Kiya-Kiya Economics

 Who would’ve thought that a nation that is said to be the most literate on the African continent would surprisingly become the opposite when it was time to read an economics textbook? As far as the people of Zimbabwe are concerned, economics is about 'kukiya-kiya'. 'Kukiya-kiya' is a Shona slang term that can be simply translated as 'to improvise'. After all, Aristotle did state that “No great mind ever existed without a touch of madness”. In this post, we shall probe some of the economic miracles, acts of financial McGyvery and monetary gymnastics that have been performed in Zimbabwe over the past 2 decades.

1. Black Friday.

Black Friday (a.k.a. the first time the Zimbabwean Dollar crashed) took place on 14 November 1997 when the government of the day paid out ZW$50 000 each to over 60 thousand war veterans. This was completely unbudgeted, and hyperinflation ensued. It was the beginning of the end and the Zimbabwean Dollar never recovered.

2. Standard Chartered becomes the new Reserve Bank?

In 2003, Standard Chartered Bank and Cargill Cotton Group issued emergency bearer cheques that were to be used as cash as a response to a shortage of regular RBZ-issued banknotes.

3. The First RBZ Bearer Cheques

In September 2003, the name “Zimbabwe Dollar” was now abandoned and the RBZ began to issue bearer cheques although there was little difference between them and Zimbabwe Dollars. They were both cash. The bearer cheques were just in higher denominations.

4. Operation Sunrise (a.k.a. “Zero to Hero)

In 2006, the existing bearer cheques had three zeroes removed from them. A ZW$1 000 note before August 2006 became a ZW$1 note thereafter. Also, a 1 cent banknote was printed. The paper it was printed on would almost immediately become more valuable than its denominated amount.

5. Special Agro-Cheque

Intended to be used only by farmers in 2008 to relieve them of the need to carry large wads of cash since they were released in higher denominations than the bearer cheques at the time.

6. Bond Note

In finance, a bond is a fixed income instrument that is normally issued by a government or a company. It is not meant for transactional purposes as it does not have a constant value. A bond is simply a loan that is to be paid back with interest at the maturity date. Zimbabwe’s bond note was the complete opposite of this with a little extra. Firstly, it was an export incentive (it must be noted that attempting to influence a largely exogenously-determined macroeconomic variable such as exports via monetary policy is unheard of). Secondly, it was used to make transactions. It lacked a maturity date and the interest it earned turned out to be technically negative. A US$1 loan to the government in 2016 has earned(lost) a negative 60 cents in interest. This loan was also non-optional due to the infamous "1:1, no need for a separate account" mantra

7. Nostro Foreign Currency Account (FCA) and RTGS Foreign Currency Account (FCA)

Simple return to US dollar and Zim Dollar. Translations: Nostro FCA = pre-dollarization FCA and RTGS FCA = pre-dollarization Zimbabwean Dollar.

8. Real Time Gross Transfer (RTGS) Dollar

A new kid on the block that shares similar DNA to the bond note. However this time it is not an export incentive that became a currency, but a payment system that became a currency. Not much to say about this one yet. We shall see what the future holds.