ZiG by force: After street money changers, government to target companies

By Bloomberg News

HARARE: Zimbabwe plans to extend a crackdown that’s targeting street currency traders to companies to ensure goods and services are priced using only the official exchange rate of the new ZiG currency.

“What should be done is an enforcement along the value chain, manufacturer, wholesaler up to retailer,” Finance Minister Mthuli Ncube told lawmakers in the capital, Harare, according to a transcript posted on the parliament’s website on Thursday. “I have actually instructed the financial intelligence unit to begin doing that.”

The announcement is the latest attempt to ensure the ZiG gains traction and doesn’t get sidelined in favor of the US dollar, as has been the case in six previous attempts to create a functioning national currency over the past 15 years. Dollars are used for over 80% of transactions in the economy.

Short for Zimbabwe Gold, the ZiG came into effect on April 5, replacing the Zimbabwean dollar, which had plummeted 80% against the greenback this year before it was abandoned. The new unit is backed by 2.5 tons of gold and $100 million in foreign exchange reserves held at the central bank.

The bank’s financial intelligence unit and police are also targeting street dealers who have been accused of currency speculation. More than 200 have been arrested and 90 bank accounts that are suspected to have been used for illicit transactions have been frozen. To evade arrest, street currency traders have switched to Meta Platforms Inc.’s WhatsApp platform and only transact with known clients.

Keeping the ZiG stable is important to building confidence in the unit, both as a medium of transaction and a store of value, and “speculation is unjustified,” Ncube said. Since it started trading more than a month ago, the ZiG, has been relatively stable. It traded at 13.40 to the dollar on Thursday, the same as the day before.

The government also plans to increase the adoption of the new currency by legislating that it be used to pay some taxes and fees, he said. “We are working on that and we will be announcing as to which taxes will be paid only and solely in ZiG currency.”