Harare – Former vice president Joice Mujuru’s last ditch attempt to stop the Zimbabwe central bank bringing in bond notes failed on Wednesday – but not everyone will be disappointed.
If the story of Zimbabwe’s last lot of “paper money” is anything to go by, there will be fortunes to be made. Or at the very least, bills to be paid off quickly.
The Constitutional Court in Harare this week dismissed an application from Mujuru challenging the forced introduction of the notes next month, according to legal watchdog Veritas. The court said that it was too soon to determine if laws governing the introduction of the notes were unconstitutional.
Analysts say the ruling means the notes will have to be introduced first before a challenge can be heard.
Many Zimbabweans fear a rerun of the hyper-inflationary era that peaked in 2008, when savings were wiped out and an average month’s salary, once withdrawn, was enough for perhaps one grocery shop.
But some are scenting a chance to make money.
Here are some of the ways Zimbabweans were able to take advantage of bearer cheques, bond notes’ predecessors.
Paying all government bills: As hyperinflation climbed, some shops and service providers quietly refused to serve you unless you paid in forex. But government offices were forced to accept bearer cheques. Run up a rates tab with the city council? You could buy “mabearer cheques” on the black market for a fraction of the real value of your bills.
This also worked if you needed to pay bills at state institutions including schools and universities. Prominent Zimbabwean advocate Fadzayi Mahere shared a message this week she’d had from a local student on social media welcoming the soon-to-be-brought-in bond notes because he is currently struggling to pay his tuition fees. “This young man supports bond notes,” she tweeted.
Paying off debts: If you had a bank loan or a mortgage between 2006 and 2008, it suddenly became very easy to pay it off. You could trade just a small amount of forex on the black market, get paid out with bags of bearer cheques and settle your Zimbabwe-dollar-denominated bond in record time. This time round, Mugabe’s Gushungo Holdings is rumoured to be in serious debt. Reports have put the total amount at anywhere between $4m and $20m.
Unfortunately Zimbabwe’s rather large external debt (more than $7b) will not be payable-offable in bond notes (though there may be ways round this: see below).
Buying forex: This only worked if you were in government or extremely well-connected. Locals receiving remittances or payments from outside the country into Zimbabwean accounts were paid out at the official, very low exchange rate in bearer cheques. Bad luck for them – but great news if you were well-connected. You could demand to buy that forex your compatriots had been forced to surrender. And you could pay for it at that same very low exchange rate. Hard cash for free, or just about.
Money-changing and money-burning: This was a lucrative earner for youths at the time. Money-changing involved what it says: selling forex for ever-increasing amounts of the local currency. Money-burning involved finding ways of making money out of vast amounts of bearer cheques trapped inside local bank accounts. Selling shares on the local stock exchange and using the proceeds to buy shares on the JSE or LSE was one way of doing this.
Of course, the advantages of bearer cheques were (mostly) short term. School fees became affordable but teachers got fed up of being paid in worthless money and skipped Zimbabwe in their thousands. Banks lost money. Councils stopped providing services. Shortages of food and fuel hit: no business wants to be forced to sell for nothing.
Eight years later, supporters of bond notes insist that they will in no way resemble bearer cheques. Central bank chief John Mangudya has staked his career on them, offering to resign if they don’t work out.
For most Zimbabweans though the fact remains: once bitten, twice shy.