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(HERALD) Zimbabwe: Inflation and the Diaspora

Zimbabwe: Inflation and the Diaspora
By Tadios Chisango

THE surge of Zimbabwe’s inflation into three-digit levels has been greeted with lots of surprising enthusiasm, gleeful interest and even grim satisfaction by the "Zimbabwean media", both within and outside Zimbabwe, and by the "international Press" (of course, the "Western" news disseminators). As has become the norm, the blame is indiscriminately laid on the doorstep of the monster called the Zimbabwean Government, otherwise referred to as Zanu-PF.

My present aim is not to absolve the Government from responsibility, nor is it to offer a holistic account of the "highest inflation" in the world. My contention is that any model we may draw to explain the rampant inflation of Zimbabwe does not have a single, monolithic factor called "Government mismanagement".

If we are ever to extricate ourselves out of the economic quagmire we are embroiled in, I guess we need to introspect, come out of denial and acknowledge our part in the whole equation.

My second objective is to show how overly simplistic and alarmist the analyses of the inflation figure have been. While acknowledging that we are indeed faced with an apparently insurmountable crisis, I believe we still need to retain and maintain our objectivity and level-headedness.

My analysis of inflation will be done in relation to the individual Zimbabwean, whether within or outside the country. It explores the causal links as well as the interpretation and meaning of the 1 000 percent inflation figure within the context of present-day Zimbabwe.

How does an individual fit in the inflation model? First, it is important to recognise that probably just less than a third of Zimbabwe’s population is out of the country, and a sizeable percentage of these Diasporans is domiciled in hard-currency "Western" countries such as Britain, Canada, the US and Australia.

A close analysis reveals that the Diasporans’ activities have ambivalent effects on the Zimbabwean economy. On the negative side, Zimbabweans outside the country are playing quite an active and significant role in pushing up the inflation figures.

The Diasporans, as self-serving as ever, have facilitated the sucking out of large amounts of cash from the mainstream economy, and placed it within their own mini-economy within Zimbabwe, from which they and their associates at home only benefit. How does this happen?

We Diasporans send money home through some criminals running "money transfer" agencies. These people are criminals, in the sense that they are committing a crime called money laundering.

In ideal circumstances, it is a crime both to the country of domicile and their home country, which is punishable by a jail term. Presently, however, it is not the legality of this act, but the economic effects, on Zimbabwe that is particularly disconcerting.

We deposit pounds and other forms of hard currency into these criminals’ bank accounts, and they deposit Zimbabwean dollars into our relatives’ accounts back home. This money escapes the legal, official routes, which include (legal) money transfer agencies such as Western Union, and finds its way straight into Zimbabwean banks as Zimdollars, exchanged using the parallel market rate, which is even higher in the Diaspora than in Zimbabwe.

More importantly, this money escapes the Reserve Bank of Zimbabwe. The Reserve Bank of Zimbabwe and consequently the mainstream economy of Zimbabwe are losing in three main ways. Without working, without any production or carrying out any formal or informal business transaction, and with the main bank of the country completely unaware, there is miracle money pouring into Zimbabwean banks every day!

It is not surprising, therefore, that miracle money in turn creates a very high demand for goods and services in the country, which has the inevitable effect of pushing up prices, and that is what inflation is all about!

The very high demand for cash necessitates the printing of cash on the part of the Reserve Bank, which maintains and nurtures the environment of very high inflation figures.

Thus, there is an extremely high demand for cash that cannot be accounted for, in any way by the Reserve Bank as it represents the illegal transactions carried out abroad and within Zimbabwe via the Zimbabwean-based money exchangers and the naive banks.

Thus, people both abroad and those in Zimbabwe who are the recipients of the forex or have access to it in one way or the other are creating a very high demand for goods and services in the country, which they only (and other already, and very, affluent people) can afford with ease.

The high buying power of some Diasporans and the moneyed people in Zimbabwe, for example, has resulted in the skyrocketing of houses in some of the country’s low-density suburbs to ridiculous figures like £250 000 which compete with some of the most robust property markets in the entire world, such as England in terms of exorbitance!

These houses were costing only up to £30 000 a few years ago! This is pure, unjustifiable, greed and profiteering, which needs to be checked, even by the much-despised Government before it is too late.

The third effect is that the cash traders in Zimbabwe certainly may never deposit the hard currencies into the banks, and they may as well keep the local tender in their homes in huge amounts in order to trade smoothly with the forex without having to be deterred or having their unconventional, illegal deeds discovered by banks and law-enforcers.

They may also keep the forex for speculative purposes, and perhaps even are buying properties to speculate with, and make huge profits!

These people are concertedly and deviously keeping inflation figures very high, and should take the blame! They can even be considered to be outright economic saboteurs. They have their mini-economy in which they are living lavishly, at the very direct expense of the rest of the impoverished Zimbabweans.

Needless to say, and as argued above, our own relatives whom we send the occasional £100 also cumulatively keep the inflation high, as their money comes directly into the banks without having gone through the Reserve Bank.

Therefore, it is the majority of the people, who do not have any relatives abroad nor any access to foreign currency, who are the only and real victims of the high inflation, otherwise the rest are players and beneficiaries of the hyperinflation, always gregariously checking by how many points the forex exchange rates have risen.

They are not the hapless victims, as is simplistically put across by many a theorist, but are actually the drivers and beneficiaries of some of the processes and phenomena that keep inflation high.

They love the inflation, or at least the potent forces that are keeping inflation high!

My conclusion is that the Zimbabwean society, both within and outside the country, should not be viewed simply as a homogenous set, who are all affected in exactly the same manner by the 1 000 percent inflation rate.

My proposal, even though probably not very practical, is that, it is, indeed, both statistically wise and necessary to restrict the range of the target population, and calculate the inflation rates separately, for the majority of people in Zim (1) without access to forex; (2) those who receive forex from their relatives abroad, based on some average figure of remittance per calendar month; (3) those who are involved in forex trade in Zimbabwe, and (4) for people working in countries such as England; and (5) for those trading in forex in such countries.

When the inflation is calculated only with regard to any people with access to forex, or to Diasporans, it might not be as high as those who bear the full burden, the very "average Zimbabweans" in Zimbabwe.

More importantly, I think the economic problems the country is facing may never go away, as our people have learnt to tinker with one of the basic fundamentals of the economy through money trading.

Even though the Government may have lost most of its high moral ground, money laundering remains a criminal offence, and has a powerful knock-on effect on the economy. I believe the country may have enough forex to break sanctions — if some of the forex were not in wrong hands.

Some people may argue that the forex trading is only a symptom of grave problems within the economy. However, I believe there is a point at which a symptom may become so formidable by and in itself such that it actually becomes one of the main causal factors.

l Tadios Chisango is a Zimbabwean based in England. He can be contacted at: tadychisango@yahoo.co.uk. This article is reproduced courtesy of globalanalysis.

Labels: COLOUR REVOLUTIONS, INFLATION

posted by MrK @ 2:16 AM