The introduction of Zimbabwe’s new ZiG currency is expected to have a significant impact on formal markets, believes Hamond Motsi, a PhD student at the faculty of agrisciences, Stellenbosch University. This, while its effect on informal markets may be more limited.

Every country has a past that includes dark corners, whether it be economically, politically, or socially. Zimbabwe, however, has experienced a unique horror in its history, in the past two decades of super hyperinflation of its currency.

Until today, Zimbabwe holds the medal of having the largest inflation hike in world history, particularly in the twenty-first century which sometime in November 2008 exploded to 79.6 billion percent on month-on-month inflation.

This has plagued the country’s overall economy alongside factors such as poor monetary policies, maladministration, poor governance, the collapse of the industrial sector, sanctions, political instability, and the uncontrollable parallel market (normally known as the black market).

Introducing the ZiG

Considering such extremes of hyperinflation, the country has taken both central and peripheral measures to mitigate it, often implementing a new currency system in response to uncontrollable inflation rates and there has been a plethora of different currencies introduced in Zimbabwe over the past two decades.

The latest currency is the ZiG transcribed from the Zimbabwe Gold, which its introduction has sparked mixed reactions both locally and internationally. The currency was introduced in early April this year being backed by the 2.5 tons of gold reserves and US$100 million in foreign currency reserves in the Reserve Bank of Zimbabwe (the country’s central bank). Altogether, this makes a total value of US$ 285 million to back the ZiG currency three times, as mentioned by the central bank governor.

The anticipated introduction of the ZiG currency is expected to have an impact on various sectors, including agriculture, due to its significant contribution to the nation’s economy.

What does it mean for formal markets?

It is crucial to comprehend the agriculture marketing dynamics in the country’s agricultural sector, particularly the local market, and explore how the new currency might influence it. The agriculture markets are commonly classified as formal and informal markets, and the effects of the new currency may vary for each market.

Formal markets typically concentrate on cash crops, which are marketed through government institutions, resulting in payments being made by the government and the government having control over the marketing dynamics.

For significant agricultural products, such as grain, cotton, and tobacco, specific government bodies oversee their marketing. For instance, The Grain Marketing Board (GMB) is responsible for managing all grain crops, while the Cotton Company of Zimbabwe (Cottco) manages cotton, and the Tobacco Industry and Marketing Board (TIMB) manages tobacco.

However, tobacco sales take place at private company-owned auction floors but in these markets, payments are made partially in Zimbabwean dollars and partially in US dollars.

What about informal market?

On the other hand, the informal markets typically involve the trading of fruits and vegetables, and the government generally has limited to no intervention in these markets. In such markets, farmers transport their commodities to local town or city agricultural markets, where the prices are determined by the principles of demand and supply.

Some notable agricultural markets in Zimbabwe include Mbare Musika in Harare, Sakubva Musika in Mutare, and Chipadze Musika in Bindura. These markets function as distribution centers, where vendors purchase goods in bulk and then resell them in their respective areas.

The payment system in the informal market is based on US dollars in cash rather than the Zimbabwean dollar. Also, in these informal markets, certain fruits such as apples, peaches, and grapes are imported from South Africa and purchased in US dollars.

Moreover, some farmers participating in formal markets opt for the informal market, especially for grains, due to the lower value of the Zimbabwean dollar offered that side and the delayed payments by the government. Consequently, they choose to participate in the informal market, which exclusively uses US dollars as a means of payment.

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Challenges for small-scale farmers

Considering the nature of these two marketing systems, it is likely to suggest that the new ZiG currency will have a significant impact on the formal market, while having a more limited effect on the informal markets. This is because in the informal sector, the payment system is strictly based on US dollars, as people prefer not to trade with the Zimbabwean dollar, which is highly volatile and subject to inflation.

Additionally, the market in the informal sector is highly sensitive, with prices determined by the laws of supply and demand. The general public has a mistrust of local currencies, due to their volatility and susceptibility to inflation when compared to the US dollar. Unverified reports circulating on social media suggest that the ZiG currency has already experienced a 33% inflation increase, just two weeks after its introduction, which further underscores why the informal market may shun its use.

The formal sector of the economy is impacted by the government’s payment system. It is likely that the ZiG currency will experience inflation in the near future, which will disproportionately affect farmers participating in formal markets.

In Zimbabwe, most goods and services are priced in US dollars, except for some government services. As a result, purchasing goods and services using the local currency devalues the purchasing power of farmers, as the local currency weakens over time.

This challenge is further exacerbated when farmers attempt to purchase inputs from agro dealers who price their products in inflated US dollars. Additionally, small-scale farmers who participate in these formal markets may face greater hardship than commercial farmers, as the small-scale have limited access to credit and inputs.

Historical currency challenges

Nevertheless, the current El Niño-induced drought has led to a season characterised by poor and varied rainfall events, resulting in projections of low agricultural output, particularly for staple grains.

Therefore, the government has already declared a state of disaster which will sprinkle high demand for grain crops, there is expected to be a significant increase in prices. Consequently, many farmers are likely to divert their produce to the informal market, where they can quickly bargain prices in US dollars rather than the formal market where they will confront the ZiG.

The new Zimbabwe ZiG currency is inevitably expected to have an impact on the country’s agriculture sector, particularly the formal sector rather than the informal sector.

The country has experienced a multitude of currency types over the past two decades, which have not effectively resolved the real economic challenges it faces.

Sectors such as agriculture, which is the country’s primary source of livelihood and a major contributor to the Gross Domestic Product (15-18%), are particularly vulnerable to these economic fluctuations. Robust measures must be put in place to address the monetary system and create a stable environment that will facilitate economic growth, particularly in the agricultural sector.

• Hamond Motsi is a PhD student at the faculty of agrisciences, Stellenbosch University (SU) interested in sustainable agriculture and agricultural development in Africa. He holds an MSc in agronomy (cum laude) from SU, a BSc Hons in crop science, and BSc in crop and soil science (cum laude), both from the University of Fort Hare. You can contact him at onehammond2@gmail.com.
• The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of Food For Mzansi.

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Innocent Mujeri Herald Correspondent

ZIMBABWE commemorates its 44th year of independence today.

This is not merely a moment of reflection but also for celebration.

This celebration is markedly highlighted by the notable progress the country has achieved under the leadership of President Mnangagwa.

With Vision 2030 in sight, President Mnangagwa’s administration is steering the nation towards a promising future characterised by broad-spectrum development and reinvigorated international relations.

Under the Second Republic, Zimbabwe has initiated a bold journey of transformative economic reforms that are steering the nation towards recovery and sustainable growth.

At the heart of these reforms is the National Development Strategy 1, a pivotal policy measure designed to stabilise the economy, attract foreign investment, and create jobs.

This initiative is fundamental in addressing and rectifying the macro-economic distortions that have historically undermined Zimbabwe’s economic potential.

By laying a robust foundation for sustainable economic growth, the NDS1 has begun to demonstrate substantial outcomes: the economy is showing signs of gradual recovery, investor confidence is being rejuvenated and the shadows of hyperinflation and economic instability are receding.

Moreover, the introduction of the Zimbabwe Gold (ZiG) and reforms to the foreign exchange market, have been crucial in restoring monetary stability and curbing the rampant inflation that once crippled the economy.

Infrastructure development has become a cornerstone of Zimbabwe’s strategy for economic revival under President Mnangagwa’s administration, receiving an unprecedented boost across various sectors.

Government’s concentrated efforts on upgrading critical infrastructure such as roads, energy, water systems and telecommunications are pivotal in enhancing national connectivity and facilitating seamless trade.

Notable among these is the extensive upgrading of the Harare-Beitbridge Highway, a project that promises to transform one of the most important arterial roads in Southern Africa.

Previously marked by its deteriorating condition and inefficiency, this highway is now being revitalised into a modern thoroughfare, expected to greatly enhance the movement of goods and people, thereby stimulating economic activities along this vital corridor.

Additionally, the development of the Mbudzi Interchange in Harare is a significant milestone in furthering the country’s infrastructural advancement.

This project, aimed at easing traffic congestion and improving road safety, is testament to the Government’s commitment to modernising urban transport networks.

Beyond transportation, there has also been a significant push to improve the energy sector, with upgrades to power generation and transmission facilities aimed at reducing energy shortages that have historically hampered industrial and residential growth.

In telecommunications, Government has embarked on expanding digital infrastructure, enhancing internet accessibility and reliability across the country.

These developments not only improve the quality of life for Zimbabweans but also create a more attractive environment for foreign and local businesses, fostering economic growth and promoting Zimbabwe as a key investment destination.

Agriculture has a pivotal role in Zimbabwe’s economy, providing the primary livelihood for a large portion of the population and contributing significantly to the nation’s GDP. Recognising this, President Mnangagwa’s administration has focused substantial efforts on revitalising this sector through innovative initiatives like the National Enhanced Agricultural Productivity Scheme (NEAPS) and the Pfumvudza/Intwasa programme.

These Government-led initiatives are meticulously crafted to enhance agricultural productivity, particularly among smallholder farmers, who form the backbone of Zimbabwean agriculture.

By supplying these farmers with essential inputs, such as seed, fertilisers and irrigation technology, along with comprehensive training on modern farming techniques, these programmes aim, not only to boost yield, but also to elevate the quality of agricultural produce across the nation.

The strategic emphasis on agricultural development through these programmes serves a dual purpose.

Firstly, it aims to achieve food security within the country. By increasing local production, these initiatives help reduce dependency on food imports, moving Zimbabwe towards agricultural self-sufficiency.

Secondly, by improving the efficiency and output of agriculture, the initiatives contribute to the stabilisation of food prices within the domestic market, making food more affordable for Zimbabweans.

This approach not only supports the livelihoods of farmers by ensuring a stable income but also stimulates rural economies through increased spending and investment in agricultural inputs and infrastructure.

Through these concerted efforts, Government aims to transform agriculture into a modern, sustainable and profitable sector, crucial for the nation’s economic health and growth.

The revitalisation of social services is also another area where President Mnangagwa’s Government has made substantial strides.

The expansion of educational facilities and improvements in healthcare systems are geared towards building human capital that can drive future growth.

By increasing access to quality education and healthcare, Zimbabwe is investing in its most valuable asset, its people. This focus on human capital development is essential for a country that aims to transform its economic landscape and improve living standards.

On the international stage, President Mnangagwa has pursued a policy of re-engagement with the global community.

Shifting from Zimbabwe’s previous international isolation, this policy has rekindled relationships with multiple countries and international entities, fostering partnerships that are crucial for economic and technological co-operation.

These relationships not only enhance diplomatic ties but also open doors for trade and investment, which are crucial for Zimbabwe’s integration into the global economy.

As Zimbabwe moves forward, the sense of optimism under President Mnangagwa’s leadership is palpable.

The nation is seeing a resurgence of hope and national pride as it works towards overcoming past challenges.

This journey is marked by significant milestones that signify a departure from old struggles toward new achievements.

Zimbabwe’s progress under President Mnangagwa showcases a nation in transformation, fuelled by a commitment to reform, unity, and inclusiveness.

As these initiatives continue to unfold, they hold the promise of realising a prosperous and inclusive Zimbabwe by 2030, an aspiration that once seemed distant but now appears within reach.

This new era of leadership and development serves not only as a testament to Zimbabwe’s resilience but also as an inspiration to nations worldwide striving for renewal and progress.

HARARE,– Trade between Zimbabwe and China has been on a positive trajectory, and Zimbabwe is seeking to diversify its exports to the Asian country, the head of ZimTrade, Zimbabwe’s trade development and promotion organization, has said.

China is one of Zimbabwe’s biggest trading partners, both in terms of exports and imports, ZimTrade Chief Executive Officer Allan Majuru told Xinhua in an interview on Tuesday. “On the export side, apart from tobacco and minerals… we are diversifying into horticulture.”

Last year, Zimbabwe’s agricultural exports to China received a significant boost when the southern African country marked its first citrus exports to China.

Zimbabwe seeks to export more of its agricultural produce to the vast Chinese market, Majuru said. The country now mainly exports minerals and tobacco leaves to China.

“Quite recently, the protocol on the export of citrus was put into place, and last year, we managed to export more than 40 containers of citrus into China,” he said. “We are currently discussing the one for avocados.”

“We also want to incorporate blueberries, pecan nuts, chilies, and sesame, just to mention a few, to make sure that we grow the export basket and diversify it to China,” Majuru added.

He said ZimTrade has been working closely with Chinese authorities to create a conducive platform for the diversification of exports into the Chinese market.

It also assists businesses in meeting Chinese import regulations and standards, Majuru said.

Trade between the two countries hit a record high of 3.12 billion U.S. dollars in 2023, reflecting a 29.9 percent increase from the previous year, according to the Chinese Embassy in Zimbabwe.

Zimbabwe exported 1.71 billion U.S. dollars to China and imported 1.41 billion U.S. dollars from China, resulting in a trade surplus of 307 million U.S. dollars for Zimbabwe, according to the Chinese embassy.

Majuru said the bulk of Zimbabwe’s imports from China are machinery and equipment, which aids in growing the country’s industrial base.

Source: (Xinhua)