Mutilated banknotes:  Troubles in ‘daladala’ to redemption room

WHEN Salma Mgosso, a University of Dar es Salaam first-year student, was moving from her home in Mbagala to a hostel located at Makumbusho in the Dar es Salaam region early this year, she found herself quarelling with a conductor of a commuter bus famously known as ‘daladala’.

The misunderstanding between the passenger and the conductor started when Salma refused to receive a 1,000/- banknote from the conductor saying: “It (the banknote) was mutilated and it was impossible to use it to get another service.”

The conductor, according to Salma, was forced to give her another banknote though he blames passengers who pay for the transport service using mutilated banknotes.

Elizabeth Lucas, a food vendor who trades at Posta Mpya in Dar es Salaam says the mutilated banknotes, sometimes, hinder others in accessing services.

In an interview with the ‘Daily News’, the 29-year-old lady remembers an incident where a daladala conductor refused to receive a 2,000/- banknote saying it was not in a good condition.

“The conductor was forcing him to get out of the commuter bus but ‘good Samaritans’ intervened by giving their cash as the bus fare for the beleaguered passenger,” said mother of one.

The resident of Manzese in Dar es Salaam says she has experienced 500/-, 1,000/- and 2,000/- are mostly mutilated banknotes compared to the remaining 5,000/- and 10,000/-.

While the two passengers explain challenges they have encountered after using the mutilated banknotes, service providers, too, face the same.

Victor Godbless (28), a bus driver whose vehicle plies Mbezi Mwisho-Mkata route says frequently his conductor quarrels with passengers who pay for the service rendered to them using mutilated banknotes but were not ready to receive change.

Asked if they return the mutilated banknotes directly to the Central Bank of Tanzania (BoT), Mr Victor says they do not do so. The only solution to them is to use the cash in purchasing fuels, though some filling stations refuse nowadays.

Both passengers and transport service providers blame the materials used to produce the banknotes as low quality hence, an officer of BOT’s Currency Department, Restituta Minja says mishandling of the note is a major factor that affects notes.

“Some Tanzanians are mishandling the banknotes… they get damaged in a short period of time,” was quoted as saying during Dar es Salaam International Trade Fair (DITF) as she added mutilated notes and defaced coins are returned to the Central Bank, the lender of the last resort, through commercial banks.

BoT, through www.bot.tz/currency recognises a mutilated note as a banknote that has been damaged accidentally or unintentionally after contact with water, fire, or chemicals.

While some Tanzanians are getting trouble with mutilated currencies in accessing some services, Certified Public Accountant (CPA) Rashid Mganwa living in Dar es Salaam region says the majority are not aware of steps to be followed to redeem the damaged banknotes.

Costly and risky

For the Government to manufacture new banknotes or coins, it has to announce an international tender to get eligible contractors.

This is why the BoT official advises Tanzanians to handle with care their banknotes and coins for the State to avoid the cost of reproducing or issuing new banknotes or coins.

According to the BoT website, the mutilated currency can be exchanged or redeemed at any commercial bank only if they are genuine at least 75 per cent of the original banknote and bear both signatures.

But apart from the cost that might be involved during the collection and redeeming of mutilated banknotes, fraudulent activities can take place amidst the processes, as has been bolded in the Controller and Auditor General (CAG)’s Annual Report on the Audit of the Central Government for the Financial Year ended 30 June 2021.

According to the CAG’s dossier handed over to President Samia Suluhu Hassan in Dodoma, in March 2022, after conducting a thorough forensic audit, CAG uncovered the Central Bank suffered a loss of 3.99bn/- on what was termed as the “fraudulent redemption of mutilated notes.”

CAG establishes in the report which was also tabled and discussed in Parliament that BoT had redeemed 4.17bn/- amounted to 417,006 banknotes in the denomination of 10,000/- between January and September 2019, which were “purported to have been mutilated notes.”

Redemption of the mutilated banknotes may be used as a precious opportunity by some pseudo-officers to swindle public funds as the report suggests. The CAG report says the investigation unmasked two officers and four cashiers from the Central Bank who were involved in fraudulently redeeming 399,392 banknotes worth 3.99bn/-, which had no redemption criteria.

 Cashless economy, a way to go

The majority of Tanzanians are not in the formal sectors with a good number of citizens in rural settings engaging themselves in agriculture for their survival, the durability of banknotes cannot be assured, forcing the country to incur some costs in reproducing the same.

Edgar Kaduma, a driver of daladala which plies between Tabata Kimanga and Mnazi Mmoja in Dar es Salaam says in his experience in Njombe Region where he grew up, handling banknotes is a challenge to the majority.

He says most Njombe dwellers are potato farmers. “Since potatoes are traded in a raw state, banknotes used as a medium of exchange are being affected. We all know the hands of farmers are not clean. It’s the nature of the work,” says the man who’s in his late 30s.

Due to the scenario, CPA Mganwa suggests avoiding challenges and cost associated with mutilated banknotes and subsequently replacing them with new ones, cashless economy is to be encouraged.

Compared to a cash economy, he said, a cashless economy boosts financial transparency whereby the government can easily understand the amount generated or spent.

Stronger polymer banknotes

While CPA Mganwa throws weight behind a cashless economy, uses of cash cannot phase out so easily. This is a reason why some developed States like the United Kingdom have decided to invest in durable polymer banknotes.

The Bank of England has been printing banknotes for over 300 years but it has decided to opt for polymer over risky paper made banknotes.

According to England’s financial institution; “The new polymer notes allow for enhanced security features, such as the see-through window and holograms. This makes them harder to counterfeit than paper notes.”

Analysts are advising the BoT to borrow a leaf from the Bank of England by embarking on plastic banknotes which are predicted to last two-and-a-half times longer than paper banknotes.

Using the stronger banknotes means that the State will avoid frequent redemption of mutilated currency and associated cost as well as fraud.

The Bank of England says on its website that despite the qualities of plastic made banknotes, users must “take care of them.”