Home » Industry » Zimbabwe Must Move On [opinion]

PERHAPS this time the debate around a local currency might begin in earnest. But I don’t expect much from our compromised party economists. The only reason I am imagining a robust debate is that I can’t afford the luxury of losing hope. Zimbabwe shall live, and live better, if only we can choose to chart our own destiny.

Finance and Economic Development Minister Patrick Chinamasa this week made a banal statement about the negative effect of the multi-currency regime on the country’s economy, a statement which nevertheless has raised the hackles of hysteria merchants who have made it their business to see a greater catastrophe in having a local currency to help industry recover than in the disaster induced by a currency antidote which has long overstayed the ailment.

Let’s give it to the fear-mongers, the minister’s statement before Parliament was inaccurately pitched, and this is how. “The migration from hyperinflation on currency to multi-currency did a lot of damage to our economy,” said Minister Chinamasa.

His enemies quickly seized on that slip-up to pillory him. The truth is that Chinamasa introduced the multi-currency regime in his acting capacity on February 29 2009, a whole two weeks before the inauguration of the inclusive Government on February 13 that year. That act alone managed to stabilise the economy and restore business confidence. Overnight, a multi-trillion inflation rate was gone, and so was the foreign currency black market where, in street lingo, money was made from “burning” the Zimbabwe dollar.

It was that policy intervention which gave the inclusive Government a patina of honour in-between not so infrequent bouts of political acrimony. It gave rise to false claims of economic growth when what we in fact had during those four and half years of forced cooperation was just a respite, a period of tentative recovery from the nadir of 2008.

Chinamasa should not be shy to take credit for that policy intervention, for giving the country a semblance of order, and I was one of the first people to criticise dollarisation at the time.

The minister then told Parliament of what I consider unforeseen residual effects of the hyperinflation experience which he wrongly ascribes to the introduction of the multi-currency itself.

“It (multi-currency) pitched our cost structure too high . . . It’s like we devalued the USD dollar . . .”

The high cost structure was “unsustainable” and killed “aggregate demand which is very necessary for any economy to function.”

That cost structure affected more than just goods in the shops. There was also the wage structure. “The wage structure that the private sector is paying is not sustainable, we are beginning to see the signs now. A lot of companies are six, seven, eight months behind, without paying wages,” said the minister.

The truth is that people carried the hyperinflation mentality into the multi-currency era with the result that the cost of both goods and labour were unsustainable. But many companies, in the euphoria of legalised foreign currency dealing, felt everything was justified and affordable. What more, the Diaspora was forced to remit more than they had been doing earlier when burning US$2 could easily yield a trillion dollars’ worth of bearer cheques. So there was a lot of hard currency floating around in the early years of the inclusive Government to transmit the illusion of buoyancy, even without much significant foreign investment.

Everybody went into a slumber. And the opposition made this a necessary disposition. There was no need to fashion, to think out strategies to re-introduce a local currency.

We were constantly told that this would scare away foreign investors. We borrowed other people’s robes and we are now treating them as if they were our own.

“. . . We are beginning to see the signs now,” Minister Chinamasa told Parliament. Yes, that’s Government’s biggest fault, that it took so long to realise that we could not sustain the illusion of stability forever, let alone talk of economic recovery, without a local currency, by whatever name called. The Government kept listening to the fear-mongers, the same people for whom a Zanu-PF-led economic recovery spells political doom. To them economic gloom is their speed boat to power.

While there is some truth that certain basics are needed for a local currency, the bigger truth is that maintaining the multi-currency system on its own has deprived Government of its role to help fund industry which is failing to retool or to export to earn foreign currency. The same industrialists who reject the Zimbabwe dollar want Government to give them money which they are failing to generate as the claimed engine of economic growth. Instead, new subterfuges are manufactured everyday to explain why investors are not flooding us with their money: it’s because of your land reform and indigenisation policies that we don’t have enough foreign currency.

When the United States and European Union states experienced similar financial convulsions from 2008, they quickly realised that “quantitative easing” was not a foreign currency issue. They printed their own currencies, billions of dollars in the case of the US, to save industry and jobs. There must be money in the system for industry to continue to produce.

Zimbabwe doesn’t have the same latitude. Then one wonders how these anti-Zimbabwe dollar prophets reconcile having the portfolios of Finance minister and a Reserve Bank governor who both can’t exercise any useful fiscal and monetary roles?

Much worse, in a bid to please the IMF and the World Bank, Government has pursued damaging neoliberal policies where every Tonho and Musa is allowed to take out of the country as much foreign currency as they please for consumption purposes.

That has impacted hard on local producers, from vehicles, clothing to food. The US makes it cheaper to import than to produce because everyone wants a quick profit.

And we want to delude ourselves that foreigners are the only ones foolish enough to invest in our economy long-term! Why should they, when they have realised that all Zimbabweans want is to consume, never mind where the goods are coming from? The better still if imported.

Perhaps a myth that needs clearing is that a local currency will be abused by allowing Government to print money willy-nilly. While that is possible, the mischief is that those fears are taken out of the context of sanctions imposed on Zimbabwe over the land reform programme to “make the economy scream” and force Zimbabweans to “stone” their ministers on the streets, and why printing money became a necessity. A responsible Government could not abandon farmers on the land without seed, fuel or implements. As then RBZ governor Gideon Gono put it, “extraordinary circumstances called for extraordinary measures”. Printing money became a matter of national survival to counter those who wanted Zimbabweans to throw stones on the streets.

That exigency is almost gone and the multi-currency system was no more than a transitional mechanism as was the GNU. Unfortunately the currency issue can’t be resolved through an election although it is also a political matter. Government has to work out the mechanics.

And that could mean adopting unpopular decisions to reduce the use of the multi-currency along with a local one. It is not clear why people need to keep heaps of foreign currency in their homes instead of using plastic money. In the hyperinflation era everybody got to appreciate the RTGS system. Government can impose a maximum limit on cash transactions on pain of sanctions. Any payment above that, say $300, should be through direct bank transfer. We have more than enough banks to do that for a nominal fee. The use of cards will make cash retention redundant.

For their part, banks must be made to pay depositors a minimum interest like they used to do before the era of bearer cheques.

At the end of the day though, we have to accept that the belief that the only route to economic recovery is through direct foreign currency is an illusion. There is no way we can ever have a surfeit of other people’s currencies as a substitute for our own. People must use their own currency to consume what they produce. That’s what will drive Zim-Asset. Foreign currency should be complementary, helping us to purchase what we can’t produce or manufacture or to get capital equipment and new technologies.

The fear of what happened in 2008 is being overplayed for sinister motives. We know a burnt child dreads fire, but that doesn’t mean we stop using fire completely. It simply cautions us to be more careful next time.

But Zimbabweans are behaving like a patient who has used a drug well beyond the cure of an ailment and now takes the comfort of addiction as a matter of necessity and is afraid to stop it and revert to his natural immune system ostensibly because the ailment might recur.

The multi-currency regime, adopted as a necessary antidote in 2009, has become a major factor in Zimbabwe’s economic malaise.

Zimbabwe must move on.

Source : The Herald