The Zim dollar is back (déjà-vu again)

7 10 2018

Who wants to look at picture of cars queuing at a fuel station?

“The bottom borehole is not working” is not the most encouraging announcement I want to hear on a Monday. The borehole in question is some 500m from my office and has  been a headache ever since I started my business. Originally it used a 3 phase motor which are more efficient than single phase motors but I got so fed up with the transformer dropping a phase to a low voltage that I swapped it out for a single phase motor. This means that if a phase goes low I can switch all critical motors onto a good phase relatively quickly with some simple wiring changes on the distribution box by my office (farming in Zimbabwe requires a good deal of DIY expertise). The cable to the borehole is not really large enough for the distance so if the supply voltage drops it can spell disaster for the motor.

A quick test ascertained that the motor was drawing far too much current and probably was burnt out. We got it out the hole and I took it off to the supplier along with the warranty card that showed the it was to expire by the end of the week. I was advised that if I wanted a quick response to whether the motor would be replaced under warranty I should take it to the workshop in the industrial sites. Yes, they still had that model in stock and it was $380. The workshop people in town said they’d get back to me soon.

On Tuesday there was a surprise announcement from the new finance minister, Mthuli Ncube, that bank accounts would be split into FCA (foreign currency accounts) i.e. real US dollar accounts earned from exports, and local money accounts. This is a tacit admission that the local money accounts are not in fact the same as US dollars even though they are listed as such. The local money immediately lost 10% on the unofficial market – the rate is now around 2.2 local dollars to US$1. Ncube also announced a new transfer tax on all electronic transfers of 2% starting at $2 to replace the old flat rate of 5c. Given that some 96% of all money transactions in Zimbabwe are electronic it is estimated that this will bring in some $4bn extra per year. This has already changed as of the time of writing with a lower limit of $10 being imposed. He also fired the entire board of ZIMRA, the local tax authority. There was no mention of how the government was going to reduce the budget deficit.

By Wednesday we were running low on water at the nursery so I had to go and buy another motor for the borehole pump as I still hadn’t heard from the workshop. It cost me $430, up $50 from Monday. I decided I had to raise my prices at the nursery by 50% – still short of the estimated exchange rate but better than we had been. I have a lot of competition so I’ve been wary of hiking prices to realistic levels up until now.

Other businesses around town have been less circumspect to the point of profiteering. Marianne went to buy some pharmaceuticals this week and they’d gone up 40% – US dollars cash! I priced a cordless drill at a local hardware outlet that had increased from $380 to $1030 in about a year. Some shops are no longer displaying prices on the shelves – you have to ask at the checkout or consult and easily changed list on the end of the shelf. Bread is now short and so is fuel. Pharmaceutical companies have stopped trading due to shortages of raw materials.

Queues at fuel stations are blocking traffic. Apparently international trucking companies are taking advantage of the disparity between US dollars and local money by sending their trucks through Zimbabwe with just enough fuel to get into the country, buying local money with US dollars at 2:1 and then buying fuel with the local money. Do it this way and diesel costs about US65c per litre – way below what it costs to import.

On Friday I got a call from the workshop – the motor had burnt out likely due to low voltage. Did I have one of their voltage protection units on the borehole? No I didn’t. Then the warranty was invalid. I was not surprised – like all forms of insurance they will look at ways to get out of paying. I have since put a 3rd party protection unit on the switch box – hopefully it will work.

My seed supplier is not returning my calls. His secretary tells me he is trying to decide whether to charge US dollars cash for the seed or hike the local price. The former will be a disaster for my business which is already in the doldrums. We have a lot of gum tree seedlings for a local company charged with reforesting farmlands that have been denuded by farmers cutting timber for curing tobacco but we negotiated the contract in April. By the time we get paid in November and December the payment is going to be very small indeed. The future is not looking bright.

A very miniature mantis

 

 

 

 

 

 

 

 

 

 

And the roses at the top of the post? Like I said, it beats looking at pictures of a fuel queue. There is a neighbouring nursery next to mine that specialises in roses and over the weekend they had their annual charity open day. The roses were stunning – worthy of a diversion. The mantis? Well, it just called by this afternoon at tea time.

The comparison with the hyper inflation of 2008 is obvious but this time the collapse has been much faster. It’s Tuesday now and over the weekend cooking oil (much used by Zimbabweans) prices have doubled and in some areas tripled. The public transport system is unreliable as many of the mini buses that ply the trade are in fuel queues. A friend who supplies agricultural chemicals has asked me if I want to trade diesel for chemicals I need. Yup, déjà-vu indeed.

 





No quick fix

14 09 2018

“It’s one of the best shows we’ve had for a very long time” commented Merv as we walked into the show. He should know; he’s bee a stalwart of the Zimbabwe Orchid Society for many years. I had to agree. I do like to visit the biannual orchid show at the Mukuvisi Woodlands park in eastern Harare when I can and in the few years that I’ve been a regular visitor it’s the most spectacular show I’ve seen. It’s also nice to escape the depressing state of the nation for an hour or so and pretend that in some respects at least – we are normal.

Not much has happened since the election and in fact some aspects of the new government led by ED Mnangagwa are decidedly familiar. There a lots of new faces in the cabinet. The minister of finance really is an economist, the Minister of Sport is Olympic medalist Kirsty Coventry and the Minister of Health does not have the medical qualifications that he claims.

Professor Mtuli Ncube (a graduate of Oxford no less), the finance minister, is on record as saying he wants to clear Zimbabwe’s foreign debt as quickly as possible and wants to reintroduce the Zimbabwe dollar. There is no time limit specified for the latter – a wise decision. The last version of the Zimbabwe dollar was officially abandoned in February 2009 in favor of the US dollar when the former became worthless due to the second highest inflation in history. I really don’t see the point of this; it will simply replace our infamous bond dollar with another of a different name. The black market will still exist and nobody will trust the new currency such is the level of distrust in the system. Some say we should adopt the South African rand being that South Africa is our neighbor and biggest trading partner. However, there are simply enough rands to support the Zimbabwe economy and it is by no means clear that South Africa will agree. Of course a currency must be based on something which in our case is our exports as the manufacturing base collapsed with the Zimbabwe dollar and is still moribund. Export horticulture is the hot ticket to get into but takes some years to build up export crops and recover the farms neglected under ex-president Mugabe’s ruinous land redistribution policy. No quick fix there. Mining, another mainstay of the economy is also down and will take some time to build up pending investment from outside the country. It was also not immune from Mugabe’s policies – one of my foreman’s sons did his accounting attachment at a German run graphite mine in the north east of the country which was shut down for some time last year because of political “issues”.

At the last count 28 people have died from the current cholera outbreak – mainly in Harare. Such is the state of the economy that the finance minister has launched a crowd funding exercise to raise money to treat the outbreak. It is unlikely to have a lot of success given the controversy over new vehicles for ministers and the public’s mistrust of all things governmental.

Obadiah Moyo, the new health minister, whose claims to various medical qualifications have been questioned has certainly got his work cut out with the new cholera outbreak. What is certain is that he did successfully run the Chitungwiza Hospital for several years. Someone I know went there last year and said that although it was threadbare it was clean and functional. Perhaps we should give him the chance to prove himself. Good luck to him – he’ll need it.

Kirsty Coventry has several Olympic swimming medals to her name but I’m not sure how that qualifies her to be the Minister of Sport. Cricket, once a source of national pride, is in disarray after the recent firing of the entire coaching team for not getting the playing team into the World Cup. A crucial match was lost due to rain causing a complicated, and some say unfair, formula being implemented to calculate the winner. Corruption is rife and players are demoralized. And that’s just cricket. Good luck to her too.

Droughts are a perennial problem in southern Africa and it looks like the coming rainy season (November to March) is at best going to be erratic. An el Niño weather condition is nearly a 70% likelihood for our summer – not a good sign. At our house in the suburb of Mt Pleasant we have not had municipal water since we moved in just over 18 months ago. We had our borehole tested earlier in the year and were told it could handle 900 litres an hour – adequate for domestic purposes. A tank have been installed to catch water from the washing machine and another 5,000 litre rainwater tank is planned to add to the two others we already have. The borehole is only 40m deep which is shallow by Harare standards so we are not confidant it will last especially as I see a lot of green verges being heavily irrigated further up our road. Fortunately our hole is 180mm diameter, large enough to get a drill down if we need to go deeper assuming there is water to be found by drilling deep.

We visited my sister in June in the USA – She lives in Spokane in Washington State. A friend of hers asked me if we in Zimbabwe thought the USA “crazy” – she was referring to the Trump administration. I replied that we were just to busy trying to survive in Zimbabwe to view the Trump administration as anything more than entertainment. No, we are in this for the long term – no quick fix to this particular mess.





Déjà-vu – and it’s not good

9 08 2017

NEVER throw away what might be useful

We have a habit in this country of not throwing things away “just in case they might be useful one day”. It’s not without good reason but it can be taken to extremes.

In the days when Zimbabwe was Rhodesia and the country was under blanket sanctions for it’s persistent colonial ways ingenuity ruled. Getting fuel was difficult and just about everything else close to impossible. Car spares were horded and years after we got rid of an old car I still found spares squirreled away “just in case”.

Now that Rhodesia is Zimbabwe and we still have sanctions (but this time targeted against certain odious individuals) spares are once again becoming difficult.  In this case it’s spares for a Husqvarna hedge trimmer we use to trim tobacco and gum tree seedlings – so of course I feel somewhat smug that I kept the remains of a previous hedge trimmer. Just in case.

The shortages this time around are nothing to do with the sanctions but gross incompetence and greed by the ruling regime; the nation has simply run out of money. The bond notes alluded to in other posts are proving to be exactly what everyone feared them to be – a return to the defunct Zimbabwe dollar under another guise. There was never a bond/loan backing them (the Reserve Bank governor simply lied) and now the government has announced that it wants to release another 300m of  them backed by precisely nothing.

Inflation has also made a return. I priced a gum wooden door last week that has increased 50% over the last 4 months despite being made entirely of local products. It is priced in US$ but I’m almost certain that if I asked I could get a discount for “cash” i.e. real US$ notes of around 20% (most people use debit cards or similar devices to pay for items). A potential customer asked me if he could get a discount for bond notes and was told most definitely no. He did not ask if he could get a discount for real cash – US dollars.

So tomorrow I will start making a plan (something else for which Zimbabweans are notorious) and see if I can assemble the 1½ hedge trimmers in the picture into one functioning one. After all adversity is the mother of invention and we’ve been here before. Once as Rhodesia and again in the years when the Zimbabwe dollar was real if completely useless.  It’s a sense of déjà-vu and I don’t like it one bit.

There is one positive aspect to this. In the carnage of the demise of the Zimbabwe dollar in 2008/9 when inflation was running in six figures per month, people who’d taken out housing mortgages paid them off with one note or less. Yes, that happens when the largest note is 100 trillion Zimbabwean dollars.  Now if the government floods the country with bond notes we should be able to pick them up cheaply enough by paying in real dollars to pay off our mortgage really cheaply. There will of course be collateral damage as they say – territory we visited back in 2008/9. I don’t think I want to go there at any price.

P.S. (a day later). I was called this morning by a company that sells irrigation equipment – a part that I’d ordered had arrived. On asking the cost I was told $78 “… but we are offering a discount of 25% for US$ cash or 10% for bond notes.” So apparently the bond notes, based on nothing, are actually in demand.

 





Déjà vu

13 06 2016
Just change the date and the bank details...

Just change the date and the bank details…

 

It was quite simple really. All I had to do was open the “Labour”
folder in Microsoft Word, look for a file with “wages request” in the title and change the date and the bank on the existing letter (above). Back in 2008 the hyper inflation was raging, shop shelves were empty, money was being printed and the money changers were making small fortunes.

Now we are in 2016 and money is about to be printed, shop shelves are full for the time being and money changers are making small fortunes if they have access to cash. And I have to make an application to the bank to withdraw my own money as cash for wages.

Last Friday I’d called in at my local bank to check on cash withdrawal limits; $300 per day for small businesses. The bank manager suggested I get my staff to open accounts so that they could use debit cards. I pointed out that a number of my labour force signed their name with an X. They were pretty much illiterate. How was I going to explain that a piece of plastic now represented cash and the actual money was held at an institution which they didn’t trust in the first place. Well then, she suggested, I should make an application to withdraw cash but they couldn’t promise anything.

So here I was, a little over 8 years later, changing minor details on a letter so that once again, I might get access to my own money to pay wages. Yes, they are US dollars now but I couldn’t help but feel a strong sense of déjà vu.  (I did also have to change the phone numbers and email address on the footer.)





Return of the Zimbabwe dollar

6 05 2016

There was a demonstration against the rule of Robert Mugabe recently. That’s not news by most country’s standards but it most certainly is news here. It was small, about 2000 participants, but noisy and although the police originally refused permission the High Court granted permission. So what exactly is happening here? Is this the beginning of the end of the Mugabe regime?

I was in town for my French lesson with Shelton. He was late, comme d’habitude, as he has to rely on the notoriously erratic minibuses. While I was waiting a call came through from an unknown number.

“Hello, is that Mr Roberts?”

“Yes it is”.

“I am name given from  ZANU-PF Gomba District at your office. I am requesting a donation for Monday”.

“What’s happening on Monday?”

“It’s Independence Day”.

I’d genuinely forgotten this most sacred of Zimbabwean holidays. There aren’t a lot of reasons to remember it. After 36 years we have steadily regressed to the point where currency restrictions are being reimposed because our balance of trade is so heavily skewed towards imports that we are once again running out of money. No, we cannot just print some more as we did with the Zimbabwe dollar; we are now using the US dollar. We don’t even have a currency of our own. Well so I thought.

Shelton told me that for 3 days this week he’d been translating at a feminist conference in town. It wasn’t just feminists, the whole spectrum of LGBTIQ (I had to ask what the last 2 letters meant) were there and it was quite an experience for him. No holds barred; there were tears, shouting and bad language aplenty but as he said just that it happened at all was remarkable. It would have been unthinkable just a few years back. Progress perhaps?

Bond coins - not enough for this cup of coffee!

Bond coins – not enough for this cup of coffee!

Then today I was on the way to do some company shopping in the industrial sites when I saw the newspaper placards advertising that the Reserve Bank is introducing bond notes. Bond notes? Really? We already have bond coins that are useful only in Zimbabwe and are on parity with the US dollar which is our de facto currency, but bond notes? Is this the start of the return of the Zimbabwe dollar as was suspected when the coins were introduced? Those fears were unfounded – it was just a means to alleviate the chronic shortage of small change – but it only gained acceptance when the South African rand plunged in value. We’d been using the rand coins, which fortuitously were one tenth the value of the US dollar, but when the rand started to run the bond coins became acceptable. Rand paper money also became unacceptable and the US dollar now rules supreme representing 95% of the currency in circulation. I decided to see where the public opinion lay.

Newspaper vendors on Coventry Road in the industrial sites were my first target.

“Can I pay for your newspapers with bond notes?”

“Yes” (no, I can’t – they haven’t been released yet)

“The Zimbabwe dollar is back!”

Nervous giggles – clearly I was not going to get a response here.

I stopped at the Zimbabwe Fertilizer Company yard to buy some gypsum. Despite my best provocations the clerk who served me would not be drawn to any sort of opinion on the matter. I was more blunt with the labourers who loaded the fertilizer. They were so bored with the lack of business that even those not involved wandered over.

“Pamberi ne ZANU-PF” (forward with the ruling party) I shouted and gave a clenched fist salute. Laughter.

“Pamberi ne Zimbabwe dollar” elicited a similar response. Nobody showed much interest in a debate.

My campaign reached it’s finale at the accounting office where I had to sign my companies’ annual returns (to indicate they were still active). The clerk’s response to my provocation was simply; “Ah, but what can we do?”. Protest perhaps?

Getting onto the internet at home was instructive. A statement from the Reserve Bank governor was circulating that was instructive and entertaining. The bond notes are going to be issued in $20, $10 $5 and $2 denominations and will be equivalent to their US cousins. They will be backed by a bond (hence the name) of $200 million from the Africa Export-Import Bank though they will be released as necessary (the $50m that backed the release of the bond coins last year has not all been used). But why are we in this mess?

  • as the economy has declined our balance of trade deficit has ballooned. There is less money around to buy the cash we need. It’s going into importing goods.
  • the cash we need has dwindled because it has become a commodity in itself. People are hoarding it because they don’t trust the banking system that let them down so badly in the past. The Reserve Bank estimates that some $3b – $7b is circulating in the informal sector and never goes through banks.
  • the countries around us with more volatile currencies are eager to get hold of US dollars and are mopping it up any way they can.
  • the cash is being illegally exported. Who is responsible? In the words of a teller at a bank I deal with  – “The big men are stealing it all”. Also the Chinese. One was caught recently at Harare airport leaving with a large amount of cash.

So the elastoplast fix is multi-faceted. Heavy restrictions on imports especially luxury items. Raw materials, medicines and fuels are unrestricted. Paying for students overseas is restricted. Cash withdrawals are limited to $1000 per day. This should make paying wages for the big companies interesting. There are heavy restrictions on taking cash out the country but I saw nothing about using local Visa cards outside the country. Use of plastic money is going to be heavily encouraged and in some cases laughable; “To this end, every business in all geographical areas and sectors of the economy must have a point of sale per till machine or purchase point” in the words of the Reserve Bank governor. Really? That rural bottle store in the Honde Valley must get a POS machine?

So will it work? No, as I said earlier it’s not addressing the source of the problem – the gravely ill economy. Luxury goods will of course be available at a hugely inflated price (better stock up on wine now!) as those who can circumvent restrictions. Local producers will lack competition and hike prices. Cash is already being sold at a 10% markup and really, what will $200m do? Real $100 and $50 notes will be hoarded and smuggled even faster than before and the run on the banks that started some time ago will not stop as people fear the worst. It’s a self-fulfilling prophecy.

So is this the return of the Zimbabwe dollar? Whilst the Reserve Bank has stated it has no plans to reintroduce the Zimbabwe dollar I don’t know anyone who actually believes that – apart from maybe itself.

 

 





A nice idea

3 02 2015

Towards the end of last year Zimbabwe was abuzz with the news that bond coins were going to be introduced. The news was not well received and, despite strong denial from the Reserve Bank, rumours abounded that it was an attempt by the government to reintroduce the Zimbabwe dollar. I had seen one or two but up until today had not actually received any as change.

Small change

Small change

Small change is in notoriously short supply in Zimbabwe. South African coins (2 RAND lower right) have been useful in that they are roughly 1/10 the value of a dollar (so the 2 RAND coin is valued at 20c) but obviously they have to be bought at least the face value plus some sort of commission. The bond coins, which are minted in South Africa, are pegged at equal to the US dollar though they have no value outside the country. They certainly cost less to produce than their face value. A nice idea and certainly preferable to receiving ball point pens or sweets as change which was the case. People receiving lots of coins, such as the mini bus drivers, can go and change the coins at the end of the day for paper money at a bank. Except, as Shelton tells me, most refuse to accept them.





NSSA and wasted time

22 04 2013

One of the larger and newer buildings in Harare is the National Social Security (pronounced NaSSA) building. It was built in the Zim dollar days so they were making a fair bit of money then. This was not difficult given that it is compulsory to give 3% of the labour force’s salary, matched by 3% from the company, in one’s employ to NSSA on a monthly basis and in those days we had a reasonably robust economy.  So given the vastly reduced income base now that there is some 90% unemployment in the country, one could forgive NSSA being overly keen to ensure that dues are paid.  But I was more than a little annoyed last week to get a phone call from one of the NSSA inspectors requesting to see the wage returns.

“Is that Mr Roberts? This is Brian from NSSA, I need to inspect your returns”.

“But I had an audit last year in December, why do you want to see them again?”

“We are doing them every 3 months. When will you be back in the office?”

I said that he would just have to wait the 2 hours or so that I was going to be in town.

On getting back to the office I produced the required documentation.

“Why are you doing inspections every 3 months?”

“It’s our policy” (meaning there is nothing I can do about it).

“Why not do it every 6 months or a year and save on time, travel and costs?”

“You will have to ask my superiors that”.

This was a blind ally so I tried a bit of information gathering instead.

“How many of you do this in Harare?”

“20”

“And do you do anything else?”

“No, this is what we do”

This sounded like a job from hell so I persisted; “How many customers do you have to see a day?”

“Oh, about 10 to 15”

“And how long have you been doing this?”

“Two years” and Brian rolled his eyes.

I was beginning to quite like this guy despite the annoyance I felt at the incredible waste of resources used in the quarterly visits. NSSA does actually pay out pensions to retired and widowed people so I guess it does fill a function. Fortunately as I am over 50 I am exempt from having to pay dues. In the past some high-profile politically “connected” farmers have point-blank refused to pay the dues and so far as I know were never brought to book. I should have put this to Brian but I had other more pressing issues to deal with.

“So I guess I will see you or a colleague in another 3 months time to look at another 3 pieces of paper”.

“Yes”, he replied, giving me a wan smile and clumped down the stairs on his way to another appointment.