CURRENCY WOES BATTER ZIM
As inflation reaches 132% and the local currency continues its rapid slide, consumers are taking the hit
Baker’s Inn is a popular fast-food spot near the Joina City shopping mall in central Harare. For the most part, its drawcard has been its $1 Russian and chips combo. But it’s not just that: the eatery has also offered a means for Zimbabweans to send sought-after US dollars to other parts of the country.
That has been thanks to InnBucks, the mobile money platform run by Baker’s Inn owner and Zimbabwe Stock Exchange-listed Simbisa Brands.
InnBucks began life as a loyalty rewards programme for Simbisa’s outlets, including Baker’s, Steers, Nando’s and Chicken Inn. But the geographic footprint of the stores — there are 240-odd dotted around the country — meant it soon blossomed into a remittance and payments service, allowing members to deposit up to $200 into their InnBucks account, to be transferred locally in US currency or used for the purchase of meals and products across Simbisa outlets.
“I used InnBucks to make purchases at Simbisa and to send money, because
[it has] outlets in almost every town or urban centre, so it’s easy for receivers to pick up the cash,” says 23-year-old Harare resident Alice Dazi. “I know colleagues who had large sums of foreign currency in their InnBucks accounts.”
Given the rapid devaluation of the Zimbabwe dollar — trading at Z$352/$ this week against a parallel market rate of about Z$600/$ — and in the face of rocketing inflation (132% in May) it offered something of a currency hedge.
Until April 20, that is. On that day, the Reserve Bank of Zimbabwe (RBZ) suspended
InnBucks, saying it was operating as a money transfer service without the necessary bank approvals. (Simbisa has reportedly been engaging with the banking regulator since the issue was raised late last year.)
At the same time, the RBZ suspended two other financial institutions: Metbank and bureau de change Rolink Finance. Metbank’s suspension — pending a full investigation of allegedly illegal currency dealings — has since been lifted.
It’s all thought to be related to Zimbabwe’s evolving regulatory landscape as it attempts to stem the use of foreign currency and shore up the shaky Zimbabwe dollar. New measures, announced last month, included a temporary hike on banks’ lending activities, and increased taxes on foreign currency withdrawals and purchases made electronically.
The idea is to stimulate demand for local currency by making dealings in forex more expensive. But it’s hitting consumers in the pocket.
“We now have problems with change when buying bread and fast-food meals, because previously you would just have your change credited to your InnBucks account,” says Dazi.
Others simply keep changing money on the parallel market.
A fast-foods till operator in the town of Chitungwiza says that before the new policies were introduced her company was selling 80% of its meals in US dollars. That’s all but disappeared now.
“People would usually just purchase in US dollars, but now they first have to exchange their money with the currency dealers outside and then come to buy, using swipe or mobile money,” she says.
Not helping matters is the rapid rise in inflation — and the knock-on effects on prices of Russia’s invasion of Ukraine.
“The bread price has gone up,” says a teacher on the outskirts of the Harare CBD. “The Russian and chips meal [at Baker’s Inn] has gone up, which is sad, because that was the most affordable meal for those who go to work. Even the canteens have raised their price for a plate of sadza, from $1 to $1.50. We are tightly squeezed.”
A bank worker tells of similar woe. “There is no respite,” he tells the FM. “At the shops, at home and at the office, prices and rates are rising. We are forced to deal with extra borrowing and credit purchases and to negotiate for delayed rental payments. It’s a crisis in the making and I don’t see any solutions.”
Many say the simple solution would be to jettison the local currency and properly dollarise the economy. As it is, Old Mutual has said devaluation of the Zimbabwe dollar, coupled with the country’s currency crunch, makes dollarisation inevitable if prices are to stabilise, news service Bloomberg reports.
It’s not unprecedented. Zimbabwe dollarised in 2009, after hyperinflation brought the economy to its knees. But since reintroducing the local currency in 2019, there’s been little respite.
Nevertheless, finance minister Mthuli Ncube is adamant the multicurrency system is here to stay. On Monday, he said the government has decided to “embed the multicurrency system and the continued use of the US dollar into law for a period of five years”.
Ncube has previously said that using the local currency alongside the dollar is a means to “manage the cash crisis” that makes it difficult to access forex.
“Banks will have negative balances [if the economy is fully dollarised],” Ncube said after a cabinet meeting this month. “The manufacturing sector will lose its competitiveness.”
But while the government hopes its new policies will offer support for the local currency, others are sceptical. As far as former finance minister Tendai Biti is concerned, for example, an “out of control” economy has already self-dollarised as “inflation and shortages run amok”.