Zimbabwe’s gold-backed currency collapses despite crackdown, 4 months later

Banknotes of the new national currency Zimbabwe Gold, ZiG for short, are presented at a press conference of the Central Bank of Zimbabwe. (Columbus Mavhunga/picture alliance via Getty Images)

• The Zimbabwe Gold currency launch in April has lost half its value, according to the black market.
• Retailers and businesses continue to undermine or reject the ZWG, including one chain owned by a government minister.
• Retailers forced to sell at the official ZWG are seeing a profitable trade in goods such as bread.

A 35-year-old security guard in Zimbabwe, Ezekiel Chiradza, was arrested on Monday on allegations that he insulted President Emmerson Mnangagwa and undermined the Zimbabwe Gold (ZWG) currency launched in April.

Chiridza’s arrest came after filming a video he later shared on a WhatsApp group accusing the president of mismanaging the economy.

“There is no respite in targeting citizens for perceived dissent,” Zimbabwe Lawyers for Human Rights said in a statement.

When it was launched, the ZWG was said to be backed by the country’s gold reserves and other minerals such as diamonds.

The currency has been sliding in value on the black market and faces public resistance despite the government unleashing police and the intelligence services on people rejecting the new money.

READ | Zimbabwe’s new currency holds fort amid fears of an exchange rate implosion

Vice-president Constantino Chiwenga said the government will continue to protect the currency.

“Our government introduced the Zimbabwe Gold as our new sovereign currency. It is our responsibility as a nation to embrace and protect the new currency as a bedrock and anchor of our economic development.

“Let me assure you that the government is working to promote the wider use of our local currency and is putting in place measures that will eliminate gaps that are creating arbitrage opportunities in the exchange market,” he said, addressing mourners at the burial of retired brigadier Shadreck Ndabambi at the National Heroes Acre on Wednesday.

The official rate on Thursday was pegged at US$1 to ZWG13.8 – while on the black market it traded at around twice as much to the US dollar.

Retailers are forced to take payments in ZWG while some of their suppliers demand US dollars or South African rand.

It’s even worse for importers, without adequate foreign currency provision from the government.

ALSO READ | Zimbabwe unleashes police, intelligence services on people rejecting new ZiG currency

Those who continue to take the ZWG have resorted to what is called “forward pricing” whereby they sell their products at black market rates.

This gives them leverage to buy forex on the black market at a premium.

A chain of stores owned by Raj Modi, Zimbabwe’s deputy minister of industry and commerce, is one of those doing so in Bulawayo.

For example, Mazoe orange juice, a product that sells for $5 or R100 in the local currency, costs ZWG114.5 at the minister’s shops.

That implies a rate of ZWG22.9 to the dollar – last week’s black market rate.

Modi did not respond to questions from News24.

READ MORE | Zim govt now wants mobile money services back – after blaming them for a currency crash

Some retailers and pharmacies switch off their point-of-sale machines, forcing customers to use foreign currency.

In some shops there are goods such as cooking oil that can only be purchased in forex, because they are critical imports.

Bigger retailers such as South African-owned Pick n Pay are closely monitored and stick to the official rate.

Pick n Pay’s Zimbabwean partner Meikles Limited, in its financial statements released in January for the last quarter of 2023, said the depreciation of the local currency was behind its poor performance.

Hunger for dollars

The disparity in official and black market rates has seen new forms of entrepreneurship pop up. Bread is price controlled and sells for ZWG15 when available in that currency, but goes for $1 or R20 in other currencies. Traders cash out the difference by buying bread in Zimbabwe Gold and reselling it in those currencies.

“It’s an easy way to earn foreign currency and you have a bigger profit margin than the bread bakers themselves,” said street vendor Tinashe Moyo.

Some traders will now offer an effective discount of 20%, he said.

The ZWG is mostly in electronic form despite physical notes and coins in circulation; you can only withdraw ZWG3 000 ($215 at the official rate) per week.

James Ncube (55) took early retirement from government employment as a teacher in January after 20 years on the job.

He had 10 more years to work before reaching 65 years of retirement age.

His pension was paid in the ZWG in May this year and he bought forex on the black market to lock in the value.

“The money has lost almost half of what it was worth when I was paid. If I had not bought foreign currency as a store of value, I would have been left with nothing,” he said.

READ MORE | Zimbabwe’s new ZiG currency goes physical… but not everywhere

Ncube said most of his family’s daily needs were paid for in foreign currency, so keeping ZWG is not a smart move.

When the government introduced ZWG, there were promises that by now one would be able to buy fuel or gas using it. That’s yet to happen.

The currency is not recognised outside Zimbabwe.

“The only things I pay for in ZWG are rates and electricity. Everything else is either in black market prices or hard currency,” Ncube said.

Bulawayo mayor David Coltart in a post on X said the government fixed ZWG rates were disadvantaging service delivery and the business community at large.

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