Are Bread Prices in Rand the answer to Inflation?
With the introduction of the RTGS Dollar on 22 February this year, an online currency only, Zimbabwe moved on terra nova as it is the first country in the world where cash in local currency has almost been abolished. Menus in Restaurants and Prices in Supermarkets are shown in “Dollar”, but it is not the US Dollar, it is the “Real Time Gross settlement Dollar”, short “RTGS Dollar”.The RTGS Dollar can currently be multiplied by 4 in order to find its Rand equivalent.
But the introduction together with the move to “Ecocash” that can be used to pay and receive money via Smart Phone Apps goes not without criticism as the example of Zimbabwean businessman Strive Masiyiwa shoes, who wants the country to start pricing its goods in Rand instead of RTGS dollars, a move that could introduce some price stability, as the RTGS has since its induction weakened about 18% versus the US Dollar. In its wake, the annual inflation rate has risen to its highest levels since a hyperinflation episode in 2008.
But know this: Masiyiwa, whose Econet is powering the Ecocash trade country-wide and now one of the biggest companies in Zimbabwe, was reacting to news that the price of bread almost doubled to RTGS$3.50 from $2 this week. He stated on Facebook: “The people who pay for a lot of goods are Zimbabweans living in South Africa, through their remittances. The cost structure – labor and goods – in Zimbabwe is distorted by the arbitrage of the United States dollar as a currency of settlement for Rand imports". Masiyiwa said further, that if every business in Zimbabwe quoted goods and services in Rand for their customers, “it would go some way to eliminating the dollar arbitrage”.
He said this was not the same thing as joining a Rand Monetary Area (he meant the CMA) , or customs union (he meant SACU), which is a more complex process. This one can be done “overnight, and even voluntarily.”
It saddens that those words are spoken by a businessman, whose wealth sprung from opportunity and who has obviously no respect for the currency of other nations. Currencies are proprietary and it is not up to any nation to simply start trading in another country’s currency as the US has made clear more recently when sending warnings to Mozambique, Angola and Zimbabwe that the day-to day-use of their national currency is no longer tolerated. Zimbabwe is currently going a unique way with a new, own currency nd requires support instead of dilution by those who control markets and goods.
It also stands to reason that leading an argument by an example that should be considered out of the ordinary is helpful to solidify trust in local authorities and fiscal policy. Zimbabwe and its RTGS Dollar need the support across all sectors and not the competition through previous scenarios, where 6 different currencies where valid for transactions in Zimbabwe.
Masiyiwa is ill-advising the public with his suggestion. Instead – and especially in his position – he should bolster the confidence in the RTGS Dollar instead of undermining it! And if we talk about a loaf of bread that is now RTGS$ 3.50 ….well welcome to South Africa, where the retail-chain-mafia is asking nothing less in order to finance their 30% profit margins!