Zimbabwe, once a food basket is now at the verge of starvation amid an economic crisis fueled by monetary maladministration. The situation is so desperate that the savings of the citizenry have been wiped off by one of the most obnoxious hyperinflations in contemporary times.
Most people remember the days when you stroll into a bar to buy beer in the Southern African country, and if you’ve sufficient money to buy ten bottles, you buy it at a time and sit with it at your table. The reason was that anytime you get up to go to the counter, the price had gone up.
The price will go up multiple times in two hours you’re in a bar. Inflation went crazy, and many people were cash-strapped with a quintillion in their bank account.
The country by 2008 had no currency of its own and was using the US Dollar alongside nine other currencies as legal tender. You can walk into a shop and pay with the USD and get a change in South Africa Rand or Botswana Pula.
The move stabilized the economy for a while and saved the people from the headache of losing their labour. However, running cross-border payments and receiving international transfers are still quite tedious and dear.
The queues at Western Union stores and banks were as long as the Victoria Falls. Zimbabweans, even up to date, have to spend hours sending and receiving money and accessing other banking services.
Sometimes before it gets to your turn, there is no money, and you have to leave and come in the next day or probably a couple of days. The fact is corresponding banks can only facilitate your international transfer if you have funds in your Nostro account.
However, the banks in Zimbabwe are underfunded, and people can’t make cross-border payments without paying insane fees. The situation makes life unbearable for everyone, principally the business community.
The US Dollar is King in Zimbabwe! Most notably, it is a store of value with many businesses and merchants refusing to accept any other medium except that.
Last year, out of the bloom, the government reintroduced the Zimbabwean dollar and outlawed the US Dollar as a medium of exchange. Alas! Hyperinflation returned big time with its concomitant high prices of essential goods and services.
At the end of 2019 alone inflation was staggering around 521.2 per cent, worsening life once again in the country. As of July 2020, the money supply is almost at 900 per cent with 2021 estimates predicted to hit 1500 per cent.
Yours sincerely was stranded in Zimbabwe from March 23 to July 31, 2020, due to COVID-19 lockdowns and travelling restrictions. The price of powdered milk in late March was RTGS 45, by July it was selling at RTGS 380.
The horrifying part is the government’s unwillingness to allow the market to determine the exchange rate between the Zimbabwean Dollars and the US Dollars. For instance, when the interbank rate was RTGS 60 to a dollar in June, the Black Market (the real market) rate was RTGS 95 to the USD.
Out of the $4.8 billion worth of goods imported internationally by Zimbabweans in 2019, vehicles accounted for $369.6 million representing 7.7% of the total imports. These cars are mainly used cars from countries like Japan, Singapore, South Africa and the UK.
Second-hand auto dealers who mostly import from Japan and Singapore have two options to pay for their goods. It is either via the banking system or travelling across the border to Zambia to make payment.
When using the local banking system, the dealer pays $100 per every $1000 transferred, which translates to a whopping 10 per cent rate per transaction. It no doubt eats into the profits of these businessmen and women.
Absorbingly, if the person does the transfer across the border in Zambia, he gets to save 50 per cent, irrespective of the bus fare that amounts to $50 round trip. Many of these people tend to go this route despite the travelling time and the risk involved.
Ironically, these services both in Zambia or Zimbabwe, take days for the money to get to its destination. The user experience is immensely horrible for anyone who goes through such a process.
These hard-working men and women deserve better in an era of cutting edge technology so that they can save, and invest in their children’s education and elsewhere in the ailing economy.
The beauty of decentralised ledger technology is that small banks, cooperatives, micro-finance, community banks and any financial institution qualified to receive deposits can turn the situation around and save these auto dealers a great deal of money.
DEMARS provides technology, at no cost to implement – API’s & wallet’s to enable financial institutions to connect to next-generation cross border payment rails.
With these tools, new entrants and others who have previously not considered offering these services can solve big problems like these and ensure that Zimbabwean auto dealers don’t need to travel long distances to make international payments at cut-throat rates.
DEMARS is a technology services company. Empowering organisations to offer digital services designed for the young, emerging customer, and satisfy a generation who at this point, demand services to be instantly available, and of the highest standard.