MJMANDALAY
04-07-2007, 04:15 PM
Black Market Economy Thrives in Zimbabwe
HARARE, Zimbabwe (AP) -- The economic chaos engulfing Zimbabwe has turned even a mundane task such as renting a car into an unachievable dream for the average law-abiding citizen.
A car rental company on Saturday quoted a day rate of 69,000 Zimbabwe dollars to hire a basic model, plus a deposit of 25 million Zimbabwe dollars. This is the equivalent of a staggering w$2,760 per day - plus a deposit of $100,000 - at the official exchange rate, but only $35 and $125, respectively, on the black market.
The figures provide an insight into the growth of the black market economy in this once-prosperous southern African nation, which is reeling under inflation of more than 1,700 percent and suffering from shortages of most basic goods.
The number of Zimbabwe dollars that bought a three-bedroom house with a swimming pool and tennis court in 1990 today - at official exchange rates - would buy a single brick. A lifetime public worker's monthly pension cannot buy a loaf of bread.
The independent Consumer Council estimates regular supermarket goods increased in price by between 50 and 200 percent last month alone. The official government mouthpiece, the Herald newspaper, warned last week that inflation would hit 2,500 percent by the end of April.
President Robert Mugabe blames sanctions, drought and Zimbabwe's former colonizer Britain for the collapse of an economy based on exports of agricultural and mineral products.
Others blame land grabs, in which Mugabe encouraged blacks to force out most of the 5,000 white commercial farmers who owned 40 percent of all agricultural land and produced 75 percent of agricultural output.
Zimbabwe's main foreign currency comes from an estimated 3.5 million of its nationals living abroad, replacing tobacco exports, tourism and mining revenues slashed in six years of political and economic turmoil.
Much of the hard currency sent home from Zimbabweans abroad ends up on the black market - and gives even impoverished villagers the benefit of black market deals, making most of the population lawbreakers, analysts say.
Currency violations carry the penalty of a fine or imprisonment, which are invoked often - mainly by political and business rivals seeking to settle grudges.
Many Zimbabweans are prepared to run the risk, saying they have no choice considering the official rate of 250 Zimbabwe dollars to the U.S. dollar, and the black market rate of 20,000 Zimbabwe dollars to the U.S. dollar.
For instance, a pack of six wax candles, traditionally used by rural poor but now essential in urban homes during frequent power outages, sold for 47,000 Zimbabwe dollars, which was $188 by the official rate, or $2.35 at the unofficial one.
A can of soda costs 10,000 Zimbabwe dollars, or $40 at the official rate, and 50 cents at the black market rate. The price of a bottle of imported Scotch whisky was around 500,000 Zimbabwe dollars, or $2,000 officially and $25 by the black market.
A Zimbabwean motorist wanting to rent a car Saturday was told that the 25 million Zimbabwe dollar deposit on a Volkswagen Chico was payable in cash - bundles of it - or a bank certified check on a day banks were closed for Easter.
"When we accept cash, it's obviously coming from the black market. We don't ask questions or we'd be out of business," said an official of the rental company who asked not to be identified in case of investigation by central bank inspectors.
"Everyone does it. That's the way it works," he said. "It doesn't make any sense to change at the bank. Do you think our politicians do that?"
If a foreign tourist bought a small, locally made chocolate Easter egg at 22,000 Zimbabwe dollars on his international credit card, charged by law at the official rate, it would set him back $88. But if he changed money on the street, he would get it for just over $1.
HARARE, Zimbabwe (AP) -- The economic chaos engulfing Zimbabwe has turned even a mundane task such as renting a car into an unachievable dream for the average law-abiding citizen.
A car rental company on Saturday quoted a day rate of 69,000 Zimbabwe dollars to hire a basic model, plus a deposit of 25 million Zimbabwe dollars. This is the equivalent of a staggering w$2,760 per day - plus a deposit of $100,000 - at the official exchange rate, but only $35 and $125, respectively, on the black market.
The figures provide an insight into the growth of the black market economy in this once-prosperous southern African nation, which is reeling under inflation of more than 1,700 percent and suffering from shortages of most basic goods.
The number of Zimbabwe dollars that bought a three-bedroom house with a swimming pool and tennis court in 1990 today - at official exchange rates - would buy a single brick. A lifetime public worker's monthly pension cannot buy a loaf of bread.
The independent Consumer Council estimates regular supermarket goods increased in price by between 50 and 200 percent last month alone. The official government mouthpiece, the Herald newspaper, warned last week that inflation would hit 2,500 percent by the end of April.
President Robert Mugabe blames sanctions, drought and Zimbabwe's former colonizer Britain for the collapse of an economy based on exports of agricultural and mineral products.
Others blame land grabs, in which Mugabe encouraged blacks to force out most of the 5,000 white commercial farmers who owned 40 percent of all agricultural land and produced 75 percent of agricultural output.
Zimbabwe's main foreign currency comes from an estimated 3.5 million of its nationals living abroad, replacing tobacco exports, tourism and mining revenues slashed in six years of political and economic turmoil.
Much of the hard currency sent home from Zimbabweans abroad ends up on the black market - and gives even impoverished villagers the benefit of black market deals, making most of the population lawbreakers, analysts say.
Currency violations carry the penalty of a fine or imprisonment, which are invoked often - mainly by political and business rivals seeking to settle grudges.
Many Zimbabweans are prepared to run the risk, saying they have no choice considering the official rate of 250 Zimbabwe dollars to the U.S. dollar, and the black market rate of 20,000 Zimbabwe dollars to the U.S. dollar.
For instance, a pack of six wax candles, traditionally used by rural poor but now essential in urban homes during frequent power outages, sold for 47,000 Zimbabwe dollars, which was $188 by the official rate, or $2.35 at the unofficial one.
A can of soda costs 10,000 Zimbabwe dollars, or $40 at the official rate, and 50 cents at the black market rate. The price of a bottle of imported Scotch whisky was around 500,000 Zimbabwe dollars, or $2,000 officially and $25 by the black market.
A Zimbabwean motorist wanting to rent a car Saturday was told that the 25 million Zimbabwe dollar deposit on a Volkswagen Chico was payable in cash - bundles of it - or a bank certified check on a day banks were closed for Easter.
"When we accept cash, it's obviously coming from the black market. We don't ask questions or we'd be out of business," said an official of the rental company who asked not to be identified in case of investigation by central bank inspectors.
"Everyone does it. That's the way it works," he said. "It doesn't make any sense to change at the bank. Do you think our politicians do that?"
If a foreign tourist bought a small, locally made chocolate Easter egg at 22,000 Zimbabwe dollars on his international credit card, charged by law at the official rate, it would set him back $88. But if he changed money on the street, he would get it for just over $1.