Dollar creep

28 03 2021

The Optimist – not and easy state of mind in Zimbabwe these days

Slowly and surely the US dollar is creeping back. It’s perfectly legal, as is the local Zimbabwe dollar, but it’s getting increasingly rare to be quoted prices in them. Even the road tolls, which were always quoted in local dollars, have now stated that prices will be in US dollars though one is welcome to pay in Zimbabwe dollars at the official exchange rate. The road tolls are set by a government body.

Fuel stations are more blunt; only US dollars are acceptable and if paying by a foreign currency bank account you have to be prepared to wait whilst it’s ascertained that it really is real dollars you are using.

A visit to Kaguvi Street in the city area known as “the cow’s guts” (it’s filthy, raucous and vibrant) to source a car part was enlightening. I was offered the piece of radiator hose – not the correct one but with a bit of cutting it would do – and told it was $12 and did I have the exact amount? No, I didn’t but suggested I could use my local debit card for the equivalent of $2. Nobody had suggested that I could pay in local currency even though the debit card machine was in full view.

A couple of uniformed police walked into my office a few weeks ago. They were very polite as befitting the public relations department. My first reaction was that I’d be in trouble for not wearing my mask, even though there was nobody else around. It’s required under Zimbabwe law that a face mask is to be worn anywhere outside the home, including your own car even if you are alone. But they weren’t interested in that. They were after donations in cash or kind for building an office at the Borrowdale (my “local”) police station. I was dumbfounded. I was not surprised that they wanted to replace the ramshackle office that they currently use – it’s very temporary and probably wouldn’t last another rainy season. I asked if they’d approached the “powers that be” for funding. They had and had been told to go out and approach the community. I gave them my usual rant that I already paid tax to this government so why should I pay again? They shrugged and looked embarrassed and asked again if I could give them anything, anything at all would be appreciated.

I asked if they knew what it would cost. An architectural plan and a budget spreadsheet were offered. It all looked professionally done and of course the budget was in US dollars. The total was around $14,000 which I thought was quite a lot for what was being planned but they assured me that they’d got the required three quotes. I wondered to myself whose relative had won the contract but decided to keep quiet. I said I’d think about it and promised to get back to them.

I didn’t have to call back as the next morning they phoned me. I said I’d get them five pockets of cement – one of the perks of a farming company is that just about anything can be put through the books so the aforementioned cement could be listed as an expense and come off my tax bill. What would I get out of it? The police at that station would owe me a favour and that, dear readers, is how Africa functions. Indeed, in the past I’ve got off a traffic speeding fine because the enforcing officer used to get cheap meat from the farm where I lived.

Later the following week when I dropped off the cement some off-duty policemen in plain clothes unloaded the pockets from my truck. I’d witnessed them negotiating some after-hours guarding work with an Indian gentlemen. All the figures were of course in US dollars. I didn’t ask what their government salaries were or what the currency was – stupid question really as it was plainly not enough to get by.

A few local stores still quote in local dollars but they are getting few and far between. Where possible I pay in the local money as the majority of my income is in that currency. Customers do pay in US cash (the local cash notes are as rare as they are useless – the biggest note is ZW$50 which is about US50c) so I hoard it to pay at least part of the wages bill. My company also has a US dollar account that I use for importing raw material. One customer does pay me this way and last week I received about $24,000 for a big gum tree seedling contract that I completed last year. The gum trees will eventually be harvested and used to cure tobacco so the initiative is funded by a levy on tobacco sales which is paid in real US dollars. Hence the fact that it can be used to import materials.

I noticed on Monday that the figure in the nostro account, as the US dollar accounts are known, had been reduced by some 20%. At first I suspected there had been a mistake and somehow the depositor had withdrawn the excess. I decided to ask my bookkeeper who is knowledgeable in these sort of things. “Oh no”, she laughed, “the Reserve Bank have taken 20 percent and given it back to you as local currency. Check your other account”.  I couldn’t believe what I was hearing but sure enough, when I checked, there was the money deposited in my Zimbabwe dollar account at the official rate which is some 30% lower than the black market rate. Once again, the government is stealing our hard currency.

Still seething the next day, I mentioned this to my neighbour at work. She was not surprised. Her son is an export agent for fresh produce into Europe and the UK – the Reserve Bank takes 40% out of his account and pays him back in local currency. This is especially problematic as he has to book and pay airfreight in advance and they don’t want Zimbabwe dollars.

At the end of every year, along with various tax obligations, we have to provide to the local tax authority a comprehensive list of income, tax paid, allowances and bonuses of all employees who have paid tax over the course of the year. This is purely a fact gathering exercise – it has no bearing on the tax bill  – but if submitted late one can garner a heavy fine.

I haven’t up until now bothered with a specific wages software package as most of the time I employ 17 permanent staff and an Excel spreadsheet copes just fine. Income tax is calculated and paid on a monthly basis using a system known as PAYE (pay as you earn) and whilst a bit tedious there were only a few people paying tax. However, in 2020 the inflation has run well ahead of the PAYE tax tables and lots of people ended up paying tax who were earning less than USD2 a day equivalent in the local currency. This meant two weeks of sifting through spreadsheets and collating tables and filling in the required ITF16 form. This is not going to happen again so I’ve spent the last 6 weeks writing my own wages software package that will do all that with just a few mouse clicks. Writing the software that does the PAYE was enlightening. No surprise that not only is there a local currency table but there’s also a US dollar table! The tax threshold starts at $2.31 per day with a tax of 20% (less a 46c deduction). If you don’t believe me look here.

“The term “absolute poverty” is also sometimes used as a synonym for extreme poverty. Absolute poverty is the absence of enough resources to secure basic life necessities.

To assist in measuring this, the World Bank has a daily per capita international poverty line (IPL), a global absolute minimum, of $1.90 a day as of October 2015.”

Using the above definition (from Wikipedia), and it is a little dated, it might be fair to say that Zimbabweans start being taxed when they are not quite extremely poor. That’s how desperate our government is.

Of course it needn’t be like this. A report from the Daily Maverick newspaper in South Africa is particularly damning.

“The report focuses on business cartels because these are the vehicles used for state capture. One of the experts we asked to review the report pointed out that normally cartels work to undermine the state. In Zimbabwe, however, they are in league with the highest people in the land. #DemLoot, in the now-famous words of journalist Hopewell Chin’ono.” The Daily Maverick

Last week I was chatting to a customer who was looking for advice on what crops he could grow. I gave him my standard spiel on finding a market first and then approaching me. Then I asked him what he’d been doing. “I’ve been in Afghanistan for the past 15 years and I’m tired” he replied. I wished him the best of luck.


Actions

Information

2 responses

29 03 2021
Eugene Pomeroy

Hang in there, Jumbo. I don’t know how you do it.

29 03 2021
gonexc

Not much choice, Eugene.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s




<span>%d</span> bloggers like this: