Plastic bank notes--Zambia leads the way


By David Simpson

The Lowdown, Zambia

August 2003

How often do you have to hand in torn and scruffy-looking currency notes in the smaller denominations when you visit your bank, and get crisp new notes in exchange? This problem of worn-out banknotes will be much reduced when Zambia achieves the distinction of becoming the first country in Africa to introduce currency notes made of polypropylene.

The first of the new notes are expected to be put into circulation in September. This is the start of a phased changeover that will save the country a considerable amount of money. Polypropylene notes should last about four times as long as paper notes, but since they cost about twice as much to produce as paper notes, the changeover, in a country such as Zambia, cannot be done all at once. Initially only two denominations will be switched - K500 and K1,000, which have been identified as the notes which wear out most rapidly - often within a year.

The K50, K100, K500, and K1,000 notes get a great deal of handling because they are so often supplied in change whenever you buy groceries. They are then recirculated by you when you buy a newspaper or a cup of coffee, for example, and retained by the shopkeeper for use as change again. The K10,000 notes, in contrast, are frequently withdrawn from the bank, handed over to the shopkeeper, and deposited straight back into the bank.

It seems Zambia is taking a lead in the financial sector, as it did with the Meridien cards some years ago.

The notes are being printed by the Canadian Bank Note Company. The technology was pioneered in Australia by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and Note Printing Australia (a wholly owned subsidiary of the Reserve Bank of Australia), and has been widely introduced in the countries of the Pacific Rim area, including Canada.

Polymer substrate is playing a key role in shaping the future of banknotes. We have developed the necessary technology to include polymer in our product offering,' explains Hutch Holton, President, Payment Systems (Canada). For countries in which banknotes need the highest level of security or have a short lifespan due to climate conditions, polymer is an excellent means of ensuring the security and longevity of the local currency. The Bank of Zambia’s decision to issue two of its denominations in polymer banknotes positions this country as a leader in the introduction of this technology in the region.

BOZ director of banking, currency and payment systems Morris Mulomba says the bank expects to save K17 billion in re-order costs over the next five years s a result of the change. In addition the labour costs incurred by the central bank in disposing of worn notes will be much reduced.

A lesser advantage is that the polymer notes are extremely difficult to forge, since the plastic cannot be run through colour photocopying machines or laser printers.

The plastic note technology uses a polymer plastic substrate instead of paper. The clear film is opaqued, allowing the incorporation of security features which are not possible in paper notes, such as a clear window which can incorporate such features as microprint, hologram or polarised design. The thickness of the opaque coating can be varied, a feature extremely difficult to detect and reproduce by illicit means. Embossing is another security feature, which is possible only to a limited degree with paper notes because they soon lose the embossing.

In Europe, polymer notes are believed to be found only in Northern Ireland and the Isle of Man. The majority of users are developing countries. Most countries use coins for small denominations, as these are extremely durable. However in a country like Zambia which has undergone massive inflation, unless there is a compensatory revaluation (for example by knocking off two zeroes from the face value of all the country’s currency) the value of the coins rapidly becomes lower than the cost of the metal that goes into the coin, and they fall out of use. The introduction of polymer banknotes will at least ensure that wear and tear on the Zambian currency is minimised.