Monday, June 14, 2010

How Zimbabwe Created the Biggest Dollar Store Ever

I knew Zimbabwe’s inflation rate was high. I’d seen the bar on graphs breaking off the page in The Economist reports. I knew that the hyperinflation had caused prices to change very often. And I also knew that this had caused them to move to the dollar. But I never really thought deeply about it all.

It didn’t really hit me until I was in the Spar grocery store. I wanted to buy a $1.25 bottle of shampoo. I handed the cashier two dollars. She asked, “Do you have 75 cents?” After I said no and she explained she had no change, she said, “What am I supposed to do?” To me this was the most bizarre question.

“Haven’t you run into this problem before? What is everyone else doing?” I asked. “They are using notes.” Then I saw these paper slips, essentially IOUs, with Spar’s logo – I guess that works because people buy groceries often. I went around asking other cashiers whether they had change. Nope. Apparently bills have made it into the country, but coins have not. As a result, the bills get used a lot – just touching them makes you want to wash your hands. A local farmer named Danielle said she and her six friends did an experiment – they put a little black cross on a dollar, and within six weeks they had all at one point had it in their possession. I’m sure the locals are happy to get their hands on my crisp newbies.

Then I started noticing things. The majority of items were one dollar, never less. You could buy 10 pens, a whole sack of apples, two yogurts, etc. On my trip to Bulawayo, I turned to barter. I traded a half a loaf of bread for three bananas, which I used for my peanut butter and banana sandwich. The situation is bit better here in the second largest city Bulawayo, which seems to have more South African rand in circulation. You can give someone dollars and get rand coins as change, like I did two nights ago for my meal over the UK/USA World Cup game. You might find prices in rand right next to dollar prices (pic 3). Apparently, at Victoria Falls, because of the tourists they are using rand, dollars, Zambian kwacha, pounds, and euros. Perhaps the funniest thing is that the Zimbabwean dollar is still the national currency.

How did they get to this point? I’ll save you the history lesson, but basically the Zanu-PF government headed by Robert Mugabe has decreed economic (e.g. printing money) and political policies (e.g. land seizures) in order to maintain power. It started in 2000 and reached its worst in 2007-2008. Some of the guys at the bar recounted how they would come in with plastic bags of money to buy a few drinks (though they couldn’t get beer, only spirits). My friend Dave said he would go into the TM grocery store, and the entire place would be empty save a couple shelves. Bread was a very rare find. When you could find it, you were talking billions or trillions of dollars (see pic 4…that one cent bill is apparently the lowest denomination bill ever made in the world). People eventually turned to the black market – everything everyone was doing was illegal. I asked Natalie, who had lived in Mutare the majority of her life, how she survived when prices were so high and earnings so low, as she had explained to me. “You don’t want to know,” she said laughing. There was plenty of government tampering along the way, of course. Dave explained that he found rice packaged in 10kg sacks that read, “A gift to the people of Zimbabwe from your friends in India.” The intended aid food had been intercepted by the government at the border and was being sold for $50. Those who had a car would go across the border of Mozambique or South Africa with four people or so (200kg quota of food per person), and buy food for several months.

The stores still look empty to me, but everyone says it’s much better now. Moffat, a store owner I talked to, said his entire stock was wiped out when Mugabe ordered a price cut of 50% in mid-July 2007. People ransacked his store. “In 10 minutes, everything was gone.” He’s still recovering. I noticed that the shelves in the back of his store were about 15 feet from the wall because of lack of stock. People still live in fear – they say that they can’t plan for the future when you don’t know if Mugabe will wake up and create or remove a regulation. And, as a result, the country’s population has fallen by 25% as the educated and capable flee. It’s a sad predicament the country once known as “the breadbasket of Africa” is in.

1 comment:

  1. Crazy read, Rob. I'm glad you post this stuff. I really wanted to make it to Zimbabwe when I was over there but never had the chance. Very enlightening. How was Easterly's book? I know it was dry, but would you recommend I read it?