Zimbabwe’s business community has urged the government to reconsider its de-dollarisation plans, warning the policy could trigger capital flight and deepen economic instability.
Capital flight refers to the rapid and large-scale withdrawal of investments from a country, often in response to economic or political uncertainty.
Business leaders fear that the government’s push to phase out the use of the United States dollar, despite its dominance in the economy, will create further volatility.
Statutory Instrument 218 of 2023 sets a deadline of December 2030 for the end of the multi-currency regime.
However, the business sector remains sceptical, citing concerns over the stability of the domestic currency, Zimbabwe Gold (ZiG).
Despite government efforts to promote de-dollarisation, an estimated 80% of economic transactions still occur in US dollars.
Economist Gift Mugano said de-dollarisation could only be successful if there was a stable economic foundation and a clear strategy to build confidence in the local currency.
“I do not really think that there is a set plan yet. There is talk that there is going to be de-dollarisation in 2030. There is a need for a plan detailing how each stage is going to be implemented,” Mugano said.
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“The issue of capital flight will not be a problem if sufficient conditions are provided. The major issues that need to be addressed are currency stability and confidence in the currency.
“Other countries, such as South Africa with their rand, Botswana with their pula, Zambia with the kwacha, and Namibia with the Namibian dollar, are anchored by stability and confidence.”
He said de-dollarisation could only happen when the country achieved single-digit inflation and stable exchange rates.
“This will cultivate a productive culture, which is key to supporting the local currency. This is currently missing,” Mugano added.
According to the Reserve Bank of Zimbabwe (RBZ), gold and foreign currency reserves increased by approximately 90%, rising from US$285 million in April last year to around US$550 million (ZiG14,3 billion) by January.
The RBZ asserts that this provides more than three times the reserve money cover of ZiG3,5 billion (US$131,33 million).
However, these reserves remain insufficient to support the broader economy, as Zimbabwe's informal sector alone is estimated to hold US$2,5 billion, equivalent to ZiG66,6 billion.
Fio Capital Group chief executive officer and chief investment officer, Ajay Wasserman, argued that the ZiG has already collapsed.
Fio Capital is a South African consultancy firm.
“What happens when a country’s brand new currency collapses — just months after launch? That is exactly what Zimbabwe faced in December 2024, and the ripple effects are eye-watering,” Wasserman said.
“The Zimbabwe Gold, a shiny new, gold-backed currency introduced with high hopes in April, plummeted in value, leaving businesses, retailers and ordinary citizens scrambling to survive.”
He said formal retailers were bleeding cash as a result of the volatile ZiG, which has created an unattractive premium in the informal market.
“Informal street markets? Thriving like never before. The rules of the game changed overnight. Major chains such as Pick n Pay wrote off their Zimbabwe operations to zero, while shop owners were forced to either inflate prices beyond reach or shut their doors completely,” he said.
“Meanwhile, bustling night markets, off the books, accepting only US dollars, became the new normal for everyday shopping.
“A brutal reminder that no matter how much you back a currency with gold, if the public does not trust it, it’s as good as worthless.”
Wasserman said trust, not gold, was the real currency of any economy.
CEO Africa Roundtable chairperson Oswell Binha recently advocated for a multi-currency regime, which would allow businesses to continue using the US dollar and other stable currencies alongside the local currency.
“We are calling this statement a call to action, and we hope and trust that we are inviting our stakeholders to give it some attention, as it chronicles the key issues that we believe need to be addressed with the urgency they deserve,” Binha said.
“The current macroeconomic environment poses a significant threat to business. Major challenges include a widening exchange rate premium, high inflation, high public debt levels, a widening fiscal deficit, currency instability, infrastructure deficiencies and erratic power supplies, all of which are negatively impacting the ease of doing business and the competitiveness of local corporates.”
He said, based on this background, the group was calling for the government to act expeditiously on the following issues.
“Number one, the de-dollarisation strategy! We are calling it an endless cycle of failed de-dollarisation efforts. The complicity of recycled de-dollarisation tactics continues to make the nation chase monetary shadows,” he said.
“The current de-dollarisation strategy is outlined in Statutory Instrument 218 of 2023. It will only serve until December 2030.
“Considering the historical legacy and current issues, it is a deeply flawed policy to have a currency with a predetermined lifespan.”
The call to action comes as Zimbabwe’s economy continues to grapple with a range of challenges, including high inflation, a widening exchange rate premium, and a large public debt.
Binha argued that the government’s de-dollarisation strategy was exacerbating these problems, rather than addressing them.
