The Sunday Mail
Twenty years ago, South Korea, which was the world’s 11th-biggest economy, was headed for bankruptcy following the 1997 Asian Financial Crisis.
The IMF put together US$58 billion to rescue South Korea, the biggest ever bailout package by the organisation then.
Accompanying the money were a string of austerity measures to be implemented: trade and accounts liberalisation, reform of labour market and restructuring of corporate governance, among many others.
There were more or less the same measures being undertaken by Government as enunciated by Finance and Economic Development Minister Prof Mthuli Ncube in the Transitional Stabilisation Programme (TSP).
To quickly get out of the debt crisis, South Koreans went a step further.
Their government, top companies, trade unions and other influential people came together and made a call for all citizens to act to end the crisis.
In one of the most moving shows of patriotism and self-sacrifice in history, ordinary citizens, celebrities, top athletes and organisations donated over 220 tonnes of gold in two months to hasten repayment of the IMF loan.
They repaid the loan with over two years to spare.
South Korea’s crisis coincided with the beginning of Zimbabwe’s own problems following “Black Friday” on November 14, 1997, the day the Zimbabwe dollar lost over 70 percent of its value against the greenback.
This was followed by a myriad of other economic catastrophes compounded by Western sanctions that led to Zimbabwe eventually abandoning its currency roughly a decade later.
Twenty years on, as South Koreans celebrate being the fourth-largest economy in Asia, with per capita GDP of over US$27 000, Zimbabwe is still battling.
Without its own currency, Zimbabwe finds itself in an unviable financial position.
But unlike South Koreans who rallied for a national cause, Zimbabweans are busy engaging in self-defeating actions.
Trust issues
Following presentation of the TSP on Friday October 5, 2018, Zimbabweans became hysterical.
Prices of basic commodities shot up, panic-buyers and bargain hunters raided shops to fuel a thriving black market.
Some businesses closed doors due to uncertainties and the black market exchange rate went haywire.
Despite assurances by suppliers that prices had not gone up and that the country had enough of almost everything required, from fuel to cooking oil, there was a frenzy.
President Emmerson Mnangagwa’s statement backed by that of Prof Ncube, to the effect that Government had secured backing from Afreximbank guaranteeing convertibility of RTGS balances on a 1:1 basis with the US dollar and availability of the greenback for Nostro foreign currency accounts, saw the situation almost back to normal by last Friday.
What was refreshing was the level of trust Zimbabweans have in their President and his word.
The lack of trust by Zimbabweans in monetary authorities was a major cause of instability in the financial sector in the old dispensation. Once trust issues are sorted, the road to recovery becomes clearer.
The planned introduction of a Statutory Instrument that protects Nostro accounts from both the RBZ and Government is another major step in restoring confidence eroded since former RBZ Governor Dr Gideon Gono raided individual and company accounts during his tenure. When multiple currencies were introduced in 2009, bank balances, insurance savings and pensions were wiped out.
The people remember.
Austerity is pain
After the IMF intervened in South Korea, the people of that country self-enforced economic discipline.
They denied themselves luxuries they simply could not sustainably afford.
So while international financial institutions and bilateral partners can help Zimbabwe’s economy, Zimbabweans have to be at the forefront of fixing their own economy. When we have legislators crying for imported luxury vehicles, heads of Government departments still hung-up on opulence, a citizenry that shuns its own products in favour of imports, why would a foreigner care?
Zimbabwe is like a beggar on a beach of gold: we import soya for cooking oil, peanuts and even toothpicks!
Zimbabwe’s executive, legislature and judiciary to lead by example. Hefty allowances must fall, brand-new SUVs on taxpayers money must be a thing of the past.
Good corporate governance must be enforced and the labour market must be restructured.
We must forgo our favourite imported whiskey and stop sending millions to foreign climes for SUVs.
Foregoing imported luxuries is a small price to pay for sustained and meaningful economic growth and development.
The upper middle-class life that some have been living is simply not what they can afford.
Way Forward
The troubles of 2007/8 must not just be remembered; they must be lessons.
The panic buying witnessed recently is instinctive and must be tamed; the profiteering we saw last week should become a remnant of a recent past.
President Mnangagwa has set the ball rolling on a welcome trajectory.
Zimbabweans have to learn to support local firms. Government must support the vehicle assembly plants in Harare and Mutare. We must stop importing peanuts. Ethanol production should rise, so that blending ratios also improve and we cut on our fuel import bill.
Hard-earned foreign currency from tobacco and mining should be for imports of things we presently can’t produce, such as certain medicines, while we work towards building our own capacity to eventually produce locally.
Security services must enforce the law. And the message must be communicated well.
Government and its agencies must help people understand why belts are being tightened. Zimbabweans need to know that they can trust their Government.
Everyone must play their part.
