Tuesday, September 22, 2020

Zimbabwe economic conditions produce multitudes of poor billionaires

HARARE- With a wad of notes in his hands, Thulani Munda, operates an “office” along Harare’s bustling Samora Machel Avenue.

On a good day, Munda can take home Z$500 million from his enterprising airtime card selling business.

Across the road, Josiah Matimba is a fruit vendor and rakes in Z$800 million per day.
On a good week, when he is lucky with municipal officers, Matimba can smile all the way to the bank.

“When I am lucky with the municipal officers, I can take home Z$4 billion but if I have to pay bribes to these officers my takings will be Z$2 billion,” he said.

To an outsider, Munda and Matimba appear to be enjoying rich pickings but in Zimbabwe’s hyperinflationary environment such money is a drop in the ocean.

They have to content with monthly expenses which are spiralling by the day.

A one way trip to town which was Z$4 million in February has risen nine fold to Z$40 million. Monthly rentals in the high density suburbs are hovering towards Z$1 billion per room.
“Monthly expenses are skyrocketing and I need to have more money to buy basic goods which are now found on the black market,” Munda said.
Zimbabwe is in the eightieth month under hyperinflation, a condition whereby month on month inflation is over 50 percent.
Zimbabwe’s annual inflation, as of February, sits at 165 000 percent, an astronomical figure in a country not at war.

Analysts note that high inflation had eroded the purchasing power of the currency leaving citizens holding wads of useless currency.

Although the Reserve Bank of Zimbabwe tried to enhance convenience by introducing higher denominated notes to ease citizens’ woes of carrying bags of cash, the victory has been short-lived.
Early this month, central bank governor Gideon Gono unveiled higher denominated bearer notes- Z$50 million and Z$25 million- the largest notes in the world but the move brought home the equivalent of a wooden spoon.
Analysts say the purchasing power of the currency will continue to be eroded by inflation as the government is doing nothing to halt the decline.

“We are seeing the classic case of too much money chasing a few goods,” said John Robertson, an independent economic consultant.

He added: “The value of the currency is supported by production taking place inside the country. Agricultural production has been going down since the land reform programme and manufacturing hamstrung by foreign currency shortages and price controls.”
Robertson said while other countries which experienced the same predicament as Zimbabwe did everything to halt the decline, the troubled southern African nation had run out of ideas to stop the economic free-fall.
Zimbabwe’s hyper inflation has resulted in some goods and services being quoted in foreign currency.

Fuel is being sold in US dollars while some landlords are demanding rentals in either US dollars or in Rands, a trend analysts warn will be spread across the economy.
“It’s not going to be long before people start refusing the Zimbabwean dollars,” Robertson said.
Governments under hyperinflation can effect price and wage controls to disguise the true rate of inflation.

In June last year, the government ordered businesses to slash prices of all goods and services by half in a populist move that left shelves empty.
Munda is worried that if a solution is not found as a matter of urgency people will use wheelbarrows to carry cash.

“We heard that Germans carried wheelbarrows of cash in the 1920s and with what is happening here, we are not far away from that experience,” Munda said.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.