Friday, October 05, 2007

(HERALD) We are our own economic liberators

We are our own economic liberators
By Godwills Masimirembwa

OUR economic survival is dependent on the actions we take, which actions must be well thought out, appropriate, forthright and courageous, taking into account the social, political and economic situation we find ourselves in.

We need to remind each other of the following anxioms:

l The Government of Zimbabwe has the moral responsibility and power to protect the population and the economy against private predators;

l The IMF, the World Bank, Western capital, profiteers and racketeers among us, will not come to our country’s aid or assistance;

l We have friendly neighbours and in the East, but the ultimate responsibility to restore and prosper our economy is ours;

l We have sufficient resources, which if utilised frugally and prudently, will facilitate the recovery of the economy;

l Thousands of Zimbabweans have access to foreign currency, which, if channelled to the productive sector, will bring about substantial growth of the economy.

Over the past 27 years the Government has taken decisive measures in nation building. There has been significant infrastructure development in the form of hospitals, educational institutions, factory shells for small to medium-scale enterprises. The land redistribution exercise is almost complete.

Despite the existence of sound infrastructure, the abundance of land, and peace, this writer submits that those with access to foreign currency and other resources still need to make a quantum leap to embrace economic patriotism.

Economic patriotism involves embracing as a value system that the prosperity of Zimbabwe and its people is a non-negotiable condition for sustainable peace and development.

Zimbabweans with the capacity to invest need to appreciate that the nation will become richer and therefore make them more prosperous if they invest in it. There is need for a paradigm shift from immediate consumptive behavioural patterns to affirmative action on the investment front.

Imagine if all the foreign currency that is sent home by Zimbabweans in the Diaspora found its way to the Reserve Bank and was used in agriculture and industry.

Imagine if all the foreign currency that is used to buy luxuries was used to buy manufacturing equipment, import raw materials and set up businesses.

But what we witness is that foreign currency received through MTAs is offloaded onto the illegal parallel market.

What we witness is that the bulk of Zimbabweans who have access to foreign currency would rather use it to buy luxuries or invest in foreign lands, rather than invest in agriculture and industry in their own country.

The Government, through the ministries of Finance, and of Industry and International Trade and the Reserve Bank has put in place a raft of measures to curb unpatriotic economic actions in order to promote patriotic economic activities. The punitive measures include the imposition of duty in foreign currency on all luxury goods.

The persuasive measures include the recently introduced 800 percent interest on the Zimbabwean dollar equivalent at the official exchange rate, if foreign currency is sold to Homelink, an authorised dealer, including MTAs or to the Reserve Bank.

When this writer listened to the Reserve Bank of Zimbabwe Governor deliver his Mid-Year Monetary Policy Statement, as indeed he listened to previous ones;

When he recalled the visits by the Reserve Bank Governor to Zimbabweans in the Diaspora to promote the Homelink project; he was and still is convinced that the Reserve Bank governor is a champion of economic patriotism. He appeals to Zimbabweans living in the Diaspora to become equally patriotic by sending foreign currency back home, selling the same to authorised dealers at the official exchange rate, to boost the foreign currency in the country.

Zimbabwe cries out for the imports that the Reserve Bank has categorised No Currency Involved Approved Imports (NCIAIs). The imports, which will not attract duty in foreign currency, are:

Fuel; the engine for economic development; maize and wheat, the food we eat, the bread we queue for; fertilizer, seeds, agro-chemicals and agro-equipment, to ensure successful farming seasons; mining sector consumables, for a prosperous mining sector with the attendant exports and generation of foreign currency; packaging material and industry raw materials, for fully-fledged industrial development and the attendant supply of goods to wholesalers, retailers and ultimately to the consumer; approved medical drugs and medical equipment, for the health of the nation.

Instead of Zimbabweans trading in currency, and in the process wrecking the economy, those with access to foreign currency are being called upon to promote, protect and preserve the economy through investing in the creation of real wealth, rather than opting to become isolated ultra-rich currency traders, surrounded by poverty stricken fellow citizens.

Zimbabweans with access to foreign currency go out in droves to buy and import trinkets or similar sub-standard products. Why don’t we produce our own goods or improve the quality of those currently under production or increase production levels?

Why don’t we invest the little foreign currency we have in all forms of manufacturing, in agriculture and in a commercial sector that is based on what is produced in our factories, on our farms, in our mines, in our electronic and pharmaceutical industries?

There is no legislation that stands in the way of any Zimbabwean with say US$5 000, US$10 000, US$100 000, or whatever sum, from investing the same in the productive sector. In fact, the No Currency Involved Approved Imports window creates an opportunity for business to those who have free funds outside Zimbabwe.

The decision to invest in another country’s trinkets, another country’s worn-out clothes, second-hand cars, rejects, etc, which are then imported into Zimbabwe for resale is a decision that hurts our economic development.

The Reserve Bank Governor’s Mid-Year Monetary Policy Statement is rightly exhorting Zimbabweans to shun spending foreign currency on activities that do not enhance the wealth profile of the country.

However, this writer submits that the Reserve Bank, in its protective role, should go further than merely offering an incentive to Zimbabweans receiving foreign currency through MTAs for them to sell it to authorised dealers or to the Reserve Bank, by sending a clear message that foreign currency received through MTAs is not to be used for speculative purposes or to be traded on the illegal parallel black market. The surest way of doing this is to deem that all foreign currency received through MTAs has been sold to the Reserve Bank at the official exchange rate with the beneficiary being entitled to be paid out the Zimbabwean dollar equivalent at the official exchange rate plus the 800 percent overnight investment incentive.

This writer submits that it is expecting too much to rely on patriotism to expect a person who has received lets say US$1 000 through an MTA to sell the same to an authorised dealer at the official exchange rate, even with the incentive of 800 percent on the overnight investment, in the process foregoing parallel market rates which are currently over 100 percent higher than the official exchange rate and the 800 percent investment incentive combined. The person who receives foreign currency instead of Zimbabwean dollars will ordinarily head for the parallel market instead of heading to an authorised dealer.

To avoid tempting recipients of foreign currency into not only breaking the law but fuelling inflation, the Reserve Bank ought to immediately stop MTAs from paying out foreign currency, but instead direct them to surrender the same to the Reserve Bank, with the beneficiary being paid out the Zimbabwean dollar equivalent plus the 800 percent overnight investment incentive.

The Reserve Bank has identified the "indexing’’ of prices to the parallel foreign exchange rates" as one of the inflation drivers in the economy. This indexing is partly facilitated by the availability of foreign currency on the local foreign currency parallel market.

Putting a stop to MTAs paying out foreign currency to beneficiaries of foreign currency receipts from persons in the Diaspora will reduce foreign currency available on the parallel market

The Reserve Bank has opened the No Currency Involved Approved Imports (NCIAIs) window.

This window opens opportunities in business and in assisting families secure agricultural imports, maize and wheat for food. This is the window that, if taken advantage of, can significantly enhance the industrial and agricultural capacity of the country.

The Governor of the Reserve Bank together with the majority of Zimbabweans pray and wish for a resoundingly successful agricultural season. This writer submits that for the prayers and dreams to become a reality the Reserve Bank should vigorously market the No Currency Involved Approved Imports window to Zimbabweans in the Diaspora for them to fully appreciate that it can be turned into a viable business proposition that benefits not only themselves but Zimbabwe as a whole. It is particularly important that administrative bottlenecks be eliminated to facilitate the smooth inflow of the prioritised imports into the country.

The Reserve Bank Governor’s pro-economic development dispensation which has seen him further reduce interest rates and providing liquidity for real economic development will be complemented by forthright and courageous actions to stamp out the currently prevailing speculative and injurious parallel market currency trading activities.

This writer submits that while inflation is our number one enemy, currency trading is arguably the number one mover of inflation.

The Reserve Bank may not catch all parallel market foreign currency dealers, particularly those who intercept foreign currency at source in order to invest outside the country, but a wider liberal approach to imports for the productive sector, assuring the importers of reasonable return on investment, will guarantee Zimbabwe a significant share of the foreign currency at the disposal of Zimbabweans in the Diaspora.

This writer acknowledges the point made in the Mid-Year Monetary Policy Statement that "a total of US$23 916 546 was received as Diaspora inflows" during the period January 2007 to August 2007, "compared to US$5 201 138 during the same period in 2006".

The question is how much of these inflows found their way to the Reserve Bank at the official exchange rate? If the foreign currency found its way to the Reserve Bank at the official exchange rate, then all is well, and this writer is willing to eat humble pie.

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