Zimbabweans shop to dispose cash

Zimbabweans are on a shopping spree, scooping up luxury cars, livestock and other goods. A signal that the southern African nation’s economic crisis has ended? Not yet.

Consumers face an inflation of nearly 1,200 percent
Consumers face an inflation of nearly 1,200 percent

The loosening of wallets has been spurred by a rush to beat an August 21 deadline to dispose of old banknotes for redenominated Zimbabwe dollars after a 60% devaluation.

Central bank governor Gideon Gono last week knocked three zeros off all banknotes to help consumers cope with rampaging inflation of nearly 1,200 percent and announced that the old currency would be phased out in three weeks.

The move caught many people off guard.

During the transition period, individuals are barred from depositing old notes in banks in excess of 100 million Zimbabwe dollars unless they can show that they have acquired the funds legitimately.

This requirement has left many holding large sums of cash, which they are rushing to convert into assets.

Big buys

Last week a Harare man handed over 100 billion Zimbabwe dollars in cash for 10 luxury cars, a transaction that got the attention of law enforcement.

Others have bought cattle and maize at a premium from unsuspecting villagers in rural areas.

The old currency is to be phasedout in three weeks

The old currency is to be phased
out in three weeks

Groceries, construction materials and anything else that can be resold in the future are on the shopping list.

James Jowa, an economist with a Harare financial institution said that “people are looking for value for money they cannot put into the banking system without being asked questions, so any asset will do.”

A checkout clerk with a chain store in Harare said : “People are buying groceries in large quantities.” He added that one customer recently walked in and bought four cases of whisky.

Some even joke that desperation to get rid of old banknotes could drive people to offer billions for a whole village.

The central bank banned all cash transactions above 100 million Zimbabwe dollars after discovering that some people were stocking cell phones and sweets just to dispose of their cash.

Gono says trillions of Zimbabwe dollars were stashed in homes to aid black market deals.

Black market

Border patrols have intercepted billions worth of old banknotes from black market traders trying to enter the country before the August 21 deadline.

Analysts say a thriving black market for foreign currency and other commodities was sustaining many families in a country where unemployment is between 70-80 percent, adding that the money never found its way into the banking system.

The currency changes have wreaked havoc in the informal sector where many left jobless after the collapse of Zimbabwe’s financial sector a few years ago have survived on commodity trading, opting to stash their cash earnings at home.

“Gono has dealt another blow to people like me, who have struggled to earn an honest living after losing our jobs. How can we trust our money with the local banks after people lost their savings a few years ago,” bemoaned Harare resident Colin Mushonga, who hires out his truck for inter-city deliveries.

Source : Reuters

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