Dianna Games
15 September 2008
Johannesburg — A SOUTH African banker I know says a financial institution looking for an expert to run its foreign exchange operations should look no further than Zimbabwe.
That country's tortuous economic policies of the past eight years have made currency boffins of even the most arithmetically challenged citizens. Zimbabweans can give you the black market rate of the Zimbabwe dollar in a flash -- and even its percentage escalation over a given period.
They can tell you what their billions are worth in any currency you care to name; they can do sums in their heads with 11 zeroes; and they can compute trillions of dollars at speed, as they used to do in supermarket queues in the heady days when there were goods to buy.
Money has become a national obsession. The less there is of it, the more it dominates life in Zimbabwe. And it is a fast-moving target. Even some experienced locals are nowadays finding it a challenge to keep up with the situation. For outsiders, it is impossible.
I travelled to Harare recently, daunted by the prospect of grappling yet again with the problem of how to change money at a decent rate -- and if I could get any at all.
To complicate matters, the government recently shaved 10 zeroes off the currency and new money has been issued. For instance, the Z$100bn note has become a tiny Z$10 coin, while the original Zimbabwe money, replaced by high denomination "bearer cheques" in 2003, is legal tender again.
People who stashed away old money -- in absurdly small denominations by today's standards -- can now use it again.
On arrival I had lunch with friends, but was unable to digest the Z$26000 bill that followed it.
I tried to find out what it was worth in real money. "What rate are you using?" the Zimbabwean experts at the table asked. I decided to quit while I was ahead and managed, for the short trip, to get by using foreign currency.
Until a year ago, the Zimbabwe dollar remained the only trad able currency in formal transactions. But the breakdown of the formal economy has pushed people to find new ways to beat the system. Paying for goods and services in foreign currency is one of them.
Getting Zimbabwe dollars has become a daily chore. The government has fixed maximum daily withdrawals at Z$500 -- the price of a newspaper.
People spend many unproductive hours each day in bank and ATM queues to get cash to cover daily expenses. Companies with surplus cash can sell it on the market for a 50% premium on its value.
Cheques carry a charge that is usually about 100% of the original bill, to cover inflation charges arising from the time taken to clear the cheque.
There are at least four exchange rates in operation. One is the rate at which banks buy and sell foreign exchange and the other two are the rates at which dealers buy and sell currency. All rates change several times a day. Then there is the ever-declining parallel or black market rate, used by individuals and even the central bank.
The situation opens up what a friend of mine in Harare calls the Zimbabwe IPO -- Individual Profit Opportunity. With confusion around rates, companies are charging what they like. The only constraint is consumer resistance.
The government, under pressure to deal with the realities, announced last week that 1000 retailers and 200 wholesalers would be licensed to sell goods in foreign currency.
It said it had evidence that nearly 400000 Zimbabweans crossed the border monthly to buy groceries, spending nearly US$1bn, money it would rather keep inside the country.
The scenario of well-stocked foreign currency enclaves in a sea of emptiness mirrors the darkest days of Zambia's economic decline in the 1980s. It is hard to see how the days can get much darker for the Zimbabwe economy. But we've all said that before.
Games is CE of Africa @ Work, a research and consulting company.
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