Zimbabwe has gradually learned what it is like to live under hyper-inflationary conditions.
After the war, veterans of the liberation (war for Zimbabwe’s independence in 1970s) were awarded hefty pay packages—the government printed more money to cover the expense. After that, the (Mugabe) government seized land and Agriculture-related businesses, which comprise 70% of the workforce, collapsed. Subsequently, the Mugabe government controversially won the election and a black market in foreign currencies started. Businesses diverted activity from their core business into purchasing hard assets (including motor vehicles and real estate) in an effort to preserve monetary values.
Several banks were placed under curatorship (guardianship) despite the governor's assurance that they were solid. Deposits are concentrated in the traditional banks, and the central bank has been charging punitive interest rates for unsecured overnight loans, at times as high as 1500%. In late 2007, a cash crisis surfaced when the withdrawal limit was increased from Z$20m to Z$50m. The banks didn’t have enough cash on hand to meet the added demand. Borrowing money is difficult. Almost everyone has more than one account at different banks because there is a limit to how much money you are allowed to withdraw at one time (approximately U.S. $25.00).
The black market for currency and commodities is still flourishing. It has managed to support a sizeable number of school dropouts, office workers, and the unemployed. Incomes have risen in nominal terms, but price increases have swept away the gains in real terms.
Foreign investors will obviously shun Zimbabwe as an investment destination because of the unpredictability of government policies.
They have a parallel market meaning the unofficial market where deals are done informally and under the table. The South African rand and the US dollar are the favorite currencies on the parallel market, for obvious reasons.
Gone are the days when people used to take pride in formal jobs! (If you want to live a life full of struggles and long suffering in monetary matters, then get a job in the formal sector—especially the government sector.) The average Zimbabwean now lives by moonlighting. They have no choice but to find work in the underground economy!
Government borrowing has crowded out private investors and expanded money supply growth. (It would also have been nice if the government had maintained the rule of law and prevented killings and the brutalizing of people on farms and during invasions.) They should never have left a metallic standard. Paper money that is not backed with anything is easily inflated and can ultimately become worthless.
Monetary authorities should have been fully divorced from the government. The central bank should be an autonomous entity with sweeping powers to restrain ballooning governmental expenditures.
People who have survived this economy were the ones who hoarded goods and profited when they sold their goods in roadside markets in most residential areas—especially high density areas. It’s funny how rarely these sellers are apprehended because they are either connected to the police in some way, or because the fines they pay are not very stiff at all.
Of the approximately 5m Zimbabweans in the diaspora, 70% of them are qualified professionals, while the remainder is unqualified. Who stayed behind?
Each of those who stayed behind had his/her own reasons. Some are too old, too young, or maybe do not have traveling papers. (It may be possible to stand in long lines waiting to obtain the necessary forms for a passport and then take forever to have it processed.) Some people are just too optimistic. They hope to see some sort of political salvation in the near future. Another group consists of people who want to obtain academic credentials and then leave. Still others are people who simply have nowhere to go, no skills at all, no education and do not know even where Harare (the capital of Zimbabwe) is. This is true of the rural populace and a few urbanites. Some people are refugees and/or asylum seekers who migrated from Malawi, Zambia, or Mozambique and know no other home. The last group of people who have stayed behind is that of people who are well-connected, financially or politically or in some other way made money by exploiting the system. They have nothing to worry about. They get money for projects or their pals and their children are in the diaspora.
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