Where is ZiG cash?

Vendors and small businesses, which typically rely on cash transactions, are finding it difficult to provide change.
A deep dive into the ZiG circulation conundrum

Economy Uncensored with Tapiwanashe Mangwiro

In recent months, Zimbabweans have found themselves in an unusual predicament, despite assurances from the Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mushayavanhu, that the newly introduced Zimbabwe Gold (ZiG) currency has been adequately distributed to banks, citizens are increasingly frustrated by a shortage of cash.

The conundrum has led to widespread difficulties in obtaining change for everyday transactions, igniting a debate about the actual state of cash flow in the economy.

To unravel this puzzle, a survey was conducted, revealing an interesting dynamic at play. The results showed that banks have indeed received the promised cash from the RBZ and have it available. However, the issue seems to lie not in the distribution but in the withdrawal habits of the populace.

The cashless culture

In recent years, the country has seen a significant shift towards cashless transactions. This transition was initially driven by hyperinflation and the collapse of the Zimbabwean dollar, which led to a severe cash shortage and the subsequent adoption of digital and mobile payment systems as the norm.

As a result, the convenience and efficiency of electronic transactions have ingrained themselves deeply in the daily lives of Zimbabweans.

Now, even with the introduction of the ZiG, this entrenched cashless culture means that many people are simply not withdrawing cash from their banks. Instead, they prefer to continue using bank transfers and swiping cards for their purchases.

This preference has led to a peculiar situation where cash is theoretically abundant in the banking system but scarce in the hands of the public.

The bank’s perspective

Banking institutions across Zimbabwe confirm that they have received ample supplies of the ZiG currency from the RBZ.

“We have the cash, but there’s a clear reluctance from our customers to withdraw it,” said a manager from one of the major banks.

This statement is echoed by several other financial institutions, suggesting a consistent pattern across the sector.

This trend is understandable given the past experiences of Zimbabweans with cash shortages. Many have become adept at managing their finances digitally, avoiding the need to handle physical money altogether.

Furthermore, the convenience of cashless transactions offers a level of security and ease that cash cannot match, especially in a country where economic instability has been a recurrent issue.

The implications for everyday transactions

The reluctance to withdraw cash has led to practical challenges in the marketplace. Vendors and small businesses, which typically rely on cash transactions, are finding it difficult to provide change.

This difficulty is not due to a lack of money per se but a lack of physical cash in circulation among consumers. The vendors and small businesses are largely unbanked as well, meaning they rely on their customers to bring the notes and coins.

For example, in local markets and small retail outlets, vendors often struggle to pay change denoted in cents, forcing consumers to round off their prices with smaller goods.

This has led to a cycle of inconvenience, where both buyers and sellers are affected. Consumers, used to the immediacy of cashless payments, now face a dilemma when cash is required, but appropriate denominations are unavailable.

The role of the RBZ

Dr. Mushayavanhu and the RBZ have been proactive in trying to address these issues. The release of the ZiG currency was a strategic move to stabilise the economy and instil confidence in the local currency.

However, the central bank’s efforts need to be supported by a change in public behaviour to be truly effective.

One potential solution could involve incentivising cash withdrawals. For instance, banks could offer small rewards for customers who withdraw cash or the RBZ could run awareness campaigns highlighting the benefits of keeping some cash on hand.

The ZiG currency saga is a complex issue that goes beyond mere supply and demand. It highlights the significant behavioural shift towards cashless transactions that has taken root in Zimbabwe over the past decade.

While the RBZ has successfully infused cash into the banking system, it now faces the challenge of encouraging its actual use in everyday transactions.

Ultimately, the solution lies in balancing the benefits of a cashless society with the practicalities of cash-based transactions.

Until then, the mismatch between available cash in banks and cash in circulation is likely to persist, continuing to inconvenience many Zimbabweans in their daily lives. The RBZ, banks, and the public will need to work together to navigate this transitional period effectively.

Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn-ebusinessweekly