By Professor Sheunesu Mpepereki
IF one pitches up in any country with American dollars in hand, one can readily source goods and services.
The US dollar is a recognised reserve currency in all countries over the world.
In truth, however, most businesses in different countries will not accept transactions directly in US dollars.
Rather they will ask the individual to go to a bank and exchange the US dollars for the local currency.
Zimbabweans think that is backward; we want the real ‘USA’!
In SA, businesses will ask for the rand currency, Malawians will ask for the kwacha while Kenyans will demand their local currency, the shilling.
Currencies may rise or fall in value depending on the economic fortunes of the given country. For example, long before Zimbabwe hit hard times, the Zambian and Malawian ‘kwachas’ lost a lot of value so much so that Zimbabweans shunned these currencies.
When the Zimbabwean dollar began to lose value against foreign currencies, Zimbabweans began to call it the Zim ‘kwacha’ in a derogatory (looking down) sense. Eventually the Zimbabwean dollar collapsed on the back of hyper-inflation.
Since then, Zimbabweans have strongly rejected the return of a local currency.
The strategy adopted by the monetary authorities when the Zim-dollar collapsed was to adopt a basket of foreign currencies for use locally.
That strategy bought the country some temporary respite.
We know that the collapse of the Zim-dollar was a result of the withering fire from the sanctions war led by the West (Europe and America).
Adopting, as legal tender, the US dollar and the European ‘Euro’ currencies provided a temporary shelter for Zimbabwe’s economy.
Some argued that the Western countries could not devalue their own currency!
Unfortunately, we did not successfully sort out our economic challenges in the period after 2009, when the multi-currency regime was adopted.
Instead, we warmed up to the strength of the US dollar whose stability we exploited to a point where it literally became the bona fide local currency.
The problem was that we do not print American dollars here in Zimbabwe, a point that seems lost to most Zimbabweans, including some who should know better.
We must export goods and services to earn foreign currency?
What are we exporting?
Low value raw materials!
Zimbabwe’s challenges in accessing US dollars lies first and foremost in the Zimbabwe Democracy and Economic Recovery Act (ZDERA) — now ZDERAA — passed by the US Congress.
This is the sanctions law which has presented numerous challenges to the economic recovery efforts by Zimbabwe.
Needless to say, some prominent citizens of Zimbabwe have travelled to the US to lobby for the renewal and intensification of the sanctions!
How does ZDERAA work?
Put simply, American authorities are empowered to seize any, and all, funds destined for Zimbabwe.
Companies and individuals are prohibited from transferring funds to Zimbabwe or Zimbabwean companies.
Use of the US dollar as reserve currency by most countries and organisations means that the funds must be cleared in the US. If destined for Zimbabwe, the funds are quickly pounced upon and seized by the US authorities.
American institutions and officials are obliged by ZDERAA law to block or veto any disbursements of funds to Zimbabwe from institutions like the World Bank, International Monetary Fund and other multilateral bodies.
Considering Zimbabweans’ love of the US dollar, it is true that: ‘Kwadzinorobwa matumbu ndiko kwadzinomanyira’.
(Literally meaning that they rush to where they face the greatest danger!)
Now the reader can imagine Zimbabweans preferring to use the American currency against official tightly enforced ZDERAA sanctions!
It means any, and all, US dollars reaching Zimbabwe are obtained literally by hook or by crook.
But how do Zimbabweans expect to move around with sacks and ‘Monarch’ suitcases full of US dollars?
How do our medical doctors, now on industrial action and understood to be demanding US dollar payments as salary, expect Government to source such foreign currency?
How do the rural school teachers, reportedly marching from Mutare to Harare to demand US dollar-salaries, expect Government to source the US dollars?
A few weeks back I spent two hours waiting outside a pharmacy where US dollars were required to pay for my wife’s prescription drugs.
I had called friends to come to the rescue and it took time for someone to find and bring the US dollars.
Literally, all persons visiting pharmacies are asked to produce US dollars as payment for medicines.
The question is: Where does an ordinary Zimbabwean, man or woman, living and working in this country obtain US dollars?
And because dollars are not readily available, those who have them are likely to get them by hook or by crook!
Can we sustainably run an economy by hook or by crook?
I lived in the US as a student on a USAID scholarship.
When I completed my studies and wanted to repatriate my small savings, I had a tough time convincing the bank to give me cash. Why do I not go use my credit card or my swipe card in Zimbabwe?
The systems are different I explained.
But no!
The money laundering regulations do not allow us to disburse such a large amount of cash to an individual, the bank manager explained to me!
But how large was the amount?
Just US$2 500!
I know Zimbabweans will think it is a small amount, used as we are to carrying sackfuls of foreign currency unperturbed.
The bank manager painstakingly explained to me that individuals are not allowed to carry large amounts of cash because it can be used to commit crime.
Drug dealers do not want a paper trail.
Corrupt deals cannot be executed by swiping, RTGS or other electronic transfers that leave a paper trail, the manager explained.
He needed permission from higher authorities if he was to give cash.
The USAID office and the University had to provide documents attesting to my status as a student and the sources of funding support.
Only then did the bank head office authorise the bank manager to disburse cash.
Then I saw the 50 and 100-dollar bills for the first time.
I had noticed over the time I was a student in the US that Americans routinely used swipe or credit card machines for virtually all their purchases.
Cheques were also used, but if one wrote a bouncing cheque, we understood one was sent to jail without the option of a fine!
Small change in the form of a dollar or two dollar notes and coins were the only cash that people might carry around to access items like soft (not alcoholic) drinks and dry chips from vending machines.
In fact, I learnt that police would arrest any person found with large amounts of cash on his/her person.
The assumption would be that the cash was either proceeds from criminal acts or were to be used to make illicit purchases such as drugs.
Criminals always avoid transactions that involve a paper trail that can be traced.
You can quickly wind forward to our own situation in Zimbabwe where people horde or carry large amounts of cash.
This situation is fertile ground for illegal dealings that are crippling our economy. People have millions that they stash away in their homes.
On the other hand, if a bank manager suddenly saw an unusually large deposit in a client’s account s/he would make an inquiry.
But in our poorly regulated formal situations, illegal deals are carried under the noses of officials. If we do not quickly tighten and enforce the laws regulating the financial or other sectors, our economy will slowly bleed to death.
Again, to return to the Zimbabwean frenzy for US dollars. The desire to possess US dollars has become an all-consuming passion.
It is the other face of our corrupt society. Remember we have pointed out how cash circulation is tightly controlled in more developed economies as a central component of crime prevention measures.
It is not hard to imagine that this frenzy is fueling corruption and lawlessness.
In the next episode we shall interrogate Zimbabwe’s perennial forex shortage in the midst of some of the richest natural resources on earth.
Can we run the Zimbabwean economy using US dollars?
Is it feasible?
Is it desirable?
The ‘kwacha’ is still up and running!