“We have to accept the economy has been ‘dollarised’ and all companies should be registered to trade in hard currency,” Obert Sibanda, president of the Zimbabwe National Chamber of Commerce, told the state-run The Herald newspaper on 19 January.

Dollarisation, or the use of a foreign currency – not necessarily the US dollar – in parallel to, or instead of, the domestic currency, has long been a daily reality for most Zimbabweans. Record-breaking inflation has made them reluctant to accept the local currency, preferring either to trade in a more stable currency, or to barter.

Photo: Wikimedia Commons

The new Zim dollar

They could not get their hands on their Zimbabwe dollar savings and salaries even if they wanted to – banks have been limited by law to a ceiling on withdrawals that no longer covers the cost of a loaf of bread.

The US dollar and South African rand are in use across the country, while Botswana’s pula is favoured in Bulawayo and the west of the country, the Zambian Kwacha is used in the northern areas, and the Mozambican metical in Mutare and the country’s eastern regions.

The Reserve Bank of Zimbabwe (RBZ) had already endorsed semi-official dollarisation in September 2008 by introducing ‘Foreign Exchange Licensed Warehouses and Shops’ when some 1,000 retail outlets and 250 wholesalers were permitted to trade in foreign currency.

In a statement released earlier in January 2009, the Zimbabwe Congress of Trade Unions (ZCTU) demanded that “all workers should be paid in foreign currency, given the fact that shops are now selling their goods in foreign currency – even those that have not been licensed to do so.”

The ZCTU was previously opposed to introducing foreign exchange as legal tender, but the reality on the ground has caused it to reconsider. “Workers are even forced to pay rentals and fares in foreign currency … public hospitals can now charge for their services in foreign currency, but the majority of workers who utilise these hospitals do not earn in foreign currency.”

Various reports in the local media this week noted that a draft economic recovery plan, purportedly issued by the RBZ, had said: “It is imperative that Zimbabwe informally adopts the rand alongside the Zimbabwe dollar”, in a bid to stem the rampant economic crisis.

However, RBZ governor Gideon Gono distanced himself from these reports by telling The Star newspaper, a South African daily published in Johannesburg: “The Zimbabwean dollar will not be overtaken by any other currency, formally or otherwise, now or at any point in the future.”

Stop printing money

Zimbabwe’s out-of-control hyperinflation has become the symbol of its unprecedented economic decline, and most people simply treat the two local currencies (original and “revalued”) as beyond salvation.

The monthly inflation rate passed the 50 percent mark – the threshold for defining ‘hyperinflation’- in March 2007; in January 2009 the RBZ issued the world’s first 100 trillion dollar note.

“Since then, it’s gotten much worse,” said Steve Hanke, professor of applied economics at Johns Hopkins University, Baltimore, in the US, and a senior fellow at the Cato Institute, a Washington-based think-tank. The latest official RBZ figure, dating back to July 2008, put year-on-year inflation at more than 231 million percent.

In the absence of credible official statistics, Hanke developed a hyperinflation index for Zimbabwe and in an article in the December 2008 issue of the financial magazine, Forbes Asia, put the annual inflation rate at around 6.5 quindecillion novemdecillion percent – 65 followed by 107 zeros. “Prices double every 24.7 hours,” he noted. “Shops have simply stopped accepting Zimbabwean dollars.”

A report released by the Cato Institute in June 2008 – Zimbabwe, From Hyperinflation to Growth – said the RBZ’s money machine was the source of the hyperinflation. “The government spends, and the RBZ finances the spending by printing money. The RBZ has no ability, in practice, to resist the government’s demands for cash … To stop hyperinflation, Zimbabwe needs to immediately adopt a different monetary system,” the report said.

The RBZ sees itself in a different light, as evidenced by its strategic vision: “to become the financial cornerstone around which Zimbabwe’s economic fortunes and developmental aspirations are anchored … the pursuit of the Bank’s vision will express itself through leadership in the formulation, implementation and monitoring of policies and action plans for fighting inflation, stabilisation of the internal and external value of Zimbabwe’s currency and of the financial system in a manner that gives pride of achievement to Zimbabweans across the board.”

The price of monetary stability

Most economists agree that ditching Zimbabwe’s discredited currency would help pave the way to recovery. “This is an idea we have been suggesting for years. We need to tie up the Zimbabwe dollar with a stronger currency,” Zimbabwean economic analyst John Robertson told IRIN. “We need the confidence in the South African rand to help us out of economic problems.”

According to Dawie Roodt, a government finance expert in South Africa, the benefits to Zimbabwe would be considerable: “First of all, they would be importing the South African inflation rate. The Zimbabwe inflation problem is purely a Zimbabwe dollar issue, so over time the inflation rate would be equal to the inflation rate in South Africa.”

This would mean the adoption of real interest rates, allowing banks to resume lending – essential to kick-start the country’s ailing industrial sector.

The notion of adopting the rand is not new to the region: the Common Monetary Area (CMA) of the rand fixes relative values of the currencies of neighbouring Namibia, Lesotho and Swaziland to the South African unit.

But Roodt cautioned that there was also a downside: “The most obvious [drawback] of using another currency is that you lose control of monetary policy,” and Zimbabwe would also be adopting South Africa’s monetary framework.

The legal tender could also become an issue of sovereignty and national pride, which, he commented, were sensitive matters. “You don’t have the president’s picture on the currency.”

It’s a tough holiday season in America. Thousands of families face eviction, while others just have to delay buying that 52-inch plasma TV. Thanks to Bernie Madoff, even caviar sales are down.

Count your blessings. In Zimbabwe, once a wealthy country that exported food, millions struggle daily against starvation, and inflation is counted in millions of percent. Nothing works – except the ruling regime’s network of thugs. For the holiday season, cholera, the plague of the poorest poor, has killed 1,200 people and infected 25,000. President-for-life Robert Mugabe, the man who destroyed his country, first claimed that the disease didn’t exist. Now he blames Britain and the CIA for the outbreak.

Cholera spreads through infected water and food supplies; Zimbabwe’s sanitation has broken down utterly, while its medical system is in complete collapse. The disease is readily treatable with cheap saline solutions, but Zimbabweans don’t even rate that much.

Ambulatory victims struggle across the border into South Africa, hoping to survive. More than a million Zimbabweans have abandoned their country, preferring life in foreign slums and the risk of anti-foreigner violence.

No country in our time has plummeted so far so fast with so little engagement by the rest of the world. Why? Dictator Robert Mugabe was a hero of the global left for decades, so today’s leftists avoid discussing his crimes. Better to let Africans die than admit that “We were wrong.”

When I visited Zimbabwe in early 2003, the once lovely country was already gripped by political violence, inflation, hunger and general breakdown. Some of us tried to write the truth, but nobody cared.

Six years on, the UN wrings its grubby paws but bows to oppressor regimes that condemn all interference in a country’s domestic affairs. Folks, the neocons may have gotten a great deal wrong, but they were morally sound when they stressed the inhumanity of allowing a butcher to seize power then hide behind claims of sovereignty.

The Bush administration – which genuinely sought to help Africa – has lately wagged a finger, withdrawing support for a con-job “power-sharing” deal Mugabe pretended to offer his opposition (while stringing the world along month after month). But the Bush years are effectively over, while Team Obama can’t find Zimbabwe on a map.

The worst villain, though, has been South Africa, an increasingly authoritarian state whose leaders behave with a selfishness humbling to run-of-the-mill African kleptocrats.

When I entered Zimbabwe through the capital’s somnolent airport almost six years ago, I shared the common assumption that South Africa must mean well by its neighbor – human solidarity among the liberated and all that crap. But I soon witnessed South Africa’s deadly greed.

The global media’s stock explanation of South Africa’s failure to act to save Zimbabwe’s people remains the old saw that veterans of the liberation struggle can’t bring themselves to publicly criticize an old comrade – they don’t want to give the former colonial powers the satisfaction.

That excuse may have applied 20 years ago, but not now. There are two main reasons – both ugly – why the region’s great power, South Africa, won’t help the people of Zimbabwe.

First, politically connected South African businessmen have been buying up Zimbabwe at fire-sale prices. There’s little left of any worth that the fat-cat profiteers from Jo’burg don’t already own – but they’re determined to grab that, too.

When Mugabe falls or dies, South Africans will hold the deed to an entire country. South Africa’s buying a colony.

Another reason for South African prevarication emerged in the last year. Since its celebrated victory over apartheid, the new South Africa has developed into a one-party state with democratic trappings (disappointingly similar to Putin’s Russia). The ruling African National Congress was all for free elections – as long as it remained an all-powerful monolith.

But as its impeccably tailored, incompetent former president, Thabo Mbeki, was shoved to the sidelines during a struggle within the ANC’s politburo, a new specter loomed: real democracy. A splinter group broke from the ANC to contest upcoming elections.

Simultaneously, Mugabe’s determination to rig Zimbabwe’s elections at any cost could no longer disguise the people’s overwhelming revulsion toward him. Attempting to stave off a loss of power, he entered cat-and-mouse “negotiations” with the opposition.

Amazingly, the world bought it. Colluding with Mugabe, South Africa disingenuously pledged to be an honest broker.

There was as much chance of spotting polar bears along the Limpopo River as of Zimbabweans getting a square deal. The ANC’s ruling faction dreads the notion that honest democracy could come to Zimbabwe. Next thing you know, South Africans might demand clean elections, too.

If the world wants to alleviate the misery of millions in Zimbabwe, we must sideline South Africa and act directly to remove Mugabe and his ruling clique.

We won’t, and the world won’t. Black Africans serve wonderfully for charity appeals, but no competent state will lift a finger to save their lives. – ExileStreet.com

Ralph Peters is a retired Army officer and the author of 19 books, as well as of hundreds of essays and articles, written both under his own name and as Owen Parry. He is a frequent columnist for the New York Post and other publications.

Last week one of the country’s leading banks, Kingdom, said the country’s inflation rate
was more than 20 million percent. The bank predicted tougher times ahead of Zimbabwe in the absence of donor support and foreign investment.

A sharp rise in inflation in June coincided with campaigning for the June 27 run-off vote which MDC’s Morgan Tsvangai withdrew, citing violence which he said killed over 120 of his party’s supporters.

Starvation looms

Once considered a regional economic model, Zimbabwe has been in the throes of economic meltdown since the country embarked on a chaotic land reform programme that has decimated its agriculture. Zimbabwe’s overall maize production for 2008 is estimated to drop 28 percent lower than last year’s already low levels.

The World Food Programme (WFP) estimates 83 percent of Zimbabweans are living on less than two US dollars a day and that 45 percent of the total population is malnourished. The WFP and the Food and Agriculture Organisation (FAO) estimate that four million people- more than a third of 11.8 million Zimbabweans will need food assistance by next year. Eighty percent of the population are living below the poverty threshold, often skipping meals and walking long distances to stretch their income.

‘Economic emergency’

Reserve Bank governor Gideon Gono earlier this month called for a six-month freeze on prizes and wages in a bid to reign in spiralling inflation.

“Zimbabweans must realise that the country is in a practically building sated of socio-economic emergency. As such there is need for a universal moratorium on all incomes and prices of a minimum period of six months” he said.

The country’s Finance Minister Samuel Mumbengegwi confirmed the new inflation figures but insisted other countries in the region were also suffering.

He said, “While our case has been aggravated by the illegal sanctions imposed by the Western powers, rising food prices are a world phenomenon because of the use of bio-fuel.”

Help form relatives abroad

According to central bank figures, remittances form Zimbabweans living abroad shot up by 226 percent to 45 million US dollars in the first six months of this year, compared with the same period last year. Long queues to pick up hard currencies such as the South African rand and the US dollar at the Zimbabwe’s money transfer agencies mean that the cash often runs out.

An estimated four million Zimbabweans are said to be living outside the country, many of them in neighbouring South Africa, Botswana, Mozambique, UK , US , Canada and Australia.

A regional summit of southern African leaders in Johannesburg at the weekend failed to bring ruling party Zanu PF and opposition MDC to a settlement which is needed to tackle the nation’s urgent social and economic problems.