Zimbabwe authorities mix charm with force in an attempt to shore up the world’s newest currency

Article content

HARARE, Zimbabwe (AP) — The introduction of the world's newest currency in April inspired a reggae artist to record a song praising ZiG, or Zimbabwe Gold.

The catchy tune, titled “Zig Mary,” was given generous airplay on state television and radio. The musician, Ras Kalb, received a car and $2,000 – ironically paid in dollars, not the new Zigg – 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.”

Article content

Article content

Although money doesn't usually require advertising, Zimbabwe's sixth national currency in 15 years needs all the help it can get.

In a desperate attempt to stem a financial crisis that is highlighting the country's economic problems, the government has launched the gold-backed ZIG, the latest attempt to replace the Zimbabwean dollar, which has been battered by currency depreciation and often outright rejection by people unwilling to put their trust in it. .

Senior officials from the Reserve Bank of Zimbabwe and the ruling ZANU-PF party have embarked on a flurry of rallies and public meetings to encourage skeptical residents to embrace the ZiG before the US dollar – which is also legal tender in the southern African country. Trade jingles heralding the currency flooded the airwaves along with Caleb's single.

But despite this charm offensive, ZiG faces a familiar problem: a general lack of trust and structural barriers that cause people to still demand US dollars. Although ZiGs have largely held their value on the official market, they have declined on the black market, where one dollar can be exchanged for up to 17 ZiGs.

Article content

Article content

The authorities are also using force to back new banknotes. They filled prison cells with dozens of street currency dealers, and froze the accounts of companies accused of undermining ZiG.

National police spokesman Paul Nyathi said law enforcement agents arrested more than 200 street currency traders on charges of violating foreign exchange regulations. The government accuses them of undermining the new currency and devaluing it by using exchange rates higher than the official rate.

Twin brothers Tapiwa and Judge Nyamadzau, 24, were arrested two weeks after the launch of the new currency after they allegedly sold $10 worth of mobile phone airtime to undercover investigators at a rate of 15 zigzags per dollar, according to court papers. The official exchange rate was just over 13 zigzags per dollar. As with other currency dealers, the twins were denied bail and remain in pretrial detention on charges that carry a maximum penalty of 10 years in prison.

This campaign is inappropriate, because Zimbabwe has a long history of street currency traders whose unofficial rates often prevail. Many stores and merchants also ignore the official rate and only accept the local currency at their own rates. Many vendors, especially in the unlicensed sector that employs more than 80% of adult Zimbabweans, still only accept dollars.

Article content

Furthermore, the government allowed some businesses, such as gas stations, to refuse to accept ZiG in favor of US dollars. Some departments, such as the Passport Issuance and Renewal Office, also accept only US currencies. 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 zijks, or about $15,000, on companies that do not adhere to the official exchange rate. The authorities also froze the bank accounts of some companies on charges of rejecting the new currency or trading using exchange rates higher than the official rate. The Reserve Bank did not name the companies affected.

Zimbabwe has a long and troubled history of monetary instability. ZiG is the sixth currency in use after the stunning collapse of the Zimbabwean dollar in 2009 amid 5 billion percent hyperinflation, one of the world's worst currency collapses.

The government has printed a 100 trillion Zimbabwean dollar banknote to keep up with spiraling prices that have seen the price of a loaf of bread rise to more than 500 million Zimbabwean dollars.

Article content

Zimbabwe's central bank governor, John Mushayavanhu, has touted the ZiG plan as a first step toward eventually stopping dependence on the dollar. The US dollar accounts for more than 80% of transactions in the country, according to Moshiavanhu, who wants the proportion to reach 50% by 2026.

But for now, the allure of the almighty dollar remains. Throughout Zimbabwe, it is widely used to pay rent, school fees and to buy groceries. Many citizens, including government employees, 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 for individuals to access dollars “to conduct small transactions.” Meanwhile, economists and business groups have warned that the use of force is unlikely to lead to more confidence in ZiG or stop black market traders.

“They will work to ensure they are not arrested by the police,” Sekai Kovarika, CEO of the Zimbabwe National Chamber of Commerce, said during a hearing of Parliament’s Finance and Industry Committees.

Street currency traders carrying large amounts of money and openly soliciting customers have been a feature of Zimbabwe's urban architecture for years. They have abandoned their familiar positions since the crackdown began in April, and appear to have moved their businesses underground.

Article content

Many are now using social media and instant messaging platforms like WhatsApp and Facebook to communicate with customers.

Maxwell Chisanga, 28, a resident of the capital, Harare, said the store where he works pays him in zigzag, but he needs US dollars for daily transactions.

“My landlord needs to rent it in dollars, so I have no choice but to look for it on the black market,” Chisanga said.

Economist Prosper Chitambara said mistrust in the local currency and demand for the US dollar will continue to drive the black market despite the security crackdown.

“The solution is to build public confidence in the local currency. Otherwise, the arrests will not succeed as long as people are hungry for US dollars, which they cannot obtain through official channels.”

___

AP Africa News: https://apnews.com/hub/africa

Article content