HARARE, Zimbabwe – The introduction of the world’s newest currency in April inspired a reggae artist to record a song praising ZiG, or Zimbabwe’s Gold.
The catchy tune, titled “Zig Mari,” was played generously on state television and radio. The musician, Ras Caleb, received a car and $2,000 – ironically paid in dollars, not the new ZiGs – from a businessman with close ties to Zimbabwe’s ruling party and President Emmerson Mnangagwa; he said he wanted to reward an act he considered “patriotic.”
While money doesn’t normally require publicity, Zimbabwe’s sixth national currency in 15 years needs all the help it can get.
Desperate to stem a currency crisis that is underscoring the country’s economic problems, the government launched the gold-backed ZiG, the latest attempt to replace the Zimbabwean dollar, which had been hit by depreciation and often outright rejection by people who were not willing to place their faith in him.
Senior officials from the Central Bank of Zimbabwe and the ruling ZANU-PF party have embarked on a series of rallies and public meetings to encourage the skeptical population to now embrace the ZiG instead of the US dollar – also legal tender in the southern African country. Commercial jingles advertising the currency flooded the airwaves along with Caleb’s single.
However, despite the charm offensive, ZiG faces a familiar problem: public distrust and structural barriers that leave people still clamoring for US dollars. Although the ZiG has largely maintained its value on the official market, it has fallen on the black market, where 1 dollar can be exchanged for up to 17 ZiGs.
Authorities are also using force to support the new notes. They packed cells with dozens of street currency dealers and froze the accounts of companies accused of undermining ZiG.
Law enforcement agents arrested more than 200 street currency dealers on allegations of flouting foreign exchange regulations, national police spokesman Paul Nyathi said. The government accuses them of undermining and devaluing the new currency by using exchange rates higher than official ones.
Twin brothers Tapiwa and 24-year-old Judge Nyamadzawo were arrested two weeks after the launch of the new currency, after allegedly selling cellphone airtime to undercover detectives worth US$10 at a rate of 15 ZiGs to the dollar, according to court documents. The official exchange rate was just over 13 ZiGs to the dollar. Like other currency traders, the twins were denied bail and remain in pre-trial detention on charges that carry a maximum prison sentence of 10 years.
The crackdown is incongruous because Zimbabwe has a long history of street currency dealers, whose unofficial rates often come due. Many stores and merchants also ignore the official rate and only accept local currency at their own rates. And many vendors, especially in the unlicensed sector that employs more than 80% of Zimbabwe’s adults, still only accept dollars.
What’s more, the government has allowed some businesses, such as gas stations, to refuse to accept ZiG in favor of US dollars. Some departments, such as the office that issues and renews passports, also only accept dollars. Many others still list their fees in US dollars, although they accept the local currency equivalent.
The government announced fines of up to 200,000 ZiG, or about US$15,000, for companies that do not comply with the official exchange rate. Authorities also froze bank accounts of some companies over accusations of rejecting the new currency or trading using exchange rates higher than the official rate. The Reserve Bank did not name the affected companies.
Zimbabwe has a long and tumultuous history of monetary instability. The ZiG is the sixth currency used after the spectacular collapse of the Zimbabwean dollar in 2009, in the midst of 5 billion percent hyperinflation, one of the worst exchange rate crashes in the world.
The government printed a 100 billion Zimbabwean dollar note to keep up with rising prices, which led to a loaf of bread costing more than 500 million Zimbabwean dollars.
John Mushayavanhu, the governor of Zimbabwe’s central bank, praised ZiG as a first step towards eventual de-dollarization. The US dollar represents more than 80% of transactions in the country, according to Mushayavanhu, who wants the ratio to reach 50% by 2026.
But for now, the allure of the almighty dollar remains. Across Zimbabwe, it is widely used to pay rent, school fees and to purchase groceries. Many citizens, including public servants, take their local currency earnings to the black market to trade for dollars.
The government said it is working on mechanisms that include opening exchange offices so that individuals have access to dollars “for small transactions”. Economists and business groups have warned, however, that the use of force is unlikely to lead to more trust in ZiG or deter black market traders.
“They will work to ensure that the police do not catch them,” said Sekai Kuvarika, chief executive of the Zimbabwe National Chamber of Commerce, at a hearing of parliament’s finance and industry committees.
Street currency dealers holding wads of cash and openly soliciting customers have been a feature of Zimbabwe’s urban architecture for years. They have abandoned their familiar haunts since the crackdown began in April and appear to have taken their businesses underground.
Many now use social media and instant messaging platforms like WhatsApp and Facebook to connect with customers.
Maxwell Chisanga, 28, a resident of the capital, Harare, said a store where he works pays him in ZiGs, but he needs US dollars for daily transactions.
“My landlord needs the rent in dollars, so I have no choice but to look for it on the black market,” said Chisanga.
Economist Prosper Chitambara said a lack of faith in the local currency and demand for US dollars will continue to drive the black market despite the crackdown.
“The solution is to build public trust in the local currency. Otherwise, detentions will not work as long as people are hungry for US dollars, which they cannot obtain through official channels,” Chitambara said.
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AP Africa News:
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