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Good for many in the country but not for money traders

The dollarisation of the Zimbabwean economy has been good for many in the country but not for money traders on the country’s formerly booming black market. Ray Ndlovu reportsFor the past 10 years, the three-block stretch along Fort Street in Bulawayo’s CBD was Zimbabwe’s hub of financial activity. Nicknamed the “World Bank” by locals, it was where many turned at the height of the economic meltdown for scarce foreign currency, sourcing the rand, pound, US dollar, pula and even the local Zimbabwe dollar, which was in short supply at banks but readily available on the streets. But a year into the dollarisation of the economy, the “World Bank” has receded, becoming a pale shadow of it’s former glory – evidence that the decision to abandon the use of the local currency has caused a dramatic shift in the balance of power.

Today, a cluster of forlorn-looking women clothed in the familiar white garb associated with osiphatheleni (money traders), are seated on red plastic one-litre soft drink cases. The big leather handbags they commonly carried – rumoured to be filled with trillions of Zimbabwe dollars – are missing; there are no lavish chicken feasts purchased from the nearby fast-food outlets. Instead, an assortment of biscuits and sweets are laid on the ground in front of the women, with weathered signs: $1 for 2. Others hold up cell phone recharge cards for sale. For many of the osiphatheleni, dollarisation destroyed their livelihood, which once had them mercilessly tinkering with the exchange rate and making huge profits at the expense of their customers, who had little choice but to get their cash traded on the streets. Now scores of osiphatheleni have turned to vending for survival.

Yvonne Nyoni (29) speaks about her new job without much enthusiasm. “You can see for yourself,” says Nyoni, pointing to her fellow entrepreneurs. “We are just trying, but there really isn’t much to do. The fast life is gone, those days of making huge profits are now over. You are content with just a $1 profit nowadays “. Plagued by massive hyperinflation, Zimbabwe abandoned the local unit and switched to a multi-currency system, using the US dollar or the rand for most transactions. The US dollar that has become “the reference currency”, used to peg other currencies, according to local economist Dr Eric Bloch. And the impact of the greenback has been enormous. “We did it!” says a delighted Bloch. “Although I feel that we should have used the US dollar a long time ago, as the government can’t abuse this currency by printing.”

Inflation, identified by central bank governor Dr Gideon Gono as “the number one enemy”, was stopped dead in its tracks. Officially estimated by the Central Statistical Office (CSO) to have reached 231 million percent in July 2008, it has now receded to -0,9% as of December 2009, marking Zimbabwe’s first period of deflation in more than a decade. The local manufacturing industry has also shrugged off a stupor that had lasted most of the past ten years, upping factory capacity utilisation to 32 % from a low of 10 %, according to the Confederation of Zimbabwe Industries. Schools are open and learners are waiting for the results of public examinations, despite last year’s teacher’s strike that paralysed the education sector. Teacher’s demands to earn in foreign currency were finally met with the Government of National Unity (GNU) and they now earn salaries of $150, and are further motivated to work by the tax-free monthly incentives paid by parents – which can range from between $10 and $50 – to cater for their welfare.

With economic recovery set high on the government’s to-do list in the new year, Zimbabweans know that the US dollar will be key in bringing transformation, keenly aware of the improvements it has brought so far. But it also means the unity government must actually implement the promised political reform and create a conducive environment for foreign investment and economic recovery. Putting to rest speculation that the local unit might be headed for a comeback later this year, finance minister Tendai Biti said that he has put “a tombstone on the grave of the Zimbabwe dollar”, ruling out any chance that the local currency could be back anytime soon. Bloch says with the government’s focus on economic recovery, the “pragmatic thing to do in 2010 would be to continue trading in the multi-currency system until stability is achieved.”

Most economic analysts agree that the reintroduction of the local currency would be feasible only after the country achieves sustainable real GDP growth rates of 7 % and above. According to the International Monetary Fund, the economy recorded a GDP growth rate of 3% last year. The reassurances of not-anytime-soon for the local currency are a welcome relief for the majority of Zimbabwe’s population that have juggled with an assortment of notes ranging from a thousand to a billion all the way up to a ZWD$100 trillion note in January of last year. But for the osiphatheleni a country without a Zimbabwe dollar adds up to a bleak future. Said a wishful Nyoni: “Maybe life could be better if we used the US dollar alongside our own money.”