Eddie Cross's Website

More Chaos

Since I sent out that initial brief on Monday, things have gone from bad to worse. This morning one filling station in Bulawayo is asking Z$1 165 000 for a litre of fuel! That is up 100 per cent in 7 days. Yesterday the Reserve Bank clearing system rejected all cheques made out in the old currency. The banks also say now they were not consulted by the Reserve Bank prior to the changes announced by Gono on Monday - they say his statement was the first intimation they had apart from rumors the previous week. When they asked the Bank about the rumors they were told to wait for a statement.

Major firms across the country have been closed for trading for some days now. At our own factory we have run out of materials and this morning our staff were simply seated at their machines. We have had to close our accounts as at the 31st July and open a new set of accounts with zero opening balances. When we are able to wrap up the period ending the 31st July (a process that will take weeks) we will then be able to open our new set of accounts with balances calculated manually. Our accountant was waving a fistful of returned cheques for today - she expected more as time went by throwing our cash flow into a complete mess.

Till operators in stores are being asked to deal in cheques at the new currency values, old prices on the goods, mixed new and old currencies from customers and all electronic banking systems are still in the old currency - ATM's are closed down as are all point of sale equipment. Just to compound the problems, no bank is yet able to handle the new currency on its systems and they are adding three zeros to all figures being credited to accounts in the new form! So I wrote a cheque last week in the old currency - the bank rejects this and I now write a new one in the new currency and the bank must round up what I have rounded down, in order to credit or debit my account!

On top of this the authorities have thrown up roadblocks across the country - yesterday it took one of our drivers 15 hours to travel from Beitbridge to Harare through 21 roadblocks. Gwanda to Bulawayo, a short run of 137 kilometers has 9 roadblocks. I am sure that some of the motivation is the capacity to loot travelers on the road - they are arbitrarily confiscating cash from people. The limit for cash coming across the border is Z$5 million per person - anything over that is confiscated and the bearer runs the risk of being detained. Internally you can only carry Z$100 million and even this small sum (10 litres of petrol) can get you into trouble - two pastors were arrested and held for two nights and their funds confiscated (they were each carrying the domestic limit of Z$100 million). It took a lawyer to get them out and to recover their money.

One major wholesaler in Harare was raided and they found nearly Z$40 billion in cash at his home. He was arrested and the money taken. The legal basis for this is not apparent, as we have seen no actual notices in the Government Gazette. Anyway, a load of flour for a bakery costs Z$3,8 billion and many firms will not accept Cheques or any other form of payment. The limit a company can draw per day is Z$750 million - when it comes to wages, let alone creditor payments or fuel purchases that will go nowhere!

Then finally there is the new currency itself - we have seen very little. I drew cash from my bank for fuel and they gave me the old currency - right now I am trying to draw out Z$780 million and they tell me that I need Reserve Bank clearance and are not sure they can give me new currency - I refuse to take the old as it is just too bulky. In 15 days time the old note will cease to be of value and I simply cannot believe that they have enough of the new notes to meet demand. We will stop accepting the old notes on about the 18th as that then gives us two working days to deposit the money in a bank. 7 days later we will need Z$40 million in the new notes to pay staff - if that is not available, we will have riots.

I said on Monday that the stock market would take off into the stratosphere - in fact equities rose 56 per cent in a week!! Parallel market rates are impossible to ascertain, as they are moving by the hour. However it is clear they are not going down! The new official rates and rules for the use of funds from exports and service charges will exacerbate this and further increase domestic inflationary pressures as the price of everything imported rises rapidly.

At present inflation rates I estimate 8 months before we are back to where we were 5 days ago - piles of useless money to do anything with and would be looking again at chopping three zero's off our currency. In fact Gono has said as much - he has promised a new currency altogether - and said this week that we would get no notice of the change and only 7 days to swap the old for the new. I guess he really thinks that practice makes each operation easier! I hope that they will learn something from this complete shambles, but if our recent experience is anything to go by - they will not learn anything at all.

Finally fuel is again very short in the City - in fact today we could not find a fuel station with fuel except for one selling at that monstrous price. I suspect traders simply do not know what to sell fuel at and are holding their stocks in the ground until the dust clears.

Eddie Cross

Bulawayo 4th August 2006.