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‘Independence liberalised economy in favour of blacks’ – The Herald

Bulawayo Bureau 

THE attainment of independence from colonialism in 1980 liberalised the economy in favour of indigenous black Zimbabweans who now own and manage big businesses in sectors that were previously dominated by the white settler minority.

Through policy interventions and empowerment programmes, which have been scaled up under the Second Republic, a majority of Zimbabweans, including women and the youth are now actively involved in economic activities in various productive sectors.

Unlike the pre-independence times when the levers of the economy were in the hands of whites, with Africans only limited to owning small businesses like grinding mills, general dealers’ shops and rural buses, the coming in of independence saw the rise of black entrepreneurs who have created massive job opportunities for many locals.

As Zimbabwe readies to celebrate 44 years of independence, analysts say black empowerment is one of the major milestones brought about by the liberation struggle. They noted that sectors such as tourism, mining, banking and energy, which were controlled by whites are now run by blacks. 

Bulawayo businessman and Zanu PF secretary for business development, Cde Elifasi Mashaba, said during the colonial era the economy was structured to benefit whites with the black majority used as cheap labour.

“The country’s economy has always been agro- and mining-based, that is why whites never wanted to let go of the land. Today we speak of mushrooming of small scale gold miners, but this does not mean that gold has just been discovered,” he said. “In these farms, the whites were conducting mining but pretending to be involved in agriculture only. That is why they had airstrips in the farms as they would smuggle our mineral wealth outside the country without being detected. 

“But the Land Reform Programme changed all that, and that is why now young black millionaires have emerged as they are involved in the mainstream economic sectors,” said Cde Mashaba.

He said while only a few conglomerates such as Total, PB, Caltex, controlled the petroleum sector in pre-independence, post-independence saw the Government liberalising the sector and now there are over 143 indigenous players in the energy business.

“The banking sector was wholly controlled by whites but now at least 90 percent of the country’s banks are run by indigenous people. Even the manufacturing sector is now controlled by indigenous players,” said Cde Mashaba. 

“But we continue fighting the economic battle as the whites, in a bid to stifle our progress, imposed sanctions on the country and the economic battle is worse than before.” 

The tourism and hospitality industry is the third highest foreign currency earner and in an independent Zimbabwe, indigenous people are heavily involved in the sector, not just as employees, but employers.

Tourism and Hospitality Industry Deputy Minister Tongai Mnangagwa said the country’s liberation struggle empowered blacks to penetrate the sector, which was a no-go area for Africans.

“From the advent of our independence we have managed to open the space for indigenous black Zimbabweans in hunting and conservancy business, which was a preserve for the white people,” he said. 

“All the big tourism players were whites. But now we have black people owning hotels, we have got black people running state-of-the-art restaurants in different resort areas. We have black people owning boats that are hired in areas such as Lake Kariba and Lake Chivero,” said Deputy Minister Mnangagwa.

He said Africans have been mainstreamed into the main levers of the economy and this is a result of the liberation struggle that ensured equal opportunities for all.

The Deputy Minister said it was pleasing to see that some of the blacks were thriving in the business and offering quality services in the sector. He said the Government has established a revolving fund to grow the sector. 

“As a Government we came up with a revolving fund which players can access to expand their business. It is available in all the major banks and after submitting all the required papers. We help these players so that they can offer international standards,” said Cde Mnangagwa.

Hospitality Industry expert and former Hospitality Association of Zimbabwe president Mr Farai Chimba said unfairness in tourism can be traced back to the early 1900s where indigenous Zimbabweans mostly participated in the sector as labourers.

“As a people we were mainly exposed to the tourism sector in menial jobs such as cooks and serving staff for the greater post-independence. The 2000s saw more senior roles in decision making and administration in tourism being taken up, bringing a generation of managers and owners, culminating in the takeover of some of the country’s private hotel groups by locals,” said Mr Chimba.

“The shift to the service industry was from a realisation of the low hanging fruit and the potential it bears, while exposure in travel also brought in new products and ideas to invest back in Zimbabwe.”

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Can gold-backed ZiG currency rescue Zimbabwe’s economy? – BizNews

In the tumultuous landscape of Zimbabwe’s economic history, the quest for stability in currency has been fraught with challenges. From the crippling hyperinflation of 2008 to the dominance of the US dollar today, the struggle for a reliable medium of exchange persists. Now, Zimbabwe sets its sights on a new dawn with the ZiG, backed by gold reserves. But amid nostalgic hopes and practical hurdles, can this latest attempt truly restore faith in the nation’s monetary future?

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By Lionel Laurent ___STEADY_PAYWALL___

Zimbabwe has a painful relationship with money. At the height of hyperinflation in 2008, the African economy’s billion- and trillion-dollar banknotes could barely buy toilet paper as war, autocracy and monetary recklessness crushed confidence and ruined lives. Fresh economic woes mean memories of that time are starting to flood back: Inflation is at 55%, the US dollar has become dominant and buying a loaf of bread requires counting out 100 bills.

Hence why Zimbabwe has its sights on a new start with the ZiG, which is short for Zimbabwe Gold and is backed by some $185 million worth of gold and other reserves. This is the sixth attempt at trying to overhaul a currency whose latest iteration resumed circulation in 2019 at 2.5 per US dollar and ended it last Friday at 30,671 — having lost some 80% of its value since the start of this year. After dabbling in literal gold coins and centrally issued digital variants, Zimbabwe’s central bank is saying the ZiG is a chance for a “solid and stable” national currency.

Extreme caution is recommended with this kind of project, however. Start with the principle: The appeal of backing a currency’s exchange rate with gold — in this case 13.56 ZiGs to the US dollar — is rooted in the nostalgic, if not mythical, view of the gold standard of the 19th and 20th centuries as a mechanism that kept money “sound” and inflation low. But even if goldbugs note with pride that the yellow metal has fulfilled its stable-store-of-value claims over the decades, with its current record reflecting a wave of enthusiasm in a more uncertain world, in the short-term, its price can be painfully volatile.

In his book The Truth About Inflation, UBS economist Paul Donovan gives the example of a staple purchase like a gallon of milk: Between 1996 and 2004, which is a long period for the average household, its price in US dollars was more stable than its price in gold dollars (assuming a standard price of $35 per troy ounce). In September 2022, Donovan calculates milk prices in US dollars were rising 16%, but in gold terms were rising over 23%. The idea that gold would be more appealing than greenbacks as money doesn’t necessarily hold when it comes to price stability — which matters for Zimbabwe, as it wants ZiG to dent the US dollar’s appeal in its local economy. Some 80% of all transactions are conducted in USD.

Then there are more practical obstacles: Maintaining a gold-backed currency like ZiG will be far from straightforward. Yvonne Mhango of Bloomberg Economics says that Zimbabwe’s gold reserves might not be plentiful enough to maintain the desired exchange rate. The fact that the country is going it alone, without a similar move from its trade partners, means that the new currency will be exposed to the volatility of the gold price. History shows the gold standard, in its classical pre-World War I form, required cooperation and commitment between world powers to defend gold parity. That’s not going to happen here.

There is undoubtedly a dire need for change in Zimbabwe. Bloomberg’s Next Africa newsletter declared the local currency effectively “dead” in January. Maybe the ZiG will somehow do better than its predecessors. But if the country has veered from hyperinflation to hyper-dollarization in a relatively short amount of time, and is currently battling double-digit inflation and interest rates, it’s because there are deep-seated issues beyond the money supply such as economic governance or corruption risks.

Without deeper reform, one of the country’s top exports will remain its own people — and maybe the odd trillion-dollar banknote as a souvenir.

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© 2024 Bloomberg L.P.

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Zimbabwe introduces new gold-backed currency to tackle inflation – Al Jazeera English

Zimbabweans have 21 days to convert their old cash into new money, according to the central bank.

Zimbabwe’s central bank has launched a new “structured currency” backed by gold, as it seeks to tackle sky-high inflation and stabilise the country’s long-floundering economy.

The new currency – called Zim Gold (ZiG) – will be backed by foreign currencies, gold and precious minerals, John Mushayavanhu, the governor of Zimbabwe’s Reserve Bank, told reporters in the capital Harare on Friday.

Mushayavanhu said the ZiG would circulate alongside a basket of other currencies.

He said the central bank would also introduce a market-determined exchange rate.

“With effect from today … banks shall convert the current Zimbabwe dollar balances into the new currency,” he said.

The move is aimed at fostering “simplicity, certainty, [and] predictability” in Zimbabwe’s financial affairs, he added, presenting the new banknotes that come in eight denominations ranging from one to 200 ZiG.

The new notes feature a drawing of gold ingots being minted, as well as Zimbabwe’s famous Balancing Rocks, which already appeared on the old ones.

Zimbabweans have 21 days to convert their old cash into new money, Mushayavanhu said.

New Zimbabwean banknotes
Zimbabwe’s Reserve Bank Governor John Mushayavanhu introduced the ZiG banknotes [Jekesai Njikizana/AFP]

Sufficient reserves to back new currency?

The Zimbabwean dollar has lost almost 100 percent of its value against the US greenback over the past year.

On Friday, it was officially trading at about 30,000 against its more coveted US counterpart – and at 40,000 on the black market, according to tracker Zim Price Check.

Its poor performance has contributed to the Southern African country’s high inflation rate, which after climbing well into the triple digits last year, was at 55 percent in March, according to official data.

The current inflation rate has piled pressure on the country’s 16 million people who are already contending with widespread poverty, high unemployment and a severe drought induced by the El Nino weather pattern.

Soaring prices have also brought back memories of 2008, when hyperinflation was so out of control that the central bank even issued a 100-trillion-dollar note, which is now a collectors’ item.

Amid these economic challenges, analysts have questioned whether Harare has enough reserves to adequately back the new currency, and if the latter could suffer from volatility in gold prices.

On Thursday, President Emmerson Mnangagwa inspected the central bank’s vaults that Mushayavanhu – who was appointed earlier this year – said hold 1.1 tonnes of solid gold.

The bank also has almost 1.5 tonnes more abroad, as well as $100m in cash and precious minerals – such as diamonds, that if converted into gold would account for another 0.4 tonnes, Mushayavanhu said.

Altogether, the reserves’ value totals $285m, which Mushayavanhu highlighted was “more than three times cover for the ZiG currency being issued”.

Meanwhile, the central bank added that it would also adopt a tight monetary policy, linking money supply growth to growth in gold and foreign exchange reserves.

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All eyes on new RBZ chief ahead of monetary policy – The Herald

Golden Sibanda

Business News Editor

NEW Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu will present the eagerly awaited 2024 Monetary Policy Statement (MPS) this afternoon with expectations high that the central bank chief will come up with policy measures to stabilise the domestic currency and tame rising inflation.

Dr Mushayavanhu will present his first MPS after officially commencing his duties last week. The policy will usually have been delivered by end of February, latest, but was delayed to allow for wider consultations.

He begins his tenure amid sustained depreciation of the Zimbabwe dollar, which has seen all economic agents needing to adjust prices, tariffs and service charges constantly to remain afloat.

Depreciation threatens the survival of the domestic currency, according to the Confederation of Zimbabwe Industries, which recently said that as a result of the currency volatility, the environment had become tough to operate in.

High inflation forced Zimbabwe to scrap its domestic currency in February 2009. By that time, people’s hard-earned savings and pensions had been reduced to nothing.

It is the hope of businesses and individuals alike that the new central bank chief will have an ace up his sleeve and pronounce measures that quickly restore the value preservation function for the domestic currency.

It is widely anticipated that among the MPS solutions would be the proposed structured currency announced by President Mnangagwa in February this year when he addressed the first Cabinet meeting of 2024.

However, Monetary Policy Committee member Mr Persistence Gwanyanya said that while many analysts seemed to confine their expectations to the structured currency, the MPS entailed several monetary issues and interventions.

These included policy measures to control the velocity of money, quantity of money in circulation and interest rates.

He said the MPS would not solely dwell on the exchange rate policy, but cover all aspects of the monetary system, including controlling monetary aggregates to ensure stability in the economy.

“But the way some people are talking about the structured currency is as if the Governor is presenting an exchange rate policy.

“The economy also requires a well thought out MPS to have stability in

the economy, which the Governor will deliver.

“Naturally, the MPS speaks to issues like money supply control, measures to deal with velocity and the quantity of money in the economy for durable stability.

“Monetary policies also speak about interest rates and how they affect the growth of money supply and promotion of the growth aspirations of the economy,” he said.

However, other analysts said the new currency, expected to entail a combination of fiat and asset-backed currency, to be backed by hard assets and foreign currency reserves, should anchor the stability of the domestic currency and the economy in general.

At the height of inflation in Zimbabwe in 2008, the International Monetary Fund reported annual inflation to have climbed to 500 billion percent, although the Government reported the rate at 208 percent at the last official count in August.

Notably, Zimbabwe has struggled with its exchange rate since multilateral lenders stopped extending credit at the turn of the millennium when the country defaulted on its loans, especially to the IMF, World Bank, African Development Bank and Paris Club.

Dependency on imports, following about two decades of economic meltdown, has also increased the appetite for forex, putting pressure on the local unit.

Zimbabwe’s economy also suffered from the illegal economic embargo imposed by the West following the land reform programme, which saw the country globally alienated.

This has denied the country access to affordable lines of credit, making it difficult for the country to implement measures to defend its domestic currency.

Commenting in its monthly update on inflation and currency developments for February 2024, CZI said despite the decrease in the premium between the parallel and official exchange rates in recent months, the rate of depreciation of the local currency was worrisome as this was directly responsible for the inflationary environment.

CZI noted that the Zimbabwe dollar continued to depreciate, both on the formal and the parallel market.

It said since January 2024, the domestic unit had lost more than 49 percent of its year-opening value on the formal market and 30 percent on the parallel market.

Zimbabwe’s annual inflation rose to a seven-month high of 55,3 percent in March from 47,6 percent in the previous month, the National Statistics Agency (ZimStat) said.

Zimbabwe’s local currency has depreciated faster on the formal market, raising hope of convergence between the two exchange rates, which would eliminate pricing distortions in the market.

The disparities between the official and parallel market rates present pricing headaches for business operators who are only required to place a 10 percent margin on the official exchange rate when pricing their goods.

“Near convergence of the parallel market and the formal exchange rate gives formal business a fighting chance.

“Therefore, measures that address currency depreciation while ensuring convergence of the official and the parallel market exchange rate remain critical.

“Despite the convergence, the rate of depreciation of the Zimbabwe dollar is worrisome as this is directly responsible for the inflationary environment. The need for a consistent adjustment of prices, tariffs as well as all service charges in line with the depreciation of the exchange rate makes the investment environment difficult to operate in.

“The World Bank also noted that inflation is a constraint for private sector development in their Country Private Sector Diagnostic (CSPD) report that was launched on March 1, 2024,” CZI said.

“High and sustained inflation affects both input and output markets and makes it difficult to undertake long-term planning or investments.

“The country is now highly dollarised with more than 80 percent of transactions in US dollars, which is also reflected in the methodology used in blending inflation,” the industrial lobby group said.

The Government has instituted several policy interventions to restore normalcy to the domestic macro-economic environment, including hiking interest rates.

At 145 percent, Zimbabwe currently has the highest bank policy rate in the world.

Last year, the Government transferred external payment obligations to Treasury in the hope of controlling the creation of excess liquidity, but the measures had short-lived success.

Other interventions included the Government’s directive that import duties be paid in local currency except for luxury goods while 50 percent of corporate tax had to be remitted in local currency.

Harare-based economist Mr Brains Muchemwa recently said the Government needed to take bold measures to create demand for the domestic currency, which would strengthen it.

Mr Muchemwa said this could be achieved if the Government demanded that all taxes be paid in local currency.

He noted the Structured Currency was doomed to fail unless policymakers created a functional demand for the local currency.

“Government will need to take bold measures to create demand for the Zimbabwe dollar, by obligating that all taxes be payable in local currency, without which the local currency will be an orphan,” Mr Muchemwa said.

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