WITH Zimbabwe’s long-time ruler, Robert Mugabe, out of power for exactly a year now thanks to a military coup, the promise of a new and prosperous Zimbabwe is increasingly fading into a nightmare, writes Zimbabwe Independent’s Kuda Chideme. Mugabe’s departure was heralded as the beginning of a new economic chapter for the southern African nation after decades of the aged leader’s disastrous leadership and policies that left the country in ruins.
Yet despite the promise of a better Zimbabwe, the country’s economy has taken a turn for the worst, with ordinary citizens and businesses reeling from inflationary pressures, shortages of basic commodities, cash and foreign currency shortages.
In the past 12 months, Zimbabwe, which adopted the use of the United States dollar and other stronger currencies in 2009 to end a wave of hyperinflation that eventually decimated the demonitised Zimbabwe dollar, the value of the bond note, a surrogate currency introduced in 2016 to help ease cash shortages, has plunged by more than 300%.
Introduced amid resistance from the majority of Zimbabweans, the monetary authorities said the currency would trade at par with the US dollar.
Although the local quasi-currency traded at a discount to the United States dollar, as demand for the greenback increased, fundamentals deteriorated and confidence in the system dampened, prices had remained largely static.
Along with its spectacular collapse two months ago after the central bank directed local banks to create separate foreign currency accounts (FCAs) — a move that many construed to mean that Real-Time Gross Settlement (RTGS) balances were not at part with the US dollar — economic problems have re-emerged with a vengeance once again with no solution in sight.
Prices, which had remained in check since 2009, shot up overnight as the currency reached all-time lows against the dollar. With the bond note trading at US$1:6 at the height of volatility a month ago, retailers and manufacturers, who often rely on imports, responded with swift price hikes.
The price hikes have seen bread retailing at $1,50, up from $0,90 and a two-litre bottle of cooking oil selling for between $6 and $9.
Prices of almost all basic goods have shot up by more than 200% on a weighted average.
Many retail outlets have been rationing the purchase of certain basic commodities such as sugar, cooking oil and various juice brands.
Cooking oil is scarce and, where it is available, it is usually overpriced. While producers maintain that they have not increased prices, retailers on the other hand have been taking advantage of the situation and cashing in on the chaos.
In many stores, a customer is forced to purchase groceries worth more than $15 to be allowed to buy a two-litre bottle of Mazoe orange juice or cooking oil.
A kilogramme of meat which used to cost no more than $5 last year now costs between $9 and $15, depending on quality and the cut. A 2kg packet of rice is now going for $8, more than double last year’s price.
Government has had to block the increase in the price of bread which had been doubled last week — up from US$1,10 to between $2 and $2,10 to the current $1,50.
However, the central bank and Treasury still maintain that RTGS balances and bond notes are at par with the greenback. Activity on the parallel black market reveals otherwise.
Distortions in the actual value of the bond notes and market volatilities have resulted in shortages of basic commodities as retailers struggle to restock.
Furthermore, the decision by Finance minister Mthuli Ncube to up the tax on electronic transfers to 2% per transaction from the previous levels of 5 cents per dollar has also stoked inflationary pressures.
The Zimbabwe National Statistics Agency (Zimstat), reports that in October inflation had reached 20%, the highest since the country dollarised, but actual developments on the ground show that prices have spiralled out of control.
At the height of the currency meltdown, fast food outlets such as KFC and St Elmos closed shop in light of the developments.
OK Zimbabwe, one of the largest retailers in the country, has cut its operating hours, with supermarkets now opening at 9am and closing at 6pm. The retail chain has stopped operating most of its branches on Sundays. Its OK Mart in Harare was closed for what the company described as “renovations”, but has since re-opened its doors to the shopping public.
The country has witnessed a marked decline in the supply of beverages as manufacturers blame inadequate foreign currency allocations. Access to basic drugs and healthcare has become a nightmare as pharmacies and service providers demand payment in US dollars.
With the rising cost of business, most operators have actually closed shop while others have downsized operations.
Individual earnings and companies’ liquid assets have been decimated. Yet despite the erosion of purchasing power for salaried individuals and the general populace, only a few companies have awarded salary increases, with some warning they could go under.
One year after the toppling of Mugabe, RTGS balances and bond notes are fast losing value — and salaries have lost value by a third, while the cost of living has skyrocketed for the average Zimbabwean.