Almost two decades of profligate monetary policy has destroyed Zimbabwe's economy and fueled rampant inflation, decimating the savings of its people twice.
Hyperinflation of as much as 500 billion percent in 2008 made savings worthless and led to the abolition of the local currency in favor of the dollar the following year. In 2016, former President Robert Mugabe's cash-strapped government introduced securities known as bond notes that it insisted traded at par with the dollar. In 2018, it separated cash from electronic deposits in banks without reserves to back them, causing the black-market rate to plunge.
Last week, it threw in the towel and allowed bond notes to trade at a market-determined level, once again slashing the value of savings. The decision came after the southern African nation faced shortages of bread and fuel, was hit by strikes and protests, and President Emmerson Mnangagwa's drive to attract new investment floundered.
"At the root of this is the currency crisis," said Derek Matyszak, a Zimbabwe-based research consultant for South Africa's Institute for Security Studies. "This is analogous to them creating a giant Ponzi scheme that originated under Mugabe. What we are seeing now is that Ponzi scheme collapsing."
The latest step, while welcomed by what's left of the country's business sector, is unlikely to solve Zimbabwe's problems because all it does is reflect exchange rates on the black market, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.
"The 1-to-1 is a fiction," Hanke said. "They are saying officially we are going to condone what has been happening anyway. It officially says, 'we robbed you.'"
The interbank rate for the new currency is about 2.5 to the dollar, data published on the central bank's website shows. That figure is meaningless because the authorities are failing to divulge the volume of trade, according to marketwatch.co.zw, a website run by financial analysts. It estimates the black-market rate for the bond notes is 3.31 per dollar.
The origins of Zimbabwe's currency crisis stretch back to a violent land-reform program initiated by Mugabe in 2000, which slashed export income and devastated government finances.
In response, then-Reserve Bank of Zimbabwe Governor Gideon Gono, known as 'God's banker' because of his close ties to Mugabe, increased printing of Zimbabwe dollars exponentially to pay government workers, stoking inflation and eventually making the currency valueless.
"It was a Ponzi scheme in the past," said Ashok Chakravarti, an economist and lecturer at the University of Zimbabwe. "Especially in the Gono era, where that chap just kept printing money." Gono didn't answer a call to a mobile phone number he has used in the past.
The currency's collapse led to the predicament Zimbabwe now finds itself in -- chronic cash shortages and rampant inflation.
By late 2008, some Zimbabweans had reverted to barter trade as illicit dealings in foreign currencies flourished. In February 2009, the answer the government came up with was to switch to the use of foreign currencies, mainly the U.S. dollar.
"Dollarization puts a hard budget constraint on the system," said Hanke. "You can't go to the central bank or any other government institution to get credit for the government."
The pressure on government finances led to history repeating itself, with a loophole being found: the introduction of bond notes and locally denominated electronic money. That contributed to money in circulation growing to more than $10 billion, according to George Guvamatanga, the permanent secretary in the Finance Ministry. The figure was $6.2 billion in 2013, said Tendai Biti, a senior opposition leader and former finance minister.
"If you continue to print money you are destroying what you are creating," Guvamatanga said. Under a stabilization program introduced by Finance Minister Mthuli Ncube in October, the government is now repaying domestic debt, has stopped issuing Treasury bills and has no overdraft with the central bank.
That's helped the economy move toward "walking on two legs, there is an effort to go in a different direction. It's an inevitable adjustment." Chakravarti said. "It's very unfortunate that this is the second time in 10 years people have lost the value of their savings. In 2009 we all went down to zero including me."
For some observers the latest development isn't a sudden discovery of fiscal discipline. It's another admission of failure and the victims are Zimbabwe's people.
To Biti, who says the new currency will fail because it isn't backed by reserves, it shows the country has come full circle.
"They have through the back door reintroduced the Zimbabwe dollar," he said. "It's theft because people had regrouped and rebuilt their lives from zero based on the U.S. dollar."
The country's best hope is to join southern Africa's Common Monetary Area, which is dominated by South Africa and its rand, Biti said. That would give certainty to business and impose fiscal discipline on the government, as opposed to the current arrangements that are unsustainable, he said.
"It's a Ponzi economy," he said.
A close race was predicted between Muhammadu Buhari and his main rival Atiku Abubakar. In the end the incumbent won the Nigerian presidential election with almost four million votes.
After the results were declared, Atiku cried foul, pointing out numerous flaws and manipulations of the electoral process. He also threatened legal action although it remains to be seen if the Peoples Democratic Party candidate will file suit within 21 days of the vote as required.
Meanwhile, international leaders have already congratulated Buhari and his All Progressives’ Congress. This is to be expected. External actors have often tended to prefer stability over denunciation when it comes to incredulous election results.
Hence this still begs the question: did Buhari actually win? Several problems marked the electoral process itself. But, in my view, while the election results were prone to manipulation, the result indicates that Buhari’s party did in fact win.
The question is: how did he do it given his poor track record in his first term? Several factors stand out from the election results: Buhari’s continued popularity in the north, combined with voter apathy in the south. And the fact that Atiku was an uninspiring contestant.
Buhari came to power in 2015 after defeating incumbent president Goodluck Jonathan with around 2.5 million votes. His victory at the time can be attributed to his tough stance on corruption, his poverty alleviation promises, and the Jonathan administration’s failure to curb the Boko Haram crisis.
In addition, Jonathan’s decision to run again as a Southern candidate had caused rifts in the Peoples Democratic Party with many, especially northern, political stalwarts defecting to the All Progressives’ Congress during his presidency. Buhari’s candidacy had already been strengthened by his coalition with the south-western Action Congress of Nigeria.
Buhari’s first term in office can be rated rather poorly.
His administration was struck with the double whammy of a severe recession and a drop in revenues from oil due to falling oil prices. The government’s responses were slow and mostly inadequate. This was partly due to Buhari’s long absence from home undergoing treatment for an undisclosed illness.
The Buhari government also didn’t perform very well on the security. While the Boko Haram crisis was pushed back during his first year in office, it resurfaced as the group split into several deadly factions. Farmer-herder conflict in the Middle Belt has also spun out of control. And the roots of new violent crises may have been laid with the brutal repression of the Indigenous Peoples of Biafra movement as well as the arrest of Muslim clerk El-Zakzaky and violence against his followers.
Finally, while Buhari has indeed taken actions against corruption, the battle against graft has often appeared to be a battle against political enemies. And little has been achieved at the policy level due to severe legislative-executive gridlock during his first term.
So why the win?
In the end the electoral map of 2019 closely resembles that of 2015 with most northern and south-western states going to the All Progressives’ Congress. In Lagos, the All Progressives’ Congress won a slight majority in the face of economic decline, but campaigned primarily to get voters to go to the polls. This only partly succeeded.
In the north, the All Progressives’ Congress’s vote share generally dropped on a state-by-state level, but turnout was high enough vis-à-vis the south to win the elections overall.
The Peoples Democratic Party did not substantially increase its leverage in the Middle Belt states, which are most affected by the herdsmen-farmer conflict. Particularly noteworthy is Atiku’s poor performance in the North in general. His home state of Adamawa was only won with a slim majority.
Buhari’s continued popularity in the North can partly be explained by the fact that the region is more insulated from international market dynamics. This means that the effects of the recession were less severe. While poverty remains more entrenched in the region, this was to some extent alleviated by the government’s subsidy programmes. These also extended patronage to localities which had before largely been excluded from such networks.
Besides this, and from a more emotional perspective, many of Buhari’s supporters still continue to view him as their political messiah.
Atiku had his weaknesses
After its loss to the All Progressives’ Congress in 2015, the Peoples Democratic Party itself remained for a long time mired in internal conflict. In the middle of a leadership crisis, the party lost political elites and followers, also due to the sudden cut-off from patronage resources.
The party came together again near the end of 2017, but had to rebuild its grassroots structures in many areas. This could have led to the lack of mobilisation in the south. While the All Progressives’ Congress lost important political figures, the party also convinced some powerful Peoples Democratic Party politicians in the South to defect in the run-up to the elections.
Another factor was that, while rotational politics necessitated a northern candidate, Atiku’s candidacy may not have resonated particularly strongly in the south.
Besides his regional origin, Atiku as a candidate also had his weaknesses, including a credibility problem due to the riches he collected during his time in office as vice-president and his old age. For many voters in both the north and the south, Atiku represented a return to the past rather than a break from traditional Nigerian politics.
Buhari’s first term record has little to show for it, but it is in the end still possible that he did win the elections, simply because the Peoples Democratic Party could not provide any viable alternative.