The Economist’s shortcomings on Zimbabwe

A few years ago in an interview at a corporate briefing lunch hosted by the Silicon Valley Bank, The Economist magazine’s foreign editor, Robert Guest, said the publication was targeted at the intelligent reader who seeks in-depth understanding of economic matters.

The Economist frequently publishes exceptional articles on economic matters.

Naturally, such reputable standards justify the status that the publication has earned over the years; not to mention the impressionable front covers which capture images that define events in time.

Unfortunately, the magazine’s reputation may over-extend into regions that do not warrant such acclaim, particularly in the developing world such as Zimbabwe.

You see, intelligence is not necessarily whether or not a reader already retains superior knowledge on a subject matter. Intelligence more accurately describes how an entity approaches to understand a subject matter.

Thus, a publication that caters to an intelligent audience must be a platform where readers can impartially interrogate the fundamentals and influential variables that factor to underlining a given subject matter.

This is far from the approach that The Economist takes towards subjects to do with the developing world; a stark contrast to its approach to events across North America, Europe and East Asia.

This week, The Economist has an article titled “Who wants to be a trillionaire?” and subtitled “Lock up your dollars right now, Mugabenomics is back”.

Holding the publication accountable to its proclaimed standards, one begins to wonder whether factually deficient and demagoguery articles pass unseen in editorial offices, or it is intentional misrepresentation of Zimbabwe.

The author of the piece suggests the Zimbabwean dollar is back, let alone in deceptive manner by our central bank.

An erudite approach would have been an analysis by the author justifying why bond notes are fundamentally a Zimbabwean dollar, and furthermore insinuate that bond notes are an unheard of economic mechanism that warrants a disparaging label of “Mugabenomics”.

Such an approach would have been taken if the motive of the article was not to incite demagoguery fear and capitalise on a moment where misrepresentation may do more harm to our economy than fair analysis would.

Bond notes can be distinguished from a Zimbabwean dollar in that they are legitimately backed by a debt obligation to Africa Export-Import Bank.

Indeed, this legitimises bond notes as a credible currency in that they are backed by this obligation in perhaps similar manner that United Kingdom bank notes were traditionally represented deposits of gold.

The words “I promise to pay the bearer on demand the sum of five, ten, or twenty pounds”, for instance, explains how just as the British public could exchange its notes for gold of the same value, Zimbabwean bond notes are backed at parity to the US dollar debt obligation.

They are a credible medium of exchange that stores value.

It is careless to insinuate that the stored value of bond notes is unconventional, or constructed out of unheard of economic principles, as they function similarly to a currency board.

A currency board is an exchange rate regime based on the full convertibility of a local currency into a reserve one, by a fixed exchange rate and 100 percent coverage of the monetary supply backed up with foreign currency reserves.

The latter is represented by the US$200 million debt obligation.

As defined by the IMF, a currency board agreement is “a monetary regime based on an explicit legislative commitment to exchange domestic currency for a specific foreign currency at a fixed exchange rate, combined with restrictions on the issuing authority”.

This further reverberates the distinct nature of bond notes to the Zimdollar in that our central bank is limited on issuing authority; a fundamentally significant point that was conveniently ignored throughout the author’s article.

Bond notes are not Zimbabwe dollars, and they are entirely legitimate.

In fact, currency boards on which bond notes derive most of their functional parameters were created by the British Bank Charter Act of 1844.

They were meant to be used by British colonies.

Thus, the sentiment sought out by labelling bond notes as a disparaging Mugabenomics exudes aggressive intent outside of technical justification.

This is far from an intelligent approach to construct an argument.

The Reserve Bank of Zimbabwe has pointed out frequently, though in bad strategy, that bond notes will act as an export incentive.

Again, this is not unconventional economics of which the author of the article suggests to be a deceptive front by the central bank.

Simple research will find that according to Food and Agricultural Organisation documents prepared by Dr Moses Tekere at the Trade and Development Studies Centre, by 1986, the Zimbabwe Government in close consultation with global partners, had already begun to take measures to stimulate production through export incentives, introducing the Export Retention Scheme and the Export Revolving Fund and foreign exchange allocations in favour of exporters.

This is neither unconventional nor is it new economics.

Even though one can argue the bond notes’ potency in achieving this technically applicable approach, it is naïve to suggest the export incentive, put in connotations by the author, is deceptive economic fodder.

Predictably, the writer goes on to reference Dr Gideon Gono’s words, “… traditional economics do not fully apply in this country … I am going to print and print and sign the money … because we need money.”

This is a superficial assessment that, unfortunately, Dr Gono left himself exposed to. What he technically meant was later emulated by the US Federal Reserve and European Central Bank as “quantitative easing”.

Granted, Dr Gono’s implementation lacked much credible institutional fiscal and monetary cohesion.

But astute and intelligent analysis would identify the context in which the RBZ failed to manage the Zimbabwe dollar, not incompetently grounding that as basis for disqualifying bond notes.

Conveniently, the author of The Economist’s article shared no critique of a more recent bond coin move by our central bank — an instrument which actually resembles the functionality of bond notes and is within the same context.

Finally, as if there weren’t endless deficiencies in The Economist’s article, the author goes on to claim that commercial white farmers were the greatest earners of foreign currency into the country.

I suspect this point is where one can trace the driving motivation behind the entire approach and utility of the article.

Perhaps this is the heart of what the author meant to strike at.

It is a very vacuous claim as it disregards the duality of agriculture, and the eventual sensitivities from both sides that led to an unfortunate sequence of land reform implementation.

From a strictly data-driven analysis, the author lacks a credible base year.

For instance, consider 1990, a decade well before land reform.

According to data compiled by the Zimbabwe National Statistics Agency and the RBZ and verified by global agencies, the manufacturing sector earned more foreign currency as it comprised up to 40,9 percent of our exports, while mining was only five percent behind farming which comprised 30,84 percent of our export earnings.

Even conceding fluctuating trends within commodity prices and the contribution of indigenous farmers, it is fairly presumptuous to claim outright that white farmers were the main source of foreign revenue.

This is an unfortunate presumption retained particularly by British observers of Zimbabwe.

More despairingly, it is often used as spiteful retribution to leverage any attack on Zimbabwe’s economic management. The entire approach used by The Economist when writing on Zimbabwe is centred on a gripe that furthers it away from economic precision; in effect sacrificing its acclaimed intelligence platform for factual and fundamentally precise subject matter.

Of course, political dialogue remains incumbent on high level authorities, and while a mortal writer such as me cannot speak to the intricacies of the evolving relationship; evident dialogue of a compensation fund suggests amicable perspectives are brewing.

The Economist is well behind this reality. Thus, for now at least, on a level of economic analysis, the magazine remains in intellectual delusion that makes it an unintelligent platform to read on Zimbabwean economic subject matter.

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