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Zimbabwe financial meltdown
| Date: |
27 August 2006 12:00 |
| Show: | Carte Blanche |
Zimbabwe is no longer a nation of poor millionaires. This week the Reserve Bank introduced new currency with three zeros removed from the unwieldy denominations. Now shoppers don't need trolleys of money to buy a few groceries.
The new notes were introduced on 1 August and Zimbabweans had 21 days to change their old money or lose it. There were long queues as people scrambled to exchange their savings before the money became worthless on Monday.
Children: 'I've got a lot of money.'
90 percent of Zimbabwe's money circulates outside the formal banking sector. Operation Sunrise was launched by Reserve Bank Governor Gideon Gono, to get local currency into the fold and curb the world's highest inflation rate of 1 200 percent, allegedly caused by currency hoarders and black marketers.
During the three-week grace period individuals were restricted to deposits of 100 million dollars a day. Any extra cash was confiscated, as the police army and youth brigades held roadblocks in a blitz that the state claims netted about 35 trillion old Zimbabwean dollars.
Jacob Mafume (Co-ordinator: Zimbabwe Crisis Coalition): 'Overnight the whole nation was turned into a criminal, unless it proves itself innocent, if you are found with money in excess of 100 million.'
Jacob Mafume is co-ordinator of the Zimbabwe Crisis Coalition, a collective of over 350 civic organizations.
Jacob: 'It took everybody by surprise. A lot of people in the rural areas are still holding onto their money. There were a lot of people in queues who could not be able to change their money in time.'
There are numerous allegations, from people too scared to appear on camera, of their savings disappearing into the pockets of the militia.
Jacob: 'It was a gross human rights violation in the manner that it has been done: their arbitrary searches, the confiscation of people's property in terms of their money, and the humiliation that people have had to suffer in those roadblocks.'
'Veronica': 'Everybody is scared of the police and the army.'
Two weeks ago 'Veronica', not her real name, was on her way to buy groceries when she encountered a roadblock.
'Veronica': 'I said to myself: 'shit this is what I really hate about this place... roadblocks at every single robot, looking for money'. The officer that stopped us, he went and wrote the statement for us saying that I said bad things about Zimbabwe and I also said bad things about Mugabe, which I did not do.'
She was arrested for 'provoking peace' and only released after paying a bribe.
'Veronica': 'I actually love this country. I just don't like the way things are going. To have money taken when you've worked hard for it... is completely wrong.'
'Veronica's' son, 'Ryan', says the police often keep people's money.
'Ryan': 'They were saying 'take your money to the bank', but then on the way to the bank they were blocking you and taking your money away without giving you the chance to go to the bank. They won't even give you any receipt.'
Cosmetic changes to the currency have done nothing to alleviate the plight of the poor. In fact, ordinary people bore the brunt as many shops cashed in on the confusion, raising their prices.
Josephine: 'They are making life for people to become [more] harder and harder.'
Most Harare residents live in sprawling slums on the outskirts of the city. Josephine and her son share a house with eight other families.
Josephine: 'These are the new notes we are having. It can't buy anything except a sweet - one 'nigger' sweet.'
Ropheen: 'Life is hard for us to just continue to live like wild animals.'
Josephine and her friend Ropheen depend on their families for food.
Jacob: 'People have had to forego meals. They have to choose to either eat in the morning or in the evening, or not at all, depending on the circumstances.'
Ropheen: 'Life is impossible.'
Susan Ntombeni (Women of Zimbabwe Arise): 'Our kitchens are very empty, even the cockroaches don't eat.'
Susan Ntombeni is an activist with Women of Zimbabwe Arise or W.O.Z.A. On Monday she was arrested in Bulawayo along with 158 others protesting the currency reforms.
Susan: 'They have no right to arrest us because we were not doing anything wrong. We were just saying that we can't afford to live. Everybody is not happy. We might smile, but we are very, very angry'
Operation Sunrise comes in the wake of Operation Marumbatswina a brutal 'clean up' campaign launched in May last year. Authorities destroyed 'illegal' structures, razing whole shantytowns. In many cases people were forced to demolish their own homes.
According to a UN report the operation left about 700 000 homeless and indirectly affected at least 2,4-million people.
Man: 'So far now... our life is very hard.'
Among the ruins of their houses destroyed by Marumbatswina these people, who eke [out] a living hawking vegetables, are living in makeshift shelters. They remain vulnerable to the elements and harassment from the police.
Man: 'I feel pitiful, but hey, what can we do?'
Both campaigns have been especially hard on the informal sector. Marumbatswina saw markets destroyed and thousands of hawkers arrested. The currency change hit hawkers in their pockets; many lost money in the transition.
Jenni Williams (National Co-ordinator: W.O.Z.A): 'This is a government at war with its own people... and that is why you always see 'Operation This' and 'Operation That'. And you see the words Operation Sun Rise... sunrise for who?'
Jenni Williams is W.O.Z.A's national co-ordinator.
Jenni: 'The people Gideon Gono should have gone to see are sitting in parliament... he went for ordinary people who don't have the trillions he supposedly was after.'
Susan: 'Those are the people who are dying because they have got no accommodation, nothing - like food - they go door to door begging.'
'Veronica': 'I have got a soft heart, so normally if can do something I try to do it. But I can't even help them... I'm a beggar myself.'
Even the relatively well-off are feeling the crunch. 'Veronica' and her husband had to sell their business after the bank crash of 1997.
'Veronica': 'We had a big house... a very big house, over an acre... which we had to sell because we couldn't afford even the pool chemicals.'
The Zim dollar has been devalued by 60 percent to sit at 250 to the US dollar. Before the 21st [of August] a litre of coke cost Z$500 000. Now it's a more manageable Z$500, but that hasn't stopped runaway inflation.
In 2003 a packet of carrots cost Z$1 000. In April this year they cost Z$33 000; four months later it's a whopping Z$354 000.
A basket of groceries that cost three million dollars in April had doubled in price last week. Two days later half the items had increased in price again, adding 853 new currency dollars to the bill.
On Tuesday, when the old notes were scrapped, there was chaos at the tills. A shortage of small notes left many shoppers shortchanged.
Jacob: 'There has been no material benefit except a huge expense: the cars that they have had to buy; the massive deployment of personnel to do that change over; the disruption in the banking services, etc. - and the cost to everyone.'
In the early days of liberation Zimbabwe's future looked bright, but today a third of the population needs food aid and the bankrupt treasury can't afford to import desperately needed food or fuel
John Robertson (economist): 'With very high inflation and the government needing a lot of money, and finding it very difficult to get more taxes from a shrinking economy, they have started to print money.'
John Robertson is an independent Harare-based economist.
John: 'We have got massive distortions in the economy. We have lost most of our production capacity. The gross domestic product has fallen by about half in the years since the land reform program started. We no longer have the foreign earnings that we once had, so we can't afford to buy things. So now throughout the country we are facing shortages. And the shortages, among other things, are helping to stimulate inflation.'
Fuel queues are a fact of life in Zimbabwe. Despite a lower petrol price gazetted at Z$335 a litre the going rate is Z$700 (R19.98) ... and the black market is thriving.
John: 'We're now paying something of the order of 700 new Zimbabwe dollars for one US dollar, while the official exchange rate tells us that it is 250.'
The decline of agriculture - the chief source of foreign exchange - has meant a massive loss of jobs and government revenue.
John: 'Government has literally looted the savings in our pension funds and our bank deposits. And when government can't raise the taxes it needs and can't borrow the amount it now needs because the savings are gone, they are forced to print even more money.'
And so inflation gathers momentum and, with unemployment at 80 percent, things fall apart.
Jacob: 'I think it has been difficult for all of us... issues of electricity, water, school fees; people cannot afford medicines, the infrastructure in hospitals has collapsed.'
Jospephine: 'Some people are making money while the rest of us are crying because of the corruption.'
Those with the right connections continue to acquire land and assets using their access to subsidised grain, foreign exchange and fuel.
Jacob: 'People have never been this wealthy in the history of Zimbabwe... the houses that they are building in some of the areas, the number of cars that they drive.'
John: 'In a lifetime of salaries, people like that would not be able to afford one tenth of that kind of asset if they were getting their money legally and if they were playing by the rules. But they can make up different rules which benefit them immensely.'
We asked for a response from the Zimbabwean government but none was forthcoming. This weekend Governor Gono apologised for any inconvenience caused and extended the deadline for rural folk stuck with the old currency. He also announced an imminent sequel to Operation Sunrise that, he said, would be 'short and swift'. But Finance Minister Herbert Murerwa has warned that those three zero's could be back on the notes as early as December.
Jacob: 'They have been able to rig the political front, but it is difficult for them to rig the economy and the social ills that we have. And we have therefore tried to ask them why [don't they] deal with the root causes of the problem, and this is the governance question.'
Susan: 'I think everybody is tired. They are not even scared any more of talking about it. '
John: 'After several years of very rough treatment the population was very intimidated. But everything has its limits and I suspect that the government is rapidly approaching the limits of people's patience right now.'
IMPORTANT DISCLAIMER:While every attempt has been made to ensure this transcript or summary is accurate, Carte Blanche or its agents cannot be held liable for any claims arising out of inaccuracies caused by human error or electronic fault. This transcript was typed from a transcription recording unit and not from an original script, so due to the possibility of mishearing and the difficulty, in some cases, of identifying individual speakers, errors cannot be ruled out.
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