This month Marondera Council revealed that it is going to be accepting payments of rates in US$. It follows Harare, Masvingo, and Norton Councils which have all taken aboard the same system.
This is an indictment of the futility of using the local currency to run operations for the local authorities.
Government has itself admitted the same after promulgating Statutory Instrument 61 of 2020.
The SI states that any person may pay for goods and services in Zimbabwe dollars or in a foreign currency using his or her free funds at the ruling rate on the date of payment.
The Marondera memo dated 18 January 2021 stated that ratepayers can choose which payment option they prefer to use.
“We are now accepting payment in forex (USD) in line with SI 185 2020.
“This means that all clients and ratepayers now have an option to make their payments either in Zimbabwean Dollar or United States Dollar”.
“All tariffs are based on approved 2021 budget effective 1 January 2021,” further states the memo.
Harare Residents Trust director, Mr. Precious Shumba, also proposed that Government allows the council to levy rates in forex.
“The central Government, through the Ministry of Finance and Economic Development and its different agencies, like the Reserve Bank of Zimbabwe, have to authorize local authorities to charge their rates in foreign currency,” he said.
“The citizens would be served better with enhanced service provision than suffer the consequences of deteriorating social services while paying in our local currency.”
Harare City Council requires between US$2,5million to US$3 million per month for the purchase of water purification chemicals depending on the quality of raw water.
This amount of money has made it tricky for them to collect rates in local currency and run operations that require US$.
The same complaints have been raised by other Councils such as Norton Town Council and Masvingo City Council.
New and Bigger Notes
It is against this backdrop that the government has revealed plans to unveil another bigger note as it seeks to curb runaway inflation.
The higher denomination banknote will come in the form of 50 Zimbabwean dollars (Z$),
This is the second time that the Reserve Bank of Zimbabwe (RBZ) is printing higher denomination banknotes in a period of one year after the introduction of the Z$10 notes in May 2020 and the Z$20 notes in early June in an effort to increase the physical money supply as well as curbing cash shortages.
Whereas the government is seeking to deal with other economic ills such as inflation it’s a historical fact and precedent that such moves have always led to other negative consequences.
Jee-A van der Linde, an economist at NKC African Economics has been quoted saying the RBZ’s credibility will affect people’s confidence in these higher denomination banknotes and damage the new notes value-wise.
“Increased liquidity should make day-to-day activities a little easier.
“However, it is unlikely that higher bank denominations would promote confidence in the local unit, in fact, logic dictates that it should have the opposite effect–Zimbabweans can perceive this as more money is being pumped into the system.”
For Councils, it’s an unnecessary distortion to the currency environment as they are now set on trying to make ratepayers pay their bills in US$.
Norton Town Council (NTC) Finance Director Mr. Tendaupenyu said they had crafted measures to encourage residents to pay in US$.
“We shall introduce a certain discount for those who pay using the US$ so as to encourage them to use that currency”, he told a recent Full Council meeting.
What many have also mooted as a solution, the dollarization of the local economy has also been ruled out by some economists who allege that it is even more dangerous for the economy.
“The scrapping of the local currency and adopting the USD, for now, can wait owing to many challenges associated with the move as experienced by the first attempt in 2009. As long as the country is still under sanctions, we have to have our own local currency,” says Confederation of Retailers of Zimbabwe president Denford Mutashu.
With such competing forces the situation is dire for Councils as many residents have so far resisted the push to have them pay in US$ which is being used as a storage of value.
Many still prefer to exchange the US$ on the black market where they get more and then pay Council.
Whilst the official exchange rate is around ZWL$81 to US$1 on the black market it’s around ZWL$100.
This makes paying Council in US$ a bad move for residents.
With very little happening on the ground economically to herald positive changes, it appears Councils will face the same challenges as before in running operations.
For residents, this means no water, poor refuse collection, bad roads, and a poor service from the local authorities.