The Sunday Mail
“We are famed for having fantastic policy documents but notorious for not implementing them.”
Guess what – we can still devalue in this economy! Wait a minute… in this dollarised environment where we “don’t have” a local currency to talk about?
Yes we can! It’s actually a sustainable and compatible economic reform from within! So why are we not having a policy to that effect? Well… I don’t know!
Maybe we fear that our weaknesses will not spare us the chance to implement.
As Professor Jonathan Moyo once said: “We are famed for having fantastic policy documents but notorious for not implementing them.”
And; by the way, by “reform from within”, I am precisely talking about internal devaluation – more about it later. Just for the record. But let’s first reflect in retrospect to comprehend the compulsion.
Taking a saunter down the economy’s memory lane, you won’t tread far before you stumble upon a point in time when you would get R8 for US$1. Now the rand vacillates at around R11,50 to the US dollar – a clear sign of appreciation of the US dollar, our main actor at the moment. This is a bitter-sweet pill for our economy to quaff!
Sweet, of course, to the traders, who can now import more merchandise with the same amount of money and make more super profits.
The appreciation of the dollar basically makes imports cheaper.
In a low-income economy such as ours, imports therefore become the choice for many who will be trying to get by. The retail shelves in the shops can paint the picture better.
A picture speaks volumes.
The situation is on the other hand bitter to the manufacturers and those falling down their value chains.
The gradual fall of the rand, which is the currency used by our main trading partner, South Africa, has made our exports expensive and uncompetitive on the international markets.
This has significantly reduced the level of our potential export revenues. Our poor rankings on the Global Competitiveness Report also indicate our adverse export situation.
Can we expect to effectively checkmate the current wide trade deficit, given the adverse status quo whereby imports are getting cheaper and our exports becoming expensive?
Exports which, please note, happen to be our biggest source of revenue as a county!
Achieving a sustainable balance of payment for our economy is definitely going to be largely dependent on internal devaluation.
This entails regaining competitiveness through lowering our labour and related costs and raising our productivity.
If there is one year we should be serious about fostering competitiveness in our economy, it is 2015!
We are fortunate that we have a Cabinet committee that has already conducted a cost-driver analysis survey on the economy.
The survey identified key cost drivers to be labour, power, water, finance, transport and trade logistics and others.
The Confederation of Zimbabwe Industries’ survey also weighed in by catching the very usual suspects in its trap.
Since we cannot devalue the US dollar, a currency that we have no control over, we must utilise the option of internal devaluation.
The intention is to make our production costs lower than in other main trading partners. The central bank governor has already set the tone by indicating that there must not be any salary increase to talk about this year.
This is a necessary step which has to be taken with a view to kick-start the process of fostering competitiveness.
In any case, consumers can still benefit from increasing their real consumption levels without having to be awarded salary increases, given the falling general price level of goods and services.
Some might argue that freezing wages and salaries may not be compatible to our efforts of implementing productivity based remuneration.
What if the employee increases his productivity and breaks the glass ceiling of his current salary? Should he not get an increase?
But there certainly is no contradiction here. Internal devaluation is actually a big fan of productivity. The kind of salary increases that are discouraged are those that are arrived at through collective bargaining, which are not scientific to the ability of the particular company to afford the increase.
A Cabinet committee has already recommended a Holistic Cost Reduction Model, which includes rationalising the parastatals and local authorities’ wages and salaries.
Let us not be “notorious” in failing to implement those recommendations.
It must also be noted that once we set our economy in the internal devaluation trajectory, we will also expose our economy to enhanced opportunities for foreign direct investment, which has been coming in dribs and drabs.
I also commend Government for transforming the obsolete National Incomes and Pricing Commission into the National Competitiveness Commission – an institution that is compatible to the economic aspirations of the day.
My tip to manufacturers as I am about to cap my pen and get on my horse is that they should label their manufactured food exports as GM-free.
If we cannot compete on price, then let’s compete on these things we regard as trivial.
In a world that is now more conscious about eating healthily, especially with the rise in diseases such as cancer and heart problems, many people are now very particular about eating food made from organic ingredients.
And we have been blessed in that department.
Back to my insight of the week – it is very crucial that we immediately start perform reform of our economy from within, with internal devaluation leading the way!
