Africa Cover Economy

Zimbabwe´s bond notes smuggler makes more profits across border

Garikai, 35, shuffles wads of green notes. A sizeable crowd gathers around him. They are astonished.

It is their first time seeing Zimbabwe´s bond notes, the disputed currency the Zimbabwean government claims is valued at parity with the US dollar.

Since they were first printed in November 2016, bond notes have fueled confusion,inflation and wild speculation in the economically troubled southern African nation.

Garikai, however, is holding his demonstration in Johannesburg, South Africa, some 2000 kilometers away. There, bond notes are not legal currency but are in high demand from travelers headed across the border to Zimbabwe.

Traders like Garikai, who hides his name to protect his trade, are making a mint off of Zimbabwe’s chronic cash shortages.

According to Zimbabwe Reserve Bank governor John Mangudya, bond notes are only legal currency in Zimbabwe and not tradeable outside the country´s borders.

Currency smuggling rings are not listening, however, and are exporting the currency for profit while squeezing the already cash-strapped economy.

“Zimbabweans living in the diaspora in South Africa do not want to stand in long bank queues when they return home. So they stock up on bond notes in exile before boarding buses home,” Garikai explains.

Bond notes are a surrogate currency. In theory their value is at par with the US dollar and they are guaranteed by a loan from Egypt’s AFRIMEX bank. However their value has plunged domestically as Zimbabweans have quickly discovered that in practice they are not convertible into dollars.

Garikai operates his business at Park Station, the largest foreign bus terminal in Johannesburg. “Three months ago I relocated from Zimbabwe to South Africa when I realised bond notes are the new get-rich-quick scheme,” he explains.

Back home in Zimbabwe, winding bank queues are a menace. Some can stretch for hundreds of metres and many jostle to access the daily limit of $20 in bond note “coins” that banks can dispense.

“When I go to Zimbabwe on holiday I don’t want to waste my time in queues, hence I buy smuggled bond notes here in Johannesburg,” says Maidei, 27, a maths teacher in South Africa, clutching her baby as she prepares to board a Greyhound bus.

Bond note traders receive boxes of fresh bond notes smuggled from Zimbabwe in plastics, facilitated by international bus drivers. Total arrivals per month can be worth up to $20,000, Garikai claims.

He also says the business is aided from on high. “Our facilitators are big business persons and influential politicians,” he explains.

The margins are compelling. For every 1000 bond notes the traders sell in South Africa, customers pay either 15 South African rand or $1.50 in commission.

Maidei frowns over the traders’ high fees but says she has no option. “Very few retailers in Zimbabwe´s rural areas accept South African rand. Coupled with the misery of bank queues we have no choice but to buy smuggled bond notes here in South Africa,” she says.

Garikai and the four other dealers whom he works with say business is roaring. “We make 45 percent profit every month in rands and real US dollars from trading these smuggled notes,” he says.

Speculation rackets on bond notes are not limited to South Africa, according to George Guvamatanga, director of Barclays Bank Zimbabwe. He says smuggled bond notes from Zimbabwe are also selling fast in bus terminals in neighbouring Mozambique and Zambia, where Zimbabwe´s cross border traders do business.

“We suspect there are more Zimbabwe bond notes in neighbouring South Africa, Mozambique or Botswana” than inside the country, Mr Guvamatanga says.

“Someone realised there is massive profit in smuggling and selling bond notes outside our borders.”

Demand from the Zimbabwean diaspora drives the trade. “There are a lot of Zimbabweans living out of the country. They want the bond notes ahead of their visit to avoid bank queues and daily limits,” the president of the Bankers Association of Zimbabwe, Charity Jinya, confirms.

The currency smuggling rackets are causing headaches for Zimbabwe’s central bank governor Mr Mangudya. “There is a lot of indiscipline in this economy. The bank, police and taxmen are acting in close cooperation to fish out money smuggling kingpins,” he has claimed.

On hearing this, however, trader Garikai laughs. “I want the cash shortages in Zimbabwe to continue. That way I can be rich again.”

Culled from: thisisafricaonline.com