Costs of rebasing the Kwacha

From Zambian Economist Wed Nov 7 2012, 14:00:00

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 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. This is just for starters! A reasonable guess would be that the the proposal would lead to business costs over K1 trillion. Most of these are passed onto consumers one way or the other! Many Zambians have failed to grasp the simple point that most costs, if not all, of rebasing the Kwacha are paid by consumers. Business will not simply take on the costs, unless the competition is perfectly competitive (and even then under only certain assumptions).

As for the benefits - there are no real economic benefits to society apart from "computational costs" to grand parents. In theory government benefits from reverse seigniorage - but that seems to be limited because Government will allow people to change up to 2015 in an effort to minimise "menu" costs. So government wont actually make that much money from the short fall in the old Kwacha exchanges for the new! Atleast we can say it is not intended to swindle. But it is still poorly designed.

It is sad that this was a purely political decision. No single economic assessment was done by GRZ! This of course is ...

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