Eric Bloch: The Zimbabwe Dollar Farce

Thursday, 19 March 2009 19:29
WHEN the then acting Minister of Finance, Patrick Chinamasa, presented his 2009 Budget to parliament, on January 29, he announced that Zimbabwe would be undergoing a currency transformation whereby diverse currencies would constitute legal tender. He refrained from giving details thereof, stating that details of the new multi-currency operating modalities would be addressed in the then forthcoming Monetary Policy Statement to be delivered shortly by the Governor of the Reserve Bank of Zimbabwe (RBZ). However, he did state that government was “allowing the use of multiple foreign currencies for business transactions, alongside the Zimbabwean dollar”.
Four days later, on February 2, 2009, Gideon Gono, RBZ’s Governor, presented a Monetary Policy Statement (MPS) and, to all intents and purposes prescribed that with immediate effect all facets of the Zimbabwean economy would operate within a multi-currency environment. Although he did not use those actual words, he stated that all traders of goods, and providers of services, would forthwith be lawfully entitled to accept payments in foreign currencies. However, he expanded thereon by saying that “The Zimbabwean dollar remains the country’s legal tender as recognised by the various legal statutes, and as such shall continue to be used as a medium for exchange for all transactions in the country”.He expanded thereon, saying that “All traders shall therefore in addition to selling their goods and services in foreign currency, adopt a dual pricing framework where goods will also be quoted in local currency. This means that prices can be in rand and Zimbabwe dollars, US dollar and Zimbabwe dollars as the case may be. The dual pricing framework to be adopted… shall be legally enforceable and the pricing formulae to be implemented shall be based on the inter-bank market determined exchange rate.”However, he proceeded to prescribe some exemptions for certain parastatals and public utilities to charge exclusively in foreign currencies for certain services, instead of their being governed by the prescribed dual currency modalities. In particular, he authorised the Zimbabwe Electricity Supply Authority (Zesa) “to bill or charge their electricity tariffs in foreign currency”. However, this authorisation was qualified by prescribing that “residents in high density areas and those domiciled in the communal areas shall continue to pay electricity tariffs in local currency”. In like manner, local authorities were authorised to charge exclusively in foreign currency in respect of services to “all corporates and residents in low density areas.” Similar authorisation was granted to Hwange Colliery Company, Air Zimbabwe, TelOne and Potraz, National Railways of Zimbabwe (NRZ), Zimbabwe United Passenger Company (Zupco), rural transport and commuter operators, the print and electronic media, and in addition it was prescribed that “property transfers shall be paid in foreign currency”. Similarly, such authorisation was granted to all academic institutions, urban and private schools, producers of milk and of other agricultural products, agricultural commodity traders, and banks.In making these announcements, and granting these authorisations, Gono stated that doing so “does not amount to the dollarisation of the economy in the strict technical sense of the word”. He claimed that “All we are doing is to liberalise our trading environment by multi-currencying it”, and he contended that the currency dualisation was “a tailor-made strategic intervention that is meant to bring convenience to the general public, as well as supporting productive efficiencies whilst at the same time preserving the sovereign Zimbabwean dollars by giving it company among other currencies of choice, which is the essence of multi-currencying”.Notwithstanding the Budget Statement declared intent that usage of foreign currencies would be alongside the Zimbabwean dollar, and Gono’s statement that the Zimbabwean dollar remains legal tender which could continue to be used as a medium of exchange for all transactions, realities on the ground are very different. Virtually no one in Zimbabwe is according any cognisance to the Zimbabwe dollar (even though, in terms of Statutory Instrument 5 of 2009, it remains legal tender, as intended by both the acting Minister of Finance and RBZ’s Governor). Every factory, wholesaler, shop, hotelier, and provider of services ( be such services plumbing, electrical, health care, accounting, catering, motor repairs, hair-cutting, or a multitude of others) only displays prices in US dollars or rand, and is only prepared to accept foreign currency payments. Even government itself, in the collection of taxes by the Zimbabwe Revenue Authority (Zimra) (save for taxes on non-existent Zimbabwean dollar transactions and revenues), and in the provision of services such as the issue of passports, as well as through its parastatals, demands foreign currency payments. To all intents and purposes, the Zimbabwe dollar has become extinct!The reluctance of all to accept Zimbabwe currency is very understandable, as in an intense-record-breaking hyper-inflation environment such as has been prevailing in Zimbabwe, the currency very rapidly loses value and, within weeks (if not days) ceases to have any meaningful value. However, the non-acceptability of the currency is a cause of intense hardship and suffering for very many, and an immense constraint upon rehabilitation and recovery of the economy. In most instances, it is also in breach of law, in the light of the provisions of S.I.5. of 2009.A very large proportion of the populace do not possess, and do not receive, foreign currency. Those without rand, US dollars, Botswana pula, British pounds or euros, have therefore been rendered even more destitute from heretofore. It is all very well that government and RBZ accorded partial recognition to this circumstance by prescribing the provision of utilities in high-density and rural areas in Zimbabwe dollars, but this does not aid the Zimbabwean dollar pensioners, devoid of other income, in medium and low-density areas. For many others, their incomes are wholly or partially in Zimbabwean dollars, generally because employers have an insufficiency of foreign currency to pay employees fully (or, in many instances, even partially so), in which instances they too are unable to pay their rents, pay for utilities, and obtain essential goods and services. All of them are condemned to great discomforts and suffering, to an extent that in numerous instances is life-endangering.These circumstances are also resulting in trade union and labour demands for total remuneration in foreign currency, in total disregard for the ability or otherwise of employers to fund such remuneration. ZCTU is demanding that the minimum wage be US$454, based upon a Poverty Datum Line (PDL) for a family of six (but disregarding that such families will often have two income earners). Conceding to such demands can only result in the enforced closure of innumerable enterprises, and to a massive increase in the already horrific levels of unemployment.The Zimbabwean dollar has become a meaningless, valueless farce, and will remain so unless government significantly and constructively modifies its demands, and those of its parastatals, from the present excessively great demands for foreign currency. Concurrently, S.I.5 of 2009 must be enforced, albeit with justice and equity, thereby substantively restoring legal tender status to the Zimbabwean dollar and, at the same time, the vigorous drive to contain and reverse inflation must continue, commencing with very marked curtailment of governmental spending.
BY ERIC BLOCH