HARARE, Zimbabwe — The introduction of Zimbabwe’s newest currency, the ZiG (Zimbabwe Gold), in April has inspired local reggae artist Ras Caleb to record a song praising the new currency. The catchy tune, “Zig Mari,” received extensive play on state television and radio. Ras Caleb was rewarded with a car and $2,000 — ironically paid in U.S. dollars — from a businessman with ties to the ruling party and President Emmerson Mnangagwa.
Zimbabwe’s government launched the gold-backed ZiG in a desperate bid to halt a money crisis exacerbating the country’s economic woes.
This marks the sixth national currency in 15 years, following the depreciation and rejection of the Zimbabwe dollar.
Senior officials from the Reserve Bank of Zimbabwe and the ruling ZANU-PF party have embarked on public rallies and meetings to encourage the skeptical population to embrace the ZiG over the U.S. dollar, which remains legal tender in the country.
Commercial jingles promoting the ZiG have flooded the airwaves alongside Ras Caleb’s single. However, the ZiG faces significant public mistrust and structural barriers, with many Zimbabweans still favoring the U.S. dollar.
While the ZiG has maintained its value on the official market, it has depreciated on the black market, where $1 can be exchanged for up to 17 ZiGs.
Authorities have resorted to force to support the new currency, arresting over 200 street currency dealers and freezing accounts of businesses accused of undermining the ZiG.
National police spokesman Paul Nyathi stated that the government accuses these dealers of devaluing the currency by using higher exchange rates than the official one.
The crackdown is seen as incongruous, given Zimbabwe’s history of street currency dealers whose unofficial rates often dominate. Many shops and merchants ignore the official rate, accepting the local currency only at their own rates, and many vendors still only accept the dollar.
Moreover, the government has allowed some businesses, such as gas stations, to refuse the ZiG in favor of U.S. dollars, and departments like the passport office also accept only greenbacks.
The government has announced fines up to 200,000 ZiG (about $15,000) for businesses that do not adhere to the official exchange rate and has frozen bank accounts of some businesses accused of rejecting the new currency or trading at higher rates. The Reserve Bank has not named the affected businesses.
Zimbabwe has a tumultuous history of monetary instability, with the ZiG being the sixth currency since the Zimbabwe dollar’s hyperinflation-induced collapse in 2009. Hyperinflation reached 5 billion percent, leading to the issuance of a 100-trillion Zimbabwe dollar banknote.
John Mushayavanhu, governor of Zimbabwe’s central bank, has promoted the ZiG as a step toward de-dollarization, aiming to reduce the U.S. dollar’s dominance in transactions from 80% to 50% by 2026.
However, the U.S. dollar remains widely used for rent, school fees, and groceries, with many citizens trading their local currency earnings on the black market for dollars.
The government is working on mechanisms to provide access to dollars through bureau de changes for small transactions. Economists and business groups warn that using force is unlikely to build confidence in the ZiG or stop black market trading. “They will work to ensure that the police do not catch them,” said Sekai Kuvarika, chief executive of the Zimbabwe National Chamber of Commerce.
Street currency dealers, once a common sight in urban areas, have gone underground since the crackdown, using social media and instant messaging platforms to connect with customers. Maxwell Chisanga, a resident of Harare, said his shop pays him in ZiGs, but he needs U.S. dollars for everyday transactions. “My landlord needs her rent in dollars, so I have no choice but to look for it on the black market,” he said.
Economist Prosper Chitambara emphasized that building public confidence in the local currency is essential. “The solution is to build public confidence in the local currency. Otherwise, arrests will not work as long as people are hungry for U.S. dollars, which they cannot get from official channels,” Chitambara said.
https://www.africanexponent.com/zimbabwes-new-currency-faces-uphill-battle/
