A lot of publications have run with this story already but I couldn’t find the original Facebook post. Strive Masiyiwa posts extensively and engages quite much on his page so I spent an hour trying to locate the post then decided to trust the publications that ran the story. Here is what Zimbabwe’s richest man, Strive Masiyiwa is quoted to have said:
Let me put the proverbial cat among the pigeons, a loaf of bread in South Africa costs R9.50. It costs R30 in Zimbabwe. 3x!!! Eighty percent of imported goods in Zimbabwe come from South Africa. It’s not uncommon to find those same goods costing anything above three times the cost.
The people who pay for a lot of goods are Zimbabweans living in South Africa, through their remittances. The cost structure – labour and goods – in Zimbabwe is distorted by the arbitrage of the United States dollar as a currency of settlement for rand imports.
This is not the same thing as joining a rand monetary area, or customs union, which is a much more complex process. This one can be done overnight, and even voluntarily.
Where the math is wrong
The very example that Masiyiwa gave betrays the error and it’s not his fault. The currency issues in Zimbabwe are just as confusing for residents. A loaf of bread in Zimbabwe is NOT costing R30.00.
Zimbabwe devalued currency by introducing the RTGS$ and floating it against all other currencies including the USD and the Rand. This official position was already late. Everyone knew already that since the introduction of the bond note, the money in our bank accounts was not at par with the USD which was the currency of record.
Even now, we all know the real value of the RTGS dollar is not determined by the interbank market because that market is inaccessible to any of us if we need to buy the USD or Rand. Of course banks will gladly buy USD from us at that rate but none of us will accept that unless you are a tobacco farmer who is being compelled to do so by the RBZ, the state and its guns.
So what is the Rand price of bread in Zimbabwe? First let’s use the official inaccessible interbank rate. Here are the interbank exchange rates on the last day of trading before the long weekend:
Using the above rates, bread in Zimbabwe is costing just above R15.
On the same day, 17 April, the parallel market rate between the USD and the RTGS$ was 4.85 and it was 2.87 between the Rand and the RTGS$. This puts the price of bread at just above R10. Quite close to the bread price that Masiyiwa quoted for South Africa.
Why this matters
Someone is obviously going to comment that I am knit picking or that I want to sound smart or that I hate Strive Masiyiwa. It’s crazy how we have lowered the standard of debate in this country. Anyway, the above matters because it defines the problem in Zimbabwe differently.
We will be in error if we interpret the problem under false assumptions because we will switch things around including currencies of record and still be stuck in the same place.
If you do price comparisons between Zimbabwe and South Africa using the reality of the currencies we are using here in Zimbabwe you will not find much of the arbitrage that Strive Masiyiwa mentioned. If we use his math it would mean Masiyiwa’s business Econet is also benefiting from arbitrage and the cost of telephony in Zimbabwe is much more expensive than in South Africa. This is simply not true.
The problem in Zimbabwe is that we were robbed of US dollars that we had been earning and saving since 2009 and they were swapped with RTGS$. The RTGS$ itself was devalued, first by real market forces and then later by official decree when the interbank market was introduced. However, our earnings were not adjusted to reflect this devaluation.
The price of bread in real terms has not gone up (in some instances it has actually gone down) but our capacity to afford it has been eroded. This reality will persist even if prices are quoted in Rand. We will still be charged for goods in a currency we are not earning whilst the currency we are earning is continuing to lose value.
Where adopting the Rand may make sense
Masiyiwa’s comment on how 80% of our imports are coming from South Africa is accurate. Adopting the Rand thus makes sense but not just businesses quoting prices in Rand as he suggests because that may make things worse. What would make sense is what Tendai Biti proposed: total adoption of the Rand.
Zimbabwe definitely needs a stable currency and the US dollar is not too good. South African businesses and others from other countries will continue flooding their wares here hunting for the USD. A strong and high demand currency is a curse when in the position Zimbabwe finds itself in right now.
However, the problem above may be achieved by other currency reforms that are not necessarily the adoption of the Rand. This is why diagnosing the problem is important before administering medicine; it broadens up the possible solutions.
The government is insincere in saying the price adjustments are not justifiable. They must admit that the problem is that Zimbabweans are daily losing their capacity to afford basic goods and services because of chaotic currency regimes. Admitting that as the real problem is the first step to solving it. Whether the solution is Rand adoption or not doesn’t matter as long as the solution is structurally sound based on the real problem.
45 comments
nice and on point.
Truly speaking what Strive Musiyiwa and Tendai Biti are saying it is very true because if you can just imagine the US dollar it is very powerful beyond the people of zimbabwe adoption of the South African Rand is a better idea everybody is going to afford life in zimbabwe and everything we got in zimbabwe mostly is coming from South Africa even the money people are full of South African Rand so to buy they have to convert that money where it is going to be very expensive for us
The problem is that other people in zimbabwe they are benefiting with that US dollar but people of zimbabwe are suffering please government of zimbabwe just give a try on that issue of using South African Rand thank you
Ntando, this is unreadable. Try using punctuation and proper grammar. I’m no grammar police, but that’s just unreadable. I come in peace.
What Ntando wrote is just readable, what are you talking about Phidza
Even this thing of people flooding to South Africa it is going to be very limited because jobs are going to be available even the investors it is going to be easy for them to open businesses
Your analysis is spot on Tinashe!
Hauna kukwana
Let our government show us how sincerely they have the benefit of Ordinary Zimbabweans at heart
loaf of bread is R14 in SA.to correct Strive.
I guess they use average price of bread.
loaf of bread is R14 in SA.to correct Strive.where will pple in Zim get the rand wen they are paid in Rtgs??
Just open the border once. I believe the Zim resources are still there. So why is the country is continuing to suffer?
The Zim resources have been handed over to the Chinese secretly. As we speak, the Chinese are in the process of building a state-of-the-art military base for their defence force to protect those very resources. It’ll take World War3 for Zimbabweans to restle them back.
Well said. I completely agree. Quoting prices in Rand will not change anything because noone is being paid in Rand. The problem of erosion of the buying power as the exchange rate shifts will not be resolved. If government is really serious about fixing the Zim currency challenge, adopting the Rand is the only practical, viable option.
Well said. I completely agree. Quoting prices in Rand will not change anything because noone is being paid in Rand. The problem of erosion of the buying power as the exchange rate shifts will not be resolved. If government is really serious about fixing the Zim currency challenge, adopting the Rand is the only practical, viable option.
Well articulated article, thanks for clarifying this to Mr. Masiyiwa and many others. However, our challenge is more than just a currency issue. Our challenge is – we are a non-functional economy, we are not producing anything to generate income for the country – we currently have a huge trade deficit. We do not have the capacity to adopt the Rand because we are not generating enough of it. The big question then becomes “why are we unable to generate income for the country with all the resources that we have?”. This is the problem we need to fix.
This is really spot on, the writer has accurately diagnosed the problem and articulated it very well in this very balanced article. Well done.
This is really spot on, the writer has accurately diagnosed the problem and articulated it very well in this very balanced article. Well done.
Government are to busy celebrating their independence… If they acknowledge the truth then they have to admit failure which for them is never an option let you start talking about regime change. Also it’s about time the sanctions were dropped…. That excuse is giving them to much excuses
Zimbabwe will get Rands from labour export. This is what has survived Zimbabwe to this end. Education and labour are the only standing commodities for Zimbabwe export. How many external families are taking their children to Zimbabwean school? Many. But who has understood, cultivated, grown and promoted that comparative advantage? None. The Zimbabwean labour is unique in the sense that it is willing, hard working and innovative. Who has promoted that? None. Adopting the rand makes sense. Zimbabwe is a transit country for commodity trade with 80% traffic coming from SA
Well said
Why do we peg prices using other people’s currency, let’s use our currency cost whatever it is, considering labor, raw materials, electricity and other overheads and where 20% or whatever of imported ingredients then we factor that. Greedy and profiteering is our problem, humbavha too much
Author you didn’t check that this article was written last year, when Bond was one as to one. How many times did the price of bread rise
Why give the suggestion now. Is it not because its now affecting u
Clearly written but not entirely correct. The problem was not bond notes thry were just the tip of the iceberg. The thing that really destroyed us was the creation of electronic money in the form of IOU’s from the government: treasury bills and “government overdraft at RBZ”. 75% of the USD in the banks had disappeared and been replaced by governement IOUs long before a single bomd note had been printed.
If we adopted the eand informally, it would not solve the problem – the government would still be able to create electronic money in the form.of IOU’s and our rands would disappear.
To.prevent this, we would have to join the RMU (Rand Mknetary Union), abolish the RBZ, hand over monetary control to the Reserve Bank of South Africa – and pass laws makibg it a crime for the government to borrow money in any way other than on the open market.
Clearly written but not entirely correct. The problem was not bond notes – they were just the tip of the iceberg. The thing that really destroyed our economy was the creation of electronic money in the form of IOU’s from the government: treasury bills and “government overdraft at RBZ”. 75% of the USD in the banks had disappeared and been replaced by governement IOUs long before a single bond note had been printed.
If we adopted the rand informally, it would not solve the problem – the government would still be able to create electronic money in the form of IOU’s and our rands would disappear.
To prevent this, we would have to join the RMU (Rand Mknetary Union), abolish the RBZ, hand over monetary control to the Reserve Bank of South Africa – and pass laws makibg it a crime for the government to borrow money in any way other than on the open market.
You’re one of the few people that understand the problem. As long as RTGS settlement happens inside the RBZ, nothing is going to work no matter which currency the country adopts. The RBZ is the bank of banks and there would be nothing to stop them from injecting fictitious Rands from nowhere into the banks Rand settlement accounts thereby diluting everyone’s real Rands which will again lead to a situation whereby customers cannot access real Rand value (cash or wire transfers). Soon the Rand in the bank will no longer have the same value as having Rand cash or Rand in a South African bank. Anenge angova manumber chete. This country is going nowhere until we repeal the exchange control and RBZ acts and completely abolish the RBZ.
The author is the tyoe of person who is needed to chair that so called Presidential Advisory Council. For as long as Zimbabwe is led by people who are incapable of reasoning and are insincere it will go nowhere.Ww all know that in strategic management the basis for a solution is defining the problem first. This guy has just done that.
Spelling corrections: The author is the type of person who is needed to chair that so called Presidential Advisory Council. For as long as Zimbabwe is led by people who are incapable of reasoning and are insincere it will go nowhere.We all know that in strategic management the basis for a solution is defining the problem first. This guy has just done that.
I think Zim is in such a mess because of poor decision-making by certain top financial advisors and economist.We must admit that we Zimbabweans are learned but we cant put theory to practice or apply the knowledge gained at school.We are in this mess because someone approved the use of Ecocash as a money transfer mechanism.Ecocash was supposed to belong to Stewart bank and not to be used by all banks.A lot of stakeholders are to blame for this mess. Stanbic, Nedbank, ZB etc were supposed to have their own e-wallets designed specifically for their banking clients.Now Ecocash is a monopolist,most of the funds for companies, govt and individuals are stuck in Eco cash ( Cloud Money).Hence this serious cashflow problem. You cant import using eco cash but if u have bond notes at least u can buy forex and import. If most of the money is stuck in Eco cash, where did the real cash(bonds and USD) go to?Food for thought.
Another stakeholder who caused this is the citizens. How can people import cars so excessively and externalise all the forex (USD) to Japan? The Japanese as intelligent as they were saw a niche market and located the car dealerships in Musina where they know they won’t be taxed by Zim and avoided Zim’s strict fiscal and monetary policies.The Japanese took all our USD thanks to our learned Zimbabweans who didnt forecast on the implications or the consequences of their actions of importing cars like its now fashionable. Then the citizens are so quick to holistically blame the govt stealing the USD yet they dont realise they were the cause. If you externalising Millions of USDs to Japan every month, there should have been more exports worth millions of USDs coming in every month to offset our vehicle shopping sprees.
Now that we, the citizens have externalised the USD to Japan..We are now forced to park those cars in our backyards because we have no USD to buy fuel. What a roller coaster ride..We really shot ourselves in the feet.
The govt was supposed to control vehicle imports when we started using the USD. Cars are a convinience, good. But we dont have a car manufacturing industry to feed the vehicle-hungry citizens.
The only solution to Zim’s situation is the multi-currency system and get rid of this bond..It’s not working. Adopting the rand alone is risky because we will expose ourselves to the black market for currency exchanges. The multi currency system is the way to go..Businesses should price their products and services using the multi-currency system.
But you can buy US $ using ecocash
Not one word about the theft and looting of the useless criminal government. Not one word about letting a FREE MARKET loose to naturally adjust, which had been happening (parallel currencies of dollar and rand) until the thieving government decided to steal more than had already been stolen. ITS NOT ROCKET SCIENCE! Honest government and free market.
Where in the world is an honest government? I hate Zanu as much as anyone but either take them out or continue to spill hate with fingers on the net. This article is well written and did not need any negative element of whose fault is it etc. WE ALL KNOW THE CULPRITS. Just appreciate the writting and facts and go out and do something about the politics of it.
can finance minister go ahead with the rand while they sort out their boardroom issues which bond or rtg to use let rand make sense to the man on the street. is it a wrong thing to EcoCash R1000 to my grandmother in mutare without worrying of further rtg, bond implications, can she withdraw that R1000 & be normal taxed as per norm
If USD adoption is a curse, how come it worked well when it was introduced (GNU period)? Mentioning GNU is really important because at the end we will realize the root cause is Politics, bad governance, again, politics. We need to get our Politics right, the future of this nation is bright. Nomatter how brilliant the guns at RBZ may be, as long as the political environment is bad as it is, no solution will be accepted by the masses. WE HAVE A CONFIDENCE ISSUE A.K.A PROBLEM.
When l wrote my MBA thesis at you in 2016 l realized that zimbo wanted to force their too to ocuppy 50% of the floor space in shops but they did not cry about high pricescoz it was USD .now that pole collect useless money they don’t want 50% floor space and complain not about imports .my friend m Mpofu wrote a topic on the effects of dollarisation it was thrown away coz some pole said it did not affect the future of zim business but just 2 years after it was thrown away l see what he wrote as you arguments to save him.those who want to contact him plz use 0773055517 maybe he can give a cure this mess.l think as zim we must learn to share the cake and not out compete like MNCs do if not checked .that was my recommendation she l researched on Buy Zimbabwe.Lt was clear at that time that pole were forced to buy zim even when they did like .now we were made to adopt bond but no mechanism was put on standby should it it fail thats
When l wrote my MBA thesis at you in 2016 l realized that zimbo wanted to force their too to ocuppy 50% of the floor space in shops but they did not cry about high pricescoz it was USD .now that pole collect useless money they don’t want 50% floor space and complain not about imports .my friend m Mpofu wrote a topic on the effects of dollarisation it was thrown away coz some pole said it did not affect the future of zim business but just 2 years after it was thrown away l see what he wrote as you arguments to save him.those who want to contact him plz use 0773055517 maybe he can give a cure this mess.l think as zim we must learn to share the cake and not out compete like MNCs do if not checked .that was my recommendation she l researched on Buy Zimbabwe.Lt was clear at that time that pole were forced to buy zim even when they did like .now we were made to adopt bond but no mechanism was put on standby should it it fail thats tradgedy we have .our policies are implemented without a back up should they fail!
Selfishness and Corruption are the main assassins of Zim economy. I have noticed how important it is for liberation movements to realise that they did well in liberating the nation, be humble and genuine enough to handover the running of the country to a sober generation with a drive and knowledge of finance and economics.
Selfishness and Corruption are the main assassins of Zim economy. I have noticed how important it is for liberation movements to realise that they did well in liberating the nation, be humble and genuine enough to handover the running of the country to a sober generation with a drive and knowledge of finance and economics.
The problems are more distorted economic systems that are endemic in each location, sector, and periods and makes it difficult to see through rather than believing that the fair view for that sector, location, etc are exactly what is there in the market. Any other suggestions, are gerrymandering. A look at the cross rates between the USD and the rand would seem that the interbank rate is fair.comparing the direct USD/ZAR rate in SA
All I know is to never take our economic advice from a person who doesn’t stay in Zimbabwe. Poor understanding of any problem always yields a poorly drafted solution. Being the richest doesn’t make you the wisest, but I’d rather be a wealthy fool any day 😉
Whatever you may wish, please please know that the Head is rotten period. The “ruling party” was never created to develop Zimbabwe for you and me. They’re here for “chinhu chavo” and that is why they, since 1997 have been stealing from you and me. Zimbabwe’s population is gullible. A few hyenas are decimating your future while you debate issues here and in the social media. From paying war vets – which moneys went to build Gracelands, C&M mansions in the Brooke, to Blue Roofs, etc. Can’t you all see whose thriving from your misery?
Just a few days ago, over $7million was discovered in Al Bashir’s house. How much was in RGM’s house in the November coup? Why was it kept closed? Who doesn’t know that Gono was printing and devaluing your salary every night to buy US$ on the black market for RGM and himself? How come the mansions brigade is only found among RGM and his close partners in gov’t? What value did they contribute to the economy to deserve what they have taken from it? What’s ED’s son and his girlfriends doing on the market? Where is that forex going? To build Zimbabwe? No.
Why was the bond note created? Exactly, to steal your US$ and replace it with papers, same way they stole your salaries and used them to buy US$ during Gonos time and then decommissioned it as useless. These thieves will keep flip flopping in order to confuse you (muddying the waters in order to eat your children during the confision) so you won’t see what happened. NO MATTER WHAT YOU DO, THERE WILL BE NO PROGRESS IN ZIMBABWE. WE ALL WIRJ FOR THE OLIGARCHY CALLED QUEEN B. WE ALL FEED QUEEN B. If there is nothing for Queen B, they will eat your children by robbing you. Period.
Now that its clear we are at the end of the cul de sac, what are we gonna do? Import AKs and fight the hyenas who dug this hole and are still digging?…or have naive faith that the zombis at ZEC and ConCourt will introduce and conduct free & fair processes that produce undisputed results? …or wait for intelligence (or impatience) to grow in the rural chieftaindoms?
The power axis in Africa is controlled by the security apparatus. Unfortunately, these are ill educated people.
A person doesn’t choose to put his life on the line as a first career choice. Only desperation forces you to choose military because you cannot make it in the cut throat corporate world, which require multi disciplines and astitute mind gymnastics.
Here we are waking up with a Class D intelligence person holding a gun and says to you lie down or I shoot! He now suddenly realises the power of control that the gun gives him, no negotiations required. You have to comply or I kill you. This is the person who now determines who the CEO of the country is.
What motivates a nation to spend time discussing every detail but the qualities of the pilots who are in our cockpits? That area is controlled by unknowns, why? These guys never achieved anything on life. But they promise they security guard with gun in hand that they will get everything. A leadership of teachers and lawyers who do nit study wealth creation but wealth consumption. The skill to write on a black board or spending life in the courtroom shouting ‘objection your honour’ cannot deliver wealth. Running country or a company is a unique science. That’s why China will be the world superpower for centuries to come,
Absolutely!