So the popular theory right now is that the RBZ’s Financial Intelligence Unit (FIU) identified and froze the accounts of the cash barons who were fuelling the foreign currency black market and cause the rate spike we saw last week.
According to those who believe in this theory, the fact that not long after the accounts of the named individuals were ordered frozen, the rate fell like a rock is irrefutable proof that fluctuations in the foreign currency market are being caused by a few big players.
The legend of the single buyer
According to lore, there was a single “big” buyer in the foreign currency black market who was willing to pay whatever price it took to get their hands on foreign currency. This baron was on a mission the exact nature of it is not clear. Some claimed this entity wanted to repatriate funds in order to pay dividends, others said it was to finance an expensive trip, to buy a fuel-the list of motivations goes on.
We can easily explain what happened using the watering hole theory
The single buyer theory simply has no basis in fact. Zimbabwe has been suffering chronic shortages of foreign currency for a while now. It seems the country has an unhealthy addiction to foreign currency and is especially partial to the US dollar which it consumes in bucket loads.
No sector has been spared the effects of this shortage. There are fuel lines everywhere, wheat shortages and right now Harare is dry because the city council has no foreign currency to buy essential water chemicals.
It’s the same in the informal sector. The RBZ stopped indulging this part of the economy a long time ago as it makes onerous demands upon those who seek foreign currency through official channels. The latest hurdle one has to cross is to have a passport which Exchanges have to stamp every time they sell you foreign currency.
It’s a dumb requirement anyway:
- First, no Exchange has been selling foreign currency, to walk-in buyers, to begin with.
- Getting your passport stamped means it will fill up faster if you are a frequent traveller. Thanks to foreign currency shortages the government is struggling to meet the public’s demand for passports. It will be years before you can get hold of a new one.
- And you don’t need to be travelling to need foreign currency. Thanks to technology you can make international payments from Zimbabwe.
All the material above just proves one thing. Just like a watering hole in the midst of the savannah drought, our foreign currency pool is shrinking. Meanwhile, thirsty hoards of people are descending on it to quench their varying thirst. There is no single buyer, but an entire herd/population is in dire need.
What happened on Friday in the context of the watering hole analogy?
What happened on Friday is that a pride of lions (the government) descended upon this hole and seized a fat wildebeest and started chomping on it. A melee ensued as each member of the fearful herd fled for dear life. This explains the chaos and confusion of early Saturday morning.
Then that unsated thirst began to drive the herd back to that ever-shrinking watering hole, for not drinking also means a slow certain death. Naturally, the few brave that ventured into the water first could lounge in the seemingly enlarged pool as others were yet to arrive, still hesitant and afraid.
Know one thing though that shrinking pool is filling up with more and more animals as they gain courage and venture back. Soon the pool will be overcrowded and animals will be jostling to get a sip.
It is already happening.