Maybe the problem is that local stakeholders can’t play?

CHRIS CHENGA

One of President Emmerson Mnangagwa’s first calls to action in office was to supposedly shame “externalisers”. The intent was to show a clearly distinct approach to the prior administration, as he portrayed a firm hand and intolerance towards, what is better termed as “economic malpractice”. Externalisation is not definitively illegal. The degree of which an entity is culpable of externalisation befits the use of malpractice as its description. It is a judgment on an entity’s subjective conscience; the degree to which it chooses to comply with an expectation. More simply, it is not explicitly right or wrong, binary as 1 or 0, for an entity to externalise. Rather, externalisation, like so many other acts of economic malpractice are determined by the subjective choice to abide by a moral expectation.

So, were the companies on the externalisation list involved in illegal conduct? Not definitively. But, yes, they consciously chose, like many other entities operating within Zimbabwe but were not on that list, to pursue actions that are not aligned to the sustainability of a monetary system which depends on a moral expectation of stakeholders. This is the correct context to approach externalisation.

A moment was missed by observers, and commentators alike, in further discussing the motivational differences between an impulse towards economic malpractice and good conduct. Along this line of thought, a society may find itself in a productive intuitive quest to understand why so many local stakeholders are bound to diverge from good conduct? Could this also be why our policymakers have developed a culture of foreign investor dependence, over local stakeholders who have billions – at least $6,5 billion in RTGS balances – that can be used productively in a truly incentivising economy?

Convention seems to have settled that the $6,5 billion in RTGS balances must be supported by attracting at least $1.3 billion of foreign currency investment, in reference to what is called a cash to deposit ratio that should be 20 percent. As at the first quarter of the year, cash in commercial banks was around $250 million meaning cash to deposit ratio is at a dangerous 3 percent. But, what of thinking that productive use of RTGS balances by locals can actually earn more foreign exchange and push up the cash to deposit ratio closer to the desirable 20 percent? There is an intuitive irony in an economy bent on attracting foreign inflows, yet has the concurrent malpractice of externalisation. Locals are the ones withdrawing and externalizing cash, not foreigners. As local stakeholders have a propensity for this malpractice, why would foreign investors be persuaded into the good conduct of pouring foreign exchange in our environment?

Indeed, one is advancing an “indigenisation” of concern. Not a prejudice of class, but preferences of benevolence to local stakeholders before foreign investors are considered. Within the new administration, and well-wishing commentators, Indigenization seems a narrative best erased from progressive economic literature under the assumption that its very mention will scare away foreign investment. Henceforth, a prosperous Zimbabwean future economy could only be achieved at the restraint of indigenisation references. So, as of last November, we have all moved on. It only occurs, in underlined or bolded font, when Zimbabwean investment literature makes sure to highlight the scrapping of Indigenisation laws as a bullet point to new investment appeal. Yet, it is this misguidance that is currently, and will continue to hold us back from a monetary system that yields desirable returns for both locals and foreigners. One is not arguing for Indigenisation laws at this point – that would demand specific context – but this an argument for indigenisation of concern.

There is enough domestic capital that could be utilised productively to revitalise a credible monetary system. The RTGS balances are evident to this capital formation. The disparity in cash to deposit ratios, however, shows that the local business environment is failing to put this capital to productive use. Local stakeholders operate in a business environment that clearly motivates a propensity to externalise capital than to productively use it here. Without an environment where local impulses are persuaded to abide by the moral expectations to sustain their own monetary system, foreign dependence is an illiterate strategy; perhaps a dangerous one too, as per nations struggling with foreign denominated debt will attest. Zimbabweans, for good reasons, are hesitant to trust their own monetary system. But that is a secondary problem. Primary is that Zimbabweans themselves are being intellectually persuaded that it is not them who can and should labour to revitalise their own monetary system. Supposedly, that is up to foreigners. This notion demands unapologetic, and accurate refute! It can only be done by a society that queries the motivational differences between an impulse towards economic malpractice and good conduct? Is that society being benevolent to its indigenous stakeholders?

President Mnangagwa was wrong to call out externalisers. There was no shame for them to feel. What they did was not illegal. It was a subtle vote of confidence, or lack thereof, in the local business environment as reflected by their subjective choice to send out capital. That choice didn’t meet the moral expectation which monetary authorities would like to enforce. Rather, shame can only reside in an administration that may believe that foreign stakeholders have a greater influence on resolutions that locals do to revitalise our monetary system. If President Mnangagwa hopes to distance himself from the poor investment governance of the previous administration, the right attitude would be to correct the environment that actually elevates proper indigenisation, not shuns it! His administration should focus on persuading local stakeholders’ impulses to become confident in their own monetary system, so that local can freely meet the moral expectation to sustain our monetary system. Doing away or posturing against a narrative of indigenisation deprives both locals and foreigners long term prosperity in Zimbabwe.

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