One cent in 1990 now worth $1


Going shopping! Don’t be put off by the prices. Just cancel the last two zeros and you have the real price you are paying. For example, if you find sadza selling for $500, think of it as $5. Don’t get upset when you spend $20 000 on your groceries and that doesn’t fill up the trolley. Think of it as only $200. And if you are overexcited about the jackpot in the Lotto, $100 million is just $1 million. And this is no guesswork.

According to the Zimbabwe Congress of Trade Unions’ economics department the value of one dollar in 1990 had been eroded to only one cent in December last year, meaning that you need a dollar today to buy what cost one cent in 1990.

Put the other way, you now have to cough up $10 000 to buy what you would have spent only $100 on in 1990. While currencies normally lose half their value or purchasing power every five years, the Zimbabwe dollar has been falling faster.

The dollar of 1990 had been eroded to 57 cents just a year after the introduction of the Economic Structural Adjustment Programme in 1992 when the country was also hit by a severe drought just like in 2002. It was down to 37 cents two years latter and 25 cents in 1996.

A decade later it was down to 6 cents, falling to 4 cents in 2001 and one cent last year.

The same has been happening to wages. While wages for the lowest paid workers in agriculture had been going up from 1995 to 1999, they have dropped significantly over the last two years. With 1995 as the base year (100), the real wage index went up to 102.1 the following year, on to 120.3 in 1997 and on to 131.8 in 1999.

It dipped to 123.4 in 2000 but shot up to 183.8 in 2001 when the labour movement negotiated for a new minimum wage of $4 181.38 for agriculture, which took into consideration the food poverty datum line in June 2001.

The real wage index plunged to 42.5 the following year and was down to 38.7 in January. Having bargained for the highest minimum wages across the board at national level in 2001, trade unions and national employment councils were left to negotiate wages on their own last year.

The same story applied to the whole economy where the real wage index rose to 108.6 in 1996 peaking at 185 in 2001 but plunging to 79 in 2002 and further to 71.9 in January this year. While wages as a percentage of the food poverty line had risen from 52.1 percent in the agricultural sector, peaking at 96.9 percent in 2001, they were down to 19.9 percent in January.

For the entire economy, excluding government, the ratio rose from 51.3 percent in 1995, peaking at 94.8 percent in 2001 and is now down to 36.9 percent. The ZCTU says the decline in the purchasing power of workers’ wages raises important policy questions regarding the effectiveness of raising minimum wages without stabilising the economy by, among other things, reigning in inflation. It says the standard of living of workers can only be improved by addressing inflation.

What is also interesting is that while an urban family of 5 – father, mother, and three children – needed a minimum of $1 302.38 to survive in 1995 this had shot up to an average of $21 952.42 by last year. A family needed $16 167.83 in March last year. This had rocketed to $40 681.36 by December and went on to $44 697.31 in January this year.

And there is very little difference between those in urban and rural areas. A rural family needed $1 151.44 in 1995 and by last year it needed $19 408.27. The cost of its basic needs shot up from $14 294.08 in March last year to $35 966.65 in December and $39 517.18 in January.

A family in Bulawayo, erroneously considered cheaper than the capital, needed $51 536.93 in January while that in Harare needed $47 695.87. For those in urban areas, the cheapest place to live in was Matebeleland South, followed by Matebeleland North, then Manicaland, Midlands, Mashonaland West, Masvingo, Mashonaland Central, Mashonaland East, and Harare with Bulawayo being the most expensive. In the rural areas, the cheapest was Manicaland, followed by Matebeleland North, Midlands, Matebeleland South, Masvingo, Mashonaland West and Mashonaland East with Mashonaland Central the most expensive.


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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