‘Proposed changes are too many, too drastic’
BOND notes are a brilliant idea but perhaps, whose time has not yet come. I argue that the timing of the announcement of bond notes was wrong and the packaging of the message was too crude if not altogether clumsy, for a market that barely survived the full brunt of a severe hyperinflation. To be fair, the RBZ governor Dr John Mangudya and Finance Minister Patrick Chinamasa had up until the latest episode, worked so hard to create some understanding with the banking public. The two are good men and the nation had begun to trust them.
I believe the proposed changes were too many, too drastic and too hurried for a scarred economy. Former RBZ Governor Dr Gideon Gono was not reviled for his lack of ideas, no. People detested his methods of implementation which were almost always predicated on the “wolf at the door” mindset. He did things “in the national interest” but banished us to devastating loss of a lifetime of savings.
Yes, the nation has been facing cash shortages for several months now; yes, the processing of international payments at banks has slowed down for various and known reasons and yes, it will always be the duty of the Government to ensure social stability as an unstable financial system can create civil strife. That socio-economic construct is understood and clearly too. The problem, however, is that the majority of our captains of business loathe to advise against potentially self-defeating decisions formulated by our regulatory bodies. It is unpatriotic not to speak in the national interest.
Arbitrarily converting people’s foreign currency earnings to a manifestly weakening currency can never engender a sense of trust in the financial system. Consequently, that very decision exacerbated what was already a bad situation. The right to one’s legally acquired property is sacrosanct. The conduct of business is premised on that right and the public should not be faulted for choosing to avoid the banking system. And so, rather than threaten people with a raft of punitive restrictions, the authorities must allow well meaning citizens to contribute positively to this conversation. The country must never again descend to the pre-2009 period.
That Zimbabwe had long become an active conduit in illicit trade and money laundering activities is a fact. It is also true that such a situation is anathema to the developmental aspirations of our people. To the extent that much is true, the underlying concept around bond notes is good as it seeks to create a medium of exchange that cannot be easily siphoned out of the country and yet remain a credible store of value. Underline the word credible.
With credibility comes trust. Our people do not trust the RBZ, not because of its recent history but rather, its previous indiscretions perceived or real. The problems caused by this latest episode will require a lot of explaining by all stakeholders before it can at most, be understood let alone forgiven. For me, we bankers should admit we got this one wrong. We need to build trust and the only way we can do so is by using the powers vested in our important institutions with restraint.
In a trusting economy a currency need not be backed by anything. The United States as a country prints a lot of money and they call it “quantitative easing”. That money is backed by nothing except the might of the United States of America. And so, that Afreximbank will underwrite our bond notes will not matter in this discourse. What matters is that the market must trust the person of Dr Mangudya and the very institution he represents. Dr Mangudya is a sincere man that I can confirm but, few will remember his predecessor with affection. It was under Dr Gono’s stewardship that this country created trillionaires whom no one envied. We became the laughing stock of the world. Today we are the walking wounded, the deep-seated mistrust of our banking system will not escape your notice.
Our people are not about to embrace the advent of bond notes notwithstanding the fact that they are having to endure long queues at the various banks. The simplest solution to the headache caused by the continued export of the physical United States dollar to safe havens outside the country may just be to only import United States dollars in lower denominations to the near-total exclusion of 20s, 50s and 100s.
We must also eliminate the infamous imports priority list or at least revise its current form as it encourages companies to hold onto their daily takings for use by “runners” who then facilitate the much needed cross-border trade. All these “work-arounds” add to the cost of doing business in the country. Many of us lost relatives and friends during Dr Gono’s era because diabetic and renal patients could not obtain forex to pay for their medical requirements. It is for this and other pertinent reasons that members of the public are shunning banks. Our economy is still very fragile and any attempts to restrict forex transactions of insignificant value no matter how noble, are likely to reverse the goodwill earned by the central bank since 2009.
None of us quarrels with the Government’s desire to make sure that the country ends up producing the bulk of its requirements for goods and services. But, we must resist the urge to place the cart ahead of the horse. Creating the necessary capacity to produce for domestic consumption requires time, patience and investment. You do not start by “banning” imports.
The Government and related institutions must create the necessary conditions needed for local industry to take root. The tax system we use must reward diligent entrepreneurs; infrastructural developments must be biased towards improving the conditions of doing business; priority must be given to improving the public transport system and above all, our financial system must exhibit a measure of transparency and utmost good faith when handling client funds. The Central Bank must be seen to be a symbol of wealth and its pronouncements; an enduring reference point for financial sobriety.
Today we stand as a retailing nation, a fact only a few people are willing to acknowledge. We are a highly literate people who simply have failed to read that a local factory producing drawing pins, cannot survive in a country where the minimum wage per factory worker is $300. How many drawing pins will you need to sell if only to pay just this one employee? These same workers still clamour for higher salaries! What exactly are we smoking and in what quantities?
I had to digress if only to locate my contribution within a desired context. This country needs to embrace the South African rand as a primary means of exchange. This fixation with the United States dollar can only result in social unrest since the bulk of our “basic” requirements are imported. Factories in this country will never compete at an equal footing with those in the region because a strengthening US dollar makes it expensive for recipients of our export goods to settle in dollars.
Better still, our Government must now actively consider joining the Southern African Customs Union. For instance, Namibia has its own currency existing side by side with the South African Rand and the same can be achieved here over time. In fact, this latter point is more or less the same with the concept of bond notes. We are a sovereign people I accept; we are a learned people I concede but, if we cannot make the kind of decisions that are necessary for us to live then the doctorates we brandish before anyone who cares to notice are not even worth the paper they are written on.