Zimbabwe’s central bank governor, John Mangudya, this week blamed market failures for ravaging the economy, which is showing signs of a deep crisis and a high degree of uncertainty.
The ailing economy has experienced high inflation, continuous skyrocketing prices of basic commodities, high unemployment, foreign currency shortages and shortages of some critical goods.
The economic meltdown has seen the majority of Zimbabweans living on the margins of poverty, while several companies are on the verge of collapse.
Mangudya said the central bank had a firm grip on the state of the economy which is in transition to a stable economy and thereafter “will see a growth trajectory”.
“There are too much market failures in this country and our hand is trying to deal with that. We have done very well under the circumstances. Otherwise, we do believe in market forces.”
Mangudya recently introduced an interbank market, which is supposed to be an important aspect in the allocation of foreign currency.
But, the official market has brought out the worst because many companies are failing to access foreign currency they require for the importation of critical raw materials from the official market. This has resulted in them continuing to source foreign currency from the
alternative market, which is the parallel market, where premiums are punitive. Business, then pass on the high costs of sourcing foreign current to consumers.
The RTGS dollars is trading at 1:3,3 against the United States dollar on the interbank market while the local currency is trading at 1:5,2 against the greenback on the black market. When the interbank market was introduced in February, it was trading at 1:2,5 against the United States dollar.
Mangudya said his main focus was economic fundamentals not short-term market whiplash. He hope there will be convergence of the two markets- interbank and black markets- soon.
“We hope in the next three months we will soon find each other. Our role as the central bank is not to allocate foreign currency, but ensure stability in the market. That is what we are working on right now. We all prefer an interbank which is working,” he said.
“We all want to go towards convergence of the market (black and official interbank market). Rome was not built in a day. If you look at Nigeria and Angola (which have thriving interbank markets) they did not do it in a day. They had turbulences too. We need to understand that.”
Mangudya said the failing economic system in Zimbabwe was largely caused by outsiders’ foreign policy towards Zimbabwe.
“We have received lower investment compared to other countries in the region, yes it’s a fact. But, there are geopolitical factors. And we have to ask, where is the bigger weight inside (Zimbabwe) or outside (Zidera),” he said adding that Zimbabwe has “lost more than 100 correspondent banking relationships because of foreign policies of
“Recently, the World Bank availed funds for Cyclone Idai for Mozambique, Malawi and Zimbabwe. How did it come to Zimbabwe, through the United Nations agencies? Why, because of these geopolitical situation. It’s sad.”
Business leaders and economists disagree with Mangudya saying markets should be left to tackle economic problems.
“It is very important that we get to the bottom of the issue and proffer solutions. Our problem as business is how do we put stock into the market and replace it, and how do we price the products particularly when the future is not known,” said Anthony Mandiwanza,
Dairibord Zimbabwe CEO.
“The interbank market is working in Nigeria today; it’s also working in Angola. Our interbank market has not lived to expectations. You find that the pricing recovery is not transparent and it is understood there is a heavy hand of government involved. Free markets are critical in this case.”
Economist Gift Mugano said ministers were failing to implement the Transitional Stabilisation Programme (TSP) launched last year because it “is timid”.
Government must come up with clear, simplified work plan say five pages from the 388 pages in TSP,” he said.
“We have seen a dollarised Zimbabwean economy being driven by the Ministry of Finance and the Reserve Bank of Zimbabwe, which is a taboo. We have also seen a country driven by exchange rate without production.”
“We expect the economy to slow down on the back of drought and adverse effects of Cyclone Idai. The other big issue is the absence of a robust industrial and agricultural policies, the country will continue to import products which can be domesticated.”
Shingi Munyeza, a business man and a member of President Emmerson Mnangagwa’s Advisory Council said there was lack of political capital.
“You cannot inspire people who don’t believe in you. They have to be a buy-in. If you don’t have that (political) capital, people will not believe in you. Government must also show competence. Government lacks competency to deliver. They should put competent people. I don’t have a problem with inflation or exchange rate. These are symptoms of a
deeper problem in the room that is governance political leadership. We don’t want to gloss over things when we know is a lie,” Munyeza said.
“For transition, we need a midwife. We need someone we put together as government, business and we will be able to talk and solve the problems faced by this economy. We also need institutional renewal. There are weak. Competent levels are at their lowest. We have allowed Grade D people to run Grade A structures and we expect to do better as
a country, we can’t.”
Economist Vince Musewe said there was need to change the system completely to get better results.
“Zimbabwe is an economy which imports 68% of products for consumption, 60% of exports are raw products and we have a very powerful secret economy in this country. We need to change the structure of the economy, which is the fundamental decision government should make. When the minister of finance is leading the park, I have a problem with that,” Musewe said.
Consumers Council of Zimbabwe executive director, Rosemary Siyachitema said consumers were hard hit by the worsening economic indicators and the leadership “don’t seem to have proper directions”.
“People are surviving on one meal a day. Government is said lets have patience, what patience and until when continue to surge. There is need for government to do something. People are suffering. Rent is now charged in United State dollars in most areas and we don’t have it,” she said.
“Government has been talking about middle class income by 2030. What middle class income are you talking about? In fact, we now have upper middle class and lower middle class income in the poor section.”