The recent introduction of the new Zimbabwean currency, the Zimbabwe Gold (ZiG), has thrown the nation into turmoil, affecting its most vulnerable citizens the most. Since last Friday, when the transition commenced, a significant portion of the population has been barred from the financial system, struggling to secure even the basic necessities for daily living.
As the first weekend of transition unfolded, ordinary Zimbabweans who relied on Real Time Gross Settlement (RTGS), bond notes, and Ecocash found themselves unable to complete essential transactions. The sudden shift left many without access to necessary goods, intensifying the already dire economic conditions.
John Mushayavanhu, the newly appointed governor of the Reserve Bank of Zimbabwe, initially promised that the banks would complete the transition within a few days. Yet, the reality has proven more challenging, with official updates now indicating that the full transition may stretch to the end of the month. Despite Econet’s assurance that Ecocash has successfully converted to ZiG, complications persist with RTGS and bond notes still inactive.
The reconfiguration of banking systems stands as a significant obstacle, causing several banks to experience delays in their digital services due to necessary system verification checks. Stanbic Bank, among others, has issued apologies for the inconvenience and aimed to restore full services promptly.
Additionally, the introduction of ZiG has spurred panic and opportunistic behavior in the market. Some informal retailers have started to refuse bond notes or significantly raised their prices. Public transport operators have switched to demanding payments in US dollars, exploiting the prevailing confusion and uncertainty.
Zimbabwe’s economy is notoriously unstable, previously marred by hyperinflation as observed in 2008 with the issuance of one-hundred-trillion-dollar notes. Over 80% of transactions have been conducted in hard currencies, primarily the US dollar, setting a skeptical backdrop for the acceptance of a new and untested currency.
The skepticism appears justified as the newly introduced ZiG traded at US$1: ZiG 13.5616 on its first day. This shift in currency valuation has dealt a harsh blow to those holding bond notes, a staple in the financial landscape since 2016. Before the announcement of the new currency, US$0.50 was valued at ZW$3,500 in bond notes. After the announcement, the value surged to ZW$5,000, with some retailers demanding up to ZW$10,000 for goods previously valued at US$1.
To manage the transition, the Reserve Bank has implemented measures requiring banks to inquire into any depositor attempting to deposit ZA$100,000 or more in bond notes, which is less than US$20 on the parallel market.
As banks scramble to update their systems, Fanwell Mutogo, chief executive of the Bankers Association of Zimbabwe, expressed optimism that most banks would resume normal operations on the ZiG platform by the end of the following day. Furthermore, provisions have been made for non-bank account holders to deposit old banknotes at designated locations within a 21-day window, an essential step to ensure that no one is left holding worthless currency.
The rollout of ZiG marks a critical juncture for Zimbabwe as it attempts to stabilize its economy and restore confidence in its financial system. The coming days will be pivotal in determining whether this new currency can navigate the complexities of Zimbabwe’s economic landscape and foster the inclusivity and stability that the nation desperately needs.