Black market saving Zimbabwean economy
Devalued currency, ineffective government programs escalate illegal trade
By: Shashank Bengali, MCT
Posted: 4/2/08
On a typical workday, Lovemore Vambe will make dozens of clandestine phone calls that lead to a handful of illegal transactions. He'll conspire with colleagues, sidestep police or bribe them if necessary, and come home in the evening with a few dollars in his pocket.
That's enough to make the rent and keep his eldest child in boarding school. In Zimbabwe's free-falling economy, the slight, mustachioed 31-year-old holds a rare steady job: He's a money dealer on Harare's thriving black market, helping Zimbabweans trade foreign currency for their increasingly worthless local cash.
With inflation estimated at 200,000 percent - easily the highest in the world - Zimbabwe's currency is barely worth the paper it's printed on. (The largest Zimbabwean note, 10 million dollars, can't buy more than a couple of sodas.) Foreign currency runs this economy now, mainly the U.S. dollar and the South African rand, nearly all of it traded on the black market.
The government of longtime President Robert Mugabe, who faces a critical re-election test on Saturday, has pegged the exchange rate at $1 to 30,000 Zimbabwean dollars. But the currency is losing value at such head-spinning speed that on the streets of Harare, one U.S. greenback will soon fetch about 2,000 times that.
Since no one can afford to do business at the official rate, Vambe says the thousands of informal dealers have become Zimbabwe's lifeline.
"If you want Zim dollars, you have to buy it on the parallel market," said Vambe, seated on an overstuffed sofa in the comfortable suburban home he shares with his wife and three children.
"The banks don't allow you to pull out more than 500 a day," he said, meaning 500 million Zimbabwean dollars, the six zeroes on the end being essentially meaningless in a figure that equates to less than $10. "And that is when they have cash. Me, I can always find cash for a customer."
But he has to hustle. Even though the police regularly crack down on the illegal trade, in a country where nine in 10 people don't hold regular jobs, money-dealing is a rare chance to make a buck and is therefore highly competitive. In a good week, Vambe can make $100 in commissions, more than enough to cover the month's rent.
Zimbabwe's economy began failing a decade ago after Mugabe launched a politically motivated land reform scheme that bankrupted the farm sector, the country's main source of income. Now, remittances from Zimbabweans living overseas drive the economy, pumping as much as $1 billion in foreign currency into the country each year, nearly all of it coming through the black market.
"There is absolutely no way that the economy could function without the inflows of money via the black market," said Tony Hawkins, a leading independent economist in Harare.
Finding money on the streets is easy, Hawkins said, because the government prints so much of it. With Mugabe facing a close election race, Hawkins believes that the Reserve Bank of Zimbabwe has dumped more than 1.5 quadrillion dollars onto the market over the past month, "to buy votes for the ruling party in one way or another," he said.
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