HomeBusinessEarly signs of 2008?

Early signs of 2008?


If there is anything that brings fear to Zimbabweans, it is the ghost of 2008, when cash, food, fuel and power shortages where the order of the day, but one group of people benefitted from the chaos and they are resurfacing with a vengeance after almost 10 years of hibernation.


Cash barons and money changers seemed to be the only people thriving during the 2008 chaos and it seems they are back again, with the Reserve Bank of Zimbabwe (RBZ) accusing them of literally hijacking the economy and holding the nation to ransom.

An exasperated RBZ governor, John Mangudya is convinced now is the time to crush the black — or as it is known by its more politically correct name, the parallel — market, which he thinks is contributing to what he describes as growing market indiscipline.

“We need to work together to get these people. I have said it many times there is too much market indiscipline and that is what is behind all these challenges,” he said.

The Zimbabwe Statistics Agency (Zimstat) said inflation at the end of August was -0,13%, but very few believe that, as prices had long started to be on an upward trajectory.

To make matters worse, inflation figures for September are likely to shoot up following a dramatic weekend of panic buying and hoarding, which left many shop shelves bare.
With shortages of foreign currency characterising the economy, retailers have been forced to resort to the ever-obliging parallel market for cash and this has inevitably pushed up the prices of commodities.

Cash barons were as of yesterday charging between 40% and 45% for the US dollar, up from just 15% mid last month.

Areas such as Eastgate Shopping Mall, Fourth Street and Copacabana bus termini have once again become a hive of activity as foreign currency and cash trade thrives.

The major concern from economists, research bodies and the International Monetary Fund (IMF) is that if the current currency woes deepen, hyperinflation could be lurking around the corner.

Prices increments

In recent weeks, TM Pick n Pay managing director, Malcolm Mycroft has confirmed there has been a “slight” price increase.

A snap survey at leading retail outlets confirms that prices have been inching up and this puts the fear of God in Zimbabweans, who dread a return to the dark days of 2008.

But Confederation of Zimbabwe Retailers president, Denford Mutashu believes there is no need to panic, but admitted erratic supplies of cooking oil could exacerbate fear.

“There is no shortage of basic commodities in the stores,” he said.

Mutashu said more needs to be done to allocate foreign currency for the importation of crude oil for cooking oil to avoid future shortages.

The rise of cash barons

Investigations by this paper found a Toyota Land Cruiser and Toyota Hiace (high roof) among several other hidden vehicles parked at the Fourth Street Bus Terminus opposite the Harare Roadport.

The Land Cruiser was managed by two brothers identified by several taxi drivers in the area as Nobert and Courage.
These two are working for a cash baron, who suppliers them, with thousands of dollars, whom they meet twice a day in the morning and at night when the cash dealers knock off.

In the mornings, both Courage and Norbert meet the cash barons at a local hotel, where they are given huge amounts of cash, largely in bond notes and take it to distribute to a network of cash dealers.
“Sometimes, what these cash agents do is to hire us the taxi drivers and take us to meet their bosses, the cash barons.

“Once there, we wait in the car, while they go and meet the barons. When they return they put huge amounts of cash in the back of the car and it is brought back here to be distributed to these cash dealers you see (Fourth Street terminus),” a taxi driver said.

Another dealer, who goes by the name Mai Sithole, revealed that there has been a drop in United States dollars supply and trade was mainly in bond notes.

“We have not had a lot of United States dollar on the market. Right now what we are doing is trading bond notes because that is all we have,” she said.

At present rates, one needs $140 worth of bond notes to buy $100, $120 bond notes to buy R1 250 and R1 280 to get $100.

EcoCash and bank transfers incur a 40% premium.


Overall, the cash crisis is poised to worsen and inflation is set to run.

While RBZ will be tackling cash dealers in the coming weeks, the market indiscipline that has given rise to cash barons will only grow, as long as they continue to have access to the financial sector.

Economist, Prosper Chitambara said the cash barons were people with very connections within the financial system.
“Obviously, there are people with access to foreign currency, but it is really difficult to pinpoint where they are coming from, but I would suspect that they are people who are quite connected,” he said.

“The only solution is to deal with the economic fundamentals.

“Remember, these things have happened before, if you look at the history of East Asia and how currencies collapsed as a result of some of these activities.

“So, I think, without addressing some of these fundamentals, you cannot really deal with these issues sustainably.”
Another economist, Moses Chundu said since the introduction of bond notes, whose value was said to be at par with the US dollar, the parallel market emerged immediately as was expected.

“However, as long as the players were small and trading on margins, the effect was not much distortionary.

“When you have a State actor, for instance, mopping real money for whatever urgent needs, you have your cash barons, who are mandated to raise whatever amount is required,” he said.

“They tend to be careless with the rates, as they are not trading on the margins and are using readily available bonds.

“Other barons also emerge on the sidelines leveraging the loopholes in the financial system disbursing the bond notes.

“The authorities may want to proffer whatever explanation, but the experience of yesteryear is what informs the interpretation of what is going on.”

Unless something is done, international research firm BMI Research inflation figure of 1,4% by year-end of 2017 will obtain, although IMF puts it at above 5%.

If the situation deepens from there, it is predicted to accelerate to 8,5% in 2018 making it the steepest acceleration in price growth since the hyperinflation days prior to dollarisation in 2009.

Recent Posts

Stories you will enjoy

Recommended reading