Institute for War and Peace Reporting | Giving Voice, Driving Change

Billion-Dollar Poverty in Zimbabwe

As the national currency continues to plummet in value, the real business is done in foreign banknotes.
By Nonthando Bhebhe
The Zimbabwean dollar’s headlong devaluation has proved impossible to halt despite all efforts by the central bank. With the exchange rate now close to 20 billion to the United States dollar, traders are sticking to foreign currency to preserve a measure of sanity in their prices.



In early May, Reserve Bank governor Gideon Gono that the Zimbabwe dollar, ZWD, would no longer be held to a fixed exchange rate but would be allowed to float freely. The immediate result was that Zimbabweans flocked to the banks to offload their foreign currency at the new, more realistic rate.



Since then, the bank has stuck to its guns and allowed the exchange rate to move with the market, but any hope that the devaluation would eventually bottom out has been dashed.



Instead, the hyperinflation gripping the economy – estimated at nine million per cent compared with last year – has made it impossible for the ZWD to stabilise.



The central bank has been printing banknotes in larger and larger denominations, but never fast enough to increase their purchasing power.



When the largest denomination yet, the 50 billion ZWD note, came out about a month ago, it could buy five loaves of bread. Today it takes two notes – 100 billion dollars – to buy one loaf.



Gono’s announcement meant that commercial banks were able to buy foreign currency from the public at a more competitive rate than the black-market currency dealers could offer. That worked for a while, and temporarily wiped out the illegal currency trade.



However, as the ZWD became more worthless than ever, people went back to the US dollar and South African rand, even for purchases of the most basic foodstuffs.



The gap between what the banks and the street traders are offering is no longer so huge as it was before the ZWD was allowed to float, but the black market is still very healthy because demand for strong foreign currencies is so high.



“Even though we peg our rates slightly higher than the banks, the public still flocks to us," said currency dealer Edmund Dube.



Nobert Ganyani, a manager at a commercial bank, told IWPR that street traders had "outsmarted" the banks, and unless further measures were put in place, the Reserve Bank was unlikely to “win this war”.



Abel Mhofu, a chicken farmer in Wedza, some 100 kilometres south of the capital Harare, is among the many Zimbabweans who have lost all respect for the national currency.



Every weekend, Mhofu brings about 50 chickens to town and sells them for four American dollars each.



“I buy my fuel in foreign currency and import almost all my stock feed from Zambia, so for me selling in the Zim dollar is not an option,” he explained.



Mhofu was pleasantly surprised by the response from his customers when he began to demand foreign currency only.



“I thought there would be resistance but I find that many people, including those in what we called ordinary households, have foreign currency in their possession,” he said.



Some of the foreign banknotes come from the many Zimbabweans who have turned into cross-border traders, going to neighbouring countries but also as far afield as Singapore and China to buy things to sell at home. But the main source of foreign currency continues to be the Zimbabwean diaspora, with relatives abroad send back money to keep their families going.



“Every family now has at least one member in the diaspora or who travels regularly in the region in search of money,” said Dube.



With Zimbabwe’s economic crisis now in its eighth year, an estimated 85 per cent of the population are unemployed, while many of those in formal employment earn less than 300 billion ZWD a month, or about 15 US dollars. The Reserve Bank has restricted withdrawals to a maximum of 100 billion ZWD, and anything left in a bank account loses value on a daily if not hourly basis.



“All Zimbabweans now understand why they should keep their money in foreign currency,” said Dube. “People from across the economic divide have now turned into forex dealers. Even vendors are now selling their wares in other currencies.”



Dube plies his trade at the Roodepoort bus terminal, which is better known as the “World Bank” these days because various foreign currencies are so freely available.



The marginalisation of the national currency could have a further destabilising effect on the economy as President Robert Mugabe tries to consolidate his grip following the June 27 presidential run-off election, in which he was the sole candidate.



According to an economist with Barclays Bank of Zimbabwe, the country has defied all economic wisdom by staying afloat for so long.



“Many have predicted Zimbabwe’s collapse and President Mugabe and his government have described the predictions as the work of prophets of doom,” said the economist, who did not want to be named. “But now they may just have run out of time.”



Aggravating the problem is the fact that the Reserve Bank might soon have nothing to print its banknotes on, following a decision by the Munich-based company that supplied the paper to stop doing business with Zimbabwe.



For Zimbabweans, the stalled political process and the leadership’s apparent inability to reverse economic decline mean the future looks bleak.



Takudzwa Nyauchi, a professional in Harare, cares less about politics than his monthly salary of 300 billion ZWD.



“I can’t keep on surviving like this. I have a wife and three children to look after and also the extended family back in the rural areas,” he said.



IWPR caught up with Nyauchi as he was starting home after work, on foot. He cannot afford public transport, which would cost between 20 and 30 billion ZWD a day, so he walks the 20 km to work and the same distance home.



He is not alone – continual increases in petrol prices mean many people now walk up to 40 km to reach their jobs.



“Money devalues at the blink of an eye,” said Nyauchi. “With my paltry salary I have to do other things to survive.”



“Other things” includes getting his workmates to buy the doughnuts that his wife bakes each night. They pay in ZWD, which he quickly takes down to the “World Bank” at Roodepoort to exchange for rands.



“Even ten rands makes a great difference to me,” he said. “If I am able to make 100 rands a week, I can buy basic foodstuffs – most traders now prefer to deal in foreign currency.”



He explained that meat, cooking oil, maize meal, salt, eggs, soap, rice, flour and other basic items are now available only on the black market, and only for South African or American banknotes.



“It is not enough to have a job any more. The focus now is on surviving each day. So I am now forced to sell whatever I come across to survive. Besides the doughnuts, I sometimes sell other people’s goods for a commission or help source foreign currency and add my own mark-up,” he said.



“I am doing whatever I can to survive, but it is still not enough.”



Like most Zimbabweans, Nyauchi has dropped eggs, milk, meat, margarine and even bread from his daily diet, as these now count as luxuries.



“I skip breakfast and lunch – I only have one meal a day. If I am lucky, I have maize-meal porridge – that is if we have sugar. It makes me want to cry when I look at my children,” he said.



Zimbabwe’s cities are quickly becoming open-air markets, with roadside stalls popping up everywhere stocked with vegetables from vendors’ gardens or goods from their homes, as they strive to earn enough to survive.



On the streets of Harare, one banana now costs 10 billion dollars. At 50 US cents, that is quite expensive.



Nonthando Bhebhe is the pseudonym of a journalist in Zimbabwe.