No matter how well-meaning and determined the Reserve Bank of Zimbabwe (RBZ) could be towards uprooting rampant delinquency in the economy, the effort may count for nothing if other institutions that should be seized with fighting the vice, in all its forms, are inflaming the situation through either their silence or inaction.
By Nathan Gurira
Hardly a month passes, without the Central Bank naming and shaming some of the culprits. That hall of shame could just be the tip of the iceberg. In the event that the captain of the ship behaves like Edward Smith of the Titanic, the whole economy could go down.
When he twice threatened to deal with those who are brewing chaos in the markets while addressing a business conference at the just-ended Zimbabwe International Trade Fair and more recently at the Harare Agricultural Show, Vice President Constantino Chiwenga could have been firing some warning shots before pulling the trigger because the state knows exactly who the real culprits are.
The offenders who are driving parallel market rates are largely the big companies, including local and foreign contractors who are working on infrastructural projects around the country; petroleum firms, fast-moving consumer goods firms, and retailers, amongst others. It has also been said and not denied that big businesses are double-dipping by using their surrogates to buy foreign currency on the auction but still charging their products at parallel market prices that would make the devil himself pity Zimbabwe’s poor who buy from the shops at those extortionate prices.
The involvement of big business in this probably explains the government’s hesitancy closing in fast on them for fear of frightening capital markets. However, after that chilling warning from Chiwenga, it may not be long before the authorities take their gloves off because allowing the chaos to continue would be career-limiting, especially for the political elite who have a lot to lose.
While the public expects the central bank to single-handedly clean up the mess, the inconvenient truth is that the monetary authorities can only do so much. From a legal standpoint, the RBZ operates in terms of the Reserve Bank Act, Chapter 22:15, whose scope confines the institution to the maintenance of price stability, formulation and execution of monetary policy, and fostering a stable financial system using financial instruments at its disposal. Apart from the Reserve Bank Act, the apex bank also administers the Banking Act, Chapter 24:20, and a slew of other statutory instruments.
These statutes do not give the bank wide-sweeping powers to extend itself beyond certain boundaries nor the carte blanche to turn itself into a big brother with authority to interfere with other State institutions. For all we care, the bank’s autonomy was surrendered to the Treasury during the unity government (2009 – 2013) when the then Finance Minister, Tendai Biti’s obsession with clipping ex-RBZ governor Gideon Gono’s wings, led to regrettable amendments that compromised its independence.
Be that as it may, the bank does not operate in a vacuum. It is part of an ecosystem with other economic agents and regulatory authorities which must be seen to be playing their part as well in fostering economic stability.
One shudders to think about the economic and political ramifications that could arise in view of the scale and pace at which indiscipline and greed is agitating economic instability or whether the state organs that are complicit in this through either their deafening silence or non-intervention fully understand what is at stake.
In the energy sector, the RBZ has been allocating foreign currency to petroleum companies on the understanding that they would supply part of their fuel in Zimbabwe dollars, yet none of them has done so. Throughout the country, petrol and diesel is being sold in United States dollars.
The question that then arises is; where are the officials and inspectors from the Zimbabwe Energy Regulatory Authority (ZERA)? It may as well be that faced with the deep-pocketed oligopolies operating in this sector and the godfathers behind them, the poorly paid ZERA inspectors and officials could have joined the bandwagon instead of risking their jobs by trying to fight them.
But while the big shots in the fuel sector are on a feeding frenzy, the truth is that the fuel which was brought into the country at the official exchange rate for purposes of enabling the struggling ordinary citizens, who are being paid in local currency to access the product at affordable prices, is being sold in foreign currencies. These daily takings are then exchanged for Zimbabwe dollars at parallel market rates to enable the gluttonous oligopolies to queue for more foreign currency allocations at the auction, and the cycle carries on.
As this would be happening, prices would be shooting through the roof through the pass-on effect, creating an unstable environment that is sinking the majority of the population into abject poverty.
Not so long ago, the Cabinet threatened to take stern action against the culprits, but it was all hot air, so it seems. This week, Cabinet released another statement to the effect that a technology-based fuel management system which was developed by the Harare Institute of Technology, with support from ZERA, would be implemented throughout the country to curtail the rampant malpractices in the fuel sector, which are negatively impacting the wider economy.
If anyone believes that the same people who are presiding over this chaos in the fuel sector would embrace this technology which deprives them of easy money for their back pockets, then you can believe anything.
Perhaps the starting point would be for the central bank to publish the full list of petroleum companies allocated foreign currency for the purpose of importing fuel to be sold in local currency and the pump stations at which motorists could fuel in Zimbabwe dollars. The RBZ would then do spot checks that run parallel to ZERA’s inspections as part of the checks and balances.
But for these and other measures to bear fruit, there has to be political will from the top, especially. More importantly, there has to be commitment and determination to flush out the culprits and replace the rotten apples with professionals (and not blue-eyed boys and girls) who walk the straight and narrow.
The maleficence extends to the law enforcement agencies. Does it not beggar belief that the police carry out raids in areas where money changers hang out, packed in their branded trucks while wearing their full regalia. Why not carry out undercover operations, gather evidence on the profiled culprits, and arrest them when you have secured proof to guarantee convictions.
Police should also dig beyond the symptoms and unravel the whole iceberg; the real culprits would be relaxing in their air-conditioned living rooms, puffing cigars, and drinking expensive whiskeys while their runners would be baking in the scorching heat and playing cat and mouse games with the police.
Assuming that there is a problem of weak legislation, where are the parliamentarians who should be steering appropriate amendments to the statutes? With the governing party enjoying an absolute majority in Parliament, is this too much to ask for?
This is not to suggest that cracking down on the culprits would strengthen the currency in the absence of increased production and improved capacity to generate exports. No matter how well an economy is performing, if the authorities allow their citizens to do as they please, the wheels will definitely come off the rails because indiscipline and greed would simply turn the economy into a Sodom and Gomorrah.
The primitive accumulations of wealth by the few elites who are neck-deep into rent-seeking suggest that the conscience for bureaucrats in some of the institutions that should be enforcing the rules has left them and if a thorough investigation is to be conducted into whether the ineptitude is a result of omission or commission, skeletons would tumble from their closets.
In terms of fundamentals, the country’s currency should have been appreciating.
For the first time in many years, Zimbabwe has registered an increase in its export receipts of close to US$5 billion, enough to take care of its import requirements. The balance of payments position is sound, partly assisted by robust performance in mining and agriculture, and Treasury has recorded budget surpluses in both the first and second quarters.
Combine the fiscal and monetary policy measures with the foreign currency auction system introduced in July last year to buttress a battery of austerity measures meant to stabilise the economy, the worst should have been over by now.
In other words, the positive economic fundamentals achieved thus far should have been inspiring confidence in the Zimbabwe dollar, but alas; the local unit has been under vicious speculative attacks, much of it linked to profiteering and greed.
The list of institutions failing in their responsibilities includes the tax authorities who, for the longest time, have been failing to plug leakages at our porous ports of entry, where the smuggling of inferior goods is destroying the industry.
If the taxman was doing a thorough job, wouldn’t they have raised a red flag on the cheeky petroleum barons who are selling Zimbabwe dollar fuel in foreign currency or the fly-by-night surrogates that are fronting for big business on the auction floor during tax audits?
There is therefore a sense in which it could be argued that while the sanctions imposed on the country by the West and Europe are real, the most damaging sanctions are those the greedy amongst us are imposing on the rest of the population through acts of corruption.
Perhaps the biggest corruption of them all can be seen from driving along the country’s highways whereby swathes of farmlands lie derelict on either side of the road when the government has the machinery to ensure that this finite resource produces not only enough to feed the nation all year round but produces in excess for the export market so that Zimbabwe does no waste precious foreign currency on importing flour, maize, and other foodstuffs that should be produced locally.
Nathan Gurira is an economist. He writes here in his personal capacity. He can be contacted at firstname.lastname@example.org