The Sunday Mail
Clemence Machadu Insight
Xenophobia almost succeeded in stealing the thunder of last week’s events in the republic’s giant capital, including the Sadc Extraordinary Summit, as the private media’s camera lenses, print or broadcast, were apparently zooming in on the unfortunate attacks.
The few media houses that managed to touch on the watershed Summit were pretty much eroticised, much to my astonishment, by trivial issues such as the flopped “ambush” demonstration of the MDC as well as the romanticised “clash” between Mugabe and one Khama.
One only had to read the Summit communique, and the remnant local publications of record, in order to get the fuller picture. Very few actually know that the Sadc Authority approved the regional Industrialisation Strategy and Roadmap and reaffirmed the importance of industrial development in poverty alleviation and the economic emancipation of the people of the region; the very people who were being “mushroomed” by the private media – I hear mushroom is fed with rubbish and kept in absolute darkness.
Anyway, the Sadc Authority, interestingly, identified regional integration as one of the three pillars anchoring the said regional Industrialisation Strategy. In other words, taking away regional integration means that the other two anchors – industrialisation and competitiveness – won’t remain standing and the whole thing falls down violently.
So, we can’t take regional integration out of the picture, and still afford not to regret. While I fully agree with Chris Chenga that we have to be “sceptical” about economic integration, I differ in the nature of such scepticisms. Chenga, for instance, posits that the consequence of greater economic integration in a capitalist ecosystem is that the rate of return on capital grows much faster than income levels.
He argues that it, therefore, won’t benefit Africans much since they don’t control capital, leading him to conclude that “in the near future, hopefully we will be ready for extensive integration.”
Just not now, in other words!
I say the time to intensify and deepen economic integration is now and the future is too late, as integration won’t make much sense then. What we have to first note is, even if we are to maintain the status quo in terms of capital ownership and level of integration – will the African be any better?
But that is not really my point.
We begin to see some challenges in Chenga’s argument where he says: “How many of us Zimbabweans actually own any form of capital which we derive returns?… the majority of us are still very much dependent on wages.”
The 2014 FinScope Consumer Survey has actually proven that it is the minority of Zimbabweans (only 14 percent) that have wages and salaries as their source of income. In any case, more capital returns translate to more tax to the tax-man, and more resources at Governments’ disposal.
The writer does not, therefore, deny the need for Africans to own capital. It is just to argue that economic integration and empowerment of Africans cannot be mutually exclusive events.
We already have many safeguards in the region to protect regional integration in the interest of empowering Africans, for those that still haven’t, while we wait for that kingdom to come.
It should also be noted that regional integration agreements come with sensitive lists of excluded products which are exempted from low tariffs to allow countries to protect growing domestic and strategic industries; which addresses Chenga’s fears that “economic integration will leave smaller enterprises in which Zambians own their greater share exposed to foreign competition”.
The European Union, through the European Development Fund, also compensates Comesa member states for revenue losses suffered under the tariff phase down exercise, which also allows them to build competitiveness.
Not long ago, our Government, following the lifting of European Union sanctions, signed an agreement to receive a cool EU234 million to support various sectors.
We really mean well in our attempts to increase our exports as we deepen integration as well.
Export-led industrialisation is actually the first principle of the National Trade Policy (NTP).
President Mugabe, in his preface in the NTP, said that the policy “takes centre stage in the transformation of the productive sectors of the economy towards the production and export of high value-added products in order to realise the country’s full export potential”.
The President’s wisdom is derived from the fact that commodities-dominated exports are so vulnerable to external shocks, as has been accurately captured in the Letter of Intent written to the International Monetary Fund managing director, Ms Christine Lagarde, a fortnight ago, by Finance Minister Patrick Chinamasa and central bank governor Dr John Mangudya.
The duo pointed out that: “Key risks to the outlook stem largely from a further decline in global commodity prices… declines in the global prices for Zimbabwe’s mineral exports – gold, platinum, and diamonds… would negatively impact the fiscal and external accounts.”
I partly alluded to this in my instalment of last week.
The solution is, of course, value-addition, which is a medium to long term solution.
While we deal with the above, we also have another underlying issue that we can try to address in the short run as we seek to engage in win-win regional integration.
It is this issue of the currency we are dealing with for the greater part of our transactions – the US dollar that is!
It is one of the nine currencies in our basket and it would be a legitimate question to interrogate whether the US dollar is in the right or wrong bhasikiti.
First, it is how the US dollar has been relentlessly appreciating against the rand, which is the currency of our main trading partner, our sister across the Limpopo. Currencies of other countries in the region are also depreciating against the US dollar. On top of that, it is also currency manipulation, whereby some countries strategically reduce the value of their currencies.
And the bad thing, as the IMF admits, is that there is currently no procedure to punish or curtail currency manipulation. And no one is a fan of what the two developments above do to the size of our trade deficit – it is not an amusing spectacle.
ZimStat has recently told us that, in the first quarter of the year, our total exports were US$716 million, while our imports were US$1.6 billion, representing a trade deficit of US$854 million, compared to US$839 million for the same period last year.
This is really a significant barrier to the much needed jobs creation and sustainable economic growth.
Some may wonder how the US dollar appreciation and currency manipulation by our trading partners gains such notoriety. Let’s take the example of South Africa.
The depreciation of the rand to the US dollar means that a dollar in a Zimbabwean’s hand can now buy more in South Africa than in Zimbabwe.
That will result in more imports from South Africa into Zimbabwe. Conversely, it also makes a rand in the hand of a South African buy much less in Zimbabwe. This means that our exports to South Africa will significantly fall.
So, while we may increase our production of value-added products, we might eventually remain stuck with piles of them when the US dollar plays wild.
One of my favourite local economists, John Mverecha, last week told delegates who attended an international business conference at the Zimbabwe International Trade Fair that: “Sanctions imposed on the country have materially impacted access to international finance and trade financing flows.”
I have partly attempted to answer how those sanctions are playing devil in an article I wrote last year, titled, “Bring back the Zim dollar”.
I argued then that: “Any US dollar transaction passes through the Office of Foreign Assets Control (Ofac), which administers and enforces economic and trade sanctions… we have had many incidences of private citizens and entities whose monies were frozen by Ofac, which prejudices the economy of much needed liquidity.”
So, it’s not only about trade, it is about the movement of international capital into the country and the barriers posed by our current currency of choice.
My fellow countrymen and countrywomen, we are at the “crossroads” just like the IMF accurately put it not long ago.
Which is why I think that we should seriously think about a modest introduction of new Zimdollar notes as a 10th currency in our basket. Don’t call me naïve, I already know about the valid and convincing arguments which have been made against having a local currency.
They can still be overcome by just having a certain amount of local currency notes that can be sustained by the current level of competitiveness and economic performance.
In other words, it is printed in proportion to productivity.
Dr Mangudya and Minister Chinamasa told Ms Lagarde, in their Letter of Intent, that:
“We have made good progress towards restoring confidence in the financial sector.”
Because of that confidence, the central bank managed to introduce bond coins that have now been phenomenally embraced by members of the public.
Rand and pula coins are now actually less preferred as people go for bond coins.
How about notes that are printed and managed carefully too, as a means to bolster the regional integration drive?
