Zimbabwe trip

Wednesday, November 12, 2008

Today, I’ll share just some general observations about the country. In anearlier post, I mentioned that the inflation rate was a quadrillion percent. I think that was accurate last week, but this week, the paper says the inflation rate is a quintillion percent. Per the paper a quintillion has 18 zeros. One of the hardest parts of operating here is understanding what that means. People who are paid in Zim dollars, basically lose money within hours of receiving it. If it goes to the bank, it becomes basically worthless, as you can only withdraw 100,000 Zim dollars at a time. By the time you get your money out, the time value of money has completely worked against you. Even figuring out exchange rates is difficult. For instance, this morning at the hotel, we were told a small bottle of water was $5 US dollars. This was at both the front desk, and at one of the two hotel restaurants. Tonight, I asked to buy a bottle, but went into the bar vs. the restaurant. In the bar, a bottle of water was $1 US Dollar. All of these places are within the same small space. In fact, you can stand in the lobby and within 20 steps be in the door of any of the three. Even more amusing, the gentleman who wanted to take my $5 dollars at the restaurant walked me into the bar, and filled out the receipt to charge me $1 there. Now picture this for every commodity at every shop in every location in Zimbabwe. Many businesses will no longer accept Zim dollars. These are businesses both licensed to accept foreign currency, and those that are not. There are signs in the hotels that state Zimbabwe law requires foreigners to settle their hotel bill in foreign currency. Imagine passing a law that says if you visit our country, we will only allow you to pay in a currency other than ours. Checks are no longer accepted, nor are credit cards. It’s too great a risk for the business due to the inflation rate. Plus, the business couldn’t cash the check, as they can only withdraw a small amount per day. As close as I can figure now, $1 is equivalent to 1,000,000 Zim dollars. A business can only withdraw 1,000,000 Zim dollars per day. And to do that, they must wait in huge lines outside the bank to try to get in and withdraw the money.

Some businesses like hotels or airlines are now requiring payment up front and in foreign currency. In some instances, the payment is required at the time of reservation. We were talking with a gentleman in the airport on the way here that told us he had reserved a rental car, and had been called the night before and told the rental agency had cancelled his reservation. Their reasoning was that even though he had paid in advance (full amount), the payment was in Zim dollars, and therefore inadequate. They would reinstate the reservation only if he would pay up front in foreign currency. At the time of our discussion, the man did not know if they
company would refund the Zim dollars he had already paid, and he was trying to figure out what options he had. I don’t believe he’ll get that cash back, as it would take weeks for the rental agency to withdraw from their bank accounts enough cash to repay him when they can only withdraw small quantities of Zim dollars a day.

Imagine how depressing this is for people here. They may be paid, but can’t access their money. Businesses can’t pay employees because they can’t access foreign currency or enough Zim dollars to pay their employees. We’ve passed dozens of industrial sites, all closed due to economic
conditions. We complain about our economy and the cost of items, and even though we are paying more for items in the US than we were a year ago, we have a huge advantage. We at least know what the item costs and the cost doesn’t change hourly. We also have some understanding of the reasons behind price increases, and have an economic system that is comprehensible.
Not all of us agree with the increases, or like the current system, but it gives us a measure of stability regardless of our opinion. That stability is completely absent here and is driving people to go to extreme measuresto support their families.

More general comments tomorrow about life in Zimbabwe.