Member access

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 
The feature you requested does not exist. However, we suggest the following feature:

Meikles : Barter Trade Resurfaces as Liquidity Crunch Worsens

07/28/2014 | 06:21am US/Eastern
Recommend:

BARTER trade, an archaic system of exchanging good or services before money was widely accepted as medium of exchange, has resurfaced in Zimbabwe.

To circumvent prevailing liquidity challenges, companies have resorted to barter trade as a medium of exchange after struggling to pay for goods or services rendered.

Barter trade involves the exchange of goods for goods or services.

Recently workers at Meikles Limited told the parliamentary thematic committee on Indigenisation and Economic Empowerment that the group was giving retired workers plates or hotel accommodation for them and their spouses.

"I was surprised when I heard retiring staff from Meikles [waiters] were given dinner plates and two or three nights at the hotel with their wives as pension," Tanganda Tea Company workers' committee chairperson Simon Madzivire told the committee.

Analysts say the prevalence of barter trade was a product of the liquidity squeeze.

"In the Zimbabwe dollar era it was a question of the currency not being wanted. In this case it's a question of the currency being unavailable," independent economist Moses Chundu said.

He said barter trade was a distortion but this "was a danger of an economy which is largely informal" and people want imported goods.

"It's so structural until government figures out how it produces more for exports and cut on imports," Chundu said.

The economy is 84% informal according to estimates, meaning that a huge chunk is not contributing to the tax collector.

Finance and Economic Development minister Patrick Chinamasa told Parliament last year that the old economy was dead and a new one based on the informal sector had been born, urging financial institutions to cater for the small to medium sized enterprises.

Economist John Robertson said resorting to barter trade was a stop gap measure to alleviate the tight liquidity situation.

He said through barter trade, it was clear that the economy was dealing with the symptoms and not the problem.

"We need to attract investors because they bring money which helps in improving the liquidity situation," he said.

"Government is discouraging investors who have choices to make as there are over 100 countries in the world where they can invest in."

Robertson said barter trade would bring difficulties at the end of the day as companies need to convert the goods into cash to pay workers' salaries.

Gilbert Muponda - who runs an economic, financial, business, research and advisory services firm - said barter trade limited trade and investment.

"It slows down the trade and transactions as people may end up holding stocks of merchandise they don't want or have a market for such stocks," he said.

Muponda said the only way out of the liquidity crisis was to negotiate with South Africa and make the Rand the only legal tender and make Zimbabwe part of the Rand Monetary Union.

"This makes sense as the Rand is a relatively weak currency compared to the US$ plus Zimbabwe economy has common features with South Africa. You cannot use a hard currency in an economy where the fundamentals are soft or weak," he said.

"Low employment rates, poor salaries, low aggregate demand, low exports and high imports and general depressed economic activity due to negligible investment levels.

"Only tobacco sub sector seems doing well benefiting from capital injected through contract farming."

Money plays four key functions -- unit of value, medium of exchange, standard of deferred payments and store of value.

Money measures the value of goods and services produced in an economy and as such it becomes the unit of value.

Experts say this function is not possible under barter trade. Money is also the basis of deferred payments.

As a store of value, people can store surplus purchasing power and use it whenever they want.

By facilitating accumulation of money, it becomes the only basis of promoting capital formation.

Analysts say government has to create more exports revenue which is the fuel that drives the economy in the absence of foreign direct investment, lines of credit and balance of payment support.

Copyright Zimbabwe Standard. Distributed by AllAfrica Global Media (allAfrica.com).

Recommend :
React to this article
Latest news
Date Title
<1m ago MEIKLES : Barter Trade Resurfaces as Liquidity Crunch Worsens
<1m ago DIAMOND BANK : Donates Office Block to Nigerian Army
<1m ago SES Receives Approval from GSA to Sell O3b Services
1m ago RESEARCH AND MARKETS : Feed Flavors & Sweeteners (Natural and Synthetic) Market - Global Trends & Forecasts to 2019
1m ago COMMERZBANK : EFSF 2.35% € 4bn Notes due 2044
1m ago World Mobile Holdings, Inc. Announces Current Status
2m ago RESEARCH AND MARKETS : Isothermal Nucleic Acid Amplification Technology (INAAT) (Infectious Diseases, Blood Screening, Research) Market - Forecast to 2018
3m ago Nevzlin 'very pleased' with Hague court ruling on Yukos
3m ago DOLLAR TREE : to buy Family Dollar
3m ago CLOUDBUY : Trading Update and Notice of Results
Latest news
Advertisement
Hot News 
ST PETER PORT CAPITAL : Says Net Asset Value Fell Due To Strong Pound
STADIUM : Buys United Wireless For Up To GBP8 Million Cash And Shares
GEONG : Announcement in Relation to the CFO of GEONG
FLOWGROUP : Director/PDMR Shareholding
MDM ENGINEERING : and Foster Wheeler merger approval from Tanzanian Competition Commission
Most Read News
1d ago WAL MART STORES : Man Charged With Arson In Fire At Stevens Church
1d ago NORFOLK SOUTHERN : Columbia Street Closing For Repairs
1d ago MOODY : Blues ; Guiding Pennsylvania Out Of The Recession And Its Consequences, As Well As The Gathering Storm Of Pension Payments, Requires Creative...
6h ago QUESTERRE ENERGY : updates Montney activities
1h ago Hague court orders Russia to pay $50 billion in Yukos case
Most recommended articles
2m ago Nevzlin 'very pleased' with Hague court ruling on Yukos
2m ago DOLLAR TREE : to buy Family Dollar
9m agoDJCrude Oil Futures Trade Lower on Global Tensions
16m ago Ryanair shares surge and may go even higher - MCCAIG
20m ago GENERAL MOTORS : GM Korea reaches tentative wage deal, averting strike
Dynamic quotes  
ON
| OFF