The Zimbabwean economy benefits immensely from the cash remittances made by those working abroad. Each month these people send money back to their relatives and friends. As much as a billion in foreign currency is injected into Zimbabwe’s parched economy this way. The general expectation however was that once the lockdowns in countries such as South Africa, the United States and UK came into effect less money would be sent to Zimbabwe as the working diaspora experienced a drop in income.
To everyone’s surprise the Reserve Bank governor said the opposite had actually happened:
Zimbabwe is a medium-term dollarised economy similar to Mozambique, Zambia and DRC. Over the past months, the amount of money that has come in from the Diaspora has increased Jan to July 2019: US$349.7 mln Jan to July 2020: US$466.2 mln, an increase of 33%Happi Zengeni reporting on Twitter
On the face of it remittances to Zimbabwe have increased by 33% which seems counter-intuitive as most of the diaspora is also hurting from the world-wide lockdowns. Sure you can point out the fact that a lot of Zimbabweans in countries such as the UK qualify as frontline workers and are therefore exempt from lockdown rules but it still doesn’t explain such a rise in inflows.
There is however another plausible explanation. Those who are familiar with how remittances know that a significant portion of remittances are done informally. People who are coming to Zimbabwe are often given money by friends so they can hand it to the relatives of those who are staying behind. Bus conductors and drivers are also similarly saddled with remittances. Each day scores of people used to wait for various buses to bring them money that their friends and relatives would have sent.
This money is essentially being send through informal channels away from the scrutiny of the central bank although it ends up being used in Zimbabwe. Those who frequent WhatsApp groups know there are those who provide instant transfer services for much lower rates than those charged by official Money Transfer Agents. However with lockdowns this underground system has been compromised forcing those who normally send money this way to utilise official channels.
The result? A seemingly 33% uptick in diaspora remittances. There are no buses, no conductors or drivers shuttling to and from Harare. Most of that money is now flowing on the surface and now the RBZ can take a peek at this. A phenomena which they are mistaking for a new peak. There is no peak, just transparency.
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