ZiG is putting lipstick on a pig, says Biti
The Reserve Bank of Zimbabwe (RBZ) on Friday introduced a new currency to be known as the ZiG, which stands for Zimbabwe Gold. RBZ governor John Mushayavanhu said the ZiG would be structured and set at a market-determined exchange rate. It replaces the Zimbabwe dollar, which was largely known as the RTGs, which has lost more than three quarters of its value this year.
It will circulate alongside the United States dollar and other currencies such as the rand.
Zimbabwe has a long history of currency failures. In 2009, the country was forced to abandon the Zimbabwe dollar after the currency crushed at the height of record hyperinflation.
For over a decade the country used a multi-currency system. In 2016, the RBZ introduced bond notes that were backed a US dollar facility. The bond notes were succeeded by the RTGs.
Veteran lawyer and former opposition legislator Tendai Biti (TB), who was Finance minister during the dollarisation era, told our senior reporter Miriam Mangwaya (MM) in a wide-ranging interview that the ZiG was destined for failure because it was established on shaky ground.
He said Zimbabweans had no confidence in the new currency, which was its major setback.
Below are excerpts of the interview.
MM: Zimbabwe is among countries with the highest inflation in the world. How effective is the move to introduce a new currency to tame inflation?
TB: A currency is just a means of exchange and has nothing to do with inflation.
You can change currencies a million times as they have done but it will not deal with inflation.
Inflation is a by-product of the fact that too much money is chasing too few goods and we in Zimbabwe generate too much money by a government that prints money and cannot live within its means, a government that spends money as if it grows on trees.
Vane shavi rekudya mari (They are obssessed with squandering money).
When there is too much money in the economy chasing too few goods, the prices of goods go up.
The second thing is the things that we are spending money on are things that we are not producing ourselves.
The economy is not producing what we are eating.
If we go into a supermarket 80% of the things that we eat are imported and that requires US dollars, but we do not have the US dollars because we are not producing.
The economy is shrinking. In the last 10 years the average growth rate has been 1.5% and that means the economy can’t grow and if it can’t grow it suffers.
So the fundamental problem in Zimbabwe; lack of fiscal consolidation.
MM: How has the government fared in terms of fiscal consolidation over the years?
TB: Fiscal consolidation is what I have been talking about when I was in government. Eat what you kill.
You balance books. If you kill a rat, you eat a rat.
But the problem with Zanu PF, they kill rats all the time and want to eat an elephant.
It does not add up. In economics, one minus two does not work.
The answer is not minus one. It does not work like that. So they can’t balance books.
My father used to earn $30 and my mother knew that we had to spend $20 and save $10.
But this government earns $30, but spends $100. There is fiscal indiscipline. So they can change currencies as they want but it won’t work.
MM: Do you think Zimbabweans have confidence in the new currency?
TB: People have no belief and confidence in this currency.
They have no belief and confidence in anything that Zanu PF and Mnangagwa do, so a currency is backed 60% by political confidence or the social contract not gold.
The world moved from goldbacked currencies in the 70s because we did not have enough gold.
No country has enough gold to back its currency, including the United States of America or China. But currencies are backed on trust and confidence in the government.
So in Zimbabwe, the currency will collapse because people have no confidence.
Remember we re-dollarised in 2017 because people lost confidence in the Zimbabwe dollar and the bearer cheques.
There is no country in the world that has involuntarily dollarised and has been able to dedollarise.
Once people have lost confidence in their currency it won’t happen. Once confidence is lost it’s gone forever.
MM: What can you say are the differences between the ZiG and the RTGS in terms of their capacity to retain value?
TB: By introducing the ZiG they have basically removed zeros like in the 2000s when they tried to reevaluate the Zimbabwean dollar.
But it does not work.
The market will catch up. In a few weeks’ time we will be back to the 1 000 exchange rates.
We will be in a situation that even they will not understand, but that is what we expect from Zanu PF madness and absolute dog’s breakfast.
MM: So this weekend the general public and business won’t be able to transact in Zimbabwean dollars to pave the way for banks to convert the Zim dollar balances to ZiG. What are the implications?
TB: It’s a nightmare. Can you imagine if you are running Delta, Econet among others?
Accounting books, how are you going to manage them because you wake up one morning using RTGS then the next morning you are to use ZiG and an accountant has to prepare fresh books in Zig. It’s a dog’s breakfast.
MM: There is speculation that the ZiG will not be recognised across borders or make certain payments locally, such as paying for fuel etc. What are your views on that?
TB: It won’t be recognised elsewhere. Introducing a currency is a process. It is not a one-night thing.
It’s not like you put on a red Tshirt today, then a yellow T- shirt or a Blue one the day after. It does not work like that. It is a process because you will be trying to build confidence internally.
Imagine what the South Africans will think when they see Zimbabwe traders approaching them with a tokoloshe called ZiG. They will just laugh and look for business elsewhere.
MM: Why do you think the RBZ decided to name the currency ZiG instead of just rebrand the notes and continue to use the Zim Dollar name?
TB: The bottom line is that the structured currency is the epitome of structured insanity and madness.
We should have just continued using the Zimbabwe dollar, scrap the auction rate, allow the US dollars to continue but because hadzina kukwana (they are mad), they did what they did yesterday [launching the ZiG currency].
MM: Earlier you talked about people lacking confidence in the new currency. What could have been done to boost their confidence?
TB: We should have removed the government in August 2023. The only solution is to have a new government.
That we should have done in August 2023. This is not a monetary or an economic problem. It's the problem of us voters. We get the government we deserve.
MM: But we are well past August 2023?
TB: Section 59 of the constitution says the Zimbabweans have the right to demonstrate and protest peacefully.
That is the only solution. Without that change, they will run this country until donkeys grow horns.
MM: As the government introduces the ZiG, it already comes with an exchange rate against the US dollar as its value is not on par with the greenback.
How long do you think it will withstand market volatility and maintain its value?
It’s just putting lipstick on
TB: a pig.
The market will take time in the next three days to understand and settle on an exchange rate.
But thereafter, it becomes free for all. In the first two months, the RTGS collapsed by 800% and ZiG will also do the same.
MM: Let’s assume you reclaim your post as Finance minister, what would you do to address the economic crisis?
TB: I will scrap the Zimdollar and completely dollarise.
Pay workers in United States dollars, scrap the auction rate, deal with Zimbabwe’s sovereign debt, put money in the productive sector, deal with climate shocks, replace the Reserve Bank with a currency body, deal with corruption.
I will put matsostsi ose (all criminals) in prison, remove the intermediated money transfer tax, and give incentives to industry exporters.
Liberalise the capital markets. In no second, the economy will grow by 7 to 8%.