By Chenayi Mutambasere
A few people have reached out to me with regards to the most recent announcement from Mthuli’s book of Zanuconomics. Most want to know what does it mean in practical sense and what should I do?
Well I will list here a quick synopsis to answer these questions with the caveat that like any market only the future will tell but allow me if I may to make some educated predictions and observations.
1- What does it mean – well essentially Zanu PF is again attempting to rig the economy by forcibly removing the USD and creating a demand for their new Zimbabwe dollar currency in the hope that this will push the value high.
It’s exactly tantamount to say the only supermarket in your neighborhood refusing to sell bread in the hope that we all buy biscuits instead- of course to use a famous term ‘it won’t work’.
People will find a way round the problem possibly by buying the bread elsewhere or making it and selling to each other. That’s market forces, they respond to a problem they will find a way of circumventing the issue.
And for Zimbabwe this is how the incumbent MoF has just given the parallel market a golden handshake and thrive it will … we must all remember the days when randomers stood outside supermarkets with cooking oil being sold for inflated local currency prices or the hard currencies rand or usd. The dawn of the famous zeroes is back sadly.
So what is the best course of action here are my top 3 must do’s and don’ts’
1- Do not hold rtgs notes or zwd (new currency) convert them as soon as possible to either low value popular commodities or buy usd or rand and hold it in that currency.
The reason for this will be the continuing devaluation of rtgs or indeed the new currency .. The exchange rate will of course not be favourable but I reckon if you go as far as 1:20 it will still be favourable for you to do so.
2) Anything you need in the future buy it now if you can afford it because the period of scarcity in the shops is returning. Local supermarkets still very much rely on imports somewhere along the supply chain even as far as the fuel used to transport their products.
Therefore there is an inherent need for forex which they will not be able to get easily. The remaining stocks will almost certainly be sold in bulk or on the streets in exchange for forex.
Currently the fact that most things are quoted in two ways either as usd or rtgs means the shops are not ready to go solo on local currency.
3) Diaspora Remittances – it will become better to either send groceries to your relatives or find an informal trader avoid using formal channels such as WorldRemit or Western Union as they will almost certainly be a crack down on these and you don’t want your money being translated to zwd without your consent.
4) Avoid the banking sector the only thing worth doing is maybe borrowing in local currency because the inflation may well make it worth your while because the principal loan amount will be devalued meaning you do not owe a lot in real terms.
Employers and employees will have to navigate the constitutes of employment law to find a middle ground that means literally people aren’t working for almost nothing. Unfortunately the most outdone by will be the civil service as their employer is enforcing this debauchery. The only possible answer to the civil servants probably cannot be found in an economics textbook…
Anyone who wants to know if the Mthuli Dollars will work I say to you let the proof be in the pudding. The streets of Zimbabwe have already delivered the verdict on this one.
Chenayi Mutambasere (Msc Development Economics and Policy) is the MDC UK and Ireland Province Secretary for Industry and Commerce. You can follow her on Twitter: @ChenayiM