Published: Sunday, May 26, 2024
HARARE (Zimbabwe) — The song, “Zig Mari,” was played on both state radio and television. Ras Caleb received a car, and $2,000 from a businessman who has close ties with Zimbabwe’s ruling party, and President Emmerson Munagwa. He said that he was rewarding a “patriotic” act.
Zimbabwe’s sixth currency in 15 years needs publicity.
In a desperate attempt to stop a money crunch that was highlighting the country’s economic problems, the government introduced the gold-backed ZiG. This is the latest effort to replace the Zimbabwean dollar, which has been battered and rejected by many people who refused to place their trust in it.
Senior officials of the Reserve Bank of Zimbabwe, and the ruling ZANU – PF party, held a flurry of rallies and public meetings to encourage the skeptics to embrace the ZiG over the U.S. Dollar — which is also legal tender in this southern African nation. Caleb’s song and commercial jingles announcing the currency were broadcast on the radio.
ZiG faces a familiar issue despite its charm offensive: public distrust and structural barriers which have people still asking for dollars. The ZiG’s value has held steady on the official market but has plummeted on the black market where $1 can exchange for as many as 17 ZiGs.
The authorities are also using force in order to support the new banknotes. The authorities have packed prison cells with street currency dealers and frozen accounts of businesses suspected of undermining ZiG.
National police spokesman Paul Nyathi announced that more than 200 street currency sellers were arrested on suspicion of violating foreign currency exchange laws. The government accuses the currency dealers of devaluing and undermining the new currency through the use of exchange rates that are higher than official ones.
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According to court documents, twin brothers Tapiwa, 24, and Justice Nyamadzawo were arrested just two weeks after the launch. They had allegedly sold undercover detectives $10 worth of cellphone airtime at the rate of 15 ZiGs for every dollar. The official rate of exchange was just over 13 ZiGs for every dollar. The twins, like other currency traders were refused bail and are still in pretrial custody on charges that can carry a maximum sentence of 10 years.
It is strange that the crackdown has been implemented, as Zimbabweans have a long tradition of street currency sellers whose unofficial exchange rates are often more popular. Similarly, many shops and merchants ignore the official rates and only accept local currency at their rates. Many vendors, especially in the unlicensed industry that employs over 80% of adult Zimbabweans accept only the dollar.
The government also allows some businesses to refuse to take the ZiG and instead accept U.S. Dollars. Similarly, some departments like the passport office accept only dollars. Some departments still list their charges in U.S. Dollars, even though they accept local currency equivalents.
Businesses that do not adhere to the official rate of exchange will be fined up to 200,000 ZiG, or $15,000, by the government. The authorities have also frozen the bank accounts of certain businesses, accusing them of refusing to accept the new currency and trading at rates higher than official rate. The Reserve Bank did not name the businesses affected.
Zimbabwe’s monetary history is tumultuous and long. The ZiG was introduced in 2009, following the collapse of the Zimbabwean dollar and a hyperinflation rate of 5 billion per cent. This was one of the worst currency crashes of all time.
The government issued a 100 trillion Zimbabwe dollar banknote in order to keep pace with the spiraling price of bread, which was selling for over 500 million Zimbabwe dollars.
John Mushayavanhu is the governor of Zimbabwe’s central bank. He has hailed the ZiG as the first step towards eventual de-dollarization. Mushayavanhu says that the U.S. dollar is used for over 80% of all transactions in Zimbabwe. He wants this ratio to reach 50% by 2026.
The dollar is still a powerful lure. In Zimbabwe, the dollar is used to pay rent, for school fees, and for groceries. Many people, including government employees, trade their local currency earnings on the black market for dollars.
The government said that it was working on mechanisms, including opening bureaus de changes to allow individuals to get dollars for “small transactions.” However, economists and business groups warned that using force would not increase confidence in ZiG, or stop black market traders.
Sekai Kuvarika told the parliament’s Finance and Industry committees that “they will ensure they don’t get caught by the police”.
For years, street currency dealers with wads full of cash and soliciting clients in an open manner have been a part of the urban architecture of Zimbabwe. Since the crackdown in April, they have abandoned their usual spots and seem to have moved their business underground.
Customers are increasingly being reached through social media platforms and instant messaging services such as WhatsApp, Facebook and Facebook Messenger.
Maxwell Chisanga is a 28-year-old resident of Harare who works in a shop that pays him ZiGs. However, he requires U.S. Dollars for his daily transactions.
Chisanga: “My landlord wants her rent in dollars, so I’m forced to buy it on the blackmarket.”
Prosper Chitambara, an economist in Uganda, said that despite the crackdown on the black market the demand for dollars and lack of trust in the local currency will continue to drive the black markets.
“The solution is building public confidence in local currency.” “Arrests won’t work if people are still hungry for dollars and cannot obtain them through official channels,” Chitambara stated.
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