Readers of this column from around the world approached me as a posse demanding my evaluation of the prevailing currency landscape in the country.
I have to start my response by stating that it is shameful propaganda to claim that the ZiG is a gold backed currency. Showing gold bars in the Reserve Bank of Zimbabwe (RBZ) vaults to government dignitaries under flashing media cameras does not constitute gold backing. Pointing at hills, mountains and river beds with unexploited minerals does not constitute gold backing in spite of the fact that Zimbabwe is the most highly mineralised country on earth. No mechanism is in place to justify the claim of gold backing.
For the life of me, I cannot understand the logic of planning to replace a currency that has been loved and trusted by the whole world since 1973 with a local currency that has been hated and mistrusted by its own country for the past 20 years. Therefore, to dream of a mono currency in four years from now is, to my mind, merely a pipe dream, a wet dream or even a fever dream.
In a world that is certainly going multi-polar right in front of our eyes I cannot understand the obsession with a mono-currency system. We are being overtaken by events at a time when we need to be ahead and on top of the events. There is a pressing need to adjust goals and milestones.
Instead of planning for an impossible mono-currency dream, why don’t we use that energy to make the ZiG strong, stable and trusted within the current multi-currency system? This is a daunting task given that past RBZ governors failed to achieve it over a twenty year period. We will certainly need more than 4 years to do it at the pace we are moving.
One cannot talk of a mono-currency until this is achieved.
A very disturbing trend has imaged in Zimbabwe where each of the past three RBZ governors has come in with a new currency and on departure from office, they depart with it. We had the bearer bonds and agro-bonds from Gideon Gono in their billions and quintillions followed by John Mangudya’s Bond Notes which vanished with him at a fantastic rate of 33000 bond/US$.
Currently we have the ZiG introduced by John Mushayavanhu which devalued by 100% soon after being introduced. This currency has proved to be irrelevant in the deeper mechanics of the economy. Its electronic form is only useful in paying taxes to the government and wages to civil servants. Its physical paper form is only useful as “coin change” in Mushikashika taxis and informal down town tuck-shops. The higher denomination of it cannot buy a loaf of bread. Cry the beloved currency! Cry me a river! It is the only paper currency in the world that is referred to as “coin” in street language. All other coins in the world are made of metal.
- Awards target married couples
- Awards target married couples
- Zimbabwe needs to rethink economic policies
- Zimbabwe needs to rethink economic policies
Keep Reading
This money is made from cheap paper and does not inspire the nation to feel any sense of pride in it. It would be easy to forge but is protected by the fact that it is not even worth forging because of its worthless nature.
There is a promise to issue higher denominations of this paper money namely a 50 and a 100. These too, will quickly become “coins” and the current denominations of 10 and 20 will immediately and automatically be demonetized by the people, not by the RBZ.
The paper currency has been totally rejected in large towns and cities such as Bulawayo, Gweru, Beitbridge, Gwanda and Plumtree, Zvishavane.
Apart from being of no significant value, the paper currency is in such short supply that service providers are mulling increasing prices to eliminate the need for the loose “coin change”. This will be inflationary as one would expect.
All these things are serious signs of currency decay and failure requiring an immediate and rigorous response and yet there is silence in the palace and the ivory tower guard house regarding this dire matter because, over the years, the failure has come to be well regarded and accepted as normal.
To force-march a country to accept such a moribund currency in a mono-currency environment would indeed be a heinous act.
A recent announcement that foreign currency reserves had reached US$736 million is a damp, miserable and embarrassing squib even if the figures are genuine, when one does a peer comparison. Botswana has reserves of US$3,374 billion and a population of 2,5 million people. South Africa has reserves of US$70 billion and a population of 64 million people. Zimbabwe has about 15 million people. A per capita analysis will show that a Motswana enjoys US$1 350 reserve cover on his head. A South African has US$1 094 cover while a Zimbo makes do with a miserly US$49 cover. This is a woeful situation.
Perennial power shortages and out-dated industrial machinery mean that the country cannot put manufactured products on the international markets at competitive prices to earn further reserves.
So what can be done about this challenge of valueless-ness? If we look back into the history of others we will find we are actually close to the solution.
Countries that previously used the Gold Standard such as USA and UK had repurchase mechanisms which kept the exchange rate stable , trusted and strong in a chosen range. For Zimbabwe, I don’t recommend these ancient mechanisms, but something more avant garde with a three-fold result that will:
- Immediately stabilise the currency at a chosen level
- Create trust in the currency locally and internationally
- Increase forex earnings and reserves in a clear and veritable manner
Our situation is that we have pieces of a jig-saw puzzle in front of us but we are not putting them together because of lack of commitment to the issue.
For more details on the necessary adaptation please contact the writer on [email protected]
*Bart Star-James. WhatsApp: +263719930568
