It is no doubt that Zimbabwe has a troubled history with currency. It all started in 2009 when the country abandoned its currency and adopted the greenback among other currencies after it was wrecked by hyperinflation.
The memories of the Zimbabwean dollar becoming worthless are still fresh in many Zimbabweans minds. The country’s current financial woes begun when hyperinflation peaked at 500 billion percent, the highest rate in the world for a country not at war, wiping out pensions and savings.
A while after adopting the US dollar, confusion began on noticing that more US dollar was going outside the country in the form of payments for exports more than what was coming in. Within no time the dollar was in short supply. As a result, banks had long snaking queues as people were in a tussle to withdraw their money and have it in cash form.
In a bid to curb the shortage, the Zimbabwean government introduced the bond notes and coins whose value was equal to that of the US dollar. Eventually, the bond notes lost value against the US dollar in the market as people had faith and valued the dollar more.
After Zimbabweans started to get comfortable using the US dollar, the government introduced Real Time Gross Settlement (RTGS) dollar, a new currency. As of June 24, the United States dollar, British pound, South African Rand, Botswana pula and a host of other foreign currencies were banned from being used in Zimbabwe. The Zimbabwe dollar was made the sole legal tender in the country.
Given the somewhat confusing history Zimbabwe has had with currencies, it will take a lot to restore people’s trust. Some businesses, mostly those that import products, had completely dropped the local currency and insisted on doing business in U.S. dollars because of the convenience that comes with it.
Unable to continue with normal operations as the cash crunch deepened, many businesses have been forced to close shops since the country started to undergo financial crisis.
And now Zimbabwe’s most profitable company Econet has placed its Pay TV arm under administration after it was reportedly on the verge of bankruptcy as a result of Zimbabwe’s currency crisis.
A report by Techcentral reveals that Econet media was placed under administration earlier this week after it racked up more than USD 130 Mn in external liabilities and thus, was unable to pay suppliers.
In a bid to salvage the situation, the company which is run by Zimbabwe’s richest man Strive Masiyiwa has appointed Ernst & Young’s Paul Gerald Lincoln to manage the process.
Speaking to South Africa’s BusinessDay, CEO Joseph Hundah said Econet’s pay-TV company, which operates under the “Kwese” brand name, will soon begin talks with creditors to rescue the business.
Hundah told Business Day Kwese’s free-to-air business was unable to sustain the financial burden of its satellite operations because it is quite small, which led to the decision to negotiate with creditors.
In a letter addressed to its creditors on July 1st, the company said it was not able to meet its obligations. It said that it is in “financial distress” and that there is “material doubt” on whether it will be able to pay liabilities on time.
In the letter, the company while explaining why the were not able to met the second installment said, ““Regrettably, with the current macroeconomic conditions in Zimbabwe, which is the company’s primary source of funding, the company has been seriously affected by the currency regime. Accordingly, this deadline could not be met.”
The letter also read, “In the circumstances, the directors believe that it is in the best interests of the company and its creditors that (it) be placed into voluntary administration … and for an administrator to be appointed.”
Featured Image Courtesy: Techjaja