eBusiness Weekly
Dr Tinashe Nyamunda
There was a Cabinet reshuffle recently, which saw Patrick Chinamasa being moved to the Ministry of Cyber Security while former Home Affairs Minister Minister Ignatious Chombo was appointed as the Minister of Finance. It looks like the President wanted to try a new approach and benefit from new ideas of how to deal with the economic challenges. Whatever the reason, the new Finance Minister has a huge task ahead of him.
We effectively have no currency! The foreign currency basket is now just fiction; bond notes are in principle “just an export incentive”, but even as a surrogate currency, effectively unavailable. Our national budget is funded from Treasury Bills debt, in an economy with over 90 percent formal unemployment, debt almost equivalent to the amount of revenue that could have been generated from Chiadzwa between 2009 and 2014.
The Confederation of Zimbabwe Industries says 30 percent of local firms face collapse due to the vexing foreign currency crisis and a lack of confidence hurting new investment. The Confederation of Zimbabwean Industries (CZI) annual manufacturing survey released this week is sobering. It shows that this collapse in manufacturing capacity has also led to the loss of 15 percent of the remaining formal jobs.
As such, whatever limited benefits of SI 64 have reached a point of diminishing returns. And yet the cost of imports is going up. Consider the story below.
A relative called me telling me that their goods brought from Asia for sale in Zimbabwe were taxed, according to new regulations for goods in transit. They had passed through South Africa to make more orders for their business so it made more sense to pass through South Africa where they could cut their costs down. Products brought in from China wield more reasonable profit than those from South Africa.
So these costs will be added to the retail price further squeezing the consumers.
In agriculture, even some tobacco farmers who had produced enough to make a good income were compromised by the currency situation. This will discourage selling to government in coming seasons with farmers preferring to be paid in cash, even hard currency to avoid the challenges that they experienced this year.
As all of this is happening, laws have been passed to restrict illegal currency trading around Harare. This may have pushed some people towards the borders of the country, but the real issue is how to make the whole thing more organised. In an economy like Zimbabwe’s there is just no way one can regulate illegal currency trading. The 3 tier pricing, the illiquidity of bond notes and serious shortage of foreign exchange make it difficult.
This is just the tip of the iceberg concerning everything happening in our country. The concept of economy has been viewed in many different ways. Such anthropologists as Caliscan and Callon have suggested that the idea of economy assumes that it is a rigid concept, and have suggested that as the process of allocating resources is complicated and always moving, they prefer the notion of economisation.
In Northern economies, they experience booms and busts, bubbles and so forth. But in the context of Zimbabwe, except for a short period of the GNU, the economy has experienced a sustained downward spiral since the late 1990s.
Minister Chombo is the latest in the series of Finance Ministers to take up the economic portfolio. From the late 1990s, the ministers included Herbet Murerwa, Simba Makoni, Chris Kuruneri, Samuel Mumbengegwi, Tendai Biti and the most recent was Patrick Chinamasa. Most of these ministers presided over a sustained decline or intermittent growth. So did Reserve Bank governors, although my concern is not as much with the central bank as it is with the finance portfolio.
As far as I am concerned, where the fundamentals of production, markets, finance, currency and foreign exchange are all skewed, the economy in those jurisdictions collapses. But where people struggle to survive, the economy dies. Some activities will be taking place, but the government’s role of providing an operating environment will not be working.
So, what can Minister Chombo do differently?
This is not to say that he does not have the capacity. He certainly has a chance to try his own approaches. Perhaps, the problem does not lie with the personnel, but elsewhere as I have suggested in previous pieces.
But even so, I am yet to hear of a comprehensive plan from the Minister regarding how he intends to address the situation. This is because the problem is bigger than just regulating currency dealers, or measures to stimulate the domestic economy. Moreover, I think the problem cannot be resolved by telling the suffering people that things are getting better when they are clearly getting worse.
So, after the reshuffle, and as we edge towards the end of another year in a seemingly unending crisis, I want to pose a question to the new Minister of Finance and Economic Development.
What is the latest strategy? How is the government confronting a situation that is continuing to deteriorate?
How is the government going to ameliorate a situation where formal unemployment is at record levels, where there is no currency and where the economy is cardiac arrest but an illusion of its existence is sustained by people just making do in spite of being continuously being suffocated by deepening challenges.
