Zambia is set to rebase her currency by removing three zeroes from the Kwacha at the beginning of next year.
Netizens have weighed in on the massive project for which the Bank of Zambia has even proposed 31 December, 2012 to be a holiday to allow for the smooth transition from the currency in use to the new rebased notes and coins that will also be reintroduced.
The costs of rebasing the Kwacha on businesses are becoming more clear. The benefits will always be less tangible [...] Standard Chartered Bank Plc revealed early October that the rebasing will cost it K5 billion [nearly US$1 million] in terms of systems and infrastructure upgrade. Part of the money will also go towards staff training in order to ensure a smooth transition to the new kwacha. National Savings and Credit Bank (NATSAVE) revealed late October that it has so far spent K1 billion on the initial preparation of the rebasing of the Kwacha. The money has gone on reconfiguration of the IT platform and general implementation of the rebasing preparation in its 27 branches across the country.
The contributor was even more critical of the move by the government:
It is sad that this was a purely political decision. No single economic assessment was done by GRZ! This of course is largely due to the “blind faith” of ordinary Zambians in the ability of government to think through things. Too many Zambians are content with simply saying, “government has thought through it, so it must be true”. It is 2012, it is shocking posture to hold that can only be explained by the psychological effects of the colonial legacy.
A comment under the blog indicated who would end up bearing the cost of the rebasing:
its simple really.i spend i billion as a business as cost incured in kwacha rebasing,i will have to find a way to recover it and ofcourse i must fined a way of transfering my cost on the consumer”"”??what??did you think i would spend that much for free?it makes no business sence…….
Responding to the blog above in a separate write up, Francis Ilunga dismissed the anonymous writer’s argument, stating that he was an employee of the Bank of Zambia but writing in his personal capacity:
[…] The author has however neglected to mention the costs that most businesses incur in reconfiguring/ customizing standard packages (accounting/audit, etc), that they acquire from time to time. You will appreciate the fact that the packages used in Zambia are developed in jurisdictions where values, at a maximum, tend to be in millions. The present situation in Zambia, where some organizations, especially banks record values in billions or trillions of Kwacha, requires further customization of such packages in order to widen data fields, which tend to be very costly. With the rebasing of the Kwacha, businesses will no longer be spending money on the reconfiguration / customization of newly acquired packages.
Ilunga also gave the historical perspective of the decision to rebase the Kwacha, writing:
[…] The idea of rebasing of the Kwacha was conceived in 2003, but couldn’t be implemented because prevailing macroeconomic fundamentals at the time did not permit such. For instance, high levels of inflation, would have meant returning to higher value denominations within a short space of time, as was the case in Zimbabwe. In the recent past, inflation has slowed down and dropped to a single digit. This low level of inflation, coupled with favorable macroeconomic conditions, has provided an opportune time to rebase the Zambian currency. Therefore, the rebasing of the Kwacha has nothing to do with politics as the author alleges.
He explained what the Central Bank has been doing to prepare for the rebasing:
You will be pleased to note that the last 3 zeros on the current K50000 , K20000 , K10000 , K5000 , K1000 notes (in red), are all small and raised, and the reason for this is simple, the BOZ had in mind the idea of rubbing off these small raised zeros at an opportune moment, and that opportune moment is now.
Commenting on Ilunga’s blog, an anonymous contributor wrote:
bravo, you are indeed and economist, we need such express information so that people are not lead to believe that rebasing of the Kwacha is just an acamedic [sic] & costly exercise meant to benefit a few individuals and institutions.
A reader on the Lusaka Times website, Enka Rasha, slammed the changes as cosmetic:
The costs of this artificial dressing up of the kwacha could’ve built a few schools.Afterall countries like Vietnam got an exchange of 1 dollar to 20,000,Bolivia has 1 dollar to 7000 and 1 US dollar =25000 Cuban pesos yet these countries aren’t in a hurry to do cosmetic changes like zambia.Make the economy better with improved earnings and livelyhoods before you rush for cosmetic changes.
Zambians are waiting for the new currency to come into effect which is just a matter of time as the government has already taken the bill to parliament.