Ball is in your bank Dr Man­gudya

Chronicle (Zimbabwe) - - Opinion/national News - Jo­ram Ny­athi Spec­trum

PRES­I­DENT Mu­gabe on Mon­day this week signed Statu­tory In­stru­ment 133 of 2016. It amends the Re­serve Bank of Zim­babwe Act to make the soonto-be-launched bond notes le­gal ten­der. On the same day the cen­tral bank launched a na­tion­wide cam­paign to ex­plain the new fiat money, which will trade at the same value as the United States dol­lar.

The two pro­cesses, while they will not im­me­di­ately end peo­ple’s anx­i­ety about the bond notes, at least they bring to an end six months of un­cer­tainty about which di­rec­tion Gov­ern­ment was go­ing. Those six months since cen­tral bank gov­er­nor Dr John Man­gudya an­nounced plans to in­tro­duce the sur­ro­gate cur­rency have been filled with in­tense spec­u­la­tion about its im­pli­ca­tions for the Zim­bab­wean econ­omy. Why bond notes? Since the be­gin­ning of the year Zim­babwe has faced a de­bil­i­tat­ing cash cri­sis, mainly of the an­chor United States dol­lars. The Re­serve Bank at­tributes this in part to lack of proper plan­ning when the coun­try dol­larised in 2009. Dr Man­gudya and Fi­nance Min­is­ter Cde Pa­trick Chi­na­masa ar­gue that it was a mis­take to use a strong cur­rency such as the US dol­lar as a trad­ing cur­rency. This has ren­dered the coun­try’s ex­ports less com­pet­i­tive, thus earn­ing less and less forex.

Traders, ven­dors and artists of all de­scrip­tion now come to Zim­babwe to sell their trin­kets so they can har­vest Amer­i­can dol­lars on the streets of Harare. As Cde Chi­na­masa once put it, Zim­babwe has be­come a re­gional fish­ing pond for Amer­i­can dol­lars.

Man­gudya also ar­gues that there has been mas­sive ex­ter­nal­i­sa­tion of for­eign cur­rency over the past few years. This is not matched by in­creased in­ward in­vest­ment in the econ­omy. The bond notes are be­ing in­tro­duced as fiat money for daily trans­ac­tions in Zim­babwe while the United States dol­lar as­sumes its proper place as a re­serve cur­rency to be used to meet crit­i­cal im­ports such as medicines, cap­i­tal equip­ment and raw ma­te­ri­als, food and fuel im­ports.

This way the Re­serve Bank hopes to limit the ex­ter­nal­i­sa­tion of for­eign cur­rency and cut down on non-es­sen­tial im­ports. This late dis­cov­ery is com­mon­sen­si­cal else­where. Bond notes are the way to go in the ab­sence of a cred­i­ble al­ter­na­tive to a lo­cal cur­rency.

We know there is the de­fault, lazy op­tion. Bit­ing the rand bul­let. Maybe our econ­o­mists are not be­ing help­ful here. How do we go about adopt­ing or join­ing the rand? Do we just grab it the way we did the US in 2009 and claim it’s now the of­fi­cial cur­rency of Zim­babwe? Coun­tries cur­rently con­sti­tut­ing the Rand Mon­e­tary Union have their own cur­ren­cies for lo­cal use; we have none. Do we sim­ply walk in there naked and ask South Africa to print for us some R100 bil­lion? What obli­ga­tion does South Africa have to find the gold to back up this neigh­bourly splurge?

And bizarre as it might seem, how is it pos­si­ble for ZNCC and CZI to pur­port to sup­port in­di­geni­sa­tion and eco­nomic em­pow­er­ment poli­cies, only with­out an indige­nous cur­rency? In other words “our” econ­omy has no lo­cal value, we can only reckon our GDP in terms of an ex­change rate set at the whim of the Fed­eral Re­serve or the gov­er­nor of the Re­serve Bank of South Africa? In per­pe­tu­ity gen­tle­men, just be­cause we are afraid to be in­de­pen­dent? Like we are the only peo­ple with a past so painful it can never be for­got­ten, or whose lessons should be the best teacher! It doesn’t speak well of our ed­u­ca­tion that our tech­nocrats can’t help solve the na­tion’s prob­lems. They are con­tent to adopt what fel­low tech­nocrats have cre­ated. Just a thought.

For its part the cen­tral bank also mis­han­dled the in­tro­duc­tion of the bond notes. It has not given rea­sons for the in­or­di­nate time lag be­tween the an­nounce­ment in May and the lack of a launch date up to now. And Dr Man­gudya him­self gets ir­ri­tated when asked about the de­lay. He doesn’t ap­pre­ci­ate why peo­ple want to know, telling one re­porter re­cently; “It’s ter­ri­ble in this econ­omy. You give them in­for­ma­tion in good faith and they use it as am­mu­ni­tion. You need to have equi­lib­rium of the in­for­ma­tion you give and what you will not give.”

That may well be true but it has left a large in­for­ma­tion gap which has been oc­cu­pied by those with fer­tile imag­i­na­tions for ill-will. They have used the dead weight of dis­torted his­tori­cism to de­cam­paign the bond notes, ar­gu­ing Dr Man­gudya wants to rein­tro­duce the Zim­babwe dol­lar. This is im­me­di­ately linked to the hy­per­in­fla­tion ex­pe­ri­ence of 2007/8 to per­suade Zim­bab­weans against talk of a lo­cal cur­rency.

Lack of trust and con­fi­dence in the Re­serve Bank are now metaphors for this nega­tive cam­paign. Which means the Re­serve Bank will have a lot of catch­ing up to do be­fore it can undo the dam­age in­flicted on this oth­er­wise brave ini­tia­tive to in­ject liq­uid­ity into a parched econ­omy.

Suc­cess or fail­ure will de­pend on how the cen­tral bank ap­plies the car­rot and stick for Zim­bab­weans to learn new ex­pe­ri­ences from the bit­ter mem­o­ries of 2008. It needs to demon­strate that it will not print bond notes be­yond the US$200 mil­lion limit re­port­edly guar­an­teed by Afrex­im­bank. (Al­though in these days of ir­re­spon­si­ble use of so­cial me­dia it is not in­con­ceiv­able for a ma­li­cious ru­mour mon­ger to quote “sources” claim­ing $6 tril­lion worth of bond notes have been printed!)

The pro­posed in­de­pen­dent board to ex­er­cise over­sight over the printed notes must be seen to be in­de­pen­dent. Not that there will be no crit­ics, but that it can re­port im­par­tially and where an ex­pla­na­tion is re­quired, give one.

Pro­duc­ers who need to im­port es­sen­tial in­puts must be able to ac­cess for­eign cur­rency with­out un­due de­lays. This is not any­thing unique to Zim­babwe. It is the pro­ce­dure ev­ery­where that peo­ple ap­ply for for­eign cur­rency when go­ing out of their coun­try be­cause most re­gional cur­ren­cies are not read­ily con­vert­ible. We lost it in 2009 when we dol­larised and al­lowed Amer­i­can dol­lars to be used to buy toma­toes and tis­sue pa­per on the streets. We must un­learn those bad habits.

Linked to the above is the stick. The coun­try must fight the scourge of cor­rup­tion. Those who gen­uinely want to im­port must not be sub­jected to bribes and oner­ous taxes. That means com­mer­cial banks, the Re­serve Bank and Zimra of­fi­cials must be ex­em­plary in their be­hav­iour by fa­cil­i­tat­ing busi­ness rather than de­mand­ing per­sonal gain.

It is not enough for Zimra of­fi­cers at points of en­try to merely de­mand duty for trade goods be­ing brought into the coun­try. There must be a pa­per trail of how much money was with­drawn from a bank against the value of the goods. We are a na­tion now used to a casino or kiya-kiya econ­omy and peo­ple al­ways try to break the rules. We have to un­learn those habits if we are to grow.

While this might not be easy in prac­tice, it is worth try­ing. Peo­ple must con­vert to the prac­tice of us­ing plas­tic money or elec­tronic trans­fers. The prim­i­tive pride in car­ry­ing for­eign cur­rency in a wal­let or boot of a ve­hi­cle should be frowned upon. It’s one habit unique to Zim­babwe. (The ridicu­lous side is that some­one spends five hours stand­ing in a queue to get $50. They im­me­di­ately rush to spend it in a su­per­mar­ket which has five swip­ing ma­chines. And even fuel ser­vice sta­tions, bars and butcheries now have swip­ing fa­cil­i­ties. We are such a con­ser­va­tive lot.)

That said, if the Re­serve Bank were to act with res­o­lute de­ci­sive­ness and in­tegrity, and win the sup­port of com­mer­cial banks, traders, Zimra of­fi­cials and law en­force­ment agen­cies, the re­sis­tance against bond notes should be easy to break. A ma­jor­ity of or­di­nary cit­i­zens have no ac­cess to for­eign cur­rency. They are ready to try any­thing to lead nor­mal lives, in­clud­ing ex­pect­ing mir­a­cle money from Pen­te­costal pas­tors. Let them have ac­cess to a cur­rency they don’t have to bury in the pil­low case or mat­tress.

A rare pos­i­tive com­ment on the prospects of bond notes came from a lo­cal econ­o­mist, Mr Kip­son Gun­dani, who told a weekly news­pa­per last week that re­sis­tance was re­flex­ive and emo­tional. He pointed out that once the bond notes were “ac­cepted by ma­jor com­pa­nies, es­pe­cially pub­lic util­i­ties and re­tail­ers, and the cen­tral bank sticks to its prom­ises, con­fi­dence will re­turn due to the power of demon­stra­tion”.

He con­tin­ued: “It is im­por­tant to note that bond notes make a lot of eco­nomic sense and what we are see­ing are emo­tional re­sponses from the peo­ple. Emo­tions are emo­tions. They will heal with time.”

That is pos­si­ble, he pointed out, pro­vided the au­thor­i­ties ad­here to “poli­cies that en­hance in­cre­men­tal in­come to peo­ple, and avoid pre­vi­ous blun­ders that killed value”.

Dr Man­gudya, the ball is in your bank.

Dr John Man­gudya

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