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A day in the life of hyperinflation
IRIN News
October 15, 2008

http://www.irinnews.org/report.aspx?ReportID=80930

Tendai Moyo, 28, living in the Zimbabwean capital, Harare, goes into a shop in the downtown area and heads for a shelf where, a day ago, she saw a feeding bottle she wanted to buy for her three-month-old son.

She picks it up and goes to the till, convinced she can afford this luxury for her child, but the cashier nonchalantly tells her the price has more than doubled, and the new price is more than the cash she has on her.

Moyo, a cleaner and one of the few people with a job in a country with an unemployment rate of more than 80 percent, storms out and joins a long queue at a nearby bank to see if she can withdraw more money.

After three hours, having withdrawn the maximum daily limit of Z$50,000 (US$2.50) and added it to the $Z100, 000 (US$5) given to her by her husband, a driver for a commercial bank, she returns to the shop. She again picks up the feeding bottle, but is then told by the cashier that in her absence the price has gone up and she is now $Z30, 000 (US$1.50) short.

Moyo is no longer on maternity leave and had hoped to use the bottle for her son's formula because she cannot breastfeed him regularly.

"This price madness is frustrating, and it makes you hopeless because it seems it will never come to an end. I just don't understand why and how prices keep on increasing at such a rate," Moyo told IRIN. "I have given up and will have to use a cup instead of the bottle that is ideal for my son."

Navigating the official annual inflation rate of 231 million percent is as perplexing to the customers as it is to the vendors. "We spend more time changing price tags than serving customers. The branch manager visits the shop floor at least two times a day with a new list of prices for the commodities that are still in stock," the cashier at the shop, who declined to be identified, told IRIN.

"In fact, these days he spends more time in meetings with other managers than supervising us, and I suspect that it is at these meetings that changes to the prices are made." As inflation spirals, business has rapidly tapered off. Most customers walk into the shop, examine the price tags, shake their heads and walk out.

He said shoppers were sometimes annoyed, or made derisory remarks like: "You will have to buy these items yourselves before they rot, because we will never come back here!"

Three prices for one item

At another shop a few streets away, transactions in foreign currency have become accepted after the Reserve Bank of Zimbabwe (RBZ) recently allowed them.

A three-tier pricing system is used: some commodities are sold for foreign currency, others — mostly small and perishable goods — are sold for local currency, and another set of prices - marked up by more than a 1,000 percent - are for those paying by credit card.

"Never in my life have I seen one shop selling the same product using three different prices. It boggles the mind, and I cannot understand why the value of one item changes from one shelf to another," said Samuel Godzongi, an informal trader who left his job as an auto-electrician because the salary became meaningless.

Even the cost of commodities priced in foreign currency changed routinely. "It seems this is the only country in the world where goods bought in foreign currency are eaten up by inflation so fast," he said. "Besides, the prices are way ahead here as compared to neighboring countries, and to me there is no justification for it."

He told IRIN that consumers had no option but to go without basic items, because "there just is no way in which you can buy them, unless you were to resort to robbery."

"What is even more painful is that no matter how much money you have in the bank, the daily withdrawal limits make it impossible for you to buy the items that you need. No matter how fast the central bank introduces higher denominations for the local currency, it cannot keep pace with the speed with which prices are galloping."

Innocent Makwiramiti, a Harare-based economist and former chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), said licensing shops to sell in foreign currency was contributing to inflation.

Inflation and politics

"It should be remembered that black market [parallel market] rates of foreign currency are going up every day, if not several times a day. As a result, for goods sold in local currency, the prices go up as well in direct response, and retailers tend to use the foreign currency mark-ups to increase the prices of goods sold in cash," Makwiramiti told IRIN.

He said prices were also responding to the political climate, and the deadlock in talks since a power-sharing deal between President Robert Mugabe's ZANU-PF and Morgan Tsvangirai's Movement for Democratic Change was signed on 15 September.

"After news that a political deal had been signed, parallel market rates fell and prices were beginning to respond. However, when it became clear that political parties had reached a deadlock, prices began to shoot up again, this time more steeply than ever before. It is mostly speculative," Makwiramiti said.

"With prices of basic commodities such as food now unaffordable to the majority, average workers have turned into beggars, going to restaurants during lunch time to ask for leftovers from the few who are still able to afford it."

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