In my own business we passed a milestone today - by our calculations
inflation in our business now exceeds 10 000 percent per annum. I was told
by my supplier today that flour for the bakery would now cost me Z$250 000
for a 50 kilogram bag and that I have to collect it at my own cost from
Harare - 600 kilometers distant, the last time I bought flour from the same
supplier it was Z$30 000 a 50 kilogram bag delivered to Bulawayo.
We have given our staff a 100 per cent raise at the month end for two months
now - it still leaves them with insufficient funds to cover their basic
costs of living. We started today to provide food to them in addition to
their wages or they simply will not be able to feed their families and come
One major supplier told me today that they are selling every product in
their range below cost. They are headed for bankruptcy and do not know what
to do next. Another service provider told me they were not able to replace
their stocks of spares and essential inputs. When they had run their stocks
down to zero, they would then go onto a hand to mouth basis, asking their
clients to source the required spares and raw materials before they could
Fuel is trading at Z$45 000 a litre, the dollar at Z$50 000 to 1 against the
US dollar and it has depreciated by 50 per cent in a week. I estimate prices
are rising 20 per cent a day and this is putting huge pressure on all firms.
There is no sign of this process slowing down and with the government simply
spending wildly in anticipation of an election in 2008, we cannot expect
inflation to slow - we are headed for super inflation in the near future. It
will then be impossible to hold money - people will have to consider barter
and the widespread use of another currency. In Mozambique when they were
experiencing similar conditions the common currency was the US dollar. The
same situation existed in Angola but because of the shortage of actual
foreign currency notes there, they also used things such as canned beer and
coca cola as currency.
The difficulty in Zimbabwe is that we have a relatively sophisticated
economy and strict currency controls. The use of either the Rand or the US
dollar for exchange would actually be illegal at present.
From other countries experience this situation will be bound to escalate the
collapse of the formal sector, exacerbate human and capital flight, destroy
the value of savings in any form except property and the stock market and
plunge civil servants, whose conditions of service are less flexible, into a
state of crisis.
In the face of these critical concerns, neither the government nor the
Reserve Bank exhibits any concern or understanding of just what they are
doing. Their remedies suggest they have little understanding of the
complexities of macro economic management policy or how the economy and
business actually functions. Virtually every prescription they have trundled
out in recent weeks has simply made things worse.
Food is scarce and unaffordable and a real humanitarian crisis is building
up - one that might still threaten national stability and put the lives of
millions are at stake. There is plenty of evidence that Zimbabweans living
in the Diaspora are pouring money into the country to try and keep their
families afloat. With some 4,5 million adult Zimbabweans abroad, this
carries quite a punch and is probably the single most important factor in
helping keep things stable.
Bulawayo, 29th May 2007