The introduction of the world’s newest currency in April inspired a reggae artist to record a song praising the ZiG, or Zimbabwe Gold.
The catchy tune, titled “Zig Mari,” received generous play on state television and radio. The musician, Ras Caleb, received a car and $2,000 — ironically paid in greenbacks, not the new ZiGs — from a businessman with close ties to Zimbabwe’s ruling party and President Emmerson Mnangagwa; he said he wanted to reward an act he considered “patriotic.”
The Launch of the ZiG
Desperate to halt a money crisis underlining the country’s economic troubles, the government launched the gold-backed ZiG, the latest attempt to replace the Zimbabwe dollar, which had been battered by depreciation and often outright rejection by people unwilling to put their faith in it.
Senior officials from the Reserve Bank of Zimbabwe and the ruling ZANU-PF party embarked on a flurry of public rallies and meetings to encourage the sceptical population to now embrace the ZiG ahead of the U.S. dollar — also legal tender in the southern African nation. Commercial jingles heralding the currency flooded the airwaves along with Caleb’s single.
Challenges Faced by the ZiG
Despite the charm offensive, the ZiG is facing a familiar problem: public mistrust and structural barriers that have people still clamouring for U.S. dollars. Although the ZiG has largely held its value on the official market, it has tumbled on the black market, where $1 can be exchanged for up to 17 ZiGs.
Authorities are also using force to prop up the new banknotes. They have packed jail cells with dozens of street currency dealers, and frozen the accounts of businesses accused of undermining the ZiG.
Mistrust and Resistance
The crackdown is incongruous, because Zimbabwe has a long history of street currency dealers whose unofficial rates often carry the day. Many shops and merchants also ignore the official rate and only accept the local currency at their own rates. And many vendors, particularly in the unlicensed sector that employs more than 80% of adult Zimbabweans, still only accept the dollar.
Additionally, some businesses are still hesitant to accept the ZiG, continuing to prefer U.S. dollars for transactions, which further undermines the new currency.
The Road to De-Dollarisation
John Mushayavanhu, the governor of Zimbabwe’s central bank, has hyped the ZiG as a first step toward eventual de-dollarisation. The U.S. dollar accounts for more than 80% of transactions in the country, according to Mr. Mushayavanhu, who wants the ratio to be 50% by 2026.
Future Outlook
Economists and business groups have warned that the use of force is unlikely to lead to more confidence in the ZiG or halt the black market traders. Building public confidence in the local currency may be the key to stabilizing its value and reducing the demand for U.S. dollars on the black market.
Despite the government’s efforts, the allure of the U.S. dollar remains strong in Zimbabwe, indicating a long road ahead for the acceptance and stability of the ZiG.
