Four reasons why forcing schools to ZiG payments is not a good idea

Zimbabwe’s second school term kicks off today, 7th May 2024, and as usual, parents and guardians are scrambling to settle school fees. However, this term ushers in a new wrinkle – the widely anticipated use of the new local currency, the ZiG. The Ministry of Primary and Secondary Education (MoPSE) has been vocal in its directive: schools must accept fees in ZiG. But is this a practical and fair ask? Let’s delve into the reasons behind schools’ reluctance and explore the potential pitfalls of enforcing ZiG payments.

MoPSE’s Push for ZiG Payments

The Ministry of Education leaves no room for ambiguity – the ZiG is legal tender, and schools are legally obligated to accept it. Furthermore, schools that set their own rates, exceeding the official (and often fluctuating) exchange rate, risk facing consequences from the Zimbabwe Anti-Corruption Commission, the Reserve Bank of Zimbabwe’s Financial Intelligence Unit, the Zimbabwe Republic Police, and MoPSE’s own Inspectorate teams.

Why Force ZiG Payments?

Back in 2019, the bulk of transactions in Zimbabwe were conducted in local currency. Fast forward to 2024, and even the government estimates that only about 20% of transactions are carried out in local currency, with the remaining 80% being conducted in foreign currency, primarily the US dollar (USD). So, why is the government adamant about intervening on behalf of such an insignificant portion of transactions?

The main reason behind the government’s eagerness to make schools accept ZiG is that it is the primary source of this local currency. Most employers in Zimbabwe now pay exclusively in USD, except for the government. Those employed by the government are already disgruntled with their earnings, and they would be outraged if they were unable to transact using the ZiG, as they have been vocal in demanding USD salaries

Four Reasons Why Forcing ZiG Payments is Detrimental

While the government’s motives might be understandable, the policy of forcing schools to accept ZiG at the official rate creates a multitude of problems for both parents and schools:

1. The Interbank Rate: A Moving Target with Little Relevance: The official interbank rate, used as the basis for converting ZiG to USD for school fees, is essentially a theoretical average that fluctuates daily. This means parents paying fees today in ZiG are essentially paying different amounts in real terms (USD) compared to those who pay in USD. This lack of consistency creates confusion and unfairness.
2. Erosion of Purchasing Power: Zimbabwe has a long history of battling high inflation, particularly with its local currency. Historically, the local currency has lost value much faster than the USD. By forcing schools to accept ZiG at a fixed rate, the government essentially devalues the fees collected, making it harder for schools to maintain basic operations, purchase supplies, and pay staff.
3. Strain on School Resources: Schools rely on predictable income streams to operate effectively. The ever-changing value of the ZiG creates budgeting nightmares. Schools struggle to plan for essential expenditures like teacher salaries, maintenance, and educational materials when their income fluctuates based on the exchange rate. This instability hinders schools’ ability to provide a quality education.
4. Unfair on those who pay in USD: Parents who have saved in USD to ensure their children’s education are being forced to carry those who pay in ZiG. This could lead to a decrease in the number of those who pay in USD which is the desirable currency. This is likely to become worse if black market rates start to rise. Why pay full price when you can just convert ZiG at black market rates and pay a discounted price? This will ultimately impact the quality of learning for Zimbabwean students.

Finding a Solution: Balancing Policy and Reality

While promoting the use of the ZiG is a long-term goal for the Zimbabwean government, enforcing its acceptance in schools at the official exchange rate creates more problems than it solves. A more practical approach is needed, one that considers the realities of the economy and the needs of both schools and parents.