First of all, this is not financial advice. This is simply ‘distilling’ stuff for people because I spend too much time reading stuff on the internet instead of studying the difference between acetaminophen and paracetamol (something actually relevant to the test I have on 1 November.)
Since we are on the same page now, what’s ZiG?
A few facts.
- A country needs its own currency. Zimbabwe can’t rely on US Dollars as it’s main currency.
- A currency like the US dollar gets its value from the belief people have in it. Otherwise, it’s just a paper.
In Zimbabwe, because all of our local currencies always lose value, the government came up with the ingenious idea of backing a local currency with something that has inherent value, gold. And since the world is becoming more digital, instead of printing the currency, they will make the new currency format digital. This is because there already physical gold coins (supposedly, I have never seen one. Maybe because I don’t have $1500 to buy one🤔).
How will it work?
Your USD Ecocash tells you that you have $30. ZiG however will be quoted in its weight, milligrams. Hence you will have 2mg of ZiG.
Weird, I know.
But here is the idea.
The value of the digital currency, since it is backed by gold and gold’s price is controlled by the London Bullion Market Association, changes. Hence 1mg of ZiG might be worth $0.60 today but depending on the international price that day, it’d be worth more (or less depending on your luck).
For example, gold in 2018 was worth $1300 or so. Now, it plays around $1600. Meaning that your ZiG would have increased value.
As news outlets have already outlined how to buy ZiG and the terms and conditions, I won’t bother to repeat saying them again here.
The bit you have been waiting for…
My opinion on ZiG. I am joking. Of course you weren’t waiting for that. But question is will it work?
Two sides. The optimist in me vs the realist.
As with many things in Zimbabwe, in theory, this was is the best move to de-dollarise (because we need to wean ourselves off the cocaine we have gotten used to - the US dollar). So the plan to go back to gold is a masterstroke.
In addition, the fact that the value of the currency is actually stored in gold and not in our faith in ‘Mu2cents Ncube’ and the government, means that this currency, in theory will hold value.
This is a result of our good friend, inflation (the thing that puts us in every economics textbook in the world for having the highest inflation rate in 2008), seizing to exist. Inflation exists because paper currencies such as the Rand and USD have no inherent value. Hence by gold being valuable in itself, it doesn’t lose value. It gains always!
The optimist in me so dearly wants this to work as the benefits of having a functioning currency are unending in Zimbabwe.
The Realist in Me
This is Zimbabwe😂 do we really think this will go straight? There is definitely a way this benefits a certain party in Zimbabwe at the expense of us, the normal people. I just don’t see that loophole yet, but I can bet the 50 bonds I got as ‘mushikashika’ change today that now worthless, that there is a loophole somewhere.
Besides that negativity, the question is the wider economy ready for a digital currency?
Imagine paying driver weHonda Fit using Zipit yeZiG instead of cash. That’d be nice in theory, but in reality, too many hurdles to jump through.
For the majority of Zimbabweans, I don’t believe we are ready for such a shift towards digital money. We don’t have the faith in not having physical stores of value.
The optimist is back. If there is a way to force the economy to become digital and be in the formal sector, this move by the RBZ is definitely one way to do it.
My hope is that this works but being Zimbabwean, I am keeping coy.