Beleaguered Mugabe regime caves in on forex dealings (News Feature)

By Jan Raath Sep 26, 2008, 11:53 GMT

Harare - Hundreds of businesses around Zimbabwe were readying Friday to open their doors to sell goods in foreign currency as the country's own currency accelerated in its crash towards oblivion.

The central bank Thursday granted special licences to 570 retail and wholesale businesses, oil companies and service stations to charge in hard currency, in the latest attempt by President Robert Mugabe's regime to put goods back on the empty shelves of the country's stores.

The move was a major climbdown in the government's war against the booming black-market trade in currency, groceries and fuel.

Inflation estimated at about 15 per cent a day has rendered the Zimbabwe dollar almost worthless, falling to a billionth of its value since the beginning of the year.

Faced with the accelerated collapse of what only eight years ago was Africa's most robust and diverse economy after South Africa, the central bank has shaved 13 zeroes off the value of the currency in a little over a year.

At the same time, the US dollar has become the country's preferred currency, with restaurants, service stations, fast food take-aways, pharmacies and hairdressers insisting on hard currency.

Hundreds of backyard dollar shops selling imported groceries, liquor, and hardware have also sprung up to replace once well-stocked supermarkets, depleted by populist price controls.

Zimbabwe's football authorities are among flocking to the US dollar.

Dynamos, the country's top team, have applied to the central bank to be able to charge US dollars for tickets when they play Cameroonian team Cotonsport Garoua in the semi-final of the African Champions League next month, according to the state-controlled Herald newspaper.

The new licenses come with a hefty price tag. Companies have to pay 20,000 dollars for each outlet, and the central bank charges a 15 percent tax on their takings.

'Failure to act in such extraordinary times, therefore, would be tantamount to the highest level of betrayal to the hard-working people of Zimbabwe,' said central bank governor Gideon Gono issuing the licences.

'Never mind that,' said a senior business executive who asked not to be named. 'It's an admission finally that they have run the currency into the ground.'

Observers also warn the move could exacerbate the plight of the poor.

'Where do ordinary people who earn a living selling tomatoes on the street get US dollars? They will go to the black market, and that will push up demand for forex, and make it much more expensive to buy than it already is,' one wholesaler executive asked.

Basic commodities like maizemeal, the national staple, sugar, cooking oil, bread, medicines and milk will still have to be charged for in local currency. 'So it means they are going to continue to be in short supply.'

Gono also acted to try to relieve the critical shortage of cash and reduce the crowds of angry customers waiting to draw cash from bank ATMs.

From Monday, they will be able to draw 20,000 Zimbabwe dollars a day, instead of the derisory 1,000 Zimbabwe dollars, which is only enough for a copy of the Herald.

The increased withdrawal limit is not likely to be much use for long. The 20,000 Zimbabwe dollar limit is equal to about 20 US dollars, having more than halved in the last week.

'You can't win,' lamented businessman David Hwenge.