Government is shelling out US$5 million towards payment for gold delivered by small-scale miners, which is weighing down the availability for physical cash for ordinary citizens, a Cabinet minister has said.
Over 300 000 artisanal miners are producing about 47 percent of total gold delivered to Fidelity Printers and Refiners (FPR) — a gold buying unit of the Reserve Bank Zimbabwe. As at June 30, FPR had paid US$350 million for almost 10 tonnes of gold delivered by both, large and small-scale miners. Similarly, the tobacco sector — which has been democratised since year 2000 when Government redistributed land — has also put a strain on the availability for cash as over 105 000 households that have joined the sector are getting over US$600 million — all in cash – per year. Said Minister Chinamasa last week: “Some of our teething problems are a result of our successes. I always mention one, to do with cash shortages.
“. . . (in) the tobacco sector, there were 2 000 white farmers. They all operated using the cheque book. Now it’s 105 000 households, they don’t want to use the cheque book (and) US$600 million is going to them. They want it all in cash, physical cash. What kind of an economy is that? Those are issues to do with our successes. The same thing with artisanal miners; we pay US$5 million dollars in cash every week, they (miners) all want it in cash . We pay civil servants almost US$300 million in wages every month and they want it in cash. What madness?”
He said no economy in the world can afford to translate all the money in bank deposits into physical cash. The international best practices are that at least 10 percent to 15 percent of bank deposits can be physical cash, with the rest being electronic money. Government, together with the RBZ, is urging citizens to move away from the use of physical cash and adopt electronic banking systems so as to reduce demand for cash.
Farmers are being urged to open accounts so that they receive payments for their crops through the bank. The Grain Marketing Board (GMB) has already started paying farmers through the banking system, given that many farmers recorded bumper harvests and are getting US$390 per tonne. Minister Chinamasa said he was stunned to see people bulk-buying products, including maize meal, despite the massive yield estimated at just over two million tonnes achieved in the 2016/ 2017 summer cropping season.
“I was surprised, in the panic buying, people were buying mealie-meal. If you move out in any direction, the silos are full. We have had to create extra storage space to store our maize, and much of our foreign currency is going to import tarpaulins to cover the maize.
“Anyone, even the most gullible, should understand that there is no way that maize can be in short supply . . . All the economic indicators are not in sync with what happened on Saturday (September 23 when people bought products in bulk).
“Platinum production is up, chrome production is up, ferrochrome production is up, nickel exports are up, horticulture exports are up; in fact, in terms of exports we have been able to achieve a 12 percent increase during the comparative period. Now all those things indicate that the economy is growing,” said Minister Chinamasa.
Critically, as the economic trajectory gathers momentum, the country has slipped out deflation. Market watchers say deflation is not good as it shows structural challenges in the economy. Normally, an economy moves into deflation when there is weak consumer demand due to low disposable income and buyers delay making purchases, expecting prices to fall even further.
In August, the inflation rate stood at 0,14 percent, which remains the lowest in the Southern African Development Community (SADC). The SADC benchmark for inflation is between 3 percent and 7 percent, indicating that the local economy is doing well. Minister Chinamasa said people should “stop worrying about inflation” as that would create an unnecessary crisis that will reverse the economic gains recorded so far.–herald