0:01

In Southern Africa, a nation may

0:03

have found a new solution to one of its

0:05

long standing issues. Zimbabwe

0:07

is replacing its battered dollar with a new

0:10

unit. It's called the Zig. The

0:12

sweeping move is Zimbabwe's six attempts

0:14

to have a functional currency since two thousand

0:17

and eight. So can this new currency

0:19

really make a difference in a country with crippling

0:22

inflation?

0:23

With the new currency being launched, the

0:26

expectation by the central

0:28

bank is that inflation is going to begin

0:30

to four.

0:32

This week, I discussed with my colleague

0:34

Ray and Lovu in Zimbabwe about

0:36

the introduction of the new unit, its unexpected

0:39

effect on the stock market, and I ask

0:41

him if the Zig is really the solution

0:44

to the country's year's long currency

0:46

crisis. I'm

0:52

Jennifer Zaba Saja. This is the

0:54

Next Africa Podcast, bringing you

0:56

one story each week from the continent

0:58

with the context only Bloomberg can provide.

1:07

Hey, Ray, so you're in Harare, the

1:09

capital of Zimbabwe, and we want to get

1:11

your thoughts on the Zig, the country's

1:13

new currency that's really been making headlines

1:16

around the world. But before we do that, I want

1:18

to first ask you about the previous iterations

1:21

of the currencies that was being used

1:23

in the country, and specifically the Zimbabwean

1:26

dollar. It was one of the worst performing currencies

1:28

in the world until it was scrapped.

1:30

So can you just take us back to the beginning

1:33

of the story.

1:34

Thank you, Jen. So everything pretty

1:36

much begins during the time of

1:38

ipay inflation. That's back in two

1:40

thousand and eight. Ipainflation

1:43

rages too, recorded levels

1:45

of over fifty billion ascent. The

1:48

Zimbabwean dollar then is abandoned in

1:50

favor of the US dollar. That's when

1:52

the US dollar is introduced in February

1:55

two thousand and nine. For ten years,

1:57

the US dollar is used to be the

1:59

transacting currency and then

2:01

it's abandoned by

2:03

again. This time the Years dollar is abandoned

2:06

in favor of the zimbabwe dollar. That

2:08

doesn't last for long. By the

2:10

time of COVID authorities, they ever rethink

2:13

of the entire situation and they

2:15

allow for a multi currency system. So

2:17

that's basically now you know, the local

2:19

currency being allowed to transact,

2:21

to to be used side by side

2:23

with the Years dollar.

2:25

And people were using the dollar for just about everything

2:27

in life.

2:28

Yeah, dollars are useful, you're

2:30

basic every day sort of

2:32

like day to day transactions. If you're

2:34

buying your airtime, buying food in

2:36

the supermarket, fuel,

2:39

paying for medicines, your rentals,

2:41

your school fees, so pretty

2:43

much what is the fabric of life.

2:45

So that was the status quo for a while,

2:48

but it didn't stay that way for long.

2:50

Things really take a nasty turn for

2:52

lack of a better term, at the start of the year,

2:55

there's a lot of demand for foreign currency.

2:57

It's usually a period when the foreign

2:59

current the inflows in the country are very low,

3:02

so there's not a lot of dollars coming through the

3:04

formal channels, and a lot of companies

3:06

and individuals moved to the black market in search

3:09

of dollars. And then this creates such

3:11

a huge demand and the normal auction

3:14

which officially supplies

3:16

dollars, you know, is shut down for the

3:18

Christmas holidays, so you have a

3:21

high demand for dollars at the time and

3:23

very little inflows as well. And

3:26

basically everything almost works against,

3:29

as it were, against the zim dollar because

3:31

a lot of people want access to dollars, there's not

3:33

enough inflows and it

3:35

starts plunging and you know, gen

3:38

the zim dollar basically until

3:40

its end on April five, had

3:42

lost value every single trading

3:45

day, so it's quite you know, a significant

3:47

fall. I think it had lost almost about eighty

3:49

percent of its value by the time it

3:52

was retired.

3:53

What exactly the differences between

3:55

the ZIG, the Zimbabwe Gold and

3:58

the other iterations of Zimbabwe's

4:01

currencies.

4:02

The main difference between the

4:04

ZIG Zimbabwe Gold and other versions

4:07

of past currencies that the country has had is

4:10

that the ZIG is backed

4:12

by gold. This is one of the key

4:14

selling points that authorities have you

4:17

been drumming up and making the public

4:19

away that the currency is

4:22

backed by gold, precious metals

4:24

and about one hundred million dollars

4:26

in foreign currency reserves. The Finance

4:29

minister in an interview with US earlier

4:31

this month, he indicated the

4:33

following.

4:35

You know, most African countries

4:37

and countries in major markets are facing

4:40

trouble with currency.

4:41

Well not.

4:41

Everyone's trying to figure out how to stabilize

4:44

their domestic currencies to maintain competitiveness.

4:46

In Zimbabwe, we think we'll figured it out

4:49

by making sure that our currency is

4:51

linked to certain reserve assets,

4:53

had assets. That's how we've constructed

4:55

it.

4:58

The main thing, it's got gold bagged, it's

5:01

got reserves. The previous versions

5:03

of the currency were not backed by anything.

5:05

There's nothing, you know, it was anchored on.

5:08

So basically you had a printing press almost

5:10

running a mock in terms of printing

5:12

as much supply of the

5:14

Zimbabwe dollar that you have. And now the commitment

5:16

that has come around this time around is that they

5:19

will not print any

5:21

more ZIG than is

5:24

available to be backed by the gold

5:26

reserves. So that should theoretically

5:29

provide the stability that is eluded Zimbabwe

5:32

for many years and the chaos that

5:34

you've seen with other currencies before.

5:37

So, y, how has the ZIG performed thus

5:39

far? I mean, are there any risks

5:42

for the currency moving forward?

5:44

So the currency has gained

5:46

just over two percent against the dollar since

5:49

its introduction. It's obviously something

5:51

quite significant because you know,

5:54

it's previous iteration, this Zimbabwe dollar

5:56

had been losing a value every single day

5:58

of the year. Well, authorities

6:01

pretty much see the main

6:03

risk on top of deflation being

6:06

the currency strengthening too much and that causing

6:09

a loss of competitiveness for industries

6:11

because of a strong currency.

6:13

And most recently the currency is

6:15

surprisingly having some unintended impacts

6:18

on the stock exchange.

6:19

Yeah, so the stock exchange

6:22

is probably one very good indicator

6:24

of what the impact of the new

6:26

currency has been. First of all,

6:29

you know, we spoke to trade as stock

6:31

brokers and a few companies as well that

6:33

have activities on the stock market. They've

6:35

seen a muted activity

6:38

over the last two weeks. So

6:40

basically what this translates to is

6:43

a fall in their incomes because they

6:45

rely on fees and commissions

6:47

from activity on the stock

6:50

market. So now because of the new currency,

6:52

which is stable and there's been very

6:54

very little activity and that translating

6:56

intowards stock brokers, they've called a painful

6:59

early way winter for them. So I think

7:01

one of the people that we spoke to was talking about

7:03

declines of as much as fifty percent in

7:05

revenues among stockbrokers.

7:07

I feel like this is not something that

7:10

the Central Bank governor, who was behind

7:12

the creation of the ZIG or the Zimbabwe

7:15

gold was expecting.

7:17

I think to an extent they expected

7:19

this, perhaps not the

7:22

effect because it does also affect

7:25

government revenues because they do call it taxes

7:27

as well from an activity on the stock

7:29

market. But I think they expected

7:32

the new currency, the ZIG buying large

7:34

to provide some stability right across

7:37

all economic sectors and the Finance

7:39

Minister in the early days of the

7:41

new currency's launch. You know, he also hinderated

7:43

that they could foresee

7:46

some sort of stability setting into the

7:49

stock market and particularly on

7:51

the share prices.

7:53

As far as businesses go, the introduction

7:55

of a new currency, I can only

7:57

imagine it presents a few challenges

8:00

or a number of the people involved. I mean, what

8:02

is it that they're actually having

8:04

to prepare for.

8:06

So with businesses, what the that to do is

8:08

pretty much convert their systems from

8:10

the old currency of the Zimbabwean

8:12

dollar to the ZIG. So it's an activity

8:15

that initially disrupted commerce

8:17

because you know, they had to do

8:19

this switchover. It doesn't you know, all

8:22

done at the same time. Some banks were able

8:24

to finish much quicker than others

8:26

and others took much longer. So

8:28

you had some disruptions that took place

8:31

to commerce and everyone. So like try to change

8:33

over to ZEG from the Zimbabwin dollar.

8:38

After the break, we dig into the

8:41

man behind the launch of the ZIG

8:43

in Zimbabwe and what exactly he's

8:45

trying to achieve for the country's economy.

8:48

We'll be right back. Welcome

9:01

back, all right, let's talk about the Central Bank,

9:03

Ray because the central Bank governor has

9:05

really been outspoken in terms

9:07

of his support for the ZIG. Can you just talk

9:09

to us about the governor and what

9:12

exactly he's been saying.

9:14

So he's been very polish promoting the

9:16

new currency. Since it's long he's been

9:18

on several speaking

9:21

engagements across the country to

9:23

explain what the currency is all about

9:25

and what he sees happening.

9:28

So the governor has got his work cut

9:30

out in terms of convincing the population. And it's

9:32

also been very vocal as well, you know,

9:35

saying that the starting point is for

9:37

them as a central bank to win back

9:39

that confidence that they've lost over

9:41

the past couple of years because of you know, the

9:43

experiences of high pain inflation.

9:45

And what does he achieve with the introduction of

9:48

this currency. I mean, obviously, if things go well,

9:50

he can tell the fact that he was at the helm when

9:52

the Zimbabwean currency actually succeeded.

9:55

But is there something else that we're maybe

9:57

missing here the governor.

10:00

We had to sit down interview with him recently

10:03

and that's one of the first things that we posed to him

10:05

to say, what is he trying to achieve with

10:07

this new currency, and this

10:09

is what he had to say. MY main

10:11

priority is to make sure that I stabilize

10:14

the currents in the next ninety

10:16

three hundred days. So he's sticking

10:19

to the mandate of the central Bank, which

10:21

is price stability

10:23

and exchange rate stability. That's

10:26

what he's setting out to do over the

10:28

next one hundred days since his appointment on

10:30

March twenty eight.

10:32

And that would require a lot of things to

10:34

be put in place by authorities in order

10:36

to get buy And I assume is there buy

10:39

in at this point in time, and how did authorities

10:41

actually go about rolling out this new

10:43

unit.

10:44

So the authorities themselves, they

10:46

are saying one of the things

10:48

that they've agreed on is that they'll last companies

10:51

to pay fifty percent of their quarterly

10:53

taxes in Zeke as a way to promote

10:56

demand. But that's been as far as

10:58

the main sort of ask from

11:00

them. So I think they need to do more if

11:03

that demand for Zeke is going to really

11:06

take a place within the economy. What

11:09

they've asked so far as the starting point, we'll

11:11

see a lot of demand in June for

11:13

payments of taxes by companies, and they

11:16

the governor himself has also say that he expects

11:18

the ZEK to strengthen even further around that

11:21

time period.

11:22

And Ray, as we mentioned you're in Harara.

11:24

I mean, what's been the reaction on

11:26

the streets. Considering these are many

11:28

people who have probably lived

11:30

through the days of hyperinflation in

11:33

Zimbabwe, how are they actually

11:35

feeling about this?

11:36

The selling point about being gold

11:38

backed really means nothing to

11:41

a lot of people. People have lost

11:43

before, savings, they've lost

11:45

money before. So the feeling is

11:47

here we go again. You know, whether it to work

11:50

or not is really something

11:52

that a lot of people are still holding out

11:55

and not banking and believing, you

11:57

know, it's going to work out. At the moment, the

12:00

key issues the central bank has to win over

12:03

the confidence of citizens.

12:04

And finally, Ray, we're still talking about

12:06

a country that has inflation that is

12:08

north of fifty percent. There's poverty,

12:11

there's also unemployment. There are

12:13

a number of economic issues that Zimbabwe

12:16

is grappling with on a daily basis.

12:18

If the ZIG actually succeeds, does

12:21

it help resolve some of these issues.

12:24

With the new currency being launched, the

12:27

expectation by the central

12:29

Bank is that inflation is going to begin

12:32

to fall. In fact, the Governor

12:34

told us that he sees inflation

12:37

anyway below five

12:39

percent and that's on the back

12:41

of inflation which in

12:43

March was around

12:45

fifty five percent, So the

12:47

expectation is to bring it down

12:50

to single digits by the end of

12:52

this year as a result of the introduction

12:54

of the Zeke the Zimbabwe Gold.

13:01

Ray thanks again so much for your

13:03

time, and as Ray said, it may

13:05

be too early to tell whether the

13:07

Zimbabwe goal will actually

13:09

be deemed a success for the country.

13:12

Zimbabwe has been relying on the US

13:15

dollars since two thousand and nine, back

13:17

to the time of hyperinflation, and as

13:19

mentioned, it now accounts for eighty

13:22

percent of all transactions in the economy,

13:24

so key to adoption and as

13:27

the Deputy President says, eventually dedollarization

13:30

may be the zig being more widely

13:33

accepted for your basic needs,

13:35

so that Zimbabweans can actually

13:37

feel the benefit of a currency. And

13:40

you can hear more stories like this one

13:42

on the Next Africa podcast, available

13:45

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13:48

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13:50

We'll be back next week.