherto was constrained by the absence of an appropriate system of coins. And true to that, prices for some goods like bread have gone down.
The coins have also done away with estimated exchange rates which most businesses were applying when changing dollar purchases with rand coins often to the disadvantage of the customer.
“These coins shall therefore go a long way in mitigating the country’s lopsided pricing structure for the convenience of consumers,” said RBZ governor, Dr John Mangudya when introducing bond coins.
The bond coins were issued in denominations of 1c, 5c, 10c, 25c and 50c. The bond coins derived their name from the $50 million bond coin facility that the Reserve Bank arranged for the purpose of providing the coins with intrinsic value.
This means that the coins are backed by real money allowing those intending to use notes, especially when travelling outside the country where the coins are not legal tender, to just walk into any banking hall to exchange the coins to the equivalent in notes.
Zimbabwe followed examples of Ecuador and East Timor, dollarised economies which introduced locally minted coins known as centavos — derived from the Latin word for a hundredth — with a par value with US currency in 2000 and 2003, respectively.
Most shops in the country, and even vendors, have removed price displays that bear South African rand, leaving US dollar signs only, and for the majority, who are vendors in the informal sector, bond coins have become the in-thing.
The currency of Africa’s most-industrialised economy, South Africa, slumped 1.6 percent to 13.6889 per dollar sometime last week, the biggest fall on an intraday basis since 4 September and the most out of 16 major currencies tracked by Bloomberg.
Other major regional currencies which are also readily usable in Zimbabwe like the Botswana pula have also been taking a knock from the firming dollar further increasing the appetite among Zimbabweans for the use of bond coins.
derick.khumalo
Online Reporter