They say in there are 2 certainties, death and taxes. For the Zimbabwean, there is a third certainty and that is inflation. It’s become a fixture of life in Zimbabwe as we close in on 2 years of continuous inflation. So bad has the inflation picture been that the government ceased to report on year on year inflation, giving the reason of uneven currency conditions in the period before February 2019. As we prepare for the shock of a return to reporting on year on year inflation, last month estimated at 540%, let’s look at things that have been proven to be effective inflation beaters.
Before we dive into the inflation beaters let’s understand what makes them so and how we can identify the same characteristics in other items. There are two main problems in an inflationary environment, closely linked but distinct problems. Firstly those who are selling things keep raising prices, that is the essence of inflation. Secondly, this continuous price increase environment also erodes the purchasing power of individuals as incomes very rarely keep step with inflation. An inflation beater negates one or both of these problems.
If you can buy something for periods to come that is not denominated in money but in some sort of unit measure or time measure you should do so. The obvious example that comes to kind is electricity which is denominated in units (kWh to be specific). The idea is simple, pay for as.much as you can now before a price increase. A future price increase does not affect what you have paid for as it is denominated in units. The same can be said for time-based subscriptions where you can pay per month, paying months in advance can also help you beat inflation. With a service such as DSTv inflation is implied by the exchange rate, in Zimbabwean dollar terms, paying for a subscription today is cheaper than it will be in a month.
Price increases in Zimbabwe are closely linked to the exchange rate for the Zimbabwean dollar versus the US dollar. This is largely because of the degree to which Zimbabwe relies on imported items starting from the absolutely essential such as fuel all the way to items which are also locally produced. Where possible, holding money in US dollars enables you to at the very least preserve the value of your money. Now there’s a bit of controversy as to whether US dollars or other foreign currencies are a good investment. My take on this is simple, they are currencies, not investments. Currencies that happen to be stable and prevent loss. In fact, the purchasing power of the US dollar has increased in Zimbabwe. The rules still allow Zimbabweans to purchase US dollars from Bureaux de changes
If you’re in business you have a proven inflation beater on your hands. While there are questions around the ethics and morality of businesses passing on costs to customers it is a reality. Your suppliers raise their prices then you sadly must raise yours. The argument that businesses are against the people when they raise their prices forgets that businesses are run by people. People living in the same circumstances as their customers. Regardless of which side of this divide you stand on the reality is those in business have an inflation beater.
Earlier we spoke about the type of things you should prepay to beat inflation there are on the other end of the spectrum there are payments you should delay making if your circumstances allow. For example, a utility bill such as council rates is something which you have 90 days to pay. So while one would want to pay as soon as possible if you have income which increases with inflation (such as business income) or hold or earn foreign currency you can find holding off on payment to your advantage. Just to illustrate if you owed ZWL$300 with 90 days to pay on January 1st 2020 and you held US dollars. Settling that bill on January 1st would’ve cost you roughly US$14 while settling the same bill on the 12th of March 2020 would only cost you under US$8.
The inflation picture is likely to get much much worse before it gets better if it ever will. These practices will help you to at the very least keep your head above water.