The times we are living in are reminiscent of the 2008 era that was replete with shortages and hyperinflation. Some actually argue that this time around it might be worse off than 2008 – what’s your take? It’s stunning how things can take a nose-dive in just a short space of time. There is a gulf between how things are now and how they were barely 6 months ago. We are now in the eye of a raging storm of spiralling inflation. I suppose the main reason the situation seems better in comparison to 2008 is the multicurrency environment which somewhat buffers us from the scourge of inflation.
This Has Been A Long Time Coming
When the bond note was introduced, a far-reaching public discourse was set in motion. How could the central bank just wake up and print a surrogate currency and declare its value is at par with the USD. At the time the RBZ governor gave empathic assurances that the surrogate currency would be backed up by an Afreximbank USD loan facility. As widespread condemnation of the bond notes raged on he even made a stunning remark that he would resign if the bond initiative didn’t work. Despite, the colossal failure of the bond note the man still sits at the helm of the RBZ. The principles and supporting frameworks for the bond notes were at best theoretical and the implementation was poorly executed.
The Introduction Of The RTGS$ & The Disregard Of The 1:1 Fallacy
When the central bank governor presented his last MPS and announced the startling introduction of the RTGS$, dark clouds began to form. This was worsened by the long-awaited disregard of the bond to USD parity they had held onto for too long. The governor gave assurances that prices of basic goods and services would remain the same. Price increases were obviously inevitable as business and service providers jostled to hike prices. This was on the pretext of aligning prices to the newly introduced interbank exchange rate of 1:2.5. Again the governor and the finance minister gave assurances that the RTGS$ would actually edge strong against the USD as times went on. Contrary to that, the RTGS$ has actually been weakening against the USD since then. This has then exacerbated price increases which are now a common feature of any business or service provider nationwide.
Basic Goods, Services & Utilities Now Costly
Fuel prices were the first major development and so intense has been the blow that fuel consumption is reported to have decreased. When the RTGS$ came in and the 1:1 parity was thrown away, the effects were felt more as business and service providers’ operating costs increased resulting in price hikes. Later on, we saw countless upward reviews of the cost of bread with the most recent change constituting a roughly 300% increase from its cost about 6 months ago. Standard Chartered Bank was the first bank to announce increases in bank charges which has seen some other banks doing likewise.
The most recent development has been that of internet and mobile service tariffs i.e. data and voice calls. ZOL and TelOne reviewed their data packages in ways that left many of their subscribers lamenting. NetOne was the first to lead the pack on the mobile front and on the 27th this month Telecel also tagged along with outrageous prices hikes for their packages. Econet already had reviewed their voice call tariffs scrapping the bundles of joy altogether some time back. As at this morning it turns out they have also hiked their prices, with for instance, 1 GB daily data bundle now costing RTGS$5 (up from RTGS$2). Looking at NetOne’s monthly data bundles, it means that 1GB now costs RTGS$20, whilst for Telecel it’s now RTGS$15. It’s funny that the least priced packages are in MB – in this day and age of smartphones, the internet and social media who can survive on 29 MB (the cost of a RTGS$1 monthly data bundle for NetOne).
The cost of utilities such as rentals have also surged with many being forced to relocate to more affordable places. I remember talking to an acquaintance of mine who was looking for a new place to stay as her landlord had hiked rent from ZWL$12000 to 550 USD. For the commuting public, things have been interesting with the introduction of the ZUPCO buses. The other major price increases being seen are in the education sector where tuition, boarding and accommodation services have sharply gone up. ZESA has also been calling for an upward review of its tariffs but so far that hasn’t been approved – I hope it remains that way.
Salaries Have Remained Static
Despite all the surges in exchange rates and prices, the basic salaries of the vast majority have remained unchanged. For those who have been given salary increments, the increments have been small amounting to no significant difference. The standards of living are plummeting whilst poverty levels continue to sky-rocket. This is also having a ripple effect on businesses as people now have limited buying power.
The most ironic feature of the current events is that in USD terms, prices are actually going down. What’s happening right now somehow speaks to how injurious it can be if politics and commerce are disproportionately mixed. Most of the problems we are currently battling with have been mainly caused by official “political” decisions and announcements that are far-removed from how economics works. Sad to say that for as long as the politics continue to override the basic laws of economics, the cries of many will continue to linger on. The calls that have been made since the beginning that the bond must go now need heeding.