The Real Sources of Liquidity in a Dollarised-yet-Repressed Economy
Zimbabwe operates in a peculiar monetary environment: formally dollarised since 2019, yet subject to persistent foreign-exchange controls, periodic re-introduction of local currency instruments (ZiG), and a banking sector that offers negative real deposit rates when adjusted for official inflation (and deeply negative rates when measured against black-market currency depreciation).In this setting, surplus liquidity does not primarily originate from conventional corporate profits or bank credit creation. Instead, it arises from three quasi-informal but highly cash-generative activities:
- Artisanal and small-scale gold mining (including significant leakages from Fidelity Printers & Refineries)
- Cross-border trading and commodity smuggling (fuel, minerals, agricultural produce)
- Diaspora remittances, a large portion of which bypasses the formal banking system
These streams deliver US dollar cash directly into the hands of households, small-scale entrepreneurs, and informal syndicates. Holders of this cash face an acute scarcity of investment alternatives that preserve purchasing power.
In a functional financial system, surplus liquidity would flow into government securities, corporate bonds, equities, or bank deposits offering positive real yields. In Zimbabwe:
- Treasury bills and bonds are either unavailable in sufficient quantity or carry yields far below expected inflation and currency risk.
- The Zimbabwe Stock Markets remains thin, volatile, and dominated by a handful of counters, with settlement risk and corporate governance concerns deterring institutional participation.
- Bank deposit rates are capped or structurally negative in real terms, while periodic bank failures (2004, 2019–2021) have destroyed confidence.
Faced with this vacuum, economic agents—ranging from small-scale gold dealers to remittance-receiving households—have converged on a single, time-tested strategy: convert excess dollar cash into physical structures that can generate a dollar-denominated rental yield. Residential stands in high-density suburbs, peri-urban cluster houses, commercial shop fronts, and rural shopping centres have become the de facto “treasury bond” of the Zimbabwean economy. The local shorthand is revealing: “building something chinondipa rent” (“something that gives me rent every month”). Cement is the indispensable input into this national hedge.
(a) Introduce measured macro-prudential restraints on construction activity
- Temporarily higher stamp duties or capital gains taxes on second and subsequent property transfers within short holding periods
- Phased increases in property rates on incomplete or speculative structures to discourage land banking and slow absorption of cement and steel
(b) Create alternative safe, liquid, dollar-denominated saving instruments
- Issue medium-term infrastructure bonds (3–7 years) listed on the Victoria Falls Stock Exchange (VFEX), offering 6–8% dollar yields and backed by specific toll or electricity tariff streams
- Allow pension funds and insurance companies to invest a portion of their portfolios in such instruments, thereby deepening the market
(c) Channel construction activity into nationally productive areas
- Accelerated implementation of the national housing policy through public-private partnerships that deliver serviced stands and mortgage finance at scale
- Tax incentives for build-to-rent schemes managed by licensed institutional players rather than fragmented individual landlords
(d) Strengthen cement supply resilience
- Fast-track approval of new clinker production investments (e.g., the proposed Sino-Zimbabwe expansion and Livetouch Investments projects)
- Negotiate medium-term import quotas under the SADC and AfCFTA frameworks to smooth seasonal shortages without undermining local producers
Conclusion
