Monday, June 05, 2017

Trade on the Streets, and Off the Books, Keeps Zimbabwe Afloat

By NORIMITSU ONISHI and JEFFREY MOYO of the NY Times. Excerpts:
"From 2011 to 2014, the percentage of Zimbabweans scrambling to make a living in the informal economy shot up to an astonishing 95 percent of the work force from 84 percent, according to the government. And of that small number of salaried workers, about half are employed by the government, including patronage beneficiaries with few real duties."

"An acute cash shortage persists despite the introduction of a surrogate currency in November. The government, unable to pay its workers their Christmas bonuses, has offered them land instead."

"As long lines keep forming outside banks, the continuing decline of the formal economy has raised fears of a repeat of the 2008 hyperinflation crisis, which was fueled by the unrestrained printing of the old Zimbabwean dollar, including a $100 trillion note."

"The government has occasionally cracked down — sometimes violently — on the street vendors, who are not licensed, describing their activities, near the seat of government and businesses, as an eyesore."

"According to an unspoken rule, the street vendors are allowed to operate only after dark on weekdays and starting in late afternoon on weekends."

"Zimbabwe’s per capita gross national income peaked with independence in 1980, when Mr. Mugabe seized power, and bottomed out with the hyperinflation crisis of 2008."

"Mr. Mugabe’s violent seizure of white-owned farms starting in 2000 precipitated a decline in manufacturing and a process of deindustrialization. Manufacturing peaked in 1992, accounting for about 30 percent of the gross domestic product. Now it is 11 percent and declining."

"With manufacturing’s sharp decline, as well as the resulting drop in exports and spike in imports, Zimbabwe suffers from a steep trade imbalance. That imbalance’s effect on the economy is exacerbated by the American dollar, which Zimbabwe adopted in 2009 to combat hyperinflation."

"Zimbabwe has experienced a crippling shortage of dollars since last March. Efforts to encourage the use of plastic money — and the introduction, so far, of nearly $100 million into the market of a surrogate currency called bond notes — have helped, though not enough. Customers still stand for hours in long lines outside banks to try to withdraw the few dollars available.

With the government now strictly controlling the transfer of dollars outside Zimbabwe, companies dependent on trade are finding it increasingly difficult to import critical goods."

"At a small auto parts shop in central Harare, called Track Board, Prince Mapira, 23, said American dollars had vanished from the marketplace. Customers now pay only in bond notes, which are recognized only inside Zimbabwe, creating a problem for his business."

"The auto shop needs American dollars to import parts from South Africa or Japan. So Mr. Mapira takes the bond notes, which are supposed to be the equivalent of the American dollar, to exchange on the black market.

“If you go there with 100 dollars in bond notes, they give you $70 or $80,” he said. “It’s not equal on the black market.”"

No comments: