Special Report - Zimbabwe's Economic Crisis

Steve Veluscek, Kuda Vana's Board Chair, spends a good share of the year in Zimbabwe, and has been in Harare with his wife and two sons for the past couple of months. This is his account of what’s happened there over the past month or so.

A typical visit to a grocery store in Zimbabwe in early 2019. Bread is limited to two loaves per customer, and is often hard to find at all.

A typical visit to a grocery store in Zimbabwe in early 2019. Bread is limited to two loaves per customer, and is often hard to find at all.

Upon arriving back in Zimbabwe at the beginning of December, we were shocked to see the massive lines for gas - miles long in some cases.  Clearly, people were spending the night in their cars and often waiting for a fuel delivery to the gas station, so the gas station could begin pumping again.  We also were amazed to see the prices of basic commodities in the supermarkets - it appeared that in some cases, already inflated prices had more than doubled since we had left about two months previous.

 We quickly began sourcing gasoline and diesel and building up a bit of a stockpile.  I felt I had won a minor victory when I was able to fill the 55-gallon barrel I bought and stored in the garage the week before the January 12th announcement of a 150% increase in price of fuel.  I did not understand at the time that this massive price increase would spark considerable unrest.

 Tuesday morning, after the fuel price hike, our boys stayed home as the school was concerned about possible protests and general unrest. As was my routine, I started to walk to the nearby gym with my earphones in and listening to a podcast.  I got out of our gate through the cul-de-sac and across the adjacent park before I looked around and realized there was nobody out.  I took the earphones out of my ears and look around.  It was deathly quiet.  Since I was already half way to the gym I decided that I would continue.  The gym was closed, as well, it turned out, as everything else.  By the time I had returned home I had seen only four cars and three people - two of which were security guards - mind you, we live across the street from a large school and business park.  Sometime midday, the internet was shut down and it was not until the internet was restored nearly two days later that we learned of the protests and violent government response.  The Zimbabwe Association of Doctors for Human Rights (ZADHR) has stated that 172 people had been injured, of which 68 were treated for gunshot wounds.  It reported that 12 people died.  ZADHR at one point recorded 844 human rights violations that included, 78 gunshot injuries, 466 arbitrary arrests and detentions, as well as 242 cases of assault and degrading treatment.

 We never felt unsafe, but we didn't venture out until the next day and then only briefly.  It was Thursday before things started returning to normal with a number of shops opening up.  The internet was turned back on late Wednesday, but was shut down again for several hours on Friday and social media such as Facebook, WhatsApp, Twitter, YouTube, etc. was not restored until a court order was issued the following week.

 A U.S. economist has estimated the inflation rate here in Zimbabwe at 290%.  The fact is that if you go to the black market, RTGS ("Real Time Gross Settlement" referring to electronic payment much like a debit card) and bond notes (a pseudo currency banknote printed by the government to be used within Zimbabwe) trade at a rate of roughly 4 to 1 U.S. dollar cash.  

Prices in the stores reflect this, but most people's paychecks do not.  The Zimbabwe citizen's purchasing power has effectively been reduced to only 25% of what it used to be.  If you could afford to feed your family of four, now you can only afford to feed yourself.  And I am not being hyperbolic by using feeding your family as an example.  People do not have enough money to feed themselves and thus the volatility of the situation here in Zimbabwe.  If you are going to starve anyway, you might as well join the protests and take your chances against the army.

The fact is that we are largely insulated from most of the suffering.  The military crackdown occurred in the high density, low income suburbs of the larger cities.  The children's home is nowhere near this and while we do live in town, we do not live near these areas.  Further, we and the children's home have access to U.S. dollars cash, which means we can generally find whatever we need and, in many cases, pay a reasonable price for it.

 Things here in Zimbabwe appear to be stable for the moment, however things could change at any moment.

 People are lining up at the grocery stores in the morning to buy the price-controlled bread.  You can find artisanal or specialty bread which is not price controlled and thus three or more times the price of an equivalent loaf.  But the cheap price-controlled bread, which is a staple of much of the population, is scarce.  When you are able to find it, you are limited to two loaves per person.

 Despite Zimbabwe now having the most expensive gas in the world, we are again seeing lines for gasoline.  Supposedly the protests and aftermath interrupted the supply chain and things will normalize soon.  We will see.

 With the fuel costs rising, costs of in general are also rising to compensate for increased transportation costs. Many people who rely on public transportation can no longer afford to go to work.  If you make $8 a day as a laborer but it now costs you $6 to go to work and back, there is little point in making the trip.

 We are starting to see more and more shops offer discounts for U.S. cash and/or international credit cards.  For a while the government would not allow any pricing disparity with the bond notes or RTGS, but the charade of parity between U.S. cash and the pseudo currencies Zimbabwe has concocted is over.  The government is now having the banks account for their U.S. cash deposits separately from the other "money."  In fact, if you are wanting to import a vehicle, Zimbabwe is requiring that you pay your import duties and other taxes and fees in U.S. Dollars or South African Rand or similar hard currency - you can't pay with RTGS or bond notes - monetary instruments that the government previously introduced and tried to argue was as good as U.S. cash. crisis

Hearing from folks in the international diplomatic community, I have to conclude that things are likely to get worse before they get better.  Zimbabwe is in desperate need of cash, and there is not an easy solution for acquiring international loans given the current climate. We can all hope and pray that total economic collapse can somehow be averted, but most Zimbabweans are already preparing for something they have unfortunately become accustomed to experiencing.

Steve Veluscek

Kuda Vana Board Chair

Founder & CEO, Frontline Management