Aus­ter­ity is ev­ery­one’s re­spon­si­bil­ity

The Sunday Mail (Zimbabwe) - - ANALYSIS & OPINION - Mtan­dazo Dube

TWENTY years ago, South Korea, which was the world’s 11th-big­gest econ­omy, was headed for bank­ruptcy fol­low­ing the 1997 Asian Fi­nan­cial Cri­sis. The IMF put to­gether US$58 bil­lion to res­cue South Korea, the big­gest ever bailout pack­age by the or­gan­i­sa­tion then.

Ac­com­pa­ny­ing the money were a string of aus­ter­ity mea­sures to be im­ple­mented: trade and ac­counts lib­er­al­i­sa­tion, re­form of labour mar­ket and re­struc­tur­ing of cor­po­rate gov­er­nance, among many oth­ers.

There were more or less the same mea­sures be­ing un­der­taken by Gov­ern­ment as enun­ci­ated by Fi­nance and Eco­nomic Devel­op­ment Min­is­ter Prof Mthuli Ncube in the Tran­si­tional Sta­bil­i­sa­tion Pro­gramme (TSP).

To quickly get out of the debt cri­sis, South Kore­ans went a step fur­ther.

Their gov­ern­ment, top com­pa­nies, trade unions and other in­flu­en­tial peo­ple came to­gether and made a call for all cit­i­zens to act to end the cri­sis.

In one of the most mov­ing shows of pa­tri­o­tism and self-sac­ri­fice in his­tory, or­di­nary cit­i­zens, celebri­ties, top ath­letes and or­gan­i­sa­tions do­nated over 220 tonnes of gold in two months to has­ten re­pay­ment of the IMF loan.

They re­paid the loan with over two years to spare.

South Korea’s cri­sis co­in­cided with the be­gin­ning of Zimbabwe’s own prob­lems fol­low­ing “Black Fri­day” on Novem­ber 14, 1997, the day the Zimbabwe dol­lar lost over 70 per­cent of its value against the green­back.

This was fol­lowed by a myr­iad of other eco­nomic catas­tro­phes com­pounded by Western sanc­tions that led to Zimbabwe even­tu­ally aban­don­ing its cur­rency roughly a decade later.

Twenty years on, as South Kore­ans cel­e­brate be­ing the fourth-largest econ­omy in Asia, with per capita GDP of over US$27 000, Zimbabwe is still bat­tling.

With­out its own cur­rency, Zimbabwe finds it­self in an un­vi­able fi­nan­cial po­si­tion.

But un­like South Kore­ans who ral­lied for a na­tional cause, Zim­bab­weans are busy en­gag­ing in self-de­feat­ing ac­tions.

Trust is­sues

Fol­low­ing pre­sen­ta­tion of the TSP on Fri­day Oc­to­ber 5, 2018, Zim­bab­weans be­came hys­ter­i­cal.

Prices of ba­sic com­modi­ties shot up, panic-buy­ers and bar­gain hunters raided shops to fuel a thriv­ing black mar­ket.

Some busi­nesses closed doors due to un­cer­tain­ties and the black mar­ket ex­change rate went hay­wire.

De­spite as­sur­ances by sup­pli­ers that prices had not gone up and that the coun­try had enough of al­most ev­ery­thing re­quired, from fuel to cook­ing oil, there was a frenzy.

Pres­i­dent Em­mer­son Mnan­gagwa’s state­ment backed by that of Prof Ncube, to the ef­fect that Gov­ern­ment had se­cured back­ing from Afrex­im­bank guar­an­tee­ing con­vert­ibil­ity of RTGS bal­ances on a 1:1 ba­sis with the US dol­lar and avail­abil­ity of the green­back for Nostro for­eign cur­rency ac­counts, saw the sit­u­a­tion al­most back to nor­mal by last Fri­day.

What was re­fresh­ing was the level of trust Zim­bab­weans have in their Pres­i­dent and his word.

The lack of trust by Zim­bab­weans in mone­tary au­thor­i­ties was a ma­jor cause of in­sta­bil­ity in the fi­nan­cial sec­tor in the old dis­pen­sa­tion. Once trust is­sues are sorted, the road to re­cov­ery be­comes clearer.

The planned in­tro­duc­tion of a Statu­tory In­stru­ment that pro­tects Nostro ac­counts from both the RBZ and Gov­ern­ment is an­other ma­jor step in restor­ing con­fi­dence eroded since former RBZ Gover­nor Dr Gideon Gono raided in­di­vid­ual and com­pany ac­counts dur­ing his ten­ure. When mul­ti­ple cur­ren­cies were in­tro­duced in 2009, bank bal­ances, in­surance sav­ings and pen­sions were wiped out.

The peo­ple re­mem­ber.

Aus­ter­ity is pain

Af­ter the IMF in­ter­vened in South Korea, the peo­ple of that coun­try self-en­forced eco­nomic dis­ci­pline.

They de­nied them­selves lux­u­ries they sim­ply could not sus­tain­ably af­ford.

So while in­ter­na­tional fi­nan­cial in­sti­tu­tions and bi­lat­eral part­ners can help Zimbabwe’s econ­omy, Zim­bab­weans have to be at the fore­front of fix­ing their own econ­omy. When we have leg­is­la­tors cry­ing for im­ported lux­ury ve­hi­cles, heads of Gov­ern­ment de­part­ments still hung-up on opu­lence, a cit­i­zenry that shuns its own prod­ucts in favour of im­ports, why would a for­eigner care?

Zimbabwe is like a beg­gar on a beach of gold: we im­port soya for cook­ing oil, peanuts and even tooth­picks!

Zimbabwe’s ex­ec­u­tive, leg­is­la­ture and ju­di­ciary to lead by ex­am­ple. Hefty al­lowances must fall, brand-new SUVs on tax­pay­ers money must be a thing of the past.

Good cor­po­rate gov­er­nance must be en­forced and the labour mar­ket must be re­struc­tured.

We must forgo our favourite im­ported whiskey and stop send­ing mil­lions to for­eign climes for SUVs.

Fore­go­ing im­ported lux­u­ries is a small price to pay for sus­tained and mean­ing­ful eco­nomic growth and devel­op­ment.

The up­per mid­dle-class life that some have been liv­ing is sim­ply not what they can af­ford.

Way For­ward

The trou­bles of 2007/8 must not just be re­mem­bered; they must be lessons.

The panic buy­ing wit­nessed re­cently is in­stinc­tive and must be tamed; the prof­i­teer­ing we saw last week should be­come a rem­nant of a re­cent past.

Pres­i­dent Mnan­gagwa has set the ball rolling on a wel­come tra­jec­tory.

Zim­bab­weans have to learn to sup­port lo­cal firms. Gov­ern­ment must sup­port the ve­hi­cle assem­bly plants in Harare and Mutare. We must stop im­port­ing peanuts. Ethanol pro­duc­tion should rise, so that blend­ing ra­tios also im­prove and we cut on our fuel im­port bill.

Hard-earned for­eign cur­rency from to­bacco and min­ing should be for im­ports of things we presently can’t pro­duce, such as cer­tain medicines, while we work to­wards build­ing our own ca­pac­ity to even­tu­ally pro­duce lo­cally.

Se­cu­rity ser­vices must en­force the law. And the mes­sage must be com­mu­ni­cated well.

Gov­ern­ment and its agen­cies must help peo­ple un­der­stand why belts are be­ing tight­ened. Zim­bab­weans need to know that they can trust their Gov­ern­ment.

Ev­ery­one must play their part.

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