The impact of hyperinflation on small to medium enterprises in Harare, Zimbabwe : the case of the formal and infomal at Avondale Shopping Centre.

Abstract

The pattern of a classical hyperinflation is an acute acceleration of inflation to levels above 1000% generally associated with printing money to finance large fiscal deficits due to wars, revolutions, and the end of empires or the establishment of new states (Coorey et al, 2007: 3). After World War I, a handful of European economies succumbed to hyperinflation. Austria, Germany, Hungary, Poland, and Russia all racked up enormous price increases, with Germany recording an astronomical 3.25 million percent in a single month in 1923 (Reinhart and Savastano, 2003: 1). Since the 1950s, hyperinflation has been confined to the developing world and the transition economies. Zimbabwe currently has the highest rate of inflation in the world with an annual rate of 7982.1% in September 2007 (RBZ Website, 1/11/07). This paper examines the impact of hyperinflation on Small to Medium Enterprises (SMEs) in Harare, Zimbabwe with aims of revealing how SMEs were affected by hyperinflation and other factors linked to the phenomenon.