Zimbabwe scrapes through first half

Zimbabwe scraped through the first half of 2003 facing a new and unprecedented crisis- the shortage of local currency. The country has experienced shortages of various commodities before, the major ones being foreign currency and fuel, but it has never run out of cash before.

Most workers are now stranded because they cannot cash their pay cheques. Most banks are only allowing customers to cash or withdraw a maximum of Z$10 000 which is less than US$5 at the parallel market rate.

One worker was charged Z$700 to cash Z$20 000 from his Z$82 000 salary cheque and was asked to come back after three weeks to cash the remainder. By that time, he will have received another pay cheque.

Economists say the country’s central bank, the Reserve Bank of Zimbabwe, is largely to blame for the current cash shortage. The bank has admitted that it made a miscalculation. It printed notes on the assumption that inflation would be reduced from last year’s 134 percent to 96 percent by the end of this year.

Inflation has, instead, shot up from 199 percent in December to 300.1 percent by the end of May. Economists say it could rise to 1000 percent by the end of the year.

They also say that the bludgeoning black market is to blame for the current shortage. People are keeping their local currency to buy foreign currency on the black market. The Zimbabwe dollar is trading at over $2 000 to the greenback. The official exchange rate is $800.

Foreign currency has become one of the safest ways of saving and ensuring a good return. The equities market which had been offering goods returns over the past four years is now lagging behind inflation. The key industrial index only rose by 193 percent during the first half, almost half the rate of inflation. The mining counters have fared better with the mining index rising by 706 percent.

But there have been some good pickings in both the mining and industrial counters. At least 26 counters out of the 79 counter exchange beat inflation. Top of the list was transport group, Clan, which was taken over by Pioneer Motor Corporation which also assembles Scania trucks and buses. Its price shot up by 1329 percent.

The Tate and Lyle-owned Zimbabwe Sugar Refineries was second with a 1295 percent increase. Although the price of sugar is controlled, the company has been doing well through its associates which include a chain of wholesales and a transport arm.

Anglo-American owned nickel producer, Bindura was in third place while Border Timbers which says it has broken into the US market was fourth. In fifth place was Falcon Gold whose profitability has been boosted by the new exchange rate of Z$800 to the greenback.

Indigenous-owned Barbican Holdings, a financial institution which has a branch in South Africa, had the distinction of being the only counter whose price declined. It plunged by 9 percent

Besides foreign currency, cars and property now seem to be other safe investments with cars being more attractive as they are easier to dispose of. But the booming demand for luxury cars is also fuelling the black market as motorists are being forced to source their fuel from either South Africa or Botswana.

Most service stations in Zimbabwe have not received any fuel from mid-June. The only ones that seem to be receiving fuel are those that service public transport vehicles such as buses and commuter omnibuses.

This has further exacerbated the shortage of local currency. But some observers say there is an element of sabotage, especially from the corporate sector. They are asking where large companies are banking their money and if they are banking it what the banks are doing with that money.

The business sector has been accused of bankrolling the opposition Movement for Democratic Change and has been largely responsible for the success of the opposition-organised stayaways to force President Robert Mugabe to step down.

Most companies shut down their operations during stayaways and order their workers not to report for duty until the stayaway is over.

And, like every other commodity that is in short supply in Zimbabwe, a black market for local currency has developed. Those with access to large amounts of cash are charging for it. The commission is said to be as high as 30 percent for large amounts.

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