Editor’s Memo

Sabotage

LAST week our editorial criticised business and religious leaders’ timidity in challenging damaging government policies and their failure to speak out on issues of national concern.

The feedback from readers was mixed although a large number of callers and those who sent e-mails felt leaders in industry were a big let-down.


We were also blamed for allowing business leaders to get away with “criminal complicity” with our errant rulers.


TA Holdings chairman Shingi Mutasa in the diversified company’s 2004 annual report, has proved he is different. He stood tall in articulating a huge problem in the fertiliser manufacturing industry where one of TA’s subsidiaries, Sable Chemicals, has been a victim of ill-thought-out government policies.


In the second half of last year, Mutasa said, when international prices of fertiliser were firming, “Sable attained a shameful distinction of losing $9 billion…”


To avoid paring Mutasa’s lament, I will quote in full a few paragraphs from his statement.


“These losses,” he said, “arose because of a government freeze on the price of domestically manufactured ammonium nitrate in the midst of triple-digit inflation. Meanwhile, government permitted the importation of fertiliser at ever-increasing prices . . .”


“Some officials in government,” he continued, “seem to believe that Sable’s answer to the pricing problem is for the company to borrow from the Productive Sector Fund. I believe that causing the company to borrow without the capacity to repay the loan is irresponsible and poor corporate governance.”


I hope central bank governor Gideon Gono saw this statement.

Manufacturers do not necessarily require loans but simply want government to allow them to charge prices commensurate with production costs. Mutasa reminded the government about the importance of the fertiliser industry.

“No country has raised its agricultural productivity without a strong domestic fertiliser industry. I speak strongly because of the total disregard by some authorities to the economic imperative and resultant social impact of their actions. Voluntary economic activity in an industry is not enduring if that industry loses money.


“Profits in an industry are a signal from society that members of that society approve of the allocation of resources to an industry for the production of goods or services for that industry.”


Mutasa said by forcing Sable to operate at a loss “through sustained refusal of the Ministry of Industry and International Trade to allow Sable to raise its prices to match the prices of imported ammonium nitrate and inflation, the government was sending a long-term signal to Sable to cease operations”.

Here is a bold statement from industry that the government — especially the misnamed Ministry of Industry and International Trade which at the time was headed by Samuel Mumbengegwi — is killing industry under the guise of protecting the consumer.


The situation at Sable is symptomatic of government’s poor agricultural policies throughout the production and support industries. It is not surprising that the situation at Sable is being replicated at seed houses. Seed Co and Pioneer have not only been forced to charge sub-economic prices but have also been forced to market their products through the Grain Marketing Board.


Mutasa’s statement dispels the myth that the central bank has been creating that its PSF money and other cheap loans will revive industry. Key to industries like Sable is being allowed to respond to market forces and matching the import parity price for imported fertiliser.


Only warped policy makers can cook a policy that kills the local industry — responsible for producing a key agro input — and then uses scarce foreign currency to import the same commodity. How do Mumbengegwi and his comrade in Agriculture Joseph Made defend this economic sabotage? How does Tony Blair come into this butchery of the economy?


I also foresee another catastrophe in the making in the agricultural sector. Gono in May said he would dish out trillions worth of cheap money to farmers in a grand plan to revive agriculture. But there is Made waiting in the wings to kill off any recovery to be achieved from this capital investment.


Farmers will still not be allowed to market their output freely. They will be forced to sell their crops at below cost and still be required to repay the loans. I am looking forward to this observation being proven wrong this time next year.


By the way, fertiliser shortages still abound because the pricing issue has still not been resolved and there is no foreign currency to import alternatives.


Mumbengegwi is no longer in the system and the new minister in charge of industry must stand up to the challenge of restoring viability. Industry knows exactly what is required. It wants the space to run business. It is not government’s role to run business, especially our government whose record at parastatals speaks for itself. That is why we are where we are today.


It is no wonder the IMF mission that was in Harare last month painted a bleak picture of Zimbabwe’s future. The IMF recommends a recovery package which should include “structural reforms, such as the removal of administrative controls, to ease shortages and restore private-sector confidence”.


Price controls and Operation Murambatsvina are not part of that package!

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