HOW US DOLLARS INCREASE PRICES IN ZIMBABWE.
Among other things, when we sell our gold, agricultural produce or currency for cash in US dollars, which most Zimbabweans prefer because of sanctions on US dollar banking transactions, we generally have to pay a high fee for the cash.
Then, we must pay handling fees, security, secure fright costs, insurance and delivery of those dollars to Zimbabwe either in luggage or by BRAIT or other such security companies.
Those who handle cash must also consider the old and tattered US dollar notes that they lose because they can’t replace or exchange them at any bank when they reach their demise.
So, by the time US$100 lands in Zimbabwe, it now costs anything from US$120-US$130. This means for Zimbabwe to get US$100 million, it will cost an extra US$20-US$30 million, even before it is employed or loaned to anyone.
The question is, how then is that extra US$20-US$30 recouped? Higher prices, cash premiums and very expensive loans which cause inbound inflation in US dollars.
In the case of US dollar loans, our loans come from secondary and third level lenders who charge very high-risk premiums due to sanctions, and where we need cash loans for the notes, they load more cash handling fees.
This makes the use of such a costly currency unsustainable for building Zimbabwean industry, producing competitive products and it’s why everything is so expensive in Zimbabwe.
All of this is happening while we are competing in a market with countries like South Africa that print their own currency at costs of 9 cents for every note they print, they pay their workers and for inputs in their cheaper currency, thus reducing production costs. More critically, their export US dollar payments, come in through their banks as low risk international transfers that don't get blocked and carry a small percentage of transfer fees, while international loans cost them minimal interest.
Zimbabwe cannot compete or successfully mitigate sanctions as long as we use the currency of the nation that is sanctioning our economy.
So, we need to make a change now by embracing our currency, promoting it aggressively, consuming less, importing less unnecessary things, exporting more processed resources, trading more in Africa to build our gold and forex reserves. Otherwise, we are stuck in the same high inflation cycle of the past 23 years.