“The US dollar.”
This is the most appropriate response for many Zimbabweans to the knock-knock joke if developments on the ground are anything to go by.
By Chris Muronzi
All evidence is suggesting Zimbabwe’s economy is headed for redollarisation once again after abandoning the US unit for its version of the greenback, the bond note, a currency the central bank claimed had the same value as the American unit.
In the midst of the economic uncertainty and turbulence, market players, entrepreneurs and companies are at the centre of a push to return to the US dollar. And understandably so.
With memories of hyperinflation that ended in 2009 after Zimbabwe adopted the US dollar still fresh for many, a rush to preserve value has begun for both small and big businesses.
The journey to redollarisation that began earnestly late last year when Zimbabwe’s new Finance minister Mthuli Ncube called time on bond notes and established a managed inter-bank floating foreign currency market to establish the value of bond notes and electronic balances is now in full swing if developments on the ground are anything to go by.
Immediately after the announcement, the local currency no longer had par value to the US dollar. Zimbabwe’s largest fast food chain, Simbisa Brands, started charging both US and RTGS prices.
The company also ran promotions and gave discounts for US dollar payments. It is not alone. Various eateries in and around Harare are discounting for US dollar payments by as much as 70% of the RTGS cost.
The list of businesses that are charging in both US and RTGS prices has grown.
ZOL, an internet service provider controlled by Econet Wireless Zimbabwe founder and billionaire investor Strive Masiyiwa, has also begun charging US dollar prices for its home and office internet services.
It is not just private and public listed companies that are charging US dollars now.
Even state-owned enterprises such as TelOne, a government-owned fixed telephone operator and data service provider, has joined the bandwagon for its data services.
Tyre retailers are openly advertising their products in US dollars on radio and television as the battle to preserve value rages on.
Most retailers have two-tier prices for their products to target those in the country who still earn hard currency.
But other companies have not been so lucky in their quest to charge US dollars for their products.
Delta Corporation, a company controlled by Anheuser-Busch InBev, the world’s largest beer maker, in January this year announced US dollar prices for its products to sustain its operations.
An analysis of the new US dollar prices charged by Delta showed that the group had simply defaulted to dollarisation prices.
A day after the new prices were announced, government ordered the group to revert to local currency prices, pledging to make foreign currency available.
However, this has not dissuaded Delta from increasing prices in local currency. In fact, the company has raised prices to almost the same prices they wanted in US dollars.
A quart of lager beer now costs RTGS$10 (US$2), which is 0,50 US cents more than the price the company wanted in real terms while a pint of lager costs RTGS$5 ($1), which is 0,20 cents more expensive than the January price.
Delta executives told analysts last week they are comfortable with current prices for their products as they reflect their brands’ regional intrinsic value.
Other companies are now remunerating workers through a combination of US and RTGS dollars to cushion them from the vagaries of the economic crisis gripping the country that wiped out purchasing power.
Additionally, the central bank has created a US dollar payment platform, a sign many read as indicating a return to the dollar.
The US dollar price is mostly cheaper and largely in line with pre-bond note prices. Is Zimbabwe defaulting back to US dollars?
Economists say this speaks to lack of confidence in the local currency.
Essentially, analysts say Zimbabwe has entered hyperinflation territory and only avoided hyperinflation in their readings in March because they changed the consumer price index (CPI) calculations.
Annual inflation to March was recorded at 66,8% but the central statistical office, Zimstat, said the figure would have been measured at 166% had they not used a new basket to measure CPI.
A loaf of bread, which was $1,80, is now RTGS$3,50 for instance.
At the centre of the problems is the weakening RTGS currency, which has lost value and is now trading at up to 1:7 to the dollar on the parallel market. Earnings of workers have remained flat and are now bearing the brunt of the economic problems.
Zimbabwe’s finance minister warns the months to come are going to be challenging.
“We are in a process of rebuilding: the reforms are underway. Zimbabwe is slowly finding its feet. The journey is long, and it will not be smooth but we are heading firmly in the right direction,” Ncube said last week.
Is the economy on a road to dollarisation? Analysts say this is the only way. “The economy has silently dollarised. KFC, OK, TM, Spar and virtually everyone is charging in US dollars,” a Harare entrepreneur, Norest Marara, noted.