Zimbabwe Business Watch : Week 50
Once again this week saw Business hesitating as the much vaunted “week of action” by the Reserve Bank came to nothing. It is now rumoured that the new currency is to be delayed further and the anticipated release of higher denomination notes (bearer cheques) did not materialize.
The shortage of cash is slowly grinding business to a halt and causing immense suffering in the community as, to this day, most retail transactions still take place in this manner.
The shortage of cash has seriously depleted fuel stocks as most of this cross border business emanates from a cash transaction to secure hard currency to fund the purchase in a neighboring country.
The Reserve Bank, is struggling to supply sufficient cash, the volume of which in circulation needs to grow by up to 150% per month just to keep pace with inflation.
The cost of producing cash exceeds its real value and this presents an enormous problem for the Central Bank economists. The shortage of cash has in turn created a shortage of currency which has forced up rates to new highs and the Old Mutual Implied Index now stands at 4.6 million to the US$. This is a good indication of the real value of the ZD$.
There have been new threats of yet other price blitz by the authorities and it is increasingly clear that the price of politics is too great for this fragile economy to sustain any further.
December 14th, 2007 06:41
Quoting you: “The Reserve Bank, is struggling to supply sufficient cash, the volume of which in circulation needs to grow by up to 150% per month just to keep pace with inflation.”
This means that prices more than double (they are multiplied by 2½) every month. It tallies with what I have read here.
So that after 12 months prices are multiplied by 2.5 to the power 12, which is 59,604.6 — inflation just a wee tad under six million percent per annum.
Nothing new. It happened less than 15 years ago in Yugoslavia: http://www.rogershermansociety.org/yugoslavia2.htm
(with a picture of a five hundred BILLION dinar banknote, worth… half a Deutsche Mark!)
Zimbabwe has been going exactly the same way:
“The [Yugoslav] government tried to counter the inflation by imposing price controls. But when inflation continued, the government price controls made the price producers were getting so ridiculous[ly] low that they simply stopped producing.”
The parallels are striking. Towards the end “At the beginning of December the bus workers went on strike because their pay for two weeks was equivalent to only 4 DM when it cost a family of four 230 DM per month to live. By December 11th the exchange rate was 1 DM = 800 million and on December 15th it was 1 DM = 3.7 billion new dinars. The average daily rate of inflation was nearly 100 percent. When farmers selling in the free markets refused to sell food for Yugoslavian dinars the government closed down the free markets.”
How did it end? “At the end of December the exchange rate was 1 DM = 3 trillion dinars and on January 4, 1994 it was 1 DM = 6 trillion dinars. On January 6th the government declared that the German Deutsche [Mark] was an official currency of Yugoslavia.”
How will it end in Zim?
December 16th, 2007 06:04
very interesting comment by “a correspondent” on the Zimbabwe journalists website that alludes to some of the cash shortage problems (and some other comments about the economy in general. The article can be read at:
http://www.zimbabwejournalists.com/story.
php?art_id=3322&cat=1 (you’ll need to reassemble the link above).
Just a few salient points here from that article:
“Reserve Bank governor Gideon Gono on Friday said President Robert Mugabe’s cronies were fueling the country’s runaway inflation through illicit dealings.” My comment - well, duh, tell us something we don’t already know.
“He (Gono)said: “Once we implement what’s in our secret bag, this economy will not be the same by this time next year.” ??? Our secret bag???? and this guy is the reserve bank governor - no wonder the economy is in a complete meltdown. He is, however, right on one point - it DEFINITELY will not be the same next year - at the current rate of things, it will probably be worse. Let us weep and mourn for the average Zimbabwean who struggles to survive. And while we weep and mourn, let us all cry out to God to intervene in a miraculous way to save Zimbabwe.
December 16th, 2007 18:39
The bread basket of Africa is now the empty basket of Africa. Zimbabwe is being sold off to the highest bidder at a premium frought with 100% risk and on the other hand with the potetential of 200% returns. The Zimbabwe situation has become a triple edged sword. The one edge is for those looking to take advantage of Zimababwes demise, the other is for those who suffer as a result of this resulting on-slaught of high prices and uparrelled inflation, while the third is the immenent demise of those who hold the sword that wields this misfortune. I may not have a glass ball but i can only forsee more suffering, increases in inflation and great losses for those who risk even one penny in investing in Zimbabwe right now. Let me break this down for you. Before it can better it will get worse. First there is no qualified, convincing successor to the leader in place now, all due to fear imposed on those who dare threaten his rule. Foreign leaders n Africa have turned a blind eye so as to avoid any form of confrontation with this now senile elderly statesman. Thabo Mbeki who has shown nothing but fear has made no effort to improve the issues affecting Zimbabawe. For that his country will only continue to be burdened with the steady influx of fleeing immigrants looking for a better tomorrow and food to eat. This in turn will only burden the South African economy as those Zimbabweans look for jobs and use Government services to survive. As the continued exodus of brain drain continues, who will teach the children that remain and work the jobs? No one. Businesses cannot function with Governement imposed price fixing, result, more businesses closing and businesses being sold off to finance their getaway from this ruthless regime. Now the door is left open to the likes of Lonzim who among other international funds is preparing for the sell off of businesses and infrastructures to only fatten the pockets of thier foreign investors. So to the highest bidder, Zimbabwe is now for sale, if you have $10 you are a millionaire, never in my life did I think i would be a millionaire but here i stand a trillionaire today and a quadrillionaire by tomorrow. The Sanctions imposed on Zimbabwe have been dismissed as a mere slap on the hand, though i wish no suffering on the great people of Zimbabwe, I would implore those in power to tighten the screws and reign in this once venerable war hero and make him accountable for his attrocities to his own people. As he holds onto power for yet another year, we who know the past know the elections are a waste of time, an effort to show the International community that Zimbabwe does have elections but as we already know, he has won. Frought with loop holes controlled by the Government, this election is over before it starts, giving the tyrant free reign to continue destroying this former vibrant country that every other African Nation wanted to emulate.
Hence it will become worse before it gets better. So until 2012 the highest bidder best wait and to Lonzim your 18 month window to find investments and to begin to bleed Zimbabwe dry may be frought with demise from the onset. To Zimbabaweans, stay strong, we found light at the end of the Liberation War, the light has been extinguished, but I assure you there is light at the end of this tunnel, it will just take a long time coming. To the Government, you are Civil servants that are meant to be elected by your countryment to lead the nation. You have failed us, we have lost all confidence in you and I am sure I do not stand alone in this matter, but you are fired!