The Zimbabwean dollar (ZWL) is undergoing a precipitous decline in value vis-à-vis the United States dollar (USD), causing growing anxiety among citizens. Both the official exchange rate, as dictated by the Reserve Bank of Zimbabwe (RBZ), and the parallel market rate are witnessing significant losses. These unsettling developments have revived memories of the hyperinflationary era that plagued the nation in 2008.
The Official RBZ Rate’s Decline
A mere fortnight ago, the official RBZ USD/ZWL rate stood at 2600. However, in an alarming turn of events, this rate has ballooned to 4900, signifying a noteworthy devaluation of the national currency. Such a substantial depreciation within such a short period has sent shockwaves through the economy, leaving many pondering the reasons behind this rapid decline.
Parallel Market Turmoil
Adding to the disquiet, the parallel market USD/ZWL rate, which operates outside the official channels, has experienced an even steeper deterioration. Just two weeks ago, this rate was recorded at 3800, reflecting a degree of disparity with the RBZ’s official rate. Yet, the latest reports indicate an astonishing increase to beyond 6000, exacerbating concerns about the currency’s overall stability.
Resurfacing Fears of Hyperinflation
The swift depreciation of the ZWL against the USD has reignited fears of a return to the hyperinflationary era that plagued Zimbabwe in 2008. During that period, the nation suffered from rampant price increases, astronomical inflation rates, and widespread economic instability. Memories of skyrocketing prices, long queues for basic goods, and a loss of purchasing power haunt many Zimbabweans who recall the hardships they endured.
Holding Onto ZWL
In light of the rapid depreciation of the Zimbabwean dollar (ZWL), it comes as no surprise that many individuals and businesses are afraid to keep holding onto ZWL. The diminishing value of the currency has created a sense of urgency to explore alternative strategies for disposing of ZWL in order to minimize potential financial losses. This article discusses valuable insights and practical approaches for effectively managing ZWL in these uncertain times.
1. Convert ZWL to USD
In light of the volatile economic climate, converting your Zimbabwean Dollars (ZWL) into a more stable currency, like the US Dollar (USD), is a strategic move to protect your financial resources. As the ZWL depreciates, the value of your savings diminishes, but by quickly exchanging your ZWL for USD, you effectively shield your savings from rapid inflation.
LESSON FROM THE 2008 HYPERINFLATION ERA: Immediately convert any ZWL you acquire into USD on the exact day you receive it. Avoid procrastination basing on the possibility that the rates might improve or decrease the next day. Instead, prioritize exchanging it into USD without delay on the very day you get it.
Please note: This should be done through legal and regulated channels like banks and authorized currency exchange services.
2. Pay Off Your Debts
If you have any outstanding debts denominated in ZWL, now is an optimal time to settle them. This includes council rates, licenses, ZESA debts, or even ZWL loans and mortgages. By settling your debts now, you prevent the possible future conversion of these debts into a more stable currency, like USD, which could result in significantly higher repayment costs. Proactively clearing your debts not only gives you financial peace of mind but also shields you from the potential ramifications of the ongoing currency depreciation.
3. Buy Stocks on the ZSE
Investing in the Zimbabwe Stock Exchange (ZSE) offers another avenue to preserve your wealth in the face of a depreciating ZWL. Consider using your ZWL to purchase shares of blue-chip companies such as Delta, Econet, and OK Zimbabwe. These companies typically have a history of stable earnings, making them a relatively safe bet in turbulent economic times. Investing in the stock market can serve as a hedge against inflation, potentially offering returns that outpace the rate of currency depreciation.
4. Purchase Essential Goods & Groceries
In the face of a rapidly depreciating ZWL, it is wise to quickly convert your cash into essential goods and groceries. Take advantage of retailers like Pick n Pay and OK that use the official rate for transactions, and stock up on non-perishable goods that you know you will need in the future. Doing this safeguards you from potential price increases and product shortages that may occur overnight due to currency fluctuations. In essence, buying essentials today acts as a hedge against the inflationary impact of tomorrow.
LESSON FROM THE 2008 HYPERINFLATION ERA: Delaying purchases until tomorrow could be financially detrimental, as prices may skyrocket overnight due to the swift depreciation of the ZWL. Instead, make the purchases today to avoid the potential cost increases that could occur by tomorrow.
5. Make ZWL Payments on Behalf of Friends & Family
You may have friends or family members looking to make payments in ZWL for expenses like council rates, customs duty, or school fees. In such cases, consider offering to make these payments on their behalf, and in return, they can reimburse you in USD. This strategy allows you to effectively convert your ZWL into a more stable currency. Disclaimer: Before proceeding with such transactions, it’s essential to consult a lawyer & accountant to ensure the legality and compliance with local regulations.
6. Buy Gold Coins and Gold Tokens
The Reserve Bank of Zimbabwe (RBZ) offers gold coins and gold tokens as a potential investment opportunity. Gold is traditionally a safe haven asset that holds its value well during times of economic uncertainty. If you trust the RBZ, buying these gold coins or tokens with your ZWL could serve as a valuable hedge against the depreciating currency, providing a stable store of value that could potentially appreciate over time.
7. Buy ZESA Electricity Tokens
Given the rapid depreciation of the ZWL, purchasing ZESA electricity tokens in advance can serve as an effective buffer against future financial uncertainty. As ZESA operates at the official rate, this allows you to sidestep potential price hikes resulting from inflation. If you own your home or have a long-term lease, consider purchasing enough ZESA tokens to cover at least a year ahead. This strategy helps lock in the current rates, providing peace of mind and certainty amidst the ongoing economic turbulence.
8. Buy Groceries Using ZWL & Resell Using USD
Leveraging your ZWL for business can be another strategic approach to weather the storm of currency depreciation. Consider purchasing quick-moving groceries (sugar, cooking oil, soap, cerevita etc) from wholesalers like OK Mart and N Richards, who accept ZWL, and subsequently reselling these items for USD. This venture not only turns a potential profit but also acts as a hedge against inflation, as the earned USD is typically more resistant to economic fluctuations than the ZWL. Disclaimer: Before proceeding with such transactions, it’s essential to consult a lawyer & accountant to ensure the legality and compliance with local regulations.
9. Buy Building Materials
If you’re in the midst of constructing a house or own a residential stand, one way to protect your finances is by using your ZWL to purchase building materials you’ll need later, such as bricks and cement. This approach converts your rapidly depreciating currency into a tangible asset that can add value over time. To maximise the use of your ZWL, shop around for suppliers who accept the local currency. By doing this, you’re effectively locking in today’s prices against the possible cost escalations of tomorrow.
10. Pay Annual Subscriptions
Making forward payments for annual subscriptions in ZWL is a prudent move in times of rapid currency depreciation. If your subscriptions – such as funeral policy subscriptions, licenses & permits, insurance, Wi-Fi subscriptions, or medical aid – accept yearly payments in ZWL, consider making these payments promptly. Changes in payment policies can happen overnight, potentially requiring more stable currencies in the future. This strategy is especially effective for subscriptions where the benefit is not a ZWL cash payout, but a service or product.
11. Buy Assets
Turning your ZWL into durable assets is a practical strategy during this period of economic instability. Consider purchasing items like furniture, raw materials & stock, agricultural inputs (if you are a farmer or reseller), gadgets and appliances with your ZWL. Many retailers still accept the local currency for these types of purchases. These assets serve two main purposes: they offer practical use in your daily life, and they hold value better than cash during periods of rapid currency depreciation. This strategy essentially transforms your vulnerable ZWL into tangible assets that can retain value over time.
Disclaimer
This article is intended for informational purposes only and does not constitute legal or financial advice. The strategies and suggestions outlined in this article are based on general economic principles and should not be taken as specific advice tailored to your individual situation. Before making any financial decisions or actions based on this article, we strongly recommend consulting with a certified financial advisor or legal professional to address your specific needs and circumstances. Moreover, while we strive to provide accurate and up-to-date information, we make no guarantees regarding the applicability or accuracy of the information provided. It is important to note that this article does not promote or condone any activities that violate the laws of Zimbabwe or any other jurisdiction. Always ensure that your actions are in full compliance with all applicable laws and regulations.