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Zimbabwe dollar dearth causes shortages, return of inflation

Oct 03 2017 09:30
Bloomberg News

Harare - Zimbabwe’s money shortage has seen card and mobile-money payments eclipse cash sales at the nation’s retailers, throttling suppliers’ stock of hard currency needed to put goods on shelves and forcing up food prices.

Cash transactions have shrunk to about 2% of daily takings across the 33-store Spar Zimbabwe chain, from 60% a year ago, Managing Director Terence Yeatman said. Consumer prices as measured by the statistics agency rose 0.1% in August from a year earlier, it said on September 15.

"About 60% of stock on any supermarket shelf is imported," and without sufficient dollars, inflation on imported goods is as much as 60% a year, Yeatman said at the Groombridge branch in the capital, Harare. "Suppliers are obviously concerned because the hard currency isn’t there." At other retailers, a 200-gram jar of Nestlé SA’s Nescafe Classic instant coffee costs $14 compared with $9 a month ago.

The southern African nation abandoned its currency in 2009 after the International Monetary fund estimated inflation had topped 500 billion percent, and has mainly used the dollar since. Greenbacks are in short supply following a collapse in exports that’s forced the government to pay its workers late.

Not accepted

The central bank has printed so-called bond notes, which it says carry a value equal to the dollar’s, since the end of 2016, but they aren’t accepted by foreign suppliers, including those that sell critical goods such as oil and agricultural feed. Small shops and gas stations in Harare charge 30% to 40% more if people use them rather than authentic greenbacks.

A political crisis has seen the economy halve in size since 2000 and caused a cash crunch that worsens in the second half of the year, when foreign currency earnings traditionally slump after the sale of tobacco ends.

The central bank has limited daily withdrawals from banks to $50, but lenders have tightened this to $20.

People sleep rough outside banks in an effort to be close to the front of the line, which can snake around the block by dawn.

Stocks depleted

At a bank in Harare’s middle-class Avondale suburb, the stock of dollars is exhausted within an hour of the branch’s opening, said Enock Mangena, a guard who was employed to ensure orderly queues and now spends his days breaking up squabbles and fights as people who are desperate for cash jostle for money.

It takes at least 10 days and 240 miles of cycling every month for Jeremiah Ndove, a messenger in Harare’s semi-industrial Southerton district, to withdraw his salary of $200. The bank branch is 12 miles away from where he lives and he often returns empty-handed because dollar supplies are depleted. Lenders no longer stock automated teller machines.

The lack of foreign direct investment is exacerbating the dollar shortage, said John Robertson, an independent economist in Harare.

“The difficulties we’re facing will only get worse, because the government believes its own expenditures are more important than those of the productive sectors,” he said. “If that doesn’t change, the cash crisis will be with us for a long time and shortages can’t be ruled out.”

Some businesses have resorted to paying workers partly with food, but this is running into difficulties too.

“At first it was excellent business for us,” said Vinod Patel, who owns a wholesale shop in northern Zimbabwe. “Then, prices start rising alarmingly fast. Now, sourcing goods is difficult because our suppliers haven’t got foreign currency to make their purchases.”

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zimbabwe  |  africa economy  |  inflation

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