Page 3 The Big Read Zimbabwe stuck in financial mire
Few believe this week’s budget speech will herald new dawn for crippled economy
● Seated in a silver-grey Toyota twincab, Keith Mlambo* is parked on the corner of Nelson Mandela Ave and 4th Street in Harare’s central business district. His phone rings from time to time; he either tells those callers his location or drives to where they are, elsewhere in the city.
Mlambo is a foreign-exchange trader and buys and sells the scarce US dollar on the black market. In this market, the dollar and the bond note have long lost the one-to-one parity first proclaimed by presidential decree when Robert Mugabe was still in office. An unofficial index, Zimbollar, puts the bond note/dollar exchange rate at 3.35/$.
Foreign-exchange traders such as Mlambo have in recent weeks been forced off the streets by police as the government wages war on runaway prices and a surging black market. About 150 of the dealers have been arrested on the grounds that their activities are said to be fuelling price increases of basic foodstuffs such as cooking oil, sugar, flour and bread.
Some businesses in Zimbabwe are demanding payment in dollars only and have more than tripled their prices for those — the majority of consumers — who pay using the bond note, mobile money or bank cards.
Col Sanders ruffles feathers
US fast-food giant KFC, which last week reopened its six outlets in Harare, Bulawayo and Victoria Falls after they had been closed for a month, raised prices at the same time — and faced public outcry over the hike.
Before the police crackdown, foreign-exchange traders operated on pavements with their wads of rands, dollar bills and bond notes. Now some of them, such as Mlambo, are working from vehicles to dodge the authorities.
“What can we do? This is the Zimbabwe we are in. We just need to survive,” Mlambo told Business Times.
This week marked the anniversary of the military coup in which Mugabe was ousted last year.
But 12 months later, the state of Zimbabwe’s economic is even worse.
President Emmerson Mnangagwa, who succeeded Mugabe, began by courting foreign investment under the slogan “Zimbabwe is open for business”, but is now imposing stern measures to try to slam the brakes on the economic slide.
Business leaders said consultations between Mnangagwa’s administration and the private sector had been minimal.
Import move causes dismay
Private-sector players have criticised the imposition of a new 2% tax on every transaction above $10, announced by finance minister Mthuli Ncube last month, and the relaxation of import curbs last year.
Sifelani Jabangwe, president of the Confederation of Zimbabwe Industries, the largest industry body, recently described the government’s decision to relax the import ban without consulting industry representatives as akin “to throwing it under the bus”.
On Monday, the government gazetted the new regulations targeting foreign-exchange traders. Authorised officials and police officers have the power to interrogate any individuals they suspect to be dealing in currencies.
“If any authorised officer or police officer … finds any person frequenting, loitering in or lingering about any public place in circumstances that give rise to a reasonable suspicion that he or she is dealing in currency in contravention of section 4(1)(a), such a person may be required by the officer to give an explanation of his or her presence in or about the public place,” the regulation reads in part.
Show me the money
It gives police officers the authority to demand identity documents and order suspects to declare all the money they have on them and explain how they came by it.
Penalties are steep, with a jail term of up to 10 years for those found breaching the law who cannot explain the source of their money.
Economist Ashok Chavrati said Zimbabwe needed to create a legal foreign-exchange market, in which anyone who needed foreign currency could bid for it.
“Let us come up with a transparent system where people can trade; under the current system we don’t even know what the rate is,” he said.
Meanwhile, the Zimbabwe National Statistical Agency said this week that inflation had increased to 20.85% last month, from the official, estimated rate of 5.39% in September.
Retail giant OK Zimbabwe said the official figure for September was too low and that it estimated the true inflation rate to have been closer to 12.2%.
Inflation ‘will drop’
John Mangudya, the central bank governor, forecast that inflation would rise in the near term but eventually stabilise below the 7% average for the Southern African Development Community.
“While inflation may go over the 7% mark, it is expected to revert to below 7% in the short to medium term,” Mangudya told MPs ahead of Ncube’s budget speech on Thursday.
“Annual inflation rose to 5.4% in September 2018, from 4.8% in August 2018,” he said.
All eyes will be on Ncube on Thursday, although fresh ideas for dealing with the economic crisis appear unlikely. The finance minister indicated at a pre-budget seminar he intended to ensure bonuses were paid to civil servants and that parliamentarians and ministers would continue to receive statefunded luxury vehicles.
* Not his real name