The bond notes, a form of currency that will be pegged at an equal value to the American dollar is backed by a US$200 million loan facility from the Afreximbank.

The move has been likened to the return of the notorious and hyperinflationary Zimbabwe Dollar that wiped out the public’s pensions and bank savings while only benefiting the government and business.

Zimbabwe’s private sector has become a willing accomplice in the ruling ZANU PF’s politics of patronage in which patronage has become an irreplaceable and an almost universal modicum of rule and governance in Zimbabwe, with its tentacles spreading to both the private and public sector. An alliance of elites in these sectors have created a parasitic network that scavenges on the economy whilst the public finds itself at the receiving end of this elite collusion in Zimbabwe’s economy. Therefore, the politics of patronage and elite collusion creates the greatest challenge to Zimbabwe’s attempted economic reforms.

An alliance of elites in these sectors have created a parasitic network that scavenges on the economy whilst the public finds itself at the receiving end of this elite collusion in Zimbabwe’s economy. Therefore, the politics of patronage and elite collusion creates the greatest challenge to Zimbabwe’s attempted economic reforms.

The million-dollar question is now, how will ZANU PF deal with its new parasitic and rent-seeking generation of party cadres? This new class has been marauding like a troop of hyenas on every little opportunity that exists within the economy.

The evidence stretches from the disastrous land reform programme, the bleeding of parastatals, price controls, to the looting of Chiadzwa diamonds, and the current attempts at introducing bond notes. Attempts to introduce bond notes present ‘get rich quick opportunities’ for both private and public sector executives in Zimbabwe.

The title of the January 2016 Monetary Policy Statement, “Economic Transformation Through Transparency and Accountability”, explains how corruption has become a big challenge in reviving the economy. The Reserve Bank Governor, Godwin Mangudya claims that close to US$684 million was externalised in 2015.

The Central Bank cites corporations in the extractive sectors and cooperative executives as the major culprits. The externalisation of money was done through the abuse of Zimbabwe’s relaxed finance and control regulations implemented during the period of the Government of National Unity and the subsequent dollarisation that came into effect in 2009.

This abuse included the non-remittances of earnings under the auspices of free funds, under-invoicing and transfer pricing. The non-remittances of earnings by corporates is understandable when one considers the lack of confidence in Zimbabwe’s economy. Most companies’ fears are the security for their money given the government’s history of raiding bank accounts.

The October 2007 Monetary Policy instrument centralised all foreign currency accounts and directed the transfer within 24hrs of all corporate foreign currency balances held by authorised foreign currency dealers. This saw the RBZ raiding corporate foreign currency accounts to fund perceived strategic national objectives.

Among some of the strategic national obligations were the Farm Mechanisation Programme and The Basic Commodities Supply Side Intervention (BACOSSI), the beneficiary list of which was dominated by elites in the ruling party. These accumulated debts were incorporated into the public debt through the Reserve Bank Debt Assumption Bill of (2015).

The net effect was to prompt government corporates to move into the parallel market as the financial system could no longer guarantee the security of its money. To make matters worse, when China Shougang International successfully sued Standard Chartered Bank to return its money that had been raided by the RBZ, the government failed to assuage the banking sector, thus further heightening corporate insecurity.

Yet, on the other hand, Zimbabwe’s financial sector also heavily benefitted from the hyperinflation. Chagonda’s study, Teachers and Bank Workers, chronicles how hyperinflation positively changed the fortunes of bank workers as bank workers and executives reaped windfalls from speculators and by participating in foreign currency black market. Bank workers had two pay dates in a month and made cheap money through selling cash to members of the public.

The Zimbabwe Dollar notes which were in short supply had become a trade-able commodity. Zimbabwean businesses came with three different price levels for goods paid in Zimbabwean dollars. The Zimbabwe dollar note attracted a cheaper price, followed by a bank RealTime Gross Settlement System (RTGSS) and lastly a personal cheque.

Access to the Zimbabwe dollar became an opportunity to make cheap money. Activities such as ‘Kubhena Mari’ (Burning money) – or what one may call speculation- was rife in Zimbabwe’s financial sector. Yet, as the bank establishment in Zimbabwe was prospering, ordinary citizens were struggling. If one didn’t have connections in the banking sector one could not access one’s money or by the time one accessed the money, its value would have been wiped by inflation.

Many Zimbabweans lost their hard-earned savings in this way. In addition, pension and insurance houses hugely benefitted from hyper-inflation as they offered non-inflation adjusted payouts. In certain cases, insurance and pension houses raised premiums based on the inflationary environment and for those members who could not afford the raise, they ended up losing their pension policies due to non-contribution.

The pension and insurance sector further benefitted from the conversion process of insurance policies during ‘dollarisation’, as pensions were undervalued. In response, the government appointed a commission in 2015 to probe the complaints of policy holders but the workings of the commission remain a secret.

The benefit of Zimbabwe’s financial sector and as well the tendency of government inaction to address economic issues that negatively affect ordinary citizens can’t be understated. Both government and the private sector seem to be mutually benefiting from each other’s actions.

A visit to the Central Business District areas surrounding Copa Cabana commuter omnibus rank in Harare reveals a hive of foreign currency changing activities. The picture of the day to day currency trading presents a normal picture of ordinary hardworking Zimbabweans trying to eke out a living. However, the untold story of this booming Harare informal currency trading is a network of corporate and government elites involved in illegal gold dealing. From this they supply the informal currency traders, also known as runners.

The elites trade their gold in South Africa and get paid in South Africa Rand (ZAR) and ship huge sums of about ZAR40-50 million for conversion into American Dollars in Zimbabwe. This thriving informal roadside currency trading becomes a platform to launder ill-gotten gold dealing money by the elites and in turn drive the demand for American Dollars.

This business has a mafia style as the corporate and government executives are not directly involved in the disbursing of the money. They have intermediaries, popularly known as runners who act on their behalf. The price of the mainly traded currencies (Rand, Pula, Kwacha, Euro and Pound) are fixed by the transporters who move around in tinted SUVs and posh cars with boots full of cash. The almost mint quality of the notes that they carry, indicate that these are not ordinary but highly connected individuals.

The phenomenon of elites in currency trading is not new to Zimbabwe and extends back to the hyper inflationary period. Mawowa and Matongo’s work on Roadside Currency Trading in Bulawayo offers insights on how the Reserve Bank of Zimbabwe and high ranking government officials, and ruling party chefs have been active participants in roadside currency trading.

Interestingly, after the RBZ announced plans to introduce Bond Notes to ease cash shortages, Zimbabwe’s private sector reportedly supported the policy interventions by the central bank. Drawing insights from the Mawowa and Matongo, and Chagonda studies, and from personal observations of informal currency trading in Harare, one can understand business’ stance of seemingly embracing the Bond Notes initiative.

The Partnership Canada Report on the looting of Marange Diamonds and the murky networks with the military and Chinese companies as well as the reported corruption scandals involving the Zimbabwe Power Company, the looting of bank deposits in black owned banks – among many others_ point to the growing Zimbabwean network of patronage. The Bond Notes provide opportunities for making cheap money for Zimbabwe’s elite.

The RBZ has announced a raft of measures, to plug the leakage of the American dollars in line with the plan to introduce Bond Notes. Already, there are accusations of the emergence of speculative and illicit practices emerging in Zimbabwe’s financial sector, reminiscent of the hyper-inflationary period.

It would appear Zimbabwe’s government is running a Ponzi pyramid scheme with people’s finances in the mould of the discredited Triple M (MMM) scheme and it is bound to collapse soon. Already, a significant number of small businesses involved in imports are being hit hard as their telegraphic transfers are now taking 2-3 months to go through, a process that usually used to take anything between 24-72 hours depending on one’s bank.

The RBZ has been raiding foreign currency accounts to support government’s insatiable consumptive appetite. This has negatively impacted the ability of Zimbabwe’s financial sector to meet payment obligations to corresponding international banks.

The shortage of cash in the economy has to do with the piracy behaviour of the Reserve Bank of Zimbabwe and the illicit financial flows as identified in the January 16 2016 Monetary Policy Statement. The measures to limit withdrawals by the public offset measures where the actual leakages exist, in government’s unbridled high expenditure and in the big corporates.

The RBZ has published a priority list for settling payments by banks. The most probable scenario will be a repeat of the 2006-08 period where financial sector and high ranking public officials had opportunities for making quick and cheap money. The danger of a stronger patronage economy developing around bond notes is very realistic given the current involvement of Zimbabwe’s elite in the informal currency trading. All these tell-tale signs point to immense opportunities for the currency traders but also for the elite to launder and profit from their ill-gotten wealth.

Bond Notes will not resolve the challenges of cash in Zimbabwe but instead will bring more misery. The operations of current informal currency trading in Harare show how the Zimbabwean elite network taps into the economies of the poor to sustain corrupt networks. Unwittingly or wittingly, Zimbabwe’s corporate sector has become complicit in perpetuating ZANU PF’s politics of patronage and ultimately its domination of Zimbabwean politics.