Zimbabwe’s financial enigma cost to the economy

TAWANDA KAROMBO


Zimbabwe has hurtled from one financial enigma, nigh crisis, to another and seems the trend, which has given birth to what is essentially a
money merry-go-round, is with us. But to what extent and cost for the economy and the ordinary citizen?


Foreign currency shortages are at the core of the country’s crisis, with pricing distortions, inflation, budget overspend and government printing of
RTGS balances emerging as the clearer symptoms.

Some have said the root cause is political instability while others opine that Zimbabwe’s problems are rooted in low productivity, sanctions or a lack of much needed investment.


Whatever, the case study one picks, there are inescapable realities on the ground and these have exhibited in much suffering for the ordinary citizens, the very people that politicians ought to look out for and do everything to ensure their lives improve.

The problems buffeting Zimbabwe’s economy are mounting and worsening.


It was given that something had to happen in the past week or so to abet the rapid decline of Zimbabwe’s economy. And indeed, something happened;
the government opted to do away with the crippling 1:25 exchange rate for the local currency versus the US Dollar and also settled for payment of
a foreign currency denominated allowance for civil servants.


But wait, we have been here before. Wait again, is there sincerity?

Furthermore, just how do we hope to solve these financial measures when
we don’t seem to be addressing the real root causes of our challenges which is productivity and capacitation?

How do these measures translate to the capacitation of farmers and how does a small to medium company that supplies key production raw materials and implements to companies such as Zimplats and others benefit from the new foreign currency auction system?


The challenge with any measures the government takes is a lack of transparency; yes the auction is an auction but then there are very wide
limits and this means that it becomes a big boys market.


What about the small scale to medium companies that have for long relied on the parallel market for foreign currency?


They will remain excluded and therein lies our challenges as a nation; we have not thought of them in these new measures which to all intends and purposes appear reactionary.


And it’s also important to mention that small to medium enterprises constitute the bigger portion of earnings for this economy. In simple terms,
the informal and semi-formal economy is the backbone of the country and these are the businesses that are consumer facing.


The combined customer counts for informal food outlets and informal shops far outweigh those of supermarket giants such as OK Zimbabwe and fast foods counters like Simbisa Brands outlets.


Yet we continue to leave out the informal sector in policy formulation and capacitation. Suffice to say that the same stock that OK Zimbabwe and Pick ‘n Pay import is the same stock that informal shops import, albeit at varying
scale and different modalities.


While it is important to ensure support to the formal retailers to accrue tax, there is a lot that the government could do to also prop up the informal sector which has eased the burden of employment for the state.


The civil servants will get some form of respite from the USD allowance and certainly this will breathe some form of US Dollar liquidity into the
economy but then it can only do so much.

The private sector now has to play catch up; but then is there enough dollars for them to pay their employees, let alone in cash. We are simply going round in circles, patching the worst areas as we go. What happened to forward planning and sitting down together as players in the economic sector then finding a way forward that is not reactionary?


Another unforeseen crisis has been US Dollar inflation as traders and everyone else seek to capitalise on the new status quo. Prices have already
started to go up, even before the civil servants have received their first US Dollar allowance. And everyone is now chasing the US Dollar.

Prices of sugar at most of the informal outlets have gone up in US Dollar terms by about 20 cents compared to two weeks ago. The price of petrol in
USD has also gone up in the past week by about at least five cents and at most 10 cents at filling stations such as Glow, Giant Petroleum and others.


This is a worrying trend that could leave us in a worse situation than before because on the one hand it is not proper for Zimbabweans to again
start spending crucial foreign currency on things that can be produced locally. But then, once a country has tasted foreign currency as a solution, it’s difficult to wean off. I would have preferred a well thought out road to de-dollarisation, a road that is transparent and well explained.


This is where government policy has faltered and failed the people. There is no transparency and it appears that the Reserve Bank of Zimbabwe
was pushing the 1:25 exchange rate against all logic and reality. This has then resulted in some farmers withholding their tobacco crop, further
starving the nation of foreign currency.


There has been widespread concern that the official exchange rate is a funnel that feeds foreign currency to the elite and those connected.


Again, the central bank has not done anything to inspire confidence and deal with uncertainties and mistrust emanating from this. How then do
you tell a nation to trust your policies when the people have disgruntlements?


And we are still going to have a crawling exchange rate system for a select few. Just how do we hope to inspire confidence by this beats the
mind? And this means we are still taking away foreign currency from exporters and giving it to some people for a song; the very same situation
that brought us to where we are – a crisis.


And the money merry-goround continues. For now, we seem to be at this forex auction system bus stop; but for how long? This is a system
that has been discarded before and from here where do we go?

Surely, if this fails, we are damned. If it succeeds, we are still damned because we will then be stuck with the US Dollar as a base currency for the economy and everyone knows we do not have enough of this to sustain the government and the private sector, especially when industry still
has to give a percentage of its export proceeds to support a crawling exchange rate for a select few.


Tawanda Karombo is a finance and tech journalist.
Email; tawakarombo@yahoo.
Mthuli Ncube co.uk Twitter: @tawakarombo

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