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Millionaires who can't afford basics
Shakeman Mugari, The Zimbabwe Independent
February 10, 2006

http://www.theindependent.co.zw/news/2006/February/Friday10/analysis.html

AN advert in the classifieds section of the Rhodesia Herald of September 1, 1974 makes interesting but sad reading for those who want to appreciate the precipitous collapse of the Zimbabwe dollar and the economy as a whole.

The advert reads: “Borrowdale: (Piers-Rd). $3 000 deposit. Mediterranean-style villa with Spanish flavour in this prestigious area, with many attractive and unusual features including curved walls and secluded arched patio. Spacious lounge, separate dining room, study, 4 bedrooms (main with private patio and en suite bathroom) 2nd bathroom. Garage. A charming and gracious home $32 000.”

It is shocking that in 2006, the same amount that could buy a house in Borrowdale then cannot buy a loaf of bread or a pint of beer. Under President Robert Mugabe’s government things have changed.

In this week’s Monday edition of the Herald there is another advert on a Borrowdale house: “Borrowdale ( Philadelphia) — $12,5 billion. Neat and solid house offering 4 bedrooms, (main en suite), main bathroom and separate toilet, lounge, dinning room and fitted kitchen, set on one acre stand with views, staff quarters, wall and gate, hurry, this property is worth viewing.”

There are other examples that show how things have changed. Also on the front page of the 1974 paper is a departmental store advert showing imported ladies shoes going for $10,75. Inside, another advert shows a 750ml bottle of cooking oil going for 35c while a 5kg packet of maize meal sold for 33c. Other products in the advert are a bar of Impala soap (27c), washing powder (38c) and 750ml detergent (20c).

The same pair of ladies shoes at a departmental store now goes for $8 million while in other shops a bar of soap goes for $150 000 — an amount that would have bought at least five houses in Borrowdale in 1974.

These examples are emblematic of the rate at which the Zimbabwe dollar has depreciated over the three decades of government’s populist yet ruinous policies.

The loss of value has made Zimbabweans poor millionaires who can’t afford the basics.

It is sad that Zimbabwe is the only country in the world where millionaires live in abject poverty because their millions are worth nothing in real value terms. Whereas in other countries a million dollars is a shocking amount, enough to buy properties in Zimbabwe, here the amount buys groceries barely enough to fill a paper bag.

It is a vivid illustration of how the Zanu PF government has managed to vandalise the economy it inherited at Independence from Britain in 1980.

While the amount of money Zimbabweans earn has increased drastically, their purchasing power has been wiped out. For instance, a bus plying the Harare-Bulawayo route carries in it about 75 millionaires because the fare is now about $1,2 million for the 450 km journey. Twenty-six years ago in 1980, the same trip cost $20.

Analysts say it is this collapse of the dollar that shows how government has dismally failed to maintain the robust economy it inherited from Ian Smith, although admittedly, that economy served a tiny constituency. Still the collapse shows that the current crisis is a product of years of economic pillage that has been going on for the past quarter century under President Mugabe’s rule.

Due to policy blunders and inconsistencies, Zimbabweans have become poorer than they were during the colonial era despite claims of black economic empowerment. Other economic researchers say the standard of living in Zimbabwe has gone down to 1953 levels.

The clearest example of economic collapse is that the $1 000 note — the country’s largest denomination in real currency — is now worth about US1cent. It cannot buy a sweet.

It’s only in Zimbabwe where different currency denominations phase themselves out of circulation because consumers can’t use them. Coins have been converted into duds by hyperinflation of over 580% that has thrown small time investors into penury.

Very few Zimbabweans will pick up a $1 000 note on the street.

The $50 000 bearer cheque introduced last week can only buy a loaf of bread. Analysts say the fall of the Zimbabwe dollar is unprecedented even in countries at war.

The dollar is now being frowned upon by other countries which until four years ago were a laughing stock of the region like Zambia.

Economists say the official explanation that the dollar is crumbling because of sanctions does not hold up to scrutiny.

CFX Financial Services economist Blessing Sakupwanya said the crisis was an accumulation of 25 years of bad policies and not sanctions.

“Even though the value of the Zimbabwe dollar has nosedived over the past five years, the reality is that it started struggling as early as the early 1980s,” Sakupwanya said.

For its part the government has attempted to exonerate itself, blaming saboteurs and sanctions for the economic spiral.

Research however shows that the plunge of the dollar started soon after independence when Zimbabwe was then the darling of the West.

Zanu PF inherited a stable economy that the regime had managed to hold together even though the country was battered by the liberation war and United Nations sanctions. Although the Rhodesian dollar was not tradable on the international market it was at least stable.

It might not have been recognised internationally but people used it locally.

How this same value went on a rollercoaster soon after Zanu PF took over is shocking. Unlike the Rhodesian dollar, the Zimbabwe dollar does not have local value and can’t be traded anywhere else.

At Independence one Zimbabwean dollar was worth more than the US dollar ($ 0,68 = USD$1).

By January 1983 the local currency had started weakening to 0,96 while by January 1997 it was trading at $10,50 against the greenback. Following years of unbridled spending and printing of paper, the Zimbabwe dollar today trades at over $120 000 to the greenback on the black market and there are no signs of an economic turnaround.

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