BERNARD MPOFU
Jean-Baptiste Alponse Karr’s popular epigram—the more things change, the more they remain the same—seems to be gaining currency as Zimbabwe slides into a somewhat familiar yet uncertain future for many.
Just over 10 years ago and to be precise, on September 10, 2008, former Reserve Bank of Zimbabwe governor Gideon Gono introduced what he termed Foreign Exchange Licenced Warehouses and Retail Shops (Foliwars), Foreign Exchange Licenced Oil Companies (Felocs) and Foreign Exchange Licenced Outlets for Petrol and Diesel (Felopads) as a desperate measure to tame runaway inflation which had officially breached the 231 million percent mark.
The economy had contracted by nearly half and foreign currency reserves had run dry. During this period of unprecedented economic decline, gold annual production plunged to 3,5 tonnes from an all-time peak of 27 tonnes.
Before long Felocs, Felopads and Foliwars became the proverbial Passover mark on the doors of retailers to survive and avoid clashing with authorities when found on the wrong side of the tracks.Before making this painstaking decision, former President Robert Mugabe’s administration had triggered the scarcity of essential commodities when, in 2007, it introduced arbitrary price controls which saw several business executive being arrested and brought before the courts.
The command economy had failed. War with the private sector would have collateral damage, it dawned on authorities.
Empty shelves in supermarkets became a common feature while long winding queues became the order of the day as the Zimbabwean dollar failed to hold forte against economic headwinds.
In 2009, government ditched the local unit for a basket of multiple currencies mainly dominated by the United States dollar.
Many opposed having the greenback as the anchor currency while opting for the South Africa Rand. After all South Africa is Zimbabwe’s major trading partner accounting for the country’s 46 percent of total exports, they argued. The United Arab Emirates is a distant second with 22 percent.
Now sensing some déjà vu, government’s spin doctors have sprung to action assuring the nation that history will not repeat itself.
But while doing so, government read the Riot Act to business, threatening “drastic action” against retailers and service providers hiking prices to offset the devaluation of bond notes and RTGS balances against the dollar. Eventually exchange rates tumbled but for how long?
Analysts, however, contend that moral suasion not threats could foster dialogue between business and government. With foreign currency reserves at a meagre $200 million (less than two weeks import cover), government could hoist its own petard by threatening the goose that lays the golden egg.
Before announcing austerity measures aimed at stimulating economic growth, Finance minister Mthuli Ncube dampened confidence in the bond note when he announced before his appointment that he would demonetise the bond note, which the central bank had said was at par with the dollar.
Resultantly, exchange rate on the parallel market breached the 100 percent mark and is fast approaching the 500 percent mark in just over two weeks.
He later made a climb down saying they were at par.
“Government recognises concerns surrounding RTGS deposits, and we commit to preserve the value of these balances on the current exchange rate of 1 to 1, in order to protect people’s savings,” he said.
Before that Vice President Kembo Mohadi and the ruling Zanu PF party ordered retailers to stop the price hikes notwithstanding the foreign currency situation in the country.
“Government is warning those that have hiked prices and those hoarding basic commodities in order to create artificial shortages, to stop this malpractice forthwith. Government will take stern measures against those who continue to engage in such malpractices, which are bent on inflicting suffering on our people,” he said.
For the manufacturing sector, which desperately requires foreign currency to buy raw materials and retool, the currency issue should be addressed with urgency to restore market stability.
Confederation of Zimbabwe Industries president, Sifelani Jabangwe, said the economy should stabilise to restore market confidence.
“Turning to the issue of supply of basic commodities, as long as adequate supply of official foreign exchange is made available, prices will remain affordable and our members will be working day and night to ensure product supply,” Jabangwe said
