Nixon S. Chekenya
Zimbabwe today!
Prices are rushing up, exchange rates are highly volatile, uneconomic and excessive importation of consumer goods is stimulated, and the seeds are sown for a subsequent collapse.
Even though fluctuations in the demand for many basic commodities owing to changes in tastes and in the direction of demand may be unavoidable. And though it is certainly the case that no radical remedy for fluctuations is possible except through measures to stabilize the aggregate effective demand. However some modifications by the government should be possible in the case of the great basic commodities, most of which can be readily produced locally.
Admittedly nothing can be more inefficient than the present system by which the prices for goods and fuel are always too high and there are frequent meaningless fluctuations in the goods supplied. However, the government has not learnt to promote the local industry. Schemes have been installed support industry. The motives behind these various programmes are not all the same. In the majority of cases the primary object of the government has been the protection of its small-scale producers from ruinous price fluctuations, of which the lack of basic commodities has been an undesired by-product.
If only we could tackle the problems of economics (production) with the same energy and whole-heartedness as we tackle those of politics. In Africa, politics is old-established as a proper object of the State, whereas economic wellbeing is still a parvenu. Social action which is nationally approved for the former purpose is still suspect when it is for the latter. Nevertheless, we are at this moment allowing expenditure for defense and bureaucrats’ salaries to help solve our problem of economic meltdown, currency challenges and unemployment as by-products of such spending.
My proposal is, therefore, that first, the Government should cut on Administration expenditure, and support the importation of specified capital goods and raw materials, either free of warehouse charges and duty-free or for a nominal charge. The Government would not become the outright owners of stock
I submit that such a plan would have several advantages, of which the following may be emphasized;
- The cost of the Treasury would be very small in relation to the volumes of resources involved. For warehouse costs and interest, provided on the lines suggested above, would cost less than 10 per cent per annum which I estimate as a normal expense to the outside holder who has no special facilities. The total cost would vary with the commodity, and we are not in a position to estimate it closely; but it might average, perhaps, at 5 per cent. If we take this as sufficiently indicative of the order of magnitude of the figures, we could store US$500,000,000.00 of raw materials at an annual cost of US$1,000,000.00. It is evident that the provision of stocks on that scale would give us better security, while the cost would be easily supportable.
- Far-reaching arrangements would become possible with producers of export-oriented commodities. We have recently had experience of the disturbance caused by persistent shortages in fuel supplies. Why not support castor bean and jatropha cultivation to try and generate biofuel? Is it because it does not make any economic sense, or we simply do not have the willingness to do so. I strongly do not think the former is true, ours is linked to the later. The government needs to think of a strategy to generate biofuel, if they cannot accept one that I shall submit in the next treatise.
- The possible strain on the exchange needs, however, a careful handling. The current interbank market rates, and the heavy importation of almost everything including toothpicks and tomato does not make any economic sense. It is for that reason that I have laid special stress on supplies of raw material and machinery to boost the defunct manufacturing industry.
Yet, even amidst the need to import, we might contrive to draw advantage out of the difficulties themselves. In so far as we are to finance importation of goods in excess of what we should do otherwise, the effect on our export trade would be exactly the same as an increase in the scale of our current borrowings.
If the Government adopts what I have submitted above, we might reasonably expect some stimulation to our exports volumes and export proceeds; and in some cases we might be able to link the agreements to import with express arrangements to aid corresponding exports. This should technically boost our foreign currency reserves and improve our balance of payments. But at this juncture of affairs, I can see no form of FDI inflows which it would be safer or more advantageous for us to accumulate. Ours are not fiscal (monetary) challenges, but rather production problems. We need to promote the production of export products and install import substitution schemes.
At the present time, the former must be urgently attended to by robust measures to revive the manufacturing industry, and the latter must await the arrival of happier days. I must not be supposed to overlook this conflict. But I seek to reinforce the former scheme by pointing out that once we deal with our production challenges, gradually foreign currency will flow into the county and eventually, the currency crisis must vanish.
