July 10, 2019
Is Cryptocurrency the Solution to Zimbabwe’s Money Crisis?
July 10, 2019
In Zimbabwe, cryptocurrencies appear to some as a solution to the currency crisis. A new platform – SPURT – is gaining popularity, but not everyone is convinced that the benefits outweigh the risks.
BULAWAYO, ZIMBABWE – Dressed in a shirt bearing an outline of Africa stitched in bright yellow thread, Charles Chindove prepares to address the crowd. There are not enough chairs in the Shangani Mine community hall, so people sit on mats and blankets on the floor. Some balance young children on their laps.
One thing has drawn them together: SPURT.
This cryptocurrency has amassed 40,000 users throughout Zimbabwe since Chindove helped introduce it in Bulawayo in 2017. And that number is only increasing, according to data provided to GPJ by Sound Prosperity, the company behind the SPURT platform.
A self-described “member-based social organization,” Sound Prosperity offers members SPURTs in exchange for hours worked on a community project. It costs 5 bond notes to join.
“I saw the need to encourage and uplift communities by paying them to develop their areas using SPURT,” says Chindove, who encountered SPURT when he moved from Bulawayo to New Zealand in 2014. “Since many people are no longer employed and have nothing to do, this is a positive way to keep them busy.”
Fortune Moyo, GPJ Zimbabwe
In Shangani Mine, a community 94 kilometers (58 miles) outside Bulawayo, Melusi Gweshe fences homes, schools and the main road to keep cattle from straying. He works 20 hours a week. For that, he earns 80 SPURTs, which Sound Prosperity says is valued at $80.
“SPURT is a great innovation that has assisted us in uplifting our communities,” says Gweshe. He paid Sound Prosperity to register to use the cryptocurrency when the construction company he worked for closed in December.
Members like Gweshe are offered 4 SPURTs per hour and encouraged to work between four to eight hours a day on projects. According to Sound Prosperity records, 90% of users live in Matabeleland Province.
While SPURT is not licensed in Zimbabwe, the people who use it hope that it soon will be.
SPURT comes after a long, complicated history of currency in Zimbabwe.
Following a period of massive hyperinflation of the Zimbabwean dollar beginning in 2006, Zimbabwe instituted a multi-currency system in 2009.
While the use of U.S. dollars, South African rand and other foreign currencies curbed hyperinflation, it cost the government control over its monetary policy. So in 2016, the treasury printed bond notes – green bills that resembled the old Zimbabwean dollar, but were said to be equal in value to the U.S. dollar.
But the bond note rapidly dropped in value, driving people to turn to mobile payments like EcoCash.
In October 2018, the government shocked the country by swapping all U.S. dollars held in Zimbabwean bank accounts for RTGS, an electronic currency withdrawn as bond notes. But values soon plummeted.
Most recently, on June 24, Zimbabwe outlawed the use of foreign currency and announced a repackaged RTGS dollar, naming the new, local dollar after the previously scrapped Zimbabwean dollar.
With the value of money changing daily, cryptocurrencies have appeared as a more stable alternative for some Zimbabweans whose distrust in the banking sector has grown.
In 2017, the use of cryptocurrencies Bitcoin and Styx24 increased rapidly in Zimbabwe, following a period of massive inflation. Golix, a cryptocurrency exchange, responded to demand by releasing a Bitcoin ATM in Harare in April 2018.
But in May, the Reserve Bank of Zimbabwe banned banks from processing payments or trading in cryptocurrencies, citing risks such a theft, fraud, money laundering and other criminal activities, including tax evasion.
The value of cryptocurrency is often “speculative,” says Steve H. Hanke, professor of Applied Economics at Johns Hopkins University and an expert on hyperinflation. “And as a means of payment they’re very questionable because a lot of people won’t accept them.”
Patience Sibanda has 1,652 SPURTs from work done in her community in Shangani. But she says there are no businesses that will allow her to use the cryptocurrency as payment. Since SPURT is not recognized as currency, she is unable to exchange it for Zimbabwean dollars.
“It is difficult to understand as it is not yet currency that we can use,” she says.
Fortune Moyo, GPJ Zimbabwe
Rosemary Dube, a former SPURT user in Mzilikazi, a high-density suburb in Bulawayo, says SPURT is not only unusable, but a way of making people work for nothing.
“About five months after joining, we were given SPURTs but were told that it cannot buy in the regular shops,” she says. “We have to wait until government approves it as legal tender.”
After trying and failing to exchange her SPURT, Dube withdrew from Sound Prosperity.
“It is easy for most people in Zimbabwe to fall for such a scam because people have no jobs,” says Ngqabutho Mzila, who graduated from a local university last year and is searching for employment.
But some say they’ve benefitted from SPURT, despite its restricted use.
Irene Chigatsi, a Shangani resident who joined SPURT in November, says the projects have benefitted her as a woman in the community. While it isn’t a full-time job, she’s grateful to be earning SPURTs.
“It is not easy to ask your husband to fund everything in the home,” she says. “I have something I am doing which can give me income.”
With SPURT, Chigatsi says she is able to purchase basic goods such as cooking oil and mealie meal from business owners who accept SPURT in her community.
Sound Prosperity works with small businesses to give members access to items such as groceries, says Chindove. Businesses that accept SPURT ask that customers pay half in SPURT and half in bond notes. When the payment is complete, Sound Prosperity collects the SPURTs from business owners and gives owners the equivalent amount in bond notes so owners are able to restock their business.
Dadiso Brian Maseva, Sound Prosperity’s business advisor, says Sound Prosperity submitted the application to legalize SPURT to the Reserve Bank of Zimbabwe in October.
“It is now with the Minister of Finance and I am confident of a positive outcome,” he says.
But others remain less convinced of SPURT’s long-term feasibility.
“Zimbabwe has already tried using other digital currencies and they did not work,” says Mzila. “What is special about SPURT?”
Fortune Moyo, GPJ, translated some interviews from IsiNdebele.