Zimbabwe takes sides with China, choosing the Chinese Yuan currency, and ditching the US dollar as its official currency. In the game of global dominance, Zimbabwe indeed goes to China – right here, on AfricanPod, the good news and the bad news about Africa, and I am your presenter, Phillip Nyakpo.
First, here is a quiz: how many Billionaires did Zimbabwe produce between the years 2000 and 2009?
The answer is coming up shortly, but here is the context: in the late 1990s to 2009, Zimbabwe was drowning in a deluge of hyper-inflation where the price of goods and services was rising by the hour.
The true value the Zimbabwean Dollar was a moving target, going down rapidly to zero. Within a one year period, the country printed Zimbabwean dollar denominations ranging from 10 to 100 billion.
As unreal as it sounds, the largest denomination of a Zimbabwean banknote was One Hundred Trillion Dollars.
That is “Trillion” with a T – “T” as in “Tango.”
The higher the denominations printed, the less the currency could buy. Purchasing power of the Zimbabwean currency practically disappeared, and it happened so fast that in 2009, the currency became completely useless. The Zimbabwean government actually devalued paper itself by printing on it.
This left more than 12 million people hanging onto 100 billion Zimbabwean Dollar notes. Zimbabweans subsequently came to be called the Hungry and poor Billionaires of Africa.
So back to the quiz: how many Billionaires did Zimbabwe produce between the year 2000 and 2009?
You got it.
They produced more than 12 million Billionaires – the entire population of Zimbabwe, and their “billion dollars” could not buy even a loaf of bread.
Somehow, Zimbabwean found a kind of reset button.
When they pressed it, the result was that the Zimbabwean Dollar was abolished and swiftly replaced by the United States Dollar. Yes, the United States Dollar became the official currency of the Zimbabwe.
However other currencies are also in circulation, and these include the South African Rand, British Pounds Sterling, and the Australian Dollar.
It is a unique multi-currency system with the US Dollar right on top of the pile.
But now, Zimbabwe says it will embrace a completely new currency to replace the US Dollar.
That currency just happens to be the Chinese Yuan.
The Yuan itself made history on the last day of November 2015, when the IMF recognised it as a Global Reserve Currency, placing it in the same league as the US Dollar, along with a handful of other influential currencies.
The Yuan’s new status is expected to take some shine off the US Dollar, especially when the whole arrangement goes into full force in October 2016.
You can find details of story on AfricanPod, Episode 6.
So the announcement by Zimbabwe to replace the US Dollar with the Yuan as its official currency is not an accident. It is part of an on-going economic romance between China and Zimbabwe.
It is all about money, as usual.
Zimbabwe owes China about 40 million US Dollars.
Then just a few weeks ago, the Chinese President Xi Jinping stopped over in Zimbabwe to meet his 91 year old counterpart, Robert Mugabe. It was a rare visit by a world leader, following Zimbabwe’s isolation by Europe and America and other western nations in connection with Zimbabwe’s human rights record under Robert Mugabe.
During the stop-over, Xi Jinping whispered in Robert Mugabe’s ear that he is willing to write off Zimbabwe’s debt in exchange for a small favour.
It was not a bad deal, especially for China.
China will cancel a paltry $40 million dollars’ worth of Zimbabwe’s debt, while Zimbabwe in return adopts the Yuan as its official currency.
It was like a match made in Beijing.
Sure enough, Xi Jinping’s plane hardly lifted off Harare’s Airport tarmac when Mugabe ordered the announcement that Zimbabwe will now adopt the Chinese Yuan.
Zimbabwe did not ask permission from the United States before using the US Dollar in place of its own dead currency.
For the same reason, Zimbabwe did not tell the US that they were getting rid of their world renowned currency.
But economically, it was in the interest of the US that Zimbabwe used its currency.
Being a relatively tiny economy though, policy makers in the United States will definitely not lose sleep over the development. The development is almost insignificant, but then, this is how an avalanche starts before chain-reacting into a major catastrophe.
In this case, the probable start of a major economic catastrophe for the US Dollar when it eventually loses its former strong influence around the globe.
For now, the two economic giants, the United States and China will be quietly counting who is on their side especially across the African continent.
But we know Zimbabwe’s choice. To say “Zimbabwe Goes to China” can be understood in two ways:
- that Zimbabwe has chosen to embrace China instead of the United States
- that in its relentless quest for global domination, Zimbabwe has become China’s latest acquisition
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My name is Phillip Nyakpo, and thanks for listening.