HARARE – John Mangudya’s words were still echoing in the distance when the whole duplicity of the government’s mono-currency push was spectacularly exposed.
“The country is on the right trajectory to de-dollarisation,” the Reserve Bank of Zimbabwe governor had confidently stated, while presenting his Monetary Policy Statement on Monday.
Just a week earlier, his boss, the finance minister Mthuli Ncube was tackled by MDC MP Tapiwa Mashakada in parliament over plans to print higher denominated Zimbabwe dollar notes when “people are re-dollarising, retailers are re-dollarising, everyone… is charging US dollars.”
“We are aware of what is going on,” Ncube told Parliament. “Of course, it is illegal, they must desist from doing it.”
Yet on Tuesday, just hours after Mangudya lauded their efforts to get everyone using the Zimbabwe dollar – the inflation ravaged local currency re-introduced last year as sole legal tender in place of a multi-currency regime dominated by the US dollar – a major player in the petroleum industry announced that some of its service stations would now be selling fuel in foreign currency.
Zuva Petroleum, which is majority owned by President Emmerson Mnangagwa’s ally and Zanu PF sponsor John Mushayavanhu, said in a notice that it had received Reserve Bank of Zimbabwe approval for eight of its service stations across the country to charge foreign currency for fuel.
The fuel crisis in the country has highlighted the short-sightedness of Zimbabwe’s move last year to reintroduce the local currency, even as production and exports remained depressed. Zimbabwe does not produce fuel and relies on imports. Price controls on fuel, and the rapid loss of value of the local currency, has left petroleum companies unable to generate the foreign currency needed to keep up supplies to meet demand.
Yet even before the fuel companies moved back towards dollarisation, the government has been backpedalling furiously (although they dare not admit it publicly). No sooner had a new law been passed in June last year outlawing use of the United States dollar that the government started announcing exemptions. First it was foreign airlines who would be allowed to collect ticket payments in foreign currency, then it was the hotels, then fast-food outlets who curiously qualify as “tourist facilities” and in good time chrome mining firms and smelters were allowed to buy chromium from small scale producers in forex.
The government itself, undermining its own currency law, also said it would continue collecting customs duties in foreign currency.
Former finance minister and MDC deputy president Tendai Biti says the selective granting of exemptions on who can bill in foreign currency is a form of corruption.
“Statutory Instrument 142 of 2019 is being implemented more in breach than in compliance,” Biti said of the regulations which banned the use of foreign currencies in domestic transactions after the central bank renamed its RTGS currency to the Zimbabwe dollar and made it sole legal tender in June 2019, ending a decade of dollarisation.
“The regime must accept that de-dollarisation has failed and failed in absolute terms. Selective formal dollarisation is corruption and subjective. The regime must repeal SI 142 and formally dollarise immediately.”
The rapid decline in the value of the local currency, and market moves towards dollarisation, have emboldened critics who argued that last year’s currency reforms were hurried.
A shrinking economy and triple-digit inflation are taking their toll on the Zimbabwe dollar. The RBZ held the nation’s key rate at 35 percent on Monday in an effort to rein in inflation that was above 500 percent at the end of 2019.
Those holding foreign currency have been reluctant to sell on the official interbank market, where the United States dollar fetched 17.74 Zimbabwe dollars on Tuesday, although it was trading at about 22 on the black market where most currency transactions are conducted.
Although major supermarkets and businesses have been forced to use the Zimbabwe dollar, compliance enforced through regular monitoring, most have simply been regularly changing their prices to keep up with currency movements. The United States dollar, for such businesses, remains the reference currency.
Smaller businesses and street traders, however, have all but rejected the local currency with most of their trade now conducted in United States dollars or the South African rand.
“The government is unable to stem the tide,” said lawyer and political commentator, Alex Magaisa.
It was particularly telling that there was no-one protesting in Parliament when, ending his exchange with Ncube on February 12, Mashakada said: “If you search Honourable Members’ pockets, they have got US dollars and not bond notes.”
