Twenty years ago, Simon Magasia graduated in History from the University of Harare, capital of Zimbabwe, and celebrated by becoming a street vendor: he went to sell trinkets on 7th street in the South African neighborhood of Melville, in Johannesburg. Like Magasia, in those years thousands of Zimbabweans, many of them with university education, clandestinely migrated to South Africa fleeing a savage economic crisis, marked by unsustainable inflation.
“It was crazy,” Magasia explained, “you were going to collect your salary and the money was worth so little that they gave you the bills in two full plastic supermarket bags. But as soon as you collected the money you had to run and buy because hours later those bills were worth even less. Prices went up two or three times a day!”
In those days, inflation was so enormous that Robert Mugabe's government even printed a one trillion Zimbabwe dollar bill, which is currently sold as a collector's item.
In 2009, the currency was definitively canceled and the executive officially accepted foreign currencies such as the US dollar, the Chinese yuan or the South African rand.
Three decades later, Zimbabwe is still desperately fighting an endemic economic crisis. In a new attempt to stabilize the national economy, Reserve Bank of Zimbabwe Governor John Mushayavanhu last week introduced a new gold-backed currency, called Zimbabwe Gold (ZiG), which will replace the devalued domestic dollar, which this year alone has lost almost three quarters of its value.
The new ZiG, with brightly colored bills decorated with gold ingots and the country's emblematic stones, will have values between 1 and 200, in addition to coins of one cent, half and quarter. Its initial value will be the equivalent of 13.56 US dollars and Zimbabweans will have 21 days to exchange the old currency for the new currency.
Mushayavanhu, who assured that the measure seeks to promote “simplicity, trust and predictability,” added that the objective is to have “a solid and stable national currency,” since “printing money has not helped us” and stressed that the new currency “must be anchored by a stock of foreign currency reserves and precious metals (mainly gold), as well as valuable minerals.” Zimbabwe's central bank has about a tonne of gold in its vaults and 1.5 tonnes abroad, along with some international currency reserves.
The governor hopes that the adoption of the ZiG will help stability and stop high inflation, 55% in the month of March alone, as well as that it will be accepted in other foreign countries as an exchange currency: “It will be the responsibility of other countries to accept the ZiG, and I see no reason why our neighboring countries, for example Zambia, would reject the money, but it is up to them to accept it or reject it.”
The social adoption of the new currency remains to be seen. Zimbabwean citizens, chastened by the decline in value of previous currencies, which has caused them to lose their savings and purchasing power, do not trust local banknotes and for years have massively opted for the use of the dollar, with which carry out 85% of transactions, or other foreign currencies, especially the South African rand. Given the scarcity of small coins, it is common for neighborhood food establishments to round up the change with gum, pens or chocolate bars.
Aware that the transition between currencies cannot be excessively drastic, President Emmerson Mnangagwa announced last October an extension until 2030 of the use of the US dollar for transactions in the national economy, a measure aimed at allaying the concerns of the Zimbabwean population. .
