Alfred M. Mthimkhulu
Mthuli Ncube did not say new currency in 12 months.
No, the Minister said no such thing. His interview is available on the Bloomberg website titled “Zimbabwe Plans to Introduce Currency ‘In Next 12 Months’: FM Ncube”. Before playing it, here is some flashback from the United States to anchor this article.
Back in January 2009, President Obama’s team was preparing to take office. The worst financial crisis since the 1930s was in full swing. Timothy Geithner was the incoming Treasury Secretary. All eyes were on him. In his memoirs, he describes how nerve-wrecking the thought of his maiden press briefing was given that President Obama had all along been pushing away all questions relating to the crisis. The President had done so because he wanted “Tim could get his moment in the sun”.
What happened after Tim got his moment in the sun? The market dropped further, literally sliding as he spoke. When he finished speaking, it was down 5 percent. The next day it was down 11 percent and, on that day, the New York Times editorial commented that “someone should have told Treasury Secretary that one thing to avoid at a time of uncertainty is raising more questions”.
While the markets’ reaction to Tim Geithner’s briefing is understandable given the scale of the problem and his self-confessed inexperience in talking to the press, the anxiety and panic that has emerged after Minister Ncube’s interview on Bloomberg TV is unwarranted.
Our minister is no stranger to the press. It is thus out of the question that the interview may have been so overwhelming that he ended up saying things he didn’t intend to. Unlike the former US Treasury Secretary whose background was international diplomacy, our minister is a highly trained economist experienced enough to articulate key economic policy matters with ease. He did.
The interview is in fact loaded with significant forward-looking guidance which has unfortunately been overshadowed by a clumsy misrepresentation of his message thanks to the online title of the video.
It has been widely reported locally that he said a new currency would be introduced in 12 months. There is a headline somewhere that reads “Mthuli triggers panic”. But he did not say a new currency will be introduced in 12 months. Such would be ridiculous given the work that has gone into currency reform so far. Now, let’s replay the interview.
Francine Lacqua kicked it off by asking the minister how the new currency (ie the RTGS$) was doing. The minister explained that it was early days but the currency was “on its way to equilibrium”. He concluded his answer by suggesting that the gap between the parallel rate and the “official floating market” will narrow.
Francine Lacqua’s follow-up question was on when interest rates would be raised to which the minister said a reference rate was being worked on. He added that interest rates had to go up and underscored that the increase would stabilise the currency.
Tom Keen then asked a very macro-level question on approaches to financing development in Africa and made reference to the views of Bill Easterly and Jeffery Sachs who are some of the foremost scholars of our time on the subject. This question merely reaffirmed the goodwill and respect the minister commands globally. But his answer also presented Zimbabwe as a progressive country that supported the candidacy of David Malpass for World Bank presidency and a country that welcomes President Trumps’ initiative on financing Africa development.
Then came the question that triggered panic back home. Francine Lacqua asked, “when are you expecting a fully-fledged currency to be introduced?”
The minister answered, “in the next 12 months”. Francine wanted him to be more precise on time frames. He said he was preparing the market for what was coming and couldn’t be more precise.
Informing the market of significant forthcoming measures is good practice. It enables stakeholders to plan ahead. It minimises panics and volatility in the markets. It enhances accountability in that citizens can then evaluate the minister. He has of course not delivered on some of his pronouncements, and one that comes to mind is his three-point currency reform plan when assuming office: keep the USD, join the Common Monetary Union or, adopt the Zimbabwe dollar — all to be done by 2018. Well, he was new in the game.
But, in this recent interview, his message was backed by a tangible record:
- Zimbabwe now has a new currency.
- The currency has started floating.
- A gap between the parallel rate and the exchange exits but should disappear.
- A reference rate is being worked on which will result in higher lending rates.
- In 12 months, the new currency will be fully fledged.
That was the message. But what did he mean by fully fledged? That’s the question we should be wrestling with. Unfortunately, the message was distorted. Over decades, we have experienced a series of man-made crises such that we could very well be now wired to be always expecting man-made crises. We heard what we expected than what was said.
Well, there will come a time when only one currency will be used in Zimbabwe as is the case in other countries. A time will come when terms such as nostro and RTGS will revert to proper use, by bankers.
A time will come when we will be oblivious to exchange rates except when intending to travel or spend money outside the country. At its most basic, that is how a Zimbabwe with a fully-fledged currency will be like. It should be a progression from what is in place now and not a new creation. In the ensuing 12 months, the ministry and the Reserve Bank will probably be, among other things, considering anchors of the fully-fledged currency which must instil trust and confidence.
It is encouraging that the minister provided some guidance in this interview. But a local press briefing would have been more appropriate. Question and answer sessions in a local briefing will minimise misrepresentations and misinterpretations as has been the case in the April 11 interview.
Alfred M. Mthimkhulu, PhD (Stellenbosch), Senior Lecturer, Graduate School of Business, NUST/Email: [email protected]/Twitter: @mthimz