Is this the Right Time to INVEST in ASSETS in Zimbabwe?

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Finance Minister Mthuli Ncube
Finance Minister Mthuli Ncube

The prevailing Zimbabwe economic environment reminds us of the 2007/8 hyperinflation era where prices where skyrocketing daily. Companies and individuals that needed forex for imports accessed it from the black market, but Zanu PF connected companies got it cheaply from the RBZ.

By Darlington Nyambiya and Joshua Chigwangwa

By 2012 the gross national product per capita had dropped to US 460 from the US$ 1 080 per capita level set in 1980. According to UN statistics the Zimbabwe dollar at independence in 1980 had an exchange rate of one Zimbabwe dollar to US$ 1,47 which however by July 2008 its value had dropped to ZW$10 billion to US$ 0,33 fuelled by increased money supply and recorded monthly inflation figures of 79,6 billion percent.

Clearly, it was obvious the Mugabe regime had failed to balance the economy. Fast forward to 2019, Zimbabweans are faced with another similar challenge as the Mnangagwa Administration battles out with Professor Mthuli Ncube’s trial and error lead Transitional Stabilisation Programme (TSP).

Abolished: Multi currency

Faced with yet unprecedented economic and monetary pressures from the now tired multicurrency system, the Government this week gazetted a guideline abolishing the use of the multi currencies and a return to the use of the Zimbabwe dollar.

Although the Central Bank had pegged the Zimbabwe dollar at 1:1 with the US$ dollar, today’s exchange rate is operating at ZW$8 to the US$1. And as the economic situation continues to deteriorate  due the foreign currency purchasing power, most retail shops and companies are still going to prefer payment  for goods and services in foreign currency but if a customer wants to pay with the Zimbabwe Dollar , the price will be linked to the black market rate which will make goods and services out of reach for most Zimbos.

US Dollar linked prices

The linkage of the Zimbabwe dollar prices to the US dollar will drive prices up as the local currency will continue to lose value on the back: of shortages of foreign currency, suppressed local production and dwindling exports.

The devaluation of the Zimbabwe dollar against major currencies will erode the buying power of most Zimbabweans as they are now paid in the local currency and prices will continue to skyrocket daily.

Moreover, Zimbabwe imported US$6,3 billion worth of goods in 2018 with almost 50% comprising basic commodities from neighbouring South Africa, whilst exports totalled US$4 billion comprising mainly 84,6% of products to South Africa to process basic commodities for importing back into Zimbabwe for local consumption.

Professor Ncube recently bragged about nearly half a billion RTGS (about US$50m at today’s exchange rate) surplus achieved in the first quarter of 2019, the authenticity of this surplus is questionable when the entire nation is grappling with 18 hours per day of load shedding due to an unpaid electricity bill to SA’s Eskom totalling US$40m.

Business Opportunities

The major advantage of having forex in hand in Zimbabwe right now is that assets, goods and services are going to be sold at a “massive discount” as sellers attract forex but vice versa, most goods and services will be expensive in the local currency.

Companies restocking goods will need foreign currency because of the skewed basic goods reliance of local demand on imports from neighbouring South Africa for basic commodities such as cooking oil, salt, matches, etc.

And as the economic pressures bite, most Zimbabweans who are already vulnerable from earning in RTGS$ in a US$ economy are being forced to offload assets and valuable items on to the market. The prevailing economic situation in Zimbabwe present a huge business opportunity to those with cash to spare and want to make a return on investment. That is if you have huge sources of revenue then the best way to preserve value and make a profit is to invest assets.

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