Source: Bloomberg – Dealers Driving Mercedes Hail Zimbabwe Dollar’s Demise
Benson Mahenya makes as much as $10,000 a month as he drives around Harare in a white Mercedes- Benz dealing in the five currencies that Zimbabwe recognizes as legal tender.
Selling South African rand to Harare’s car-part dealers, he receives dollars in return and uses them to buy euros from the city’s hotels. He then sells the European currency to liquor stores so they can import French and Portuguese wine.
“Different customers want different currencies, depending on the business they’re in,” Mahenya, 46, said in an interview in Harare last month. “On a good month I make an excellent living.”
Mahenya, and traders like him, have sprung up since Finance Minister Tendai Biti abandoned the Zimbabwe dollar in 2009 following hyperinflation that the International Monetary Fund estimates hit 500 billion percent. Under Biti, Zimbabwe stopped printing money and adopted the U.S. dollar, the euro, the South African rand, the Botswana pula and the British pound as legal currencies.
While the country is still mired in political crisis 33 years into President Robert Mugabe’s rule, the move helped end an economic collapse that decimated the country’s tobacco and rose export industries and shrank the economy by 40 percent between 2000 and 2007, according to an IMF estimate.
It also created huge arbitrage opportunities for a new breed of currency trader.
“I’ll always better the banks,” says Jackson Jere, sitting on a wooden crate as he haggles with customers ranging from shop owners to tourists at Harare’s Road Port international bus terminus.
“Until recently we were using old Zimbabwe dollar notes, even though they weren’t legal tender. It was like a voucher or ticket system,” Mike Muparutsa, a minibus taxi-driver, said. “Now it’s rand coins, but the consumer loses on the exchange rate.”
The currency reform has brought some semblance of stability to a country bearing the scars of Mugabe’s economic mismanagement. Zimbabwe’s central bank began printing money in 2006 to pay a debt to the IMF to stave off expulsion and continued the practice to meet expenses including infrastructure payments.
“Having a multi-currency economy with no Zimbabwe dollars is primarily good news for Zimbabwe because government can’t print its way out of a deficit,” said John Robertson, an independent economist, in an interview from Harare. “They can’t just print more if they need it, as was happening in 2008.”
The economy is expanding and most shortages have abated. Economic growth of 5 percent is being targeted this year, Biti told reporters in Harare on April 16. Biti and Tsvangirai have said a return to the Zimbabwe dollar isn’t likely soon.