(SUNDAY MAIL ZW) Where are the thinkers?
Saturday, 23 November 2013 23:26
There is something scandalous happening to this country’s economy. Everywhere you go, people are talking of a “liquidity crunch” and a “lack of capital”. How has the language of bookish economists gained such currency?
Clearly there is a problem. But what the pundits will not tell you is that, when it comes to the economy, the whole country has become a ridiculous theatre of the absurd.
Let’s look at a few interesting anecdotes. If you are in the timber business, and you operate a sawmill in the teak forests of Lupane, what would be your major costs? They have to be labour, energy (electricity or diesel), machine repair, transport and so forth. Let’s further dissect these costs.
What exactly does the labour cost entail? Paying the workers and supervisors who make things happen. These workers and supervisors are all Zimbabwean citizens. Here is your first absurdity: if you run a Zimbabwean company and you have Zimbabwean workers, why do you find yourself in a situation where you have to pay salaries in United States dollars? Mind you, this is a transaction between a Zimbabwean employer and a Zimbabwean workforce.
The ridiculous scenario does not end there. Once the sawmill owner has paid salaries in US dollars, the worker takes the pay and goes to a neighbouring village where he will buy a chicken for relish. He is buying the bird from a peasant family. These are free-range chickens which feed on insects, plants and the occasional morsel of isitshwala/sadza. The sawmill worker - let’s call him Mike the lumberjack - forks out US$4 for the “road runner” chicken. Once again, keep your eye on the currency being used. The medium of exchange is the US dollar. The setting is deep in the forbidding forests of Lupane, a staggering 12 000 kilometres away from the hot press of the US Bureau of Engraving and Printing which churns out the banknotes.
Mike gets his favourite relish.The seller of the “chicken makhaya” now has US$5 securely stored in her grimy doek. She remembers that she needs some sugar for her tea. Off she goes to the nearest general dealer’s store where she buys a packet of sugar for US$3. The sugar is made from cane grown in the southeast Lowveld. Again, you notice that the medium of exchange is the US dollar. This is a product made in Zimbabwe by Zimbabwean workers for Zimbabwean consumers. For crying out loud, where does the US dollar come in? The shocking absurdity of a Zimbabwean existence!
There are more than 60 countries which do not mint a national currency of their own. The figure may seem quite large, but do not be fooled.
Apart from nations that belong to monetary unions such as the Eurozone and therefore do not have sovereign currencies, most of the countries which do not have their own national currencies are small island nations with no economic clout whatsoever. How Zimbabwe joined the ranks of these forsaken islands is a story that is already in the public domain. But how Zimbabweans have connived to remain in that currency-less category is a scandalous tale that should jolt us out of our collective slumber before it is too late and in the national interest. After all, this proud nation is no midget in the economic arena. This stretch of land between the Zambezi and the Limpopo has been described as a vital part of “the Persian Gulf of precious minerals”. Surely, that must count for something.
It makes you wonder, does it not?
Which brings us to the shrill calls for the expulsion of “foreigners” from the small business sector. Who is leading those calls and to what end?
We hear a 30-day ultimatum has been issued to all foreigners operating retail and wholesale businesses, barbershops, beauty salons, bakeries, employment agencies and grain mills which are classified as “reserved sectors” of the economy. The other reserved sectors of the economy are agriculture (primary production of food and cash crops), transportation, estate agencies, tobacco grading and packaging, tobacco processing, advertising agencies, milk processing, provision of local arts and crafts, marketing and distribution. The concept of economic empowerment and indigenisation is understand by every right thinking Zimbabwean. The debate has long shifted from the rudimentary arguments to the more complex and nuanced aspects. What is creating discomfort is the failure by some top decision-makers in Government to realise that a Nigerian, a South African, a Ghanaian, a Congolese, a Kenyan cannot be classified as aliens in this age of economic integration.
African countries have small domestic markets which can never compete competitively with the likes of the European bloc, China, India, Russia and the US. Their markets, in terms of population size and per capita income, are too small to threaten the global economic status quo. This is where economic integration comes in. As individual nations, Africans will find the going very tough, but as a united bloc of countries Africa can achieve a whole lot more. Without economic integration, Africa will find it difficult, if not impossible, to build globally competitive economies.
So, before the Zimbabwean authorities start victimising Nigerians, Zambians and other Africans who are operating small businesses in this country, they have to be reminded that it is European colonialists who shaped Africa’s geo-political configuration. The so-called borders which confer nationality are an imperialist construct. When we sought help in toppling the colonial system, it is the Zambians, Mozambicans, Tanzanians, Batswana, South Africans who made huge sacrifices to expedite our attainment of freedom and democracy. If these nationalities were our brothers and sisters yesterday, how do they suddenly become greedy “foreigners” who want to gobble up our economic cake today? No, no, no. Nigerians are not our enemy. If there is a law which says my Nigerian brother is my foe, then that law is unjust and must never be obeyed.
Instead of promoting xenophobia on the continent, nations should be taking bold and decisive measures to scrap intra-Africa visas. Tourism and intra-Africa trade and investment are being hampered by restrictive visa regimes that are relics of the bygone era of colonialism.
While it is vital to remain alive to the threats of terrorism and organised crime when discussing the merits or demerits of visa regimes, the people of Africa cannot justify a situation where it is easier for an Englishman to travel from London to Harare than for a Nigerian to travel from Lagos to Cape Town.
As Zimbabwe grapples with the vagaries of economic decline and the headaches associated with the frantic search for funding for the 2014 National Budget, we need to convince the world that we are indeed a nation of celebrated thinkers and doers.
Labels: DOLLARISATION, NEOLIBERALISM
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‘Dollarisation slows growth’
Wednesday, 25 July 2012 00:00
Golden Sibanda Senior Business Reporter
DOLLARISATION of the economy has significantly slowed down the rate of economic growth and development, despite ushering stability and predictability, the Governor of the Reserve Bank of Zimbabwe has said.
Dr Gideon Gono was speaking at the 43rd edition of the Institute of Bankers of Zimbabwe Winter Banking School in Nyanga last week. He said the last three years had exposed the underlying challenges associated with dollarisation.
It had resulted in liquidity shortages, weak aggregate demand and an inability to respond to shocks.
It had also resulted in the RBZ’s incapacity to bail out troubled banks, constrained economic growth and balance of payment pressures.
Furthermore, the governor said, dollarisation had also constrained the country’s ability to service its debts, spawned an inactive interbank market, high interest rate spreads, high bank charges, price distortion in utility charges, inadequate credit and huge debts.
There had been general distortion of basic economic fundamentals, making self-adjusting of economic variables impossible, although the economy stabilised, while inflation plunged.
Zimbabwe switched its currency from the Zimbabwe dollar to the US dollar in 2009 after a decade of instability and hyperinflation.
The period was succeeded by three years of high growth rates, but the growth had significantly fallen, said the governor.
“Given the prevailing liquidity shortages, and depressed industrial activity, the multi-currency system serves well only as an interim arrangement.
“As such, it becomes an inappropriate medium- to long-term monetary regime on which the much-needed economic turnaround (efforts) can be permanently anchored,” he said.
This was because under the multi-currency regime, dominated by the US dollar, the central bank could not now influence aggregate money supply and interest rates to induce faster economic growth.
Sources of liquidity had been confined to export earnings, Diaspora inflows, offshore credit, foreign direct investment and capital transfer.
But this had been limited and a huge import bill had resulted in a huge current account deficit.
Financial institutions had taken advantage of the liquidity tight conditions to set punitive interest rates (due to high risk of default) and bank charges, while arms of Government could not intervene in terms of critical funding requirements.
Local banks now had interest rates of between 8 and 32 percent with the majority charging around 20 percent per annum.
The economic challenges, he said, were worsened by the fact that most economic agents had failed to either adapt to the prevailing economic conditions or realise that things have changed.
This had manifested in most economic agents that assumed expensive debt to finance operations under the assumption that high margins under hyperinflation would continue to prevail.
Labels: DOLLARISATION
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Unemployment a time bomb - sata
By Abigail Chaponda, Misheck Wangwe and Joseph Mwenda
Sun 01 July 2012, 13:25 CAT
PRESIDENT Michael Sata says
youths in Zambia will turn against the government if the high unemployment levels are not addressed immediately.And President Sata says the Zimbabwean International Trade Fair he attended in Bulawayo recently was better organised than the one he officially opened in Ndola yesterday.
Speaking before the luncheon hosted in his honour sponsored by First Quantum Minerals (FQM) at Mukuba Hotel in Ndola yesterday, President Sata said it was unfortunate that he was invited to dine with investors when a majority of Zambians were going for many days without a meal.
He said he was disheartened to see thousands of youths fighting for recruitment in the Zambia Army when the government was previously pleading with citizens to join the defence forces.
"We cannot be here enjoying this lunch while the youths are fighting for employment. We should be ashamed as Zambians because in the past, the army brass band would have to perform to encourage youths to join them," President Sata said.
He said the unemployment levels in the country were a time bomb and warned that if nothing was done about it, youths would turn against the government.
"When you see children fighting over recruitment in the army, it means they
are warning us. If we are not careful, these young people will beat us one
day with these flags we are carrying on our vehicles," President Sata said during his address to senior government officials, exhibitors and organizers of the 2012 Zambia International Trade Fair.
"When we are sitting here and eating what First Quantum is giving us, let us think of how many of our relatives have gone for three days without a meal. Yesterday I was in Chama, I saw Mr.Tom Mtine's relatives, they are as thin as a thread. They don't even know when they last ate. And here we are eating. We don't even know what to do with what is going to remain."
He said Zambia would not survive if all stakeholders, both public and private, fail to join hands to end the high levels of unemployment among young people.
"At every point we have young people trying to remind us leaders why we are
lying idle. The purpose of the Trade Fair is to come and watch your innovations on how you are creating employment," he said.
President Sata said it was sad that in Zambia today the Zambia Army, Zambia Police, Zambia Air Force and the Zambia National Service were being accused of corruptly recruiting fewer youths when defence wings did not have the capacity to recruit annually.
He challenged ministers and other senior government officials who were present to find ways of creating employment in their respective sectors.
"All industries are closed, what are we doing honourable ministers? Let us
work hard to revamp the industries," he said.
He asked the ministry of commerce to reopen Dunlop in Ndola and Mulungushi Textiles in Kabwe.
And President Sata commended the Bank of Zambia over the Statutory
Instrument banning the pricing, quoting and general transaction in foreign
currency, saying it was the only way of giving the kwacha its own identity.
"When you go to Britain, the legal tender is pound, when you go to America, it's dollar and in Zambia when we say we want kwacha, you have the so called politician saying they can't be tourist, let them be," he said.
President Sata said some of the critics of the Statutory Instrument were tourism operators and did not want to pay loyalties to the government.
Meanwhile, police officers almost caused chaos during the President's tour
of exhibitors' stands at the Trade Fair.
Close to a thousand police officers have been deployed to maintain order at
the event, but the exaggerated security detail blocked journalists from covering the tour of stands yesterday.
The heavily armed officers at one instance manhandled Post Photojournalist Joseph Mwenda for getting pictures of the Head of State using a flash.
Mwenda was hurled out of the Ministry of Agriculture exhibition hall by one of the senior police officers who told him that he had taken enough pictures of the President.
President Sata's press aide George Chellah, however, intervened and wondered why the police officers were harassing journalists who were merely doing their job.
Labels: DOLLARISATION, FIRST QUANTUM MINING, MICHAEL SATA, UNEMPLOYMENT, ZIMBABWE INTERNATIONAL TRADE FAIR
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Government to address cross-rate problems through policy
Tuesday, 26 July 2011 20:44 Top Stories
THE Government would soon come up with a policy to control the issue of cross rate between the United States dollar and the South African rand, which has been blamed for price distortions and erosion of salaries especially for people in Bulawayo and its surroundings.
Presenting the Mid-Term Fiscal Policy Review Statement yesterday in Parliament, Finance Minister Mr Tendai Biti said the cross rate issue was problematic and announced that Government would take sterner measures to control it.
“It is sad to note that there are unscrupulous traders who are exploiting the public over the exchange rate involving the US$ and the South African rand,” said Minister Biti.
“Cross-rate rate has become problematic. However, the Government is putting measures to control the issue and with effect from 1 September 2011, all the traders would be required to display their exchange rate figures clearly. We will also expect everyone to stick to the official rate.”
Minister Biti said the multiple currency system would remain in use as indicated in the recent Mid-Term Policy document. He said his ministry would soon present a document to the Cabinet for discussion regarding the issue of whether or not the country should join the Rand Monetary Union. Minister Biti said the Government was still engaging the United States government to have smaller denominations.
At the moment the smallest denomination used in the country is the US$1. Bulawayo residents who are among the worst affected by cross-rating, have on several occasions called on the Government to introduce a single currency system to avoid cross-rating. The problem comes against the background of the rand firming against the greenback. At the moment the exchange rate for the US dollar to the rand stands at around 1:7.
The residents have complained that cross-rating was eroding their salaries, which weakened their buying power. While most workers in the country are paid in US dollars, a majority of shops peg prices of their goods and services in rand. Commuter omnibuses also charge their services in rand while some landlords demand rentals in rand. At the introduction of the multiple currency system in March 2009, the rate was US$1:R10. It later on changed to 1:9, 1:8 and is now 1:7.
Illegal foreign currency dealing became a lucrative business during the 2007-8 hyperinflationary periods with foreign currency dealers popularly known as osiphatheleni occupying every street corner to cash in on desperate residents. The group was once known for driving flashy cars, eating from expensive restaurants and spending lavishly as they were literally running the economy and dictated the exchange rate.
The business, however, suffered a knock following the dollarisation of the economy, which stopped the transactions in Zimbabwean dollars. Most of the dealers were relegated to selling cell phone recharge cards, chicken feet and gizzards while some were forced to dispose of their fancy cars. However, the group is back on the streets of Bulawayo after diversifying their trade and some have resumed their flamboyant lifestyles. A number of them have become go-betweens in deals involving diamonds, gold and the procurement of passports and other important documents.-Chronicle.
Labels: DOLLARISATION, TENDAI BITI
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Multiple-currency system to stay: Govt
Thursday, 28 July 2011 02:00
By Ruramai Gatsi
FINANCE Minister Tendai Biti says Government will continue using the multiple-currency system while addressing emerging challenges related to the shortage of change and small denominations.
"However, it is also apparent that the economy, although on a recovery path, remains fragile with a lot of challenges and serious weaknesses related to fiscal space, investment, indebtedness, balance of payments and reserves, among others."
He said the Government would continue to facilitate debate on the issue of currency reform.
"There is anxiety, particularly within the business sector, on the future course of Government with regards to the foreign currency regime," he said..
"This also follows Government pronouncements in previous Budget statements for a review of the currency system at the end of STERP II in 2012.
"Government will continue to facilitate debate on the issue of currency reform being guided by regional integration objectives, specifically those related to the formation of the Sadc Common Monetary Area by 2018."
Minister Biti said the review of the currency system was to be guided by attainment of certain macro-economic milestones.
This included the evidence of a sound track record of policy consistency and implementation, a fairly stable and strong economy characterised by a sustainable external position, a strong financial sector and overall confidence in the economy.
He said empirical evidence shows that there is economic stabilisation as a result of the adoption of the multiple currencies.
"Other benefits realised include immediate containment of inflation by arresting rapid price movements, creation of scope for medium- to long-term planning for businesses and individuals, restoration of the banking sector's financial intermediation role and a gradual building of confidence in the economy," he said.
He highlighted the need to continue with the multiple currency system in the medium term in order to allow consolidation of the prevailing fragile macro-economic environment and building of the necessary confidence for the ongoing economic recovery efforts.
These recommendations are also consistent with the agreed assumptions and objectives of the recently launched Medium Term Plan 2011-2015.
The minister also expressed concern over the shortage of smaller denominated coins.
He said in the 2011 Budget, Government undertook to facilitate the acquisition of smaller denominated coins to alleviate difficulties being faced by the public.
"Efforts to import small dollar coins to ease the small change problem are continuing, with the Bankers' Association of Zimbabwe now spearheading the process in liaison with US financial authorities.
"It is envisaged that the coins will be availed before the end of the year," he said.
The shortage of coins has created distortion in pricing and buying of goods in the country.
The retail sector has capitalised on the shortage of coins and in most cases the public is forced to buy unwanted commodities - among them sweets, biscuits and other smaller items - for change or to take vouchers, redeemable only at that particular shop.
Labels: CURRENCY, DOLLARISATION
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US dollar 'poses credit challenges': Ncube
04/07/2011 00:00:00
by
THE adoption of the US dollar as a base currency in Zimbabwe has been positive but also challenging, Mthuli Ncube, chief economist and vice-president of the African Development Bank (ADB) has said. Zimbabwe adopted the US dollar in 2009, shortly before the establishment of the establishment the coalition government.
But Ncube said on Monday morning that, while the dollarisation in Zimbabwe had been positive by stopping inflation "dead in its tracks" and improving growth, it had also increased the cost of doing business and reduced the availability of credit.
"It [dollarisation] has slowed down the availability of credit in the productive sector but, secondly, just made the cost of doing business very high," said Ncube who ran Barbican in Zimbabwe and was the Dean and Professor of Finance at Wits Business School before moving to the ADB.
"But I guess that's the pain that needs to be undertaken in order to get things straightened out there," he added.
The African Development Bank forecast Zimbabwe's growth at about 8% for 2011.
Meanwhile Ncube said the turmoil in North Africa has hit growth across in the region which is now forecast to reduce this year to 0.7 percent from 4.7 percent last.
Overall, Africa's growth is estimated at 3.7 percent in 2011, down from 4.9 percent last year.
Further south, Ncube said economies have been affected by a drop in money sent home by Africans from elsewhere on the continent who had been working in North Africa.
Niger, for example, had 200,000 citizens working in oil-rich Libya, according to ADB statistics.
Another knock has come from the reduction in sky-high Libyan investment as well as declining tourist numbers from that country, Ncube said.
Though the events of recent months in North Africa have clearly had an economic impact, Ncube said the political changes have not just been isolated to the region.
He noted that Senegal's longtime president has canceled a proposed legislative change that would have made it easier for his son to take charge of the west African nation.
"It was really the North Africa effect," Ncube said. "The youth will not tolerate any behavior they don't perceive as democratic."
Labels: AfDB, DOLLARISATION
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Dollarisation a boon for capitalists
by Takura Zhangazha
14/12/2010 00:00:00
EVER since the dollarisation of our national economy, it has become common public opinion that ‘things have improved’. This improvement is directly related to the fact that goods are now available on the supermarket shelves and elsewhere.
What is, however, not questioned is whether these now available goods or services are accessible or affordable to the majority of Zimbabwe’s low income earners. Instead, what is now apparent is that both the government and big businesses are functioning on the basis of the dictum ‘take it or leave it, so long as it’s better than what was there before dollarisation’.
For many economists, there would be nothing fundamentally wrong with the above cited dictum. In fact it fully serves to augment the purpose for which business exists -- which is profit no matter the circumstance. And this is why since the introduction of a multi-currency national economy, business has been milking the meagre incomes of the majority mercilessly.
Some readers might argue that to define the operations of corporate business as merciless might be misleading, but the fact is the examples are now too glaring to ignore.
To begin with, the reinvigorated expansion of our telecommunications network via the licensed mobile telephone service providers must be welcomed and viewed with the greatest of caution. Because one of the most sought-after electronic gadgets in the country is the cell phone, the marketing around this has become preposterous if not downright dishonest. In the chase for the dollar of the Zimbabwean consumer, the mobile telephone companies are bordering on being ruthless.
Take for example a mobile phone company which is now offering life insurance via the topping-up of airtime in collaboration with a life insurance company. The exact contractual arrangements of this life insurance are glossed over and are motivated by trying as far as is possible to ensure maximum exploitation of the consumer on -- an issue which normally would be much more serious than a text message to a subscriber.
The extent and nature of the coverage or how relatives of subscribers to the same will benefit are unclear until you have paid a part of the requisite payment via re-charging your phone’s airtime.
Another example is that of our now ever mushrooming supermarkets that are doing service through inducing an exaggerated consumer culture in the country. The fact that they are selling South African goods and by so doing not assisting our own local industries, means that they are operating purely on the basis of an unsustainable profit. Or a profit that relies totally on the ability of the South African manufacturing industry to supply us with finished goods and products in a manner that makes Zimbabwe similar to Swaziland and Lesotho.
But because their primary purpose is unmitigated profit, they will not see the linkage, hence the arrival of Pick ‘n Pay amongst others onto the scene without any clear plan of how they will boost local production of goods and increase employment.
A third example is that of our health services sector. This sector has become a multi-million dollar spinning enterprise minus any clear public benefit. With the complicity of health-related non-governmental organisations, the health industry has taken advantage of issues relating to fear of mortality to make a super profit.
The very basic maxim of the health services is that if one does not have money, one does not get treated. Even if a medical doctor wants to assess a patient for free, the equipment, drugs and other related products are beyond the reach of many. The NGOs weigh in by arguing about private-public partnerships which to all intents and purposes are a euphemism for profit making at the expense of public access to reliable health services.
Even ARV distribution is a big business with better versions of the latter being the preserve of the rich, together with the attendant medical supervision. That is perhaps why the funeral services are making a huge profit burying our fellow citizens as though it were normal for death to be a roaring enterprise.
A fourth and final example is that of our education services sector. The outsourcing of education to private colleges or commercial school development associations has led to exorbitant tuition fees being charged on parents who barely make more than US$150 a month. The universities and other tertiary learning institutions are taking advantage of parents’ basic intention to get their children the best education possible by charging fees that lead to a profit that no-one is clear as to where it ends up.
Occasionally, a school/college bus will be bought as a demonstration of where the money is going but to all intents and purposes, this is largely a cover up for profits that intend to milk the parent/guardian to the last cent.
So as we all go for Christmas, some with a bonus, others without, we must be conscious of the dishonest manner in which private and commercialised state enterprises are functioning. It is now their primary purpose to milk every dollar that a Zimbabwean citizen has to the last cent. Their tactics include emotional blackmail in the case of a relative, friend or child falling ill or needing an education befitting best practices.
They will also function on utilising every other opportunity that emerges to make a super profit, regardless of how unsustainable it is for the national economy or the betterment of the welfare of the people of Zimbabwe.
As far as can be discerned, it is private business that has benefitted the most from the GPA and its inclusive government. And at this rate, it shall continue to be the same.
Labels: CONSUMERS, DOLLARISATION, MOBILE PHONES
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Dollarisation still best alternative
Sun, 17 Jan 2010 22:26:00 +0000
DEAR EDITOR - In response to an article published on your website saying that dollarisation was not working for Zimbabwe, please accept my small contribution. Sure enough the US dollar has its problems, but I personally feel that it is the only solution we have at the moment.
Your suggestion holds a lot of economic sense, but in Zimbabwe what counts most is political sense. As long as the Zimbabwean dollar is introduced concurrently with the US dollar, it is prone to abuse. You will see a parallel market emerging taking advantage of the difference in rates.
We all witnessed the misuse of the Zimbabwean dollar last year when those with access to the Reserve Bank of Zimbabwe looted all the forex in the street using the useless Zimbabwean dollar.
Maybe we should first put contingent plans to curtail abuse by the well-connected politically. Nothing has actually has been done to harness the run-away inflation?
Production is still very low in most sectors of production (agriculture, mining and industry), so there is no guarantee that our currency will not create more problems for us in as far as inflation is concerned. The ground work is still very raw.
T. Chivengwa
Zimbabwe
Labels: DOLLARISATION, FOREX
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