Zimbabwe crisis: Crazy black market for currency shoots up
17 Nov 2017

Robert Mugabe’s long-awaited exit was never going to be dull, considering the drama that characterised his 37-year reign.

News that he had been suddenly captured by the army and placed under house arrest hit headlines the world over .

At home, among other aspects, it triggered alarm in the darker parts of his fragile economy – the country’s infamous black market for currency.

Zimababwe’s illegal cash trading system became notorious especially for its role in the contry’s record-breaking hyperinflation crisis, which saw a loaf of bread being sold for something like one trillion Zimbabwe dollars and the price of goods go up by the hour.

By around 2008, buying and selling dollars unofficially became rampant, authorities tried but could not contain the problem – it was much like trying to put out a huge bushfire with buckets of water.

The black market was regarded as crazy by locals, including those who used it.

The Zimbabwe dollar was eventually wiped out. It now exists nominally, with the government still insisting on its presence.

A new unity government introduced the use of the US dollar and other currencies such as the South African rand to the mainstream market. The US dollar is now the main currency used in the public and private sectors.

Although the black market went low after the reintroduction of the US dollar, it did not disappear.

In fact, after the unity government and Mugabe regaining full power, the economy continued dwindling speedily, enabling the uncontainable black market to gain strength again.

News of the coup has sent currency trading to new heights, Harare-based analyst Masimba Kuchera told KYC360, with the US dollar now trading at a premium of 85%. The rate was 60-70% last week.

“After the Mugabe development this week, the US dollar shot up on the black market,” he said, “what this 85% premium means is, for example, if you need US$100, you pay US$185. However, if it were done through the banks, they might charge a much lower premium, such as 3%. So you pay US$103 or US$105 in total, instead of the high black market rate.”

“The problem of course, is that the banks in the country are short of cash, you can’t easily get US dollars from there.”

And hence the black market thrives.

The 85% rate applies to electronic money, Kuchera said, such as mobile money which has become mainstream because of factors such as the cash shortage.

The illegal trading premium has also shot up in the cash black market, he explained: “it is now trading at around 30-40%, up from 20-30% before developments this week.”

With such a black market, corruption thrives, Kuchera said. People have also been cheated when dealing on this platform, but cannot go to the police.

Part of the reasons why it has thrived is because some of the authorities are also benefiting from it, Kuchera explained.

By Friday there was no sign that the situation would improve, or that the crazy black market would hold back from the unfolding drama.

News that Mugabe had showed up at a university graduation ceremony that morning was no sign that he was back in control.

Instead, indications are that the army is still in charge and that Mugabe is refusing to officially step down from power.

And as the power struggle rages on, so does the dark trading system that helped bring Zimbabwe’s economy to its knees.

– By Irene Madongo

More on Zimbabwe:

Zimbabwe: Army seizes broadcaster over ‘criminals’, finance minister reportedly held

Zimbabwe crisis: Country on edge, Mugabe’s future unclear

Zimbabwe: Banks blame cash shortage on laundering, state paydays

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