Fresh off his million-dollar birthday extravaganza, courtesy of the taxpayers and held in a part of the country racked with famine and drought, the erstwhile leader of Zimbabwe, one Robert Mugabe, has finally decided to turn his attention to reviving the economy.
After attempting to sell off wildlife to fill the state coffers, he has now decided to reintroduce the country’s own currency which was discarded in 2008 when it was worthless and inflation was completely out of control. Since then, the country has adopted the US Dollar as its official currency in order to control hyperinflation. It’s a pity it didn’t control ineptitude at the same time.
The new currency about to be churned out by the Central Bank will be named ‘Bank Notes’ and the only good thing about the name is that it’s spelled correctly! As soon as the new currency is introduced it will be worth nothing, so in hopes that lightning doesn’t strike twice in the same place, Mr. Mugabe is trying to prove that idiom as sacrosanct.
Panic has set in; there has been a run on the banks to get money out before the new currency comes into effect rendering people’s savings damaged forever. As a result, banks have put limits on daily withdrawals, in some cases as low as $20 per day. Many people have opted to leave the country and are not in any hurry to return. The drain of professional and technical citizens is unabated, which makes one wonder if that’s the next thing to be controlled.
So, what is the rationale behind introducing the new old currency? Simply put, because Mr. Mugabe cannot control the printing presses when the official currency is the US Dollar. He must believe that by controlling the printing presses he can keep the good times rolling and fund his lavish lifestyle at the expense of his starving citizens.
I guess economics was never one of his strong subjects, or is he trying to prove the other idiom wrong. Doing the same thing twice and expecting a different outcome, surely that’s a sign of madness. But what if all inflows of FDI dried up and he had to flee the country to save his life? How happy would the population be?
Peter Kohli is CEO of DMS Funds.