Zimbabwe’s struggles mean cash a necessity
Walk into Pedzai Nyika’s furniture factory in Zimbabwe’s capital and he’ll offer a 20 percent discount straight away — provided you pay in cash.
He’s not alone. A shortage of banknotes gripping the southern African nation has become so dire that business are offering huge discounts to cashpaying customers and limiting the amounts they can charge on credit cards or refusing to accept them altogether.
“I am desperate. Business is very slow, so really I need to do anything I can to retain cash flow,” Nyika, 46, said by phone from his office in Harare. Most fabric suppliers “only accept dollar notes, nothing else and certainly not cards.”
The nation has mainly used the dollar since economic mismanagement and runaway inflation rendered its own currency worthless eight years ago. A liquidity squeeze ensued as growth faltered and a strong dollar eroded the competitiveness of Zimbabwe’s exports. The cash crunch has become so severe that banks are now capping customer withdrawals at $150 a week, a limit set by the central bank, while CBZ Holdings, Zimbabwe’s largest lender, said this month it would suspend the use of Visa cards for local transactions.
The crisis has fueled opposition to President Robert Mugabe, who’s been in power since since independence from the U.K. in 1980 and overseen an economic decline that’s given rise to food shortages, an unemployment rate of more than 90 percent and the collapse of basic services. Even as 92-year-old Mugabe’s health falters, the ruling Zimbabwe African National Union-Patriotic Front, or Zanu-PF, has nominated him as its presidential candidate in the next elections in 2018.
In a bid to address the banknote shortage, the government began distributing so-called bond notes in November, with about $73 million of the dollarlinked securities issued to date. While the introduction of the notes was met with protests, initial predictions that they would be universally rejected haven’t materialized with banks, and most large retailers recognizing them as legal tender. Many small stores, informal traders and taxi drivers won’t accept them, however, or price them at as little as 70 percent of their dollar face value.
“The dollar is real money. Dollars work everywhere,” said Mike Mawere, 54, who sells tools and building supplies from a stall in Harare. The bond notes “are paper, so I suppose they’re worth what the paper and ink are worth, but no more.”
The skepticism over whether the new proxy currency will retain its value is a hangover from the days when the central bank printed money to enable the government to pay its bills, after the seizure of white-owned land by statebacked militants slashed farm output, exports and tax revenue.