On Friday October 5, 2018, the Ministry of Finance published a 388-paged document that details the Transitional Stabilisation Programme. The document is dubbed, “Towards a Prosperous & Empowered Upper Middle Income Society by 2030”.
There were no new surprises in the document other than the normal reform agenda that have been echoed already in different economic forums. However, the positive thing is that the vision has been documented and it is a two year programme running from October 2018 to December 2020. The key highlight is that a cap has been placed on the US2,0c per dollar transacted Money Transfer Tax.
The tax will apply on transactions of US$10 and above with an upper limit of US$10 000. This implies that transfers above US$500 000 will attract a flat rate of USD10 000. In addition, certain payments such as capital market transactions and salaries have been exempted from the tax. Developments on the ground show that a number of merchants are now adjusting prices so as to incorporate the new tax. In addition, queues at filling stations are now a common feature despite the announcement by the Reserve Bank of Zimbabwe that it had released US$41,0m towards fuel procurement.
Meanwhile, the Ministry of Energy and Power Development has cited that the country has adequate fuel stocks but panic buying and hoarding was causing stock-outs at filling stations. On the other hand, we have also witnessed queues in major supermarkets as consumers were hoarding basic food stuffs such as cooking oil on price-increase-fears. Perhaps an important study for merchants in Zimbabwe will be the queueing theory.
Queueing theory is the mathematical study of waiting lines or queues. A queueing model is constructed so that queue lengths and waiting time can be predicted. In designing queueing systems, there is need to aim for a balance between service to customers (short queues implying many servers) and economic considerations (not too many servers). For example, some questions could be; “How many supermarket tills would be needed to avoid queuing?” or “How many buses or trains would be needed if queues were to be eliminated?”
Generally, queues form because resources are limited. On the other hand, consumers hoard commodities when there are fears of scarcity. In Economics, hoarding is defined as the practice of obtaining and holding resources in quantities greater than needed for one’s immediate use. Hoarding behaviour is a common response to fear, whether fear of imminent societal collapse or a simple fear of a shortage of some good. Economic hardships may lead people to collect foodstuffs, water, petrol and other essentials which they believe, rightly or wrongly, may soon be in short supply. A feature of hoarding is that it leads to an inefficient distribution of scarce resources, making the scarcity even more of a problem. That said, given the limited investment options that local institutional investors have with their RTGS balances, the hoarding mentality to be extended to the Zimbabwe Stock Exchange (ZSE). There has been significant demand for the ZSE blue chips (Old Mutual, Delta, Econet and Innscor), fuelled mainly by local institutional money. This is expected to continue given that the ZSE offers an avenue for institutional investors to preserve RTGS balances.
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