Zimbabwe’s economy is slowing re-dollarizing despite the government’s recent ban of the greenback for settlement of local transactions as uncertainty within the economy continues to shutter confidence in the Zimbabwean dollar (ZWL$), 263Chat Business can report.
In June, the government scrapped the multi-currency system through a statutory instrument (142/2019) to pave way for the re-introduction of the Zimbabwean dollar.
But in less than two months, the USD is informally re-gaining its position as the preferred currency.
A snap survey by this publication revealed that most businesses in Harare’s down-town have resorted to charging in USD again.
Most merchandisers say transactions in local currency are being eroded by inflation on a daily basis, rendering the Zimbabwean dollar unattractive.
However, authorities are adamant; the Zimbabwean dollar is here to stay.
“When you are in business under the current environment you will understand it’s really difficult to keep your earnings in RTGS dollars. Our suppliers are always hiking prices and for us it makes sense to keep prices in USD because our revenue remains stable,” said one Ruzvidzo, a motor spare parts dealer plying his trade on the outskirts of Harare CBD.
With inflation soaring around 175 percent in the month of June, more and more small businesses are beginning to re-dollarize.
Small and Medium Enterprises (SMEs) who are at the forefront of reverting to the USD form the biggest chunk of business establishments operating in the country.
Interestingly, payments in USD are conducted under the know-your-customer arrangement and for new customers; strict assessment is done before sale for fear of arrest by undercover authorities.
Some analysts have blamed the government for failing to make tangible interventions to quell the situation by restricting inflation and save the Zimbabwean dollar from total collapse amid fears that by year end, the economy might have fully re-dollarized.
The development is even more pronounced in the real estate sector were property owners are charging in USD for both sale of property and rentals at a time salaries have been converted to local currency.
“The SI (Statutory Instrument) was focusing on removing the function of USD and any other foreign currency for transactions purposes but as a store of value you cannot stop that, so people will still require the USD as a store of value or store of wealth,” weighed in economic expert, Pepukai Chivore.
Recently the government backtracked on its entire ban of foreign currency on local transactions by allowing fuel companies, embassies, chrome miners and individuals with access to funds to conduct selected transactions in foreign currency with the intention of incentivizing and capacitating chrome miners to produce more and fuel dealers to augment fuel imports.
Analysts however say the move entailed a gradual return to dollarization.
Zimbabwe adopted the USD back in 2009, ending the worst hyperinflation in recent history but following a decade of its use, a firm greenback had rendered the economy uncompetitive on the export market, prompting authorities to outlaw it and settle for a local currency.