ZIMBABWE BLOG:People are queuing at banks for days to take out their money and spend it before it melts to nothing, writes Eddie Cross
TODAY I went from one meeting to another using the main streets in Harare - it was pure chaos. The city had no electricity, the traffic lights at all intersections were not working and the traffic was gridlocked. The police were nowhere to be seen . . .
At the Reserve Bank it was the same. It is printing money and creating money in other forms so fast that the inflation rate is no longer calculable. What we do know is that the RTGS rate - ie the rate of foreign exchange in the open market for money transferred by electronic means - is moving by the hour. At the beginning of August, it was seven to one against the US dollar (after we dropped nine zeros) and yesterday it was 2,000,000 to one. Quite a change in eight weeks.
Desperate people are queuing for days at the banks and other financial houses to try to get their money out of the system so they can spend it before it melts to nothing. In Gweru last week, the main street was almost closed by crowds at ATMs and banks. In Harare, thousands of people jam every cash outlet.
The Reserve Bank, faced with the escalating consequences of its own ineptitude, is now printing money on plain local bond paper with no security features. The mafia are having a field day and so many counterfeit notes are circulating that people are refusing the new notes.
Instead of adopting a carefully crafted plan to overcome these problems and correct the fundamentals that are driving the system towards collapse, the governor simply closed down the RTGS system and, I understand, even the interbank system, rendering the only alternative window for payments impassable.
It is illegal to trade in hard currency - you can go to jail for this if you try; it is illegal to change money on the street; you cannot charge a market price for what you sell unless you are willing to risk intervention or worse. Even today there were reports of the government taking action against retailers who were "overcharging". Business is unable to pay staff in cash - they pay them by bank transfer and then watch as half their workforce are absent all day standing in queues.
Non-cash forms of payments are rampant - barter is common and fuel coupons with a face value of about $30 (€22) each is also common tender. The BBC recently carried a story of an auction in Harare where the bids were all expressed in coupons.
Most firms are now being forced to sell their goods and services in hard currency - South African rand or US dollars - even though it is illegal.
Businesses do not bank the money because the Reserve Bank keeps a close watch on foreign exchange balances in the banks and simply expropriates them, then crediting the owner of these accounts with local currency at a ridiculous rate of exchange and using the flow of hard currency to support the lifestyles of the small elite that is still in charge. At these rates of exchange, a top-of-the range luxury car costs less than the price of a local cigarette.
Here we are, four weeks away from the start of the wet season, and we have 2 per cent of our fertiliser requirements in stock.
All other inputs are virtually unobtainable. The Reserve Bank is handing out expensive farm equipment to Zanu-PF fat cats like sweets in a kindergarten, but they cannot provide fuel or seed or fertiliser or chemicals.
Remaining farmers - black and white - are being evicted from their farms by Zanu-PF heavies such as a deputy governor of the Reserve Bank and what is left of the once world-class tobacco industry is facing extinction.
Dairy farmers, pig farms and fruit estates are all facing illegal invasion and disruption of activity. The police simply respond to appeals for help by saying they cannot help because "it is political".
Our retail chains are empty, many stores are closed, the wholesalers are no longer functional, and industry is running at 10 per cent of capacity.
Power supplies are down to about half of demand, fuel is in short supply and spare parts are unobtainable. All basic foods are virtually only available in the parallel market at very high prices.
Government schools have opened their doors and the children have gone to school, but no teachers are at work. The universities will not open their doors this term - the final term before vital exams. Businesses cannot fix prices or salaries - their normal activities are simply frozen.
In the midst of this chaos, president Robert Mugabe went on a 10-day spree to New York to make a speech. The cost of a 20-minute opportunity to denigrate the leading nations in the world, the very people who have fed his population for eight years, was the cost of taking a Boeing 767 to New York and back via Egypt. The 54-member delegation must have spent at least $2 million in allowances and expenses while there.
On his return, Mugabe wastes another week with no action on the formation of a new government - weeks after the deal with the Movement for Democratic Change (MDC) was signed.
And, remember, we have not had a proper government since March 29th - almost seven months.
Since parliament was convened several weeks ago, we have had no government at all.
When confronted with the need to make a decision on the allocation of ministerial portfolios, Zanu-PF has been frozen in its tracks like a child confronted with a cobra, not knowing what to do and beginning to realise that the end of the road is in sight for them.
Even though Thabo Mbeki is no longer the powerbroker he was after his removal from the presidency in South Africa, Zanu-PF members are terrified of his visit to sort out the impasse because they know their arguments for a disproportionate share of ministerial portfolios are not defensible.
They cannot hold out for much longer and Mbeki is on his way.
• Eddie Cross is a businessman, member of the MDC, and MP for Bulawayo. His blog can be read at www.eddiecross.africanherd.com