Zimbabwe is no stranger to controversy and once again finds itself in the international spotlight as its currency goes through rapid inflation.
As locals scramble to find ways to park their money outside of the local banks, they turn to airlines.
What is happening in Zimbabwe?
First, a brief summary,
In 2008, Zimbabwe underwent a rapid and large economic upheaval resulting in their currency reaching record high inflation.
Typical scenes included residences arriving at bakeries with wheelbarrows full of cash bills to buy a single loaf of bread.
It seems that they are going through some Deju Vu with their currency, with the Zimbabwe dollar starting to triple, quadruple and quintuple against the ‘pegged’ US dollar. (It is supposed to be a 1:1 ratio).
“It’s a pretty big hole. We’re suffering the effects of many, many years of misgovernance. We’ve been living beyond our means and it has come to a crunch,” – Economist Ashok Chakravarti.
This has caused many many businesses to close down, from local stores to international brands like KFC. Even the large mining corporations operating in the country have found that they can’t access external capital funds.
Stores have even been limiting items per customer.
Imagine there is no fuel, food prices are going up, there are no jobs and you aren't allowed to even buy more than one beer to get drunk and get over your problems.. Zimbabwe pic.twitter.com/3n5oqK88Gf
— The Instigator (@Am_Blujay) October 8, 2018
This has left the locals looking for places to place their money until after the turbulence has passed. The government has placed a 2% fee on transferring money out of the country in an effort to prevent hoarding wealth and local banks might be raided for their capital, wiping out savings.
So some locals are speculating on airline tickets.
Airlines are withdrawing from Zimbabwe
The idea is that they will buy a ticket to refund it later, effectively parking their money for 6-12 months. Some tickets have been bought up to August 2019.
This speculation has put the capital risk on airlines, meaning they are effectively losing money and they are no longer making any cash flow from Zimbabwe. This is tanking their profitability in the region and causing them to withdraw from the local marketplace. You can still book a flight to Zimbabwe, but they no longer accept Zimbabwe dollars.
“The issue of remittances is a disturbing issue to all of us from the minister. When the airlines don’t now accept payment, in whatever currency we call our local currency, because we believed all along our local currency was US dollar. But it’s now becoming clear that there is a big difference between our local currency and the US dollar because airlines are not accepting it.” – Zimbabwe Tourism Authority (ZTA) chief executive officer Karikoga Kaseke
Some airlines have a fortune in tickets ‘on hold’ by locals. Overall, International airlines are owed $136 million in repatriation debt.
“In light of the ongoing difficulties experienced in foreign currency repatriation, Comair regrets to inform our trade partners that British Airways operated by Comair is temporarily limiting distribution of ticketing authority in the Zimbabwe market” – Statment from British Airways & Comair
With the list growing shorter, locals are looking further afield for airlines still serving the marketplace.
One of these is Emirates, who still offer tickets in the local currency.
“It’s devastating on us as a destination. For one it doesn’t give the destination the brand that it should maintain in the international market. It really affects our brand and we are concerned. We understand other airlines are following what Kenya Airways has done,” – Kaseke
Stay tuned to find out more.