How the Market can solve Zimbabwe’s impeding Economic Implosion

Since the 2005-2008 economic era, Zimbabweans have never experienced turbulence in their individual, domestic, corporate, and collective lives as they do at the moment. Yes, we may boast about ‘high gold deliveries’ and ‘excellent tobacco exports,’ but critical questions linger: are these economic victories positively affecting the man-in-the-street? Have they enhanced real income or improved the general standard of living?

In the past year in Zimbabwe, runaway inflation fueled by an incrementally worthless local currency has savaged and completely decimated consumer purchasing power. As living costs escalate, the value of the Zimbabwean currency and its real-time gross settlement (RTGS) equivalent depreciated, forcing citizens to rely on scarce but reliable US dollars.

Food, rental, transport, medical aid, insurance, school fees, entertainment, and pension ‘costs’ are well beyond the average citizen. Entrepreneurs complain about eroded profit margins while both private and public service employees rightly clamor for improved US-dollar denominated wages and salaries.

The central government has failed to respond to these demands, positioning the nation for industrial unrest. This whole cacophony of economic turbulence translates to political discomfort, forcing the central government to harden its stance on dissenting voices. Using its legislative majority, the ruling party attempts to invoke a barrage of policy reforms that would only exacerbate the already dire situation.

The Coalition for Market and Liberal Solutions (COMALISO) proposes a more dignified way of returning Zimbabwe to economic and national governance sanity.

National Governance

COMALISO has always insisted that too much government interference in the economy upsets the balance of forces of demand and supply that should determine the development agenda. There is an urgent need to de-militarise and de-politicize the economy to allow inclusion, equal access, and empowerment.

Creating a real market-led economy today has become difficult because the invisible hand of demand and supply is decapitated by price manipulation.

Our government is too big, attempting to respond to every challenge with a new ministry, department, or statutory instrument. Its insecurity compels it to concoct inconsistent policies meant to appease most citizens who are better off defining their own lives.

The dazzling array of economic and political statutory instruments like new bills, and laws meant to strengthen the control of private and public institutions are a blight. There is no commitment to the rule of law, while economic freedom is thwarted by an appetite for central planning by the Reserve Bank of Zimbabwe. This only adds bureaucracy and red tape to the already chaotic state of the economy.

Moreover, persistent reports on property rights violations are other factors worsening our country’s economy. No economy can grow when citizens are choked with excessive legislative and policy power. The Zimbabwean government is always on the defensive against real and perceived enemies. Without political freedom, private property rights, and free markets, there can be no real economic growth.

Citizens must be allowed to freely exercise their constitutional rights without impediments. The central government must focus on effective policy reform that encourages individual innovation, individual expression, and strong currency. Dominating public media and interfering with judicial independence does not work well with the matrix of economic growth.

National Institutions

The central government controls hundreds of public institutions meant to enhance the quality of life of citizens. It is a COMALISO submission that most such entities as public enterprises are beyond reform, thus they should be privatized. The net result is to release resources into the fiscal system that can be diverted to public health and infrastructure projects.

Moreover, privatization exempts he central government from unnecessary recurrent expenditure and costly subsidies. The central government has heavily invested in grain, power, and transport without offering value for money to the citizenry. But these institutions have become harbingers of corruption and sources of self-enrichment only for a few ruling party henchmen.

[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]If ZANU.PF is entertaining any hopes of winning in 2023, Ncube and Mangudya are their defeat agents. No economy can function with such disruptive and impoverishing monetary policy.[/perfectpullquote]

Compelling citizens to deliver grain to state institutions is a recipe for food insecurity. All national commodities—whether grain or mineral—must be traded in an open, free market to yield the best value for producers. Let the forces of demand and supply dictate the value of all commodities.

National Policy Environment

One of the biggest failures of this government is public policy, especially monetary policy. Money defines everyone’s life. If money is valueless—if money cannot be saved and loses its essence as a reliable medium of exchange—creates the need for a change of government only for the good of the citizens. How is it that after the 2008 hyperinflationary nightmare, policymakers have not learned anything? In this day and age, Zimbabwe is subjected to a ‘multi-currency’ environment of bond notes, RTGS, United States dollars, Rand, and an array of other ‘virtual transaction’ currencies.

COMALISO likens monetary policy to a high-pressure hosepipe watering a famished vegetable garden. If the hosepipe develops a small hole, you can only repair it effectively by closing the tap and temporarily ‘starving’ the vegetables for a good cause. You would be drenched if you try to repair the hole while water is running.

To this effect, our humble submission is that both Professor Mthuli Ncube and the Reserve Bank Governor John Mangudya must be urgently cut off from the monetary hosepipe system. They are drenched with gross incompetence. Although their experiments have not only failed dismally, it is drenching citizens with intractable poverty.

If the ZANU.PF is entertaining any hopes of winning in 2023, Ncube and Mangudya are their defeat agents. No economy can function with such disruptive and impoverishing monetary policy. President Emmerson Mnangagwa must urgently employ more competent Zimbabweans to head the National Treasury and the National Reserve Bank.

The COMALISO Panacea

We have already alluded that the Zimbabwe government is too large a burden to its citizens. Our domestic and foreign debt is largely attributable to reckless government expenditure on huge public services, appeasement projects, and widespread corruption.

Failure to adhere to the rule of law and widespread violation of private property rights extinguishes opportunities for Zimbabwe to be considered a destination for foreign direct investment. Billions of dollars are wasted on expensive state-owned companies that can perform better as independent private entities.

No country can enjoy enhanced domestic production, competitive exports, domestic savings, consumption, and investment without its own strong currency. The Zimbabwean government must urgently make up its mind to have its own Zimbabwean dollar supported by fiscal discipline, strong production, and foreign reserves. The reason why our dollar is rejected as worthless is that the RBZ is exploited for political expediency.

Both Mthuli Ncube and John Mangudya are clueless about how to run a modern economy. Allowing the Zimbabwean dollar to operate parallel with a ‘basket of currencies’ will tame inflation.

Zimbabwe, just like Botswana, needs a free flow of funds with liberalized forex market not subject to partisan state interference. This whole experiment of ‘bank auction’ is a total failure. It creates false hope for foreign-currency-starved producers who could benefit more from a liberalized stock exchange which is the secondary capital market for firms to raise capital.

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Yes, they may have ‘brought in millions’ in investment, but how many billions are they exporting? Why does Zimbabwe owe China that much if we are development partners?[/perfectpullquote]

Commercial banks, finance houses, bureau de change, and building societies should be left to practice their expertise without senseless government interference and statutory instruments.

The RBZ needs to take the route of a currency board so that the printing of money not supported by fundamentals is eliminated and confidence restored.

The National Treasury needs to religiously adhere to budget spending and fast-track implementation of international public sector accounting standards for greater accountability and transparency. We have also observed that the current status of political freedom is not supporting multi-party political representation in the parliament. This results in a one-party majority thwarting oversight.

COMALISO insists that industry boards like the Institute of Chartered Accountants Zimbabwe, Zimbabwe National Chamber of Commerce, Confederation of Zimbabwe Industry, Chamber of Mines, Banker Association of Zimbabwe, and Commercial Farmers Unions be listened to and involved in all key decision-making.

Measures to encourage savings and investment need to be implemented as this is the only way to guarantee production and stability. The Central Bank should allow the market to set interest and exchange rates to avoid arbitrage and distortions.

COMALISO is equally concerned by China’s expropriative and exploitive tendencies in Zimbabwe. Yes, they may have ‘brought in millions’ in investment, but how many billions are they exporting? Why does Zimbabwe owe China that much if we are development partners?

What value do Chinese companies offer to Zimbabwe’s human capital and industrial relations? How much do Chinese companies contribute to the national purse? How transparent is China’s relationship with our military establishment? We need answers.

Rejoice Ngwenya is the director of COMALISO. He writes from Ruwa, Zimbabwe.