Zim economy getting worse: Economists

HARARE - Economic experts have warned afresh that Zimbabwe’s economy is in dire straits and that authorities need to move with more urgency and vigour to mitigate the country’s plummeting fortunes.

The warning comes in the wake of the country’s worsening liquidity and cash crises, the economy contracting precipitously, thousands of companies shutting down, unemployment hovering at well over 90 percent, and the Zimbabwe Stock Exchange losing more than $2,5 billion of its value as foreign investors flee.

“The cash crisis is a reflection of structural deficiencies and distortions in the economy,” Labour and Economic Development Research Institute of Zimbabwe chief economist, Prosper Chitambara, said.

“The insanity of Mugabenomics caused hyperinflation and the well documented destruction of the Zimbabwe dollar.

“Switching the system over to United States dollars provided some respite, but failure to effect urgently required fixes meant this was only ever going to be temporary. That wasted period of ‘extra time’ is over,” South African economic analyst Alec Hogg said.

He said Zimbabwe’s cash shortages highlighted the struggle that the government faced in resuscitating an economy that was now half of the size it was 15 years ago.

The worsening cash crisis has forced the central bank to limit daily cash withdrawals to $1 000, amid further plans to introduce bond notes to be backed by a $200 million Afreximbank loan.

But in reality, daily withdrawal limits have gone done to as low as $50 in some banks, as depositors have rushed to withdraw all their money before the introduction of the bond notes.

The panic withdrawals have seen a leading local safari company warning visiting tourists that “with the recent cash shortage in the country and the possible introduction of bond notes, our guests are advised to travel with cash in small denominations so as to avoid disappointment and unnecessary headaches”.

In addition, long-forgotten foreign currency dealers and cash barons are back in business, “selling” cash for a 10 percent premium, in exchange for electronic cash transfers.

“I get substantial amounts of cash from my businesses and it makes business sense to distribute the money to people in need of it at a premium than to deposit it in the bank,” a local businessman who preferred anonymity said.

FBC Holdings chairperson Herbert Nkala has recommended that Zimbabwe would be better off if it expeditiously shifts to using the South African rand, in the wake of worsening dollar shortages.

“My view is that while the rand is certainly not ideal, as South Africa has its own issues, we import most things from Mzansi. We just need to be realistic and embrace the rand,” he said, adding that “the alternative is not attractive”.

“Almost certainly, the easiest way forward is to move increasingly to the rand. It does not have the desirability of the US dollar, but at least there is relative confidence in the unit.

“The quicker this happens in this country — dual pricing and the like — the softer the landing we are going to have in the months ahead,” Nkala said.

Comments (8)

This is not about which currency Zimbabwe has to use. This is about a government which is on spending spree and using money that does not belong to it. What is wrong with a US$ if it is your earned dollar. The way these desk analysts talk about the Rand, seems as if the Rand can just be available, as soon as you just "yes", I want to use the Rand. You still need to earn it and you still need to use what is yours. If you spend money as its supply is infinite, then you will always experience a cash crisis irrespective of the currency you will be using, moreover when it is not your local currency. Let the Government use what the government is earning and over and above that they need to put in places policies which are conducive for FDI. The Rand story is oversimplified and over exaggerated. South Africa or the Rand union is not all out looking for new members. They even do not want Zimbabwe to use their currency. Face the government squarely, that is where the problem is and that is also where the solution is. Wake up.

Zvichapera - 16 June 2016

You do not need a doctor to tell you that you are hungry. We do not need economists to tell us that we are doomed. We do not need rocket scientists to tell us that the economy has fallen down.

Zach Seder - 16 June 2016

The gvmnt is illegitimate full stop. Why do we skert around facts? We don't have faith in the system. The solution is early free and fair elections.

Ndini ndadaro - 17 June 2016

It has been easy so far to bludgeon Zanu PF opponents, kidnap some, burn some huts here & there, scare the hell out of the voters, even kill off some. Yeah, until now the moment of truth. Failure is staring us in the face. Government failure, leadership failure including failure to think from those with the almighty power to do EVERYTHING else except solve the economic problems we face. Years of shouting, insulting, walking on international stages pontificating ethos and values we dont have and ideologies we don't even understand has led us into a deep hole. Keep digging Zanu PF we'll get out on the other side of the earth!!

Sagitarr - 17 June 2016

@Ndini -you are very correct mate , but this is the hell part of it , ZANU PF will again win the next election , the opposition parties are just barking from one corner instead of working and focusing nationally . Campaigning only in urban areas is not enough for these opposition parties , they need to go out to rural areas and convince the popoulation out there . Remember ZANU PF got more of its votes from rural areas in 2013 (rigged or not ), now ZANU PF is still working very hard supplying food relief to the people out there in rural areas and definitely it would be very difficult for the people out there to turn around and bit such a feeding hand . Opposition parties must come up with something tangable especially to the population of rural areas , apart from doing that, ZANU PF will definitely win the 2018 elections .

Khalabemgeza - 17 June 2016

@kala.yu absolutely correct on rurals,our chinas.we control them by giving them what they want,food,farms,free health.opposition wont make it in rurals.everyone there is a spy for us,everyone.Its in twns that we going to put more effort than 2013.we got more in twn than mdc in rurals.That is why we want to crush corruption n open industries for twn votes.Mugufuli(ngwena) is ready to sterm out corrupt government rats,burn them.come 2018,yu will be witnesses to a resurgent zanu n zimbabwe.Its only corruption we gotta deal wthOnly corruption.

viola gwena - 17 June 2016

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finance service - 11 July 2016

British supported independence and Mugabe since 1980 and look what was achieved. From top agriculture producer in Africa (before independence) to complete bankruptcy and a hungry poor nation.

peter - 13 July 2016

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