October 15, 2010
Harare, Zimbabwe
When I told my close friends and family that I was heading back to Zimbabwe, I got the same request over and over: “bring me back some money with a lot of zeros.”
With multi-trillion dollar bank notes, Zimbabwe was once the laughing stock of the world economy. Now Zim’s policymakers are having the last laugh, particularly as the US dollar falls to all-time lows against gold, the Aussie dollar, and Swiss franc.
Make no mistake, there will be several dollar bounces in the coming years. In the long run, though, and absent any major policy shifts, it’s clear that the Federal Reserve will happily sacrifice the dollar in favor of mismanaged government stimulus programs.
As I sit here in the capital of a nation where a trillion dollars once bought a loaf of bread, I’d really encourage you to take steps to preserve your capital.
Opening a foreign bank account is a great way to do this– you can free your capital from potential exchange controls that are coming and park your cash in stronger currencies, including gold.
For premium service subscribers, your October issue should be delivered to your inbox today. Inside you’ll find actionable contact information for where you can open up a foreign bank account online, right from your living room. They also offer purchase and storage of physical gold through a Swiss partner.
Unless you want to wait until there’s 14 zeros on your currency, I’d suggest that you consider taking action right away. And with that, let’s move on to this week’s questions.
Who wants to be a Zimbabwe trillionaire?
First, Simon R [paraphrased] comments, “Simon, I’m a huge fan, but I could name at least 100 much nicer and more livable cities than Cape Town. South Africa is rife with corruption, racial tension, and reverse-apartheid. I’m not denying the opportunities, but why risk it?”
I always enjoy polite disagreement. Mr. R’s analytical comment was in response to my recent article about Cape Town in which I described why it is one of my favorite cities for *year-round* living.
To be clear, I recognize the issues in South Africa, and they’re worth discussing. Mr. R correctly articulated several problems in the country, including the tide of illegal immigrants, crime rates, and racial quotas.
It’s true. Post-apartheid has given rise to some level of reverse-apartheid, and it’s something that will take more than a generation to fix. Black South Africans were denied basic education under apartheid, and consequently the vast majority of them are now underqualified to meet job requirements.
They can drive taxis and wait tables, but there is a systemic lack of qualified black applicants for skilled positions. The government has tried to fix the problem by imposing a quota system for many businesses, or by incentivizing the promotion of unqualified blacks.
I can sympathize with the reaction to find balance and right the wrongs from the past, but doing so at the expense of growth is never a good idea. If you make it difficult for business to thrive by imposing quotas and controls, there will be fewer jobs and less wealth for everyone in the long run.
The government is starting to back down due to pressure from businesses, freeing up the quotas and allowing skilled foreigners into the country to fill vacant positions.
The thing is, a lot of black South Africans remain upbeat about the future. They might not have the skills to rise to the top, but they’re optimistic for their children who are exposed to a lot more educational opportunities.
It will take many years, but it will sort itself out eventually.
All of that being said, I still love Cape Town, and it’s on my short list for year-round living. This is mostly due to weather– there are a lot of cities that I adore, but they can be too harsh in the winter. Cape Town’s winter is mild by comparison.
Other cities in this year-round category for me include Split, Croatia; Medellin, Colombia; Santiago, Chile; Quito, Ecuador, some places in Australia, Hong Kong, and a few others.
Next, Anna asks, “Simon, you travel so much, is it possible for someone like you to have a relationship? And how is it that you’re able to hone in on the issues and opportunities in a country so quickly? It’s intriguing.”
When I travel to these places, typically I’ve been there before, possibly many times. It’s also likely that I’ve done business there in some capacity, so I already have a pretty good feel for the situation.
If it’s my first time, I’m seasoned enough that I know what to look for– government statistics tell you nothing, it’s the little things on the ground that are more compelling.
For example, taxi drivers using air conditioning in developing countries is an indicator of optimism and disposable income. Acceptance of the local currency for large purchases and bribes suggests confidence. Seeing a lot of younger people relative to elderly indicates favorable long-term demographics, etc.
On the issue of relationships… let’s save that for another time.
Last, Anel asks, “Simon, I’m putting together some projects that I’m really excited about, but when I show them to friends they laugh and say that no one will invest. What do you suggest if everyone thinks your business ideas are crazy?”
First of all, budding entrepreneurs should stop talking to friends and family (F&F) unless (a) they are unconditionally supportive, or (b) your uncle is Sir Richard Branson.
Otherwise, F&F will only fill your head with doubt. It’s best to keep things to yourself and then tell them about your smashing success after the fact.
If you want guidance and support as an entrepreneur or investor, talk to other entrepreneurs or investors. Seek them out at industry conferences, local associations, or online forums. Make yourself valuable to the most successful people in your industry and learn from them. Leave F&F alone with their pessimism.
