Benson Mahenya makes as much as $10,000 a month as he drives around Harare in a white Mercedes-Benz dealing in the five currencies that Zimbabwe recognizes as legal tender.
Selling South African rand to Harare’s car-part dealers, he receives dollars in return and uses them to buy euros from the city’s hotels. He then sells the European currency to liquor stores so they can import French and Portuguese wine.
“Different customers want different currencies, depending on the business they’re in,” Mahenya, 46, said in an interview in Harare last month. “On a good month I make an excellent living.”
Mahenya, and traders like him, have sprung up since Finance Minister Tendai Biti abandoned the Zimbabwe dollar in 2009 following hyperinflation that the International Monetary Fund estimates hit 500 billion percent. Under Biti, Zimbabwe stopped printing money and adopted the U.S. dollar, the euro, the South African rand, the Botswana pula and the British pound as legal currencies.
While the country is still mired in political crisis 33 years into President Robert Mugabe’s rule, the move helped end an economic collapse that decimated the country’s tobacco and rose export industries and shrank the economy by 40 percent between 2000 and 2007, according to an IMF estimate.
It also created huge arbitrage opportunities for a new breed of currency trader.
“I’ll always better the banks,” says Jackson Jere, sitting on a wooden crate as he haggles with customers ranging from shop owners to tourists at Harare’s Road Port international bus terminus.
Harare, the capital in the north of the country, has largely become a dollar economy while in the south, the second city, Bulawayo, uses rand because of its proximity to South Africa. In Harare supermarket goods are often paid for in dollars while retailers give out change in rand and minibus taxis also charge in the South African currency. Speculators profit from arbitrage between the different rates in the cities.
“Bulawayo is closer to the South Africa border, so rand are both more popular there and cheaper,” said Jere, who deals in amounts as high as $30,000. “I can buy rand there and sell the rand for a better price in Harare. I’ll always better the banks.”
On March 22 Barclays Plc’s Zimbabwe unit was selling 100 rand for $11 at its Borrowdale branch in northern Harare. Across town in the central suburb of Avondale a branch of Standard Chartered Plc’s local unit was selling the same 100 rand for $10.43.
Officially there are three exchange rates in Zimbabwe, Dave Mills, managing director of Meikles Africa Ltd.-owned TM Supermarkets (PVT) Ltd., said in a March 21 telephone interview from Harare. TM competes with OK Zimbabwe Ltd. as the country’s biggest retailer.
Banks sell currency to general customers at rates set at a daily level based on international markets while giving their corporate customers, such as retailers, a range within which they can trade. Customs rates are set weekly by the government for import duty purposes.
It’s an “incomparable” improvement from trading before Zimbabwe dollar was abolished, said Mills, whose company competes with OK Zimbabwe Ltd. to be the country’s biggest supermarket chain, said. “Back then shelves were empty and retail was at a standstill.”
Stores and taxi drivers convert the rand at 10-to-the-dollar for ease rather than using a market-related rate.
“Until recently we were using old Zimbabwe dollar notes, even though they weren’t legal tender. It was like a voucher or ticket system,” Mike Muparutsa, a minibus taxi-driver, said. “Now it’s rand coins, but the consumer loses on the exchange rate.”
The currency reform has brought some semblance of stability to a country bearing the scars of Mugabe’s economic mismanagement. Zimbabwe’s central bank began printing money in 2006 to pay a debt to the IMF to stave off expulsion and continued the practice to meet expenses including infrastructure payments.
Biti was then brought in as finance minister in 2009 after the 15-nation Southern African Development Community forced Mugabe and Morgan Tsvangirai, who is now prime minister, to form a coalition. Tsvangirai’s Movement for Democratic Change won control of the economic ministries as part of that agreement and Biti was one of his appointments.
That agreement ended a decade-long recession and political dispute after a series of violent elections won by Mugabe’s Zimbabwe African National Union-Patriotic Front.
“Having a multi-currency economy with no Zimbabwe dollars is primarily good news for Zimbabwe because government can’t print its way out of a deficit,” said John Robertson, an independent economist, in an interview from Harare. “They can’t just print more if they need it, as was happening in 2008.”
The economy is expanding and most shortages have abated. Economic growth of 5 percent is being targeted this year, Biti told reporters in Harare on April 16. Biti and Tsvangirai have said a return to the Zimbabwe dollar isn’t likely soon.
Still, with no control over the currencies, commerce can be stymied when enough of the right currency can’t be gathered for a transaction, said Robertson.
“It boils down to scarcity and extremely tight liquidity, which has created a very skewed economy,” Robertson said. When a particular currency is short the buyer has to “pay a premium.”
That’s a boon to the Mercedes-driving Mahenya, who says he has no plans to take his currency-trading prowess to the trading floor.
“The bank would be making fortunes, not me,” said Mahenya, explaining that he was able to walk into a dealership and pay cash for his car. “You saw me, you saw my Benz. $33,000 walk-in, drive-out cash.”