Zimbabwe: Currency Yes, but Tackle Fundamentals
Our deteriorating economy has become a news item worldwide. Fuel price increases have become a weekly ritual. The most topical is the huge hike in electricity tariffs, buffeting most consumers. An ordinary loaf of bread now costs ZW$15. Two litres of cooking oil cost ZW$47, while 1kg of meat is selling at an average price of ZW$85. The prices have risen by an average of 1 500%. The parallel market continues to flourish. Only God knows who is feeding the parallel market.
Salaries have not moved. Perhaps that is what Finance minister Mthuli Ncube meant when he spoke about the wage freeze. Does a salary increase ultimately equate to real increase in value? Or it is sheer increase to cover for inflation? If it is the latter, then we are chasing our own shadows. God help us.
The assertion we have sustained for a period of time: that the prevalence of hot money entrapped in our financial system could also be culpable for driving the exchange rate, prices and inflation. This has finally been confirmed by Reserve Bank of Zimbabwe governor John Mangudya.
“However, the idle cash was not ill-gotten wealth, although it was being used speculatively. The funds will now be invested in productive sectors,” Mangudya said.
In his statement, Mangudya revealed that there are 50 companies sitting on about 50% of the ZW$17 billion in the banking system. Banks themselves, put together, have reported billions of dollars in profit during half-year results.
Given that there is limited lending going on, even in start-ups and scale-ups in small to medium enterprises (SMEs), are banks really comfortable with maintaining profits in RTGS balances? What is the real deployment of this money? How much of it is being tossed in the foreign exchange markets and how much is being channelled to the productive sector?
The introduction of the new Zimbabwean currency notes is a commendable milestone. But why have they opted for small denominations comprising ZW$2 and ZW$5 notes and ZW$2 coins? This question has to be answered by monetary authorities.
If there is no comprehensive deployment plan for the new notes, then obviously the new notes are coming to ease the mopping up of foreign currency on the black market by hot money in the financial system and the unbanked foreigners who might be smuggling US dollars and gold out of Zimbabwe.
In that view, the new notes might be a curse to the general transacting public. Our economy is beleaguered by the spurious hot money that is institutionalised in our financial system and the uncontrolled immigrants who are coming straight into the cash-rich retail sectors of the economy to mop up foreign currency in Zimbabwe. Such activities have the potential to fuel the exchange rate, prices and, in turn, inflation.
On the question of foreigners’ illicit trading, multiple players are called to the task including the Immigration Department, local authorities and all licensing agencies. It is not ideal for foreigners to acquire permits to sell plastic dishes, cups, pipes and simple machines in this country as these are not investors to a nation.
In fact, such behaviour is tantamount to subjecting Zimbabweans to shameful ridicule and exposing the economy to all manner of risks.
The monetary authority must carefully conceptualise policies for our folks in the rural areas. Ncube has to build an economy for Zimbabweans, not to appease the International Monetary Fund and the World Bank at the expense of Zimbabweans and our folks in rural areas. We are under United States sanctions.
Right from the inception of the Second Republic, I proffered counsel to both the fiscal and monetary authorities to mount an inward-looking approach. Internal resource exploitation and mobilisation would have been key to the strategy.
The school of thought that building confidence for the Zimbabwean economy is hinged on how well we pay the international financial organisations is one I am vehemently opposed to. What guarantees do we have to ascertain if we will ever have enough to pay them? What guarantees do we have that they will lend us when we eventually finish paying?
And then foreign direct investment (FDI) will be unlocked or enhanced? Would we then need to count on the FDI to enable new and old Industry to be (re)commissioned? In whose lifetime? A question that could be lingering in our young people today. There is need for a more inward-looking approach and revamped natural resources exploitation policies that reflect the Pan-Africanist and nationalist ideological foundations of Zimbabwe. There is no need to be apologetic for taking ownership of what is truly ours.
A demographic profile that has a +65% youth dividend meant we had the energy, skill and strategy to work the economy. Robust, inclusive and viable models could be put together.
In my next instalment, I will share with you the Two-Hectare Life Model that can be a real game changer and double-edged sword in tackling youth unemployment and low productivity.
That model is already 80% complete and is an apt illustration of what social enterprising can do in undoing poverty while bringing youths in the mainstream participation of economic reconstruction. Home-grown solutions that are owned and driven by Zimbabweans could just be what Zimbabwe needs more than handouts and staff-monitored programmes from the international monetary organisations. Thus by leading the production and productivity crusade ourselves, we can stimulate insurmountable market confidence for our economy.
One could imagine how tough life is for the rural folk. Totally cut off from the news in the city, more so with the unrelenting increases in data tariffs, folks in rural areas are helplessly enduring the vagaries of the chronic inflation. No one is explaining the dramatic increases. Legislators, now known for song and dance in parliament, seem to be fighting in their own corner for personal benefits.
Some walk away from parliament to protest in the street while others go for five years without contributing to debate. This is prevalent on both sides of the house. The performance of parliament, as an institution that has constitutional responsibility for the oversight role on the executive, is appalling. No wonder why our economy is in need of real, practical solutions more than promises and gimmicks. President Emmerson Mnangagwa needs men and women who can help him shape and deliver on the election promises.
The millennials and youths are also curious and anxious. We could be at that time where the president needs to mark and reconsider real stewards with the capacity to deliver Vision 2030, in both government and Zanu PF.
Currency? Yes, but fix the fundamentals first.Mabhanga is a business intelligence practitioner, Pan-Africa Chamber of Commerce board member, resource person for the Mt Carmel Institute Business Forum and has worked for 12 years in an agro-processing multinational entity.
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