Gono, banks: crisis of confidence

As a result, anyone with a bit of cash prefers to stash it away under a pillow or in a drawer at home, rather than deposit it with a bank.

It is safe to say that millions of dollars in cash are circulating outside the formal banking system. This is the main reason Zimbabwean banks have been failing to pay depositors on demand.

A number of historical and current factors have combined to undermine the vibrant banking culture that we used to know before 2000. The economic meltdown this country has suffered for more than a decade has significantly driven people to pessimism regarding the effectiveness of our banks.

Who has forgotten the crisis of 2003, when people would spend several nights in the queues in order to withdraw a limited amount of cash? This scenario became more pronounced in subsequent years, particularly in 2007 and 2008. Due to runaway inflation, a depositor’s money would lose all its value while he or she waited to withdraw it.

Gideon Gono, the Reserve Bank of Zimbabwe Governor, did not make things any better through his unorthodox measures to deal with hyperinflation. He swooped on individuals’ and institutions’ accounts without their consent. Some have still not got their money back. Many believe Gono stole depositors’ money – and in the absence of repayments it is difficult to dispute this.

With the transition to a multi-currency system in 2009, thousands of people had their money trapped in the banks. There are no indications that they will get back it back. A persistent worry at the moment is that whenever a person deposits money, he or she loses a significant portion of it because of the weird charges our banks have imposed.

Now, who would want to spend an hour in a queue to deposit money when he or she is going to lose much of it to exorbitant charges? Who would want to deposit money when there is no guarantee that the RBZ is going to order the bank to hand it over? Who would want to surrender his or her money to a bank knowing fully well that it might be the last time he or she sees it?

Of course, keeping large amounts of money at home or in the car is not ideal – because it might get stolen or destroyed in an accident.

The RBZ and the banks it superintends have a mammoth task to ensure that the banking system returns to normality. They should come up with sustainable strategies that promote a positive banking culture among Zimbabweans.