It’s chaos out there – but we have plenty of fuel

9 01 2019

One of the less congested fuel queues around town

I passed W coming out of the gym this lunchtime just as I arrived. We exchanged the usual pleasantries. I know he works for a fuel distribution company so couldn’t resist asking how business was going, given the chaotic fuel queues around town.

“Oh it’s madness” he replied, shaking his head and laughing at the craziness of it all. “I couldn’t even get past the fuel queue at the intersection of The Chase and Golden Stairs road. Some truck had managed to totally block the road”.

I felt relieved that I’d taken a different route and made a mental note to go back the way I’d come, the road was appalling but free of congestion. “But what’s causing the chaos, the usual lack of money?” I asked.

“Of course. The government is utterly broke. They are insisting that the bond, RTGS or whatever you want to call the local money is equal to 1 US dollar when we all know it’s not.”

“So is there really a fuel shortage?” I asked.

“Oh hell no” and he laughed ironically. “You know all those fuel depots around town?” and he mentioned several though I only knew of the one on the Mutare road to the east. “They are all full, right to the brim. The fuel all belongs to private importers and they are ONLY accepting hard currency”.

“So if someone comes to you with real money you can sell them fuel?”

“Oh yes” W replied. “We are doing quite a lot of business with people who have Nostro accounts (foreign currency accounts holding export earnings). I am sure we can help you out. We can bypass all the nonsense. I must dash, see you around” and he was gone.

I wasn’t actually asking to buy any fuel – I don’t at the moment have anywhere to store fuel as I bought a couple of thousand litres in February last year when we had a similar panic. It didn’t last long but I am glad now that I bought it. Anyway, I’d found out what I needed to know – namely that the government was only half telling the truth when they claim that we have plenty of fuel in the country. We do, they just cannot afford to buy it. The solution has to be a return to the US dollar as the official currency but that is not going to happen anytime soon. There are not enough of them to support the economy. The government would have to admit the local currency is not on parity with the US dollar (current street rates are about 3.7:1 which makes our fuel very cheap indeed) and work out how to demonetize the local money. It’s not going to happen soon and like a customer said to me yesterday – “the future looks bleak and there is no rabbit in a hat to pull out this time. It’s going to be a tough year ahead.”

 





Waiting for the hammer to fall

24 09 2017

A very expensive hammer – or is it?

Just a pretty average ball pein hammer with an expensive price tag. I’ve just looked on Amazon and one can get a set of three for about £10 and the most expensive one in this style, also with a genuine hickory handle, is £15. Of course we expect to pay more but nearly double? Well that’s the way of Zimbabwe at the moment, that’s right folks, inflation is back!

Zimbabwe produces little these days and imports a lot. Along with a bloated civil service whose wage bill gobbles 80% of the budget and rampant corruption we are in deep trouble. We have a three tier monetary system which in theory is all US dollars but in practice has three different values; money in the bank which is labelled US dollars but will buy the money version, referred to as “cash” at a rate of 1.6 to 1. Then there are bond notes, a local substitute for “cash” which are pegged at the same value as the “cash” but trade at around 1.2 to the dollar. These bond notes are in theory backed by a bond from the Cairo based Afrexim Bank but it was recently revealed that the bond never existed so they are valueless but preferable to having money in the bank. A case of a bird in the hand being worth more than what’s in the bank.

Most outlets have a 3 tier pricing system to reflect the various value rates. For the moment my business doesn’t but that will change tomorrow. In the time that I’ve been writing this blog (about 4 days) Harare fuel pumps have run dry. It’s not surprising as the price for diesel has been hovering around $1.20 per litre for quite a few months now – completely unrealistic considering that they have had to buy the real US$ at a premium of 1.2 during most of that time. Yes, I guess the price is controlled somewhere along the line.

I was, by chance, chatting to a farmer at an agricultural supplies outlet on Friday. He asked if I could grow him some paprika as he was looking for an export crop to stay viable. He mentioned that he’d been pricing steel that morning and by the time he’d gone back to place the order 2 hours later the price had gone up 15%. We are talking a bank transfer price of course. That evening I went to a talk on Bitcoins and how to use them and what the investment opportunities and pitfalls are. The speaker referred to the day as Black Friday in reference to the galloping exchange rate.

A while ago I called my local service manager at the bank. On asking if I could pay for an import of the coir pith we use to propagate seedlings he asked me if we exported anything. No, I replied. Had I deposited any US$ cash recently? No of course I hadn’t – was this really a serious question? Well then, he said, bring in the cash and we can do the transfer. Guaranteed? Yes, guaranteed. This raised the obvious question of how far to trust the banking system. All external payments have to go through the Reserve Bank of Zimbabwe, the very instrument who in no small way has landed us in this mess. To be fair there has been a lot of greed and incompetence driven political pressure on them to just add zeroes to the value of the currency though, with the exception of the governor, a lot of the senior staff were there for the meltdown of the Zimbabwe dollar in 2008 – 9 and one must wonder what their influence is.

It should be evident by now that the USD price tag on the handle of the hammer is not United States Dollars at all but a proxy currency probably better named (nearly) Useless Substitute Dollars and the price of 39.00 is probably quite cheap. The Zimbabwe dollar is back under another name as a lot of people feared when the bond notes were first introduced.

When I started this post on Thursday I thought the title was appropriate. After reading a WhatsApp message this morning from a friend (the full text by Matt Matigari can be read here http://source.co.zw/2017/09/opinion-currency-crisis-art-deception/) I realized that it had been looking decidedly unstable as far back as 2013. The hammer most definitely has already fallen and we have only now heard the sound of the impact.

There are going to be casualties during the course of this next meltdown. An old friend has already lost his job and has no alternative income. He and his wifer may well end up renting our cottage and hopefully renting out their house. We have advised them most definitely NOT to sell as they will likely lose a lot of money in the time it would take to find a smaller property. They have several dogs most of which will have to be euthanized. Those who can will emigrate. Those who cannot will once again be destitute. Companies that depend on imports will likely fold. Money changers will prosper and just maybe, we will pay off the bond on our house for the equivalent of a few dollars – cash. Tighten your seat-belts folks, there’s rough weather ahead.

 





The honesty oasis

26 01 2012

“50c?” I asked, incredulous*.
“Yes, 50c” the shopkeeper replied.
“Why don’t you just make it a dollar?”
“Because there are other things here that do cost a dollar so that would be dishonest” he said.
“Well, this is Zimbabwe so while in Africa…” I replied attempting to make a joke of it but he had no apparent sense of humour.
I took a closer look at the zip I’d bought. There was no name brand on it.
“So I guess this will last about as long as I’d expect for 50c” I postulated.
“It’s not a bad zip” he replied. “I have tried them out”.
“So what do you do about the change?” I asked.
“I usually have it” came the reply as he dug into the change drawer and gave me a R5 coin which is actually worth 60c but I was not going to quibble. On Wednesday I was given change for a milkshake for 50c in US coins and South African rand coins. I did wonder how many zips he would have to sell to make it worth his while but the shop has been in the Mount Pleasant shopping complex for as long as I can remember so I guess they have got their maths right.

(* the US dollar is the de facto currency of Zimbabwe though it does vary by region: in Bulawayo, further to the south, the South African rand is more popular)