07 August 2006: Zimbabwe: More Money, More Problems?

Zimbabwe's splintered main opposition Movement for Democratic Change (MDC) party temporarily set aside internal squabbles to unite in condemning new monetary changes introduced by Reserve Bank of Zimbabwe governor Gideon Gono. The central bank chief on Monday slashed three zeroes from the local currency and devalued the dollar by 60 percent in a bid to bring Zimbabwe's economy back on the rails. But economic experts have dismissed the monetary changes as inadequate to rescue the economy and the two factions of the MDC weighed in with criticism for Gono describing his latest measures to right the economy as meaningless. Playing on Gono's move to slash three zeros from the currency, the finance spokesman of the larger faction of the MDC, Tapiwa Mashakada, said the only one "big zero" that Zimbabwe needed to get rid of to put things right was none other than President Robert Mugabe himself. "It is not the zeroes that are at the core of the Zimbabwean crisis. The MDC believes it is not simply the zeros that must go. Mugabe is the big zero and he must go," said Mashakada in a statement to the press (1).

In fact many economic analysts have described these new measures as "cosmetic" since they fail to address the root causes of the Zimbabwe’s economic crisis. New monetary policies were presented to the nation by the Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono, during his mid-year monetary policy review on 31 July 2006, in which he announced a number of piecemeal economic measures under what he termed "Project Sunrise".

According to the RBZ, this new economic policy is largely focused on Small and Medium Enterprise (SME) development and the removal of 3 zeroes from the currency from August 1 through the introduction of a "new family of bearer’s cheques". The central bank chief gave Zimbabweans until 21 August to dispose of old cheques in their possession. The project will also see the re-introduction of coins in note form to replace some lower denomination notes. In cases where the funds involved for individuals are in excess of $100 million and $5 billion for companies, bearers will be required to produce proof of the source of the money. Where such proof is not available, the funds will be confiscated and deposited into an "anti-laundering bond" for two years, at zero interest rate.

To curtail money laundering and parallel foreign exchange activities, Gono limited daily cash withdrawal to $100 000 for individuals and $750 000 for companies. The central bank will, with immediate effect, monitor all payments by banks of more than $1 million.

The project also includes the introduction of "border patrols" involving the Zimbabwe Revenue Authority, Zimbabwe Republic Police and "youths" to investigate the "illegal" export and import of local currency. Gono estimates that there is more than Z$33 trillion outside the country in what he termed "mini-central banks". Under the new measures, anyone caught with currency in excess of $5 million will be prosecuted.

Meanwhile, RBZ said on 1 August alone it had already confiscated about Z$100 billion which was being smuggled back into the country as Zimbabweans stampeded to beat a 21-day deadline to hand over old currency. The central bank governor is reported to have said on 2 August “We have seized large amounts of cash coming into the country and yesterday alone we managed to seize $100 billion with the majority of the money being seized at the Beitbridge, Plumtree, Forbes, Victoria Falls and the Chirundu border posts. Most of those arrested were truck drivers who attempted to smuggle the cash back into the country.” (2)

Hyperinflation is one of many severe symptoms of Zimbabwe's economic crisis that has also spawned shortages of fuel, electricity, essential medicines, hard cash and just about every basic survival commodity.

The main opposition, the Movement for Democratic Change (MDC), and Western governments have blamed Zimbabwe’s economic crisis on policies such as his seizure of productive farms from whites for redistribution to landless blacks. The farm seizures destabilised the mainstay agricultural sector and caused severe food shortages after the government failed to give black villagers resettled on former white farms skills training and inputs support to maintain production.

President Mugabe, who has ruled Zimbabwe since the country's independence from Britain in 1980, denies mismanaging the country and says its problems are because of economic sabotage by Western governments opposed to his seizure of white land. Additionally President Mugabe persists in his belief that the main opposition party, the MDC, carry an external, foreign agenda, and do not qualify as a ‘national’ political entity. This positioning of the MDC outside of a legitimate national discourse provides Mugabe with the pretext for continuing to reject their calls for constructive dialogue to jointly find an end to the political and economic crisis that is crippling the country. It has also set the context for the international dimension of Mugabe’s political message that first emerged in the 2000 general election, marked the 2002 Presidential election, and was once again the refrain in the 2005 general election: this message constructed the political battle in Zimbabwe as essentially over the land question, and between a liberation movement and its former colonial oppressor.

Irrespective of the multitude of causes that have been presented as reasons for Zimbabwe’s multifaceted crisis, it is now clear that what is required of Mugabe is an urgent solution to the socio-economic challenges that face this country. However, up to now, the government has failed to come up with any comprehensive strategy to pull Zimbabwe out of the current quagmire.

Chris Maroleng

1. “Harare seizes Z$100 billion at border posts”, ZimOnline, 3 August, 2006.

2. Ibid.

3. RBZ Monetary Policy Statement July 2006 (PDF)

4. New Zimbabwe Currency (PDF)