IF government manages to deliver on its promise that US$20 million worth of special coins will be in introduced into the Zimbabwean economy next month or in December, hard-pressed local consumers will at least go to Christmas with something to smile about even if that will only make transactions easier, not improve their disposable incomes.
Zimbabwe has been using multiple currencies since 2009 following the demise of the local currency due to hyperinflation.
Ditching the local dollar ended hyperinflation and helped steady the economy through exchange rate stabilisation and facilitated marginal recovery under the coalition government even though the rebound phase has now ended and recession seems to be setting in.
Coins have been a medium of exchange since time immemorial and make transacting much easier even if in some economies people now tend to resist using them as they argue they have become cumbersome and inconvenient.
For instance, in the United States, government is building a stockpile of US$1 coins and the hoarding has topped US$1,1 billion such that the US Federal Reserve is running out of storage space.
Americans are resisting using US$1 coins, preferring US$1 notes which they say are convenient and not burdensome.
However, the US keeps minting them anyway and the Federal Reserve estimates it already has enough US$1 coins to last the next 10 years. The coins began to pile up in 2007 when a law came into effect creating a new series of US$1 coins commemorating late US presidents.
Of course, the irony is that while US citizens resist coins, Zimbabweans actually badly need them because since the advent of the multi-currency regime in 2009, the economy has been operating mainly with the US dollar whose denominations start with US$1.
While South African rand coins have been available, they have not been in circulation in adequate quantities and present everywhere to make transactions reliable and smooth.
Rand coins are useful, but a more organised and reliable coinage system is needed.
So Reserve Bank of Zimbabwe governor John Mangudya’s recent announcement special coins would be introduced must be welcomed and embraced by local businesses and consumers.
“We will get US$20 million special coins in November. We will also get US$25 million in rand coins which we expect to be in the country earlier than the special coins as they have to be made specifically for us. We will get the coins from South Africa. The minting of the special coins will be done in that country as well,” Mangudya said. “They are not Zimbabwean coins; we don’t want to bring back the Zimbabwean dollar due to confidence issues.”
Two points arise from this. First, it was important that Mangudya allayed fears that bringing in special coins was not in any way a backdoor attempt to bring back the Zimbabwean dollar. Secondly, it was not only long overdue that coins were introduced in the economy but also critical.
The introduction of coins — which will buttress the multi-currency system, that has helped the economy function without a local currency despite its own downsides like hurting consumers and businesses — in Zimbabwe should bring relief to customers, the business sector and the economy at large.
Lower denominations are exchanged more often in day-to-day life of consumers who use this to buy daily essentials such as bread, milk, vegetables and other products that are consumed daily in households.
The coins will also help consumers and the retail sector in terms of change. Retailers have to date had to use unconventional means of issuing change such as giving credit notes and in some extreme instances, confectionary items such as sweets, bubblegum and ball point pens to customers.
This inconveniences both consumers and retailers as it hinders the smooth flow of transactions and create problems in situations where customers end up getting items they had not budgeted for or simply don’t want.
Even if this might sound petty to moneyed consumers, a quick calculation of what would have been lost in change at the end of the month, for example, would show that if that change was saved, it would have been enough to buy something more useful to the consumer.
Even worse problems would arise for corporate consumers who undoubtedly would have to account for the change from money accessed from petty cash accounts of their organisations.
One really wonders how, for instance, a corporate business would reconcile a petty cash account using sweets and bubblegum.
Pricing issues would become easier for the business sector and consumers with coins.
When questioned about their pricing regimes some in the retail sector of the economy have argued that they are forced to round off to the nearest US dollar figure.
This situation has been convenient as businesses push prices up unnecessarily, hence making the price of goods and services more expensive.
For example, every newspaper in Zimbabwe costs at least US$1 regardless of size and quality. It is largely because of change issues and that is why some have tried to use tokens which were inconvenient and open to manipulation.
Take the price of a 330ml can of coke as another example. Its average price in the world is US$0,47 but in Zimbabwe the retail price of the same product is at least US$1.Undoubtedly therefore, the Zimbabwean price is way too expensive, even more so given the levels of local disposable incomes.
Commodities such as bread and milk should also not cost above a US$1 all things considered even if there is a problem of declining production or low aggregate demand in the economy.
Even though these look like insignificant examples, they become a serious problem when looked at holistically and cumulatively in the broader economic context.
As a result, government, business and consumers must work together to ensure coins are introduced as soon as possible as part of the medium of exchange in the Zimbabwean economy.
In economies that actually function and work well, coins actually carry the day in day-to-day business transactions in financial systems.
A positive response from industry in the form of lowering prices and moving volumes would undoubtedly work well in the resuscitation of the economy and restoring the confidence of the consumer and ensuring that the market functions well.
While citizens of economies like the US have the luxury to argue coins are an obsolete form of currency, non-portable or bulky and do not fit in wallets, and thus should be abandoned in favour of notes — which are not durable compared to coins — Zimbabweans can ill-afford such superfluity.
The reality is that the economy has been functioning abnormally with consumers being taken advantage of by retailers, while transactions have been difficult to complete without resorting to unorthodox methods of change like giving people credit notes which easily get lost or sweets, pens and bubblegum even when they do not need them.
It is important to also point out that in the preparation and maintenance of a good coinage system, several problems arise. Government must therefore ensure good units of value, with the right size, weight and fineness of coins, and their denominations.
Magida is a Southern Eye columnist.