Zimbabwe moves back to stone-age

MORE and more local companies are resorting to barter arrangements to escape an unrelenting liquidity crunch that has resulted in the closure of several firms. Bartering is defined by online site Investopedia as the act of trading goods and services between two or more parties without the use of money.

It is of benefit to individuals, companies and countries that see a mutual benefit in exchanging goods and services rather than cash, and enables those lacking hard currency to obtain goods and services. As the cash squeeze deepens, sections of Zimbabwe's business community have been reduced to barter trading to stay afloat. In the print and electronic media, suppliers of consumables and other raw materials are bartering their goods for advertising space.

Other companies have also devised ways of trading between them without the loss of value although this is posing serious headaches to the tax authorities in terms of computing Value Added Tax payments. The practice has spread to rural Zimbabwe where villagers are bartering crops and livestock for basic household goods such as sugar, flour and cooking oil.

Economist, John Robertson, said the phenomenon calls government to urgently address fundamental issues afflicting the country's economy. He said none of the policies introduced by government has impacted positively on the economy and there appears to be no desire by President Robert Mugabe's administration to fix the challenges. He gave the example of the controversial indigenisation law which remains on the country's statutes despite its negative efforts.

Robertson believes that bartering would continue to operate on a limited scale, without cascading down to the ordinary man on the street.

"This is unlikely to develop into a big feature and will not get to the man on the street as it is essentially limited to trading in a limited range of services and goods," he said.

The Zimbabwe Agenda for Sustainable Socio-Economic Transformation, an economic blueprint adopted by the ruling Zanu-PF, has failed to give assurances that the economy is on a recovery path. The blueprint itself needs US$27 billion in funding for it to take off. China and Russian, touted among Zimbabwe's all-weather friends, have also been reluctant to help breathe life into the country's economy.

With a continued decline in commodity prices, Zimbabwe is likely to be hard-hit by the sustained slide in the price of precious metals, further compounding the country's liquidity woes.Gold prices have been hovering at US$1 190/oz and platinum at US$1 200 from a high earlier this year of over US$1 400.Zimbabwe is heavily dependent on mining for the bulk of its foreign earnings.

Busisa Moyo, the Confederation of Zimbabwe Industries Matabeleland region president, said what they have experienced are cases from one or two firms involved in barter trade, but those have been isolated and not entirely widespread to cause a significant impact.