By Malata Siame
Bank of Zambia is concealing and downplaying the negative effects of rebasing of Kwacha, while trying to portray the exercise as the best policy ever taken. These BOZ authorities are sugar-coating and exaggerating the benefits of rebasing but are providing very little and scanty data on the negative effects of the rebasing. All those sensitizing the public on rebasing are only talking much about the benefits without explaining the obvious negatives. Worse still, even our reliable economists are quiet and when they talk, only benefits are explained in order to please the powers-that-be.
For instance, in the BOZ-currency- rebasing presentation to LAZ article of April – 2012 clearly showed that these bankers choose to ignore to explain the impact of inflation due to rebasing. In this article these guys explained that “the impact of the rounding off rule on inflation will be almost zero’
So the whole bunch of economists from BOZ could only identify the rounding off of the rebased kwacha as the only component that can cause inflation (of which according to them will be almost zero), but they are forgetting the impact of menu costs and other numerous costs as a result of changes in price tags in many retail outlets.
IMPACT OF MENU COSTS ON PRICES OF NECESSITIES IN RETAIL OUTLETS
Shoprite, Pick and Pay, game stores and many other large and medium supermarkets and shops in Zambia will be subjected to extra costs of reprinting menus or price tags. These retail outlets have hundreds and hundreds of price tags of different goods and all these must be changed within a shortest possible time or print the second tags besides the current ones.
So these BOZ economists think all the reprinting or printing of new numerous price tags or menus will costs nothing. Don’t these guys realize that retailers will spend extra cash on printing and reprinting menus, price tags and adverts to accommodate the rebased currency?
Think about all those beautiful food pictures displayed with some prices printed on them, they have to be partly or fully reprinted in rebased line and this will cost money.
Any costs accrued will be passed on to the consumers as prices in those outlets will increase and many Zambians with small incomes who go for shopping will feel the impact.
Rebasing might show to be inflationary neutral because in Zambia inflation figures are perfectly manipulated to give fake rates which would only please politicians. But we are not interest in manipulated figures by the C.S.O but inflation which is really affecting the common people on the ground. Prices of many common important goods are always increasing but CSOs inflation rates are decreasing. That is deception.
Extra costs ACCRUED BY financial(and non financial) institutions and Mobile Operators
The financial institutions will be forced to spend large sums of cash just because of this policy of rebasing. For instance; Standard Chartered Bank announced that it will spend about 5 billion kwacha to meet the costs of rebasing. I quote,
“We are setting aside K5 billion for this very important exercise, it will involve a lot of training for our people and our customers in order to achieve the objectives of this exercise (rebasing),” Mrs. Melu told Reporters at a media breakfast in Lusaka.(Lusaka times)
Besides, ZANACO also explained that they will spend more than 1 billion kwacha to accommodate the rebasing. Many other banks like Stanbic Bank, First National Bank, Access Bank, ADB, Capital Bank, Investrust Bank, Building Society etc and all the Microcredit institutions like Bayport, Microfin, Izwe, etc will have to spend billions of kwacha in meeting the rebasing costs. If Standard Chartered alone would spend about 5billion kwacha, what about all these other financial institutions. Billions and Billions of kwacha will be spent on rebasing.
The costs will emanate from recalibration of certain equipment like ATMs, hiring of experts to change some accounting software, making changes in the accounts available, reprinting of certain documents quoted in current kwacha like deposit slips and other documents, refining the current adverts which are spelt in current kwacha, training of employees on new arrangements, etc.
All these costs will be passed on to the customers belonging to these banks. Bank charges like ATM fees, account related charges, book balances and even real interest rates might rise. If interest rates don’t rise, then they might not fall for a long time.
So BOZ think standard Chartered or any Bank can spend K5 billion without recovering it? BOZ isn’t telling people the truth.
Furthermore there are other institutions like insurance companies that will be forced to spend millions of kwacha on calibration of systems, reprinting of numerous documents, retraining of employees etc.So all this is free?
Finally, in the telecommunication sector effects will also be felt. All the mobile providers must also re-calibrate their equipment, reprint some adverts or re-design the adverts and reprint many documents in current kwacha in order to accommodate the new family of kwacha.
A lot of money will be spent on this exercise, and does BOZ think these firms will accumulate these costs without recovering them through their customers?
BOZ authorities are the first people to hugely benefit from rebasing while hiding the actual costs of the policy. But despite this, BOZ and all the Zambian must know that the exercise of rebasing will provide very insignificant benefits to this country. As a country we will lose more than 300 billion kwacha on this rebasing of which part of it will go into paying the allowances to the BOZ employees involved in the rebasing and most of it printing the new money. This cash could have been used in many sectors leading to reduction of poverty levels.
Many BOZ employees involved in this wasteful rebasing are very excited as they are earning a lot of money from the exercise.
Rebasing in reality has no tangible benefits directly or indirectly to the masses of this great nation. Despite knowing that Poverty levels or maternal mortality or any negativity will never be reduced directly or otherwise as a result of rebasing we have still gone on in reallocating the hard earned tax payers money meant for the poor, into implementation of a policy that will never provide anything good to this country both in short and long run.
The problem is that our so called economists who are suppose to correctly explain to the people have all become deadly political cadres who because of their opportunism failed to predict the effects of the 2008 global credit crunch. Immediately Chibamba Kanyama sung songs on how this rebasing will benefit Zambians, he got a job as ZNBC director.
Thus, many more economists from BOZ and other sectors will continue deceiving innocent people into believing that Rebasing will result in growth of their wealth.
Zambians on rebasing have been swindled of their hard-earned cash by both politicians and BOZ.
(Malata Siame works for one of the biggest Banks in Zambia, and understands the effects of Rebasing or Redenomination of the Currency)