The Sunday Mail
Clemence Machadu Insight
What is of concern, however, is that while Chinamasa cites lack of confidence as one of the factors causing poor circulation of cash in the domestic circular flow, he did not mention any measures to boost confidence amongst folks.
Howdy folks!
The success of the Command Agriculture programme has encouraged Government to widen its scope to other areas such as fisheries, soya, cattle ranging, and others. But it appears some folks are taking it off limits, introducing command shopping, command price increases, command premium charges among others, much to the anguish of the consumer.
The problem is that the price increases are not commensurate with the incomes of members of the public. Some retailers also reject plastic money which monetary authorities are encouraging, preferring cash. That creates needless demand for cash, as people who fail to get adequate cash to transact with from the banks end up resorting to the black market which has been increasing its premiums. The consumer is the ultimate loser in all this as they bear the brunt of the rising cost of living and a decline in their real income levels. The rise in prices to the tune of 40 percent is depleting their budget lines and if not addressed might lead to labour uprisings as calls for wage increases intensify.
The new legislation that Government introduced to deal with the black market, while it is welcome, should however be matched with more supply side interventions aimed at jump-starting the economic fundamentals. For instance, measures envisaged to obliterate the black market should be matched with robust measures to open more avenues to foreign exchange in the formal markets. Otherwise it will simply result in more foreign currency shortages and even much higher premiums on the black market, as supply declines, which might cause further price increases.
Folks, Finance and Economic Development Minister Patrick Chinamasa gave a ministerial statement in Parliament last week Thursday touching on recent economic developments, particularly zooming in on the foreign currency situation. In his address, Chinamasa highlighted that the shortage of cash also reflects the poor circulation of money in the economy due to lack of confidence, discipline as well as rent seeking behaviour among our people.
Said Chinamasa, “There is one billion of physical cash in circulation made up of $180 million in bond notes, $28 million in bond coins and US$800 million. We consider this one billion to be sufficient if it was circulating efficiently. The $1 billion translates to around 15 percent of deposits which is international best practice in normal economies”.
What is of concern, however, is that while Chinamasa cites lack of confidence as one of the factors causing poor circulation of cash in the domestic circular flow, he did not mention any measures to boost confidence amongst folks. The same day Chinamasa presented his statement, the IMF also spoke about Zimbabwe in its fortnightly briefing, saying that the current difficulties in securing access to US dollars by the country have deeper, underlying causes that need to be addressed, including financial consolidation, so that the Government does not persistently spend more money than it is generating.
Again on the same say day, President Mugabe said that there are certain people busy manipulating the currency to trigger inflation, hinting that some senior people are the culprits. Folks, in light of the above, there is need to put together all the pieces of the puzzle in the quest to address our macroeconomic situation. We should get to the bottom of the matter, otherwise innocent members of the general public will continue to suffer from things they don’t deserve a single day. The President’s statements should be taken seriously. Unfortunately, there seems to be a culture of ignoring his calls by people who should act.
Sometime back, the President highlighted that the country lost not less than $15 billion in diamond revenue, but we are yet to get answers from agencies that are responsible for that as to where our money went. Again many months ago, President Mugabe clarified the indigenisation policy and called for a revisit of the legislation to make clarifications to give confidence to investors.
However, many months down the line, no amendment has been done, and all we have is an awkward indigenisation message that does not convince the foreign investor that much. Last week Thursday, Minister Chinamasa touched on that, saying, “The issue of indigenisation which remains in terms of aligning the clarification by His Excellency to the law, remains unattended and continues to be an embarrassment to us but these are issues that we will address more forcefully now than before”.
Until when shall we continue to bear an ‘embarrassment’ over something that can be simply done? Doesn’t the ruling party have majority in Parliament? Or it is ‘embarrassed’ to use it? Folks, we have a situation that calls for everything to be done urgently. There seems to be an excitement that exports are growing, as if imports are not growing too. Do we have net exports to celebrate yet? Certainly not!
Exports are therefore not an end in themselves but a means to an end. Focus should be on addressing all the drivers of foreign currency inflows so that we don’t put our eggs in one basket. Confidence building measures are of equal importance too. The guiding question is, “If I give you US$1,000 to save today, would you put it in a bank?”
Meanwhile, let’s do away with command price hikes and command buying.
Later folks!
