Wednesday, March 26, 2008
The opinions in this treatise are interpretations by Rejoice Ngwenya, facilitator/discussant and NOT the official positions of either ZNCC or FNF. Dagny Taggart in Ayn Rand’s ‘Atlas Shrugged’ says: "Don’t ever get angry at a man for stating the truth."
Dollarisation may be a strange term for continental Africans who have never experienced hyperinflation of One Hundred Thousand Percentage Points, but to members of the Zimbabwe National Chamber of Commerce [ZNCC], the word evokes familiar echoes of despair. In this landlocked Southern African country that shares borders with South Africa, Mozambique, Zambia and Botswana, the American Dollar, known popularly as The USA, is competing for legal and illegal circulation in daily transactions. ZNCC members, bankers, industrialists, academics, economists and interested citizens disagree on the acceptability of ‘dollarisation’ in an economy that has contracted by almost Seventy Percent since year 2000.
Steve Hanke, former economic adviser to Ronald Reagan and now professor of applied economics at the prestigious Johns Hopkins University, recently published a report in which he accuses Reserve Bank [RBZ] governor Dr Gideon Gono of steering Zimbabwe in a course of fiscal and monetary doom, calling for the bank’s dissolution. This hypothesis seems to dovetail with Friedrich Hayek’s that an institution that causes a problem – by introducing commandist-type anti market controls – cannot proffer any sustainable solutions since it is itself an integral part of the problem. Gideon Gono, by admitting that he has authorised his Fidelity Printers to churn out in excess of Three Hundred Trillion Zimbabwe dollars, seems to fulfil Hanke’s prophecy of self-destruction.
ZNCC members are therefore justified to feel confused by Dr Gono’s insistence on managed exchange controls that on one hand stifle the industry’s ability to create foreign currency reserves, while on the other they authorise ZIMRA – Zimbabwe Revenue Authority -, fuel stations, hotels, Air Zimbabwe and the Passport Office to charge for their services in USAs. Infact, it is impossible to conceive how thousands of ‘poor’ Zimbabwean citizens cross the borders everyday to buy groceries, furniture, electronic goods and cars in foreign currency when RBZ fails to supply Letters of Credit to local business for importation of critical raw materials. In the midst of this policy confusion, both Zimbabwe Electricity Supply Authority [ZESA] and Grain Marketing Board [GMB] are struggling to pay for power and grain imports respectively due to a shortage of ‘official’ foreign currency while the USA has common presence in the streets of Harare and Bulawayo.
University of Zimbabwe lecturer Dr Innocent Matshe argues that Dollarisation is a global phenomenon that touches on sensitive political nerves of sovereignty. Even if Dr Gono wanted to, he would not convince a government that is already hostile to Americans to accept ‘their money’ as official tender, as the country would lose more that it would gain. Like Hanke, Dr Matshe asserts that it is stabilising the local currency that is more urgent than legalising the USA. Ironically, he observes that the economy already sits on foreign bonds and assets, so Dollarisation is not that strange after all. Economic Analyst Dr Daniel Ndlela also concurs that Dollarising is a short-term solution with few benefits. Although he seems to agree that hyperinflation is a manifestation of failed state policies, eliminating the RBZ is not recommendable, because both Mozambique and Zambia managed to regain monetary sanity through their respective central banks. Rather, he proposes a reconstitution of RBZ- as in East European cases where Currency Boards were used in conjunction with ‘unofficial’ use of foreign currencies. It is not possible, he adds, for Zimbabwe to ‘officialise’ local use of USAs and Rands without seeking authority from the American and South African monetary authorities.
Marah Hativagone, current president of ZNCC, reflects the typical state of self-resignation and despair that correctly portrays ZNCC members as victims of an all too powerful, domineering bully policy control environment. Her argument exposes fundamental a weakness of command and control economies – they ignore the ingenuity of citizens to respond to the natural dictates of demand and supply. Mrs Hativagone questions the wisdom of banning Bureau de Changes while frog marching unwilling citizens to sell the USA to a central bank that offers a rate One Thousand times below what the ‘real market’ offers. "The government expects us to pay for duty, buy petrol and pay for passports in foreign currency," she questions, "where do they think we are getting that money from?" Her members have another problem: the National Income Pricing Commission [NIPC], a fundamentalist state institution run by dogmatic bureaucrats who impose price controls on consumer goods and services yet completely ignore the supply cycle.
Public Relations consultant James Maridadi observes that Dollarisation is more of a political problem that calls for a political solution rather than monetary policy engineering. If part of this ‘political solution’ is dissolving NIPC and the current regime of fiscal and monetary authorities, global banking icon Nigel Chanakira argues for a case of engagement rather than confrontation. "Our role as business is to impose our influence on politicians," he says. Mr Chanakira’ s father is a former diplomat, and with Nigel’s investment stakes high – currently on the verge of placing his stocks on the New York Stock exchange – one can understand why he maintains a politically correct perspective on banking issues, particularly the RBZ. His colleagues – Dr Mthuli Ncube, James Mushore and Nicholas Vingirayi are fugitives from justice for hitherto unspecified banking malpractices known only to RBZ strongman Gideon Gono who generally resents criticism. Political opposition parties also accuse him of starving business of ‘cheap’ foreign currency to import critical raw materials while favouring to spend millions importing agricultural equipment, computers and generators for president Robert Mugabe’s electoral campaign. Nevertheless, Nigel Chanakira insists that it is the role of business to call politicians to account.
Therefore what is it that Zimbabwe Business proposes as the way forward? Liberal economist Professor Friedrich Hayek cautions in ‘The Road to Serfdom’: "The fundamental principle that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion – is capable of an infinite variety of applications." For ZNCC members, Dollarisation is not just a symptom of ‘the spontaneous forces of society’, but an inert, yet unexpressed acceptance to be viewed as a manifestation and a backlash of the rise and rise of market-defying totalitarian control of exchange policies by Dr Gono’s RBZ. Until Zimbabwe reverts back to the pre-2000 era where legislators and business were natural protagonists of the free market economy, Dr Gono will continue to buckle under the negative principalities of commandist policies motivated by sinister political motives responsible for creating a deficit in the foreign exchange market. What choice does Zimbabwe business have other than not just exposing the failure of monetary authorities but also demanding a return to free market justice? Muffled cries camouflaged in retarded egotistical complacency, diplomatic talk and political correctness will never restore, as Dr Matshe advises, the ‘value of local currency that must act as the basis for monetary confidence’. Progressive modern-day entrepreneurs like financial whiz kid Nigel Chanakira, food preservatives genius Marah Hativagone, telecom engineman Strive Masiyiwa, refrigeration icon Callisto Jokonya, platinum king Jack Murehwa and beverage mogul Johnson Manyakara have reason to fear for their corporate lives. In having to deal with Reserve Bank governor Dr Gideon Gono, their corporate fate lies in the fidgety hands of a man who at this stage wields more authority than the four ministries of defence, finance, economic planning and home affairs combined. Nevertheless, intellectuals, academics and we analysts owe it upon the future of our country to expose the evil of a totalitarian policy environment for what it is and the first step in this noble call to duty is to demand the restoration of RBZ’s core business as a regulatory, rather than a commandist authority. End.