It has been weeks since Zimbabwe introduced a new currency, the Zimbabwe Gold (ZiG) and the notes have not been released as of yet. It is only available for online transactions.
This on its own has sparked panic among citizens.
Already the Zimbabwe Republic Police (ZRP) has arrested scores of illegal forex moneychangers, who were operating in Harare and Bulawayo as well as other parts of the country.
They were converting ZiG into US dollars at a higher rate than that proposed by the government.
They were arrested in terms of the Exchange Control Act, which prohibits illegal monetary dealings.
Under the country’s laws unlicensed foreign currency traders face up to 10 years in jail if convicted and they risk the loss of their money and assets.
The emergence of illegal forex traders as already witnessed with the RTGS dispensation leads to inflation as well as loss of value of the local currency.
It leads to Zimbabweans undermining the currency as well as loss of confidence in the local unit.
Before the ZiG was even introduced, citizens already had doubts about the currency.
The government itself did not take any steps to ensure that people will have confidence that the new currency will be stable and strong.
Upon its introduction, the illegal forex traders were already filling the streets leading to their arrests.
Some businesses had their bank accounts frozen for refusing to trade in ZiG.
These businesses were exclusively trading in US dollars.
The central bank’s Financial Intelligence Unit (FIU) blocked their accounts for exchange control violations.
The root of these hurdles in the implementation of the new currency is lack of confidence in the currency and the failure of government to instil and build confidence in it.
There is trust deficit between the citizens and the government that has had tangible repercussions for policy making and implementation.
The introduction of the currency was devoid of public consultations.
Confidence in the new currency and trust in its management is central to its success.
The government ought to address the trust issues and restore public confidence in the currency and show its ability to manage the economy.
However, just as Reserve Bank of Zimbabwe governor John Mushayavanhu pointed out, confidence cannot be legislated and it has to be earned by the central bank.
This is indeed true as the government cannot rely solely on legislative measures to build public confidence.
Public confidence can be earned through consistent action and transparency.
If anything these legislative measures instil fear in the public as people will be wary of being arrested, but it will not give them faith and confidence in the new currency.
Finance minister Mthuli Ncube highlighted that the government wants the public to have confidence in the new system and that confidence can be built through communication.
Arresting illegal forex traders and freezing accounts of companies will not boost public confidence. It will instil panic.
The law cannot build confidence among citizens.
Confidence in a currency is instilled by making it strong enough to buy anything on the market, yet there are service providers that do not accept ZiG for example fuelstations.
Fuel prices are pegged strictly in US dollars.
All government services should be paid for in ZiG and all domestic payments should be in ZiG.
As long as the government continues to reject the ZiG for goods and services that it offers, the demand for US dollars will remain high, so will the number of illegal forex dealers on the streets.
The government can put in place confidence building measures that make the ZiG the main currency.
Duties are charged in foreign currency, but charging them in local currency will help boost the confidence instead of using state resources to chase around money changers.
This is not to say illegal money changers should be allowed to prowl the streets, but the government can do better in order to instil confidence in the currency.
Making the ZiG the prime and sole currency for all services will be like killing two birds with one stone.
It will build confidence as well as chase the money changers off the streets without having to harass them.
If the government does not put up measures or changes, which ensure that citizens or businesses will not require the services of money changers they will continue to fill the streets.
No amount or level of legislation will build or attract trust in the new currency.
No threats or force will instill confidence in the ZiG.
Just like trust, confidence cannot be demanded it has to be earned as already pointed out.
Earning it means putting in some work and efforts to ensure that there is complete confidence in the works of the government and management of the currency.
Government officials are paid in US dollars yet they expect ordinary citizens to be paid in local currency.
It is like the government itself does not have confidence in its works.
They want the public to accept the ZiG yet themselves are earning in foreign currency.
There has to be a demand for all government officials to be paid in ZiG.
This will enhance stability and build confidence in the new currency.
No citizen will have confidence in the ZiG if there is no shift in policy towards allowances for all elected government officials to be paid in local currency.
Zimbabwe has become over reliant on US dollars, which instead of taking the country forward has kept it in a retrogressive mode because it has neglected the needs or to serve the needs of the majority as it has mainly focused on the needs of the few political elites.
It is time the financial system in Zimbabwe is linked to an economic development plan and not the pockets of the bank owner.
Once the presidium of this land and the legislature change their attitudes towards the use of local currency it will ignite confidence, which will ensure stability.
As Mushayavanhu stated, the government has to walk the talk on protecting the new currency.
Everyone has an equal role to play in ensuring a stable building of confidence.
The rise and fall of the ZiG does not depend on money changers only and businesses, it depends on the attitude towards the currency starting from the executive, judiciary, and legislature down to the common man on the streets.
Legislation cannot build confidence in the currency. The government itself has to have confidence in the currency first in order to build confidence among citizens.
- Mlondolozi Ndlovu is a Zimbabwean media practitioner, media trainer and aspiring legal practitioner at the University of Zimbabwe.