Most Zimbabwean retail outlets are stocked with imported goods that sell cheaper to similar products produced locally.
WHEN Mordekai Musundire, a Zimbabwean journalist, moved to Lesotho in search of greener pastures at the height of Zimbabwe’s economic crisis in 2008, he realised that this was one of the best decisions he had ever made in his life.
From the money he earned in his new job in Maseru, the capital city of Lesotho, he was able to send part of it home where his wife, children and members of the extended family were so appreciative and grateful.
However, for Musundire things changed suddenly from 2009 when his home country abandoned its currency that had been mercilessly ravaged by galloping inflation which peaked at about 80 billion percent, to adopt a multi-currency regime primarily anchored on the United States dollar.
His wife started to complain that the same money he used to remit home during the Zimbabwe dollar era was no longer able to cover even half of the family’s needs, let alone those of the extended family.
Musundire, realising that he had no magical powers similar to those of Jesus Christ who could make five loaves of bread and two fish overfeed a crowd of 5 000, had no choice but to take his wife and children with him to Lesotho later in 2009.
“With my earnings here, I am able to send my children to an international school, something that would not be possible in Zimbabwe,” Musundire told the Financial Gazette this week.
“My family would not be enjoying the lifestyle they are having here if they had remained in Zimbabwe, even if I were to send them most of my earnings,” he added.
Some Zimbabwean private schools charge as much as US$4 000 in school fees per pupil per term, in addition to other hidden expenses that are passed on as levies.
Musundire is one of the estimated three million Zimbabweans who left the country for economic reasons over the years, but are finding the usurious pricing system back home especially punishing.
Virtually every Zimbabwean in the Diaspora is complaining about the high prices of goods and services back home. As a result, their remittances are no longer appreciated as they used to be during the Zimbabwe dollar era.
When this writer’s grandmother died in early 2008, his sister who was based in Tanzania contributed US$200 towards the funeral expenses. When converted to the local currency, the money was so much that it took care of all the expenses with substantial change being left, yet that amount in the Zimbabwe of today can hardly buy a decent coffin.
Such is the tragedy that faces many Diasporans who may be committed to providing for their families back home as they battle to cope with the never-ending cash requests.
Mordekai Musundire
Patrick Tasiyana, a Zimbabwean technician who has been building a house in the high density suburb of Kuwadzana since he moved to South Africa a few years ago, said he was shocked when he recently discovered that a house in Harare’s medium density suburb like Mabelreign can cost upwards of US$100 000.
“The prices are crazy. That is more than R1 million. For a million (rands) here, you can buy a plot with a running project and a state-of-the-art house and possibly get some change. This side, life is still very cheap,” Tasiyana said.
“It is a fact that the strengthening of the US dollar against the rand hasn’t made it easy for us, compounded by the abuse of the US dollar, (and the) devaluation of the Chinese yen against the US dollar. This has practically forced many currencies dependant on the greenback into unintended devaluation, thereby giving the US dollar even more strength,” he added.
Zimbabwe’s high prices, which are a hang-over from the Zimbabwe dollar period when citizens counted their pocket money in trillions, quadrillions and even quintillions, extend to almost every facet of life… from food, to rentals, to fuel, to salaries and wages, to school fees, to medical services and to almost everything else.
Last week, one Nairobi-based colleague who works for an international media house, whose family is in rural Masvingo, said he was praying that predictions of another drought do not come to pass as that would surely leave him ruined financially as he is already struggling to pay for food, school fees and others expenses for both his own family and members of the extended family.
“No one believes you when you say you do not have money, when you are working abroad. Already, I get angry calls from home almost every day. Every time I send money, it is never enough,” he said.
“I used to think these people are just trying to fleece me off, but the few times I have visited, I have had to leave early because I would have spent in one week what I would have thought would last a month. So just imagine what it would be like if there is a drought and everyone needs money to buy food at those prices.”
Another Zimbabwean, Takawira Musara, who is based in Canada and is married to a wife from Philippines, said his wife fails to understand the incessant distress calls of financial nature that his family is always bombarded with from Zimbabwe.
“Back home, US$500 doesn’t do much, yet if we send the same amount to Philippines where the wife comes from, we do not hear from them in several months,” Musara pointed out.
“I think I understand why. I have a personal example. When I arrived in Canada I had US$4 500. Coming as I was from a mentality of trillions and quadrillions, I didn’t think it was a big deal to spend US$140 on a pair of shoes. It only began sinking in after several months. And I think that is what affected Zimbabweans. They don’t really comprehend the value of the US dollar,” he said.
Musara said it was this Zimbabwe dollar mentality that crept into the country’s corporate culture, resulting in the irony where some Zimbabwean firms, government departments and parastatals that rank among some of the worst performing have the best remunerated executives in the whole world.
He gave an example of a “small but very successful” company that he works for in Canada which he said makes a profit of about US$50 million annually without fail, yet the top man there does not have any of the mouth-watering featherbedding enjoyed by executives at Zimbabwe’s loss-making entities.
“The CEO has no company car… we ride on the same train, no cell phone from the company, no company sponsored holiday, no school fees for his children, all he gets is his annual salary of US$146 000. Salaries here are not a secret. Yet back home, one of my relatives who is a middle manager at a (loss-making) parastatal has two cars and all benefits one can think of. To be successful in Zimbabwe, we need a complete revision of the pay structures and benefits,” Musara added.
Last year, Finance Minister, Patrick Chinamasa, while defending government’s move to effect a blanket slash of executive salaries — some of which were as high as US$500 000 per month — to a just US$6 000, argued that the US dollar was being abused.
“We migrated from the Zim dollar to the US dollar and we migrated with the hyperinflation mentality into a US dollar environment,” Chinamasa said then, adding: “As a result, we devalued the US dollar.”
“Any visitor from America is shocked that a 300ml Coca Cola costs US$1 in Zimbabwe. Whether we are talking about mushroom on the road (it) costs US$1 and if you buy mazhanje (a wild fruit) they cost US$1. We need to conceptualise what this means. Somebody goes to the forest and picks up something and sells it for US$1!”
So high is the price of locally-produced goods that even with an import duty regime of as high as 40 percent, some imported consumer products can still sell at about half the price of those produced locally.
Because of this, South African manufacturers are having a ready market for their products where they can sell in a currency that is almost resistant to the vagaries of exchange rates.
It is this pricing system that makes imports more affordable compared to locally-produced goods.
Most Zimbabwean retail outlets are stocked with imported goods that sell cheaper to similar products produced locally.
Economic analysts say it is this reap-off pricing system that makes it hard for Zimbabwean firms to export their products.
While in bad seasons maize can be imported for prices as low as US$150 per tonne from regional countries, Zimbabwean farmers insist that because of the high production costs they incur, any price below US$350 would not allow them to return to the fields in the next season.
In coming up with the minimum producer price, farmers’ organisations take into account the high costs farmers pay in inputs and labour, which costs are what is prevailing in the Zimbabwean economy.
Analysts add that this pricing system makes it even harder for Zimbabweans based abroad to meaningfully invest back home.
Tapiwa Mashakada
Economist and opposition politician, Tapiwa Mashakada, who was the minister for economic planning and investment promotion during the 2009-13 inclusive government era, agreed with Chinamasa on the residual effects of the Zimbabwe dollar mentality. He, however, said it was not correct that the US dollar had been devalued, if anything, it was overvalued.
“You find mark ups of 100 percent in a US dollar economy. Look at school fees, property prices etc, you will see the extortionist pricing model,” Mashakada said.
He went on to explain thus: “The following issues affect the value of the US dollar: Firstly, imported inflation… Zimbabwe imports about US$8 billion worth of goods and services compared to its US$4 billion exports. Add customs duty plus freight charges and insurance; this affects the pricing of commodities, hence the overvaluation, not devaluation of the US dollar. Secondly, depressed production again affects value because we import and without enough exports we don’t get compelled to become competitive, hence our dollar remains overvalued. Thirdly, we have no exchange rate so the value of the dollar is determined by production and terms of trade. Fourthly, money supply is short so the dollar is overvalued. In short, we should talk of over-valuation rather than devaluation.”
The cash-strapped government is trying to lure Zimbabweans in the Diaspora to remit more and more back home, but actual figures are showing a continual decline in remittances, a sure sign that the community is convinced that it is not getting value and appreciation back home for their hard-earned money.
This year, government is hoping the country will receive about US$1,4 billion in Diasporan remittances, up from a “paltry” US$900 million received last year.
The US$1,4 billion that is hoped for this year is less than the US$2,1 billion remitted by Zimbabweans abroad in 2012, which figure went on to decline to US$1,8 billion in 2013 before it plummeted by 100 percent to the US$900 million that came in 2014. – Cyril Zenda
newsdesk@fingaz.co.zw