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Eric Bloch Column

Defective hammer cannot crack the nut

-fareast-language: JA”>By Eric Bloch

RARELY in history can any government have demonstrated its total inability to recognise realities as does the Zimbabwean one, with nauseatingly frequent recurrence, and especially so in the case of economic issues.

The magnitude of the repeated failure to recognise economic realities is matched only by government’s ineptness at trying to counter the innumerable economic ills which have now afflicted Zimbabwe for over six years and which are continuously intensifying and bringing the economy closer and closer to the precipice of total destruction.

Whenever government does become aware that untoward circumstances have developed within the economy, its first action is not, as should be expected, to try to counter and reverse those circumstances. Instead, after a prolonged pretence that either the deleterious conditions do not exist or, in the alternative, that they are very temporary and transitional in nature, and will soon be replaced by a more favourable economic environment, government finally and very belatedly acknowledges their existence.

Upon doing so, government first concentrates its efforts on identifying as many as possible as it can allege are culpable for the creation of those circumstances. It does so with utmost vigour, in order to divert any possible criticism as may be suggestive that fault lies with government, even though invariably that is where the fault does lie.

But government has long realised that if you repeat accusations sufficiently frequently and vociferously, many will accept such accusations as well-founded in fact, even if they are completely devoid of substance and credibility. Thus, government has had no difficulty in ascribing the near total collapse of agriculture to the acts of omission and commission of those whites who were formerly commercial farmers but ceased to be so as they became victims of a vicious, unjust, racially, nepotistically and corruptly applied programme of land reform, redistribution and resettlement, instead of a programme justly applied which would concurrently accord agricultural empowerment to many whilst attaining development and growth of Zimbabwe’s most economically important sector.

In like manner, in order that none should cast blame where blame is really due, being at the feet of government, the diversionary tactics of the government have successively attributed the catastrophic economic decline to the evils of policies of the Bretton Woods institutions (the IMF and World Bank), to the malevolence of the British and United States governments, to “profiteering” industrialists, wholesalers, retailers, bakers and others, to the vile actions of the much oppressed, discriminated against, white minority in Zimbabwe and to sanctions imposed on Zimbabwe by the European Union and many members of the Commonwealth.

The fact that those sanctions almost wholly comprise only travel restrictions upon members of the government, senior public servants, and the hierarchy of the ruling party, and upon the funds of such persons held outside Zimbabwe, is irrelevant. The sanctions have no material or significant economic consequences, but government happily suggests otherwise in order that the populace not realise the very real extent that the country’s numerous economic calamities are almost entirely attributable to government.

After embarking upon its diversionary tactics, inclusive of oft-repeated misrepresentations within the media controlled by the state, government then seeks to address the economic ills. However, due to its inability to identify the real causes of those ills, it invariably fails to prescribe the required medications necessary to restore the ailing economy to good health. Instead, it consistently resorts to its standard medications which comprise increased regulation of the economy, ignoring the unavoidable contrary consequences of greater regulation and lessening of the influences of market forces.

Moreover, the extent of the increased regulation is such as can only either worsen the economic ills or cause new ones. Any who have the temerity to advise government of the inefficacies of its intended remedial measures are dubbed to be saboteurs and enemies of the state (as the president saw fit to do when opening Parliament in July 2002, giving rise to the resignation of then Minister of Finance and Economic Development, Simba Makoni).

Instead of heeding the well-intentioned advice of many well qualified to give such advice, government arrogantly and with authoritarian dictates, almost without exception resorts to excessively heavy-handed tactics. It tries to crack whatsoever economic nut requires cracking, with a hammer, thereby considerably overdoing its assault upon the nut, and rendering the nut valueless. Moreover, all too often the hammer adopted by it is defective and cannot achieve its intended task — instead of cracking the nut — it demolishes the underlying economy upon which the nut is based.

One of the most recent, pronounced examples of ham-fisted, heavy-handed, and as yet completely ineffectual actions has been government’s mishandling of the Zimbabwean cash crisis. Undoubtedly the non-availability of $500 bank notes was partially caused by cross-border traders and illegal foreign currency dealers, who accumulated such bank notes as their stock-in-trade. And undoubtedly the scarcity of those bank notes was exacerbated when, in reaction to their diminishing availability, recipients of $500 bank notes did not recirculate them through the banking system, but retained them to service their own cash requirements and, in particular, to enable them to pay wages to staff.

But their doing so could not have caused radically greater shortages of bank notes, for they were still in circulation. Instead of being deposited with banks who would, in turn, issue them to others, they were issued to employees, suppliers and the like, or to third parties to issue them to employees and others. Therefore, the notes continued to be, in the main, in circulation, the role of the banks merely being circumvented.

By far, the overriding causes of the bank note shortages have been Zimbabwe’s rampant inflation, now exceeding 400% per annum, and the greater need of many for bank-notes in order to access otherwise non-available supplies. The average person, at any time, needs to have at least four times the value of bank-notes than he required a year ago,  to buy the same volume and nature of goods. In addition, with many products no longer being available from traditional sources, including petroleum products and maize meal, a flourishing black market has developed, but will only trade for cash and, therefore, many need even more than four times the value of bank notes they needed previously.

These factors would not have created a crisis if the Reserve Bank of Zimbabwe had timeously issued additional bank notes, but it was precluded from doing so as it was required to apply the foreign currency necessary for the importation of bank note security papers and inks to the funding, albeit insufficiently, of fuel and energy, and government demands. The “hoarding” of bank notes only became a factor once the shortages were already very pronounced, and then was not of magnitude as those who discontinued banking them soon had to put them to use or made them available to others.

Instead of constructively addressing the situation, with simultaneous expeditious release of new bank notes, containment of inflation and deregulation of a nature as would markedly obviate black market activity, government has once again resorted to a very heavy, but highly defective, hammer, which it intends to use to crack (unsuccessfully) the cash crisis. Abusing Presidential Powers intended for use in circumstances of uncontrollable emergency, government has gazetted the Presidential Powers (Temporary Measures) (Promotion of Banking Transactions) Regulations, 2003 (Statutory Instrument 171 of 2003). Those regulations are intended to prevent “hoarding” of cash, but can only frustrate normalcy of operations of cash-based businesses and particularly so those as are large or have numerous branches.

They also restrict the size of cash transactions, which must inevitably reduce trade volumes in an already sadly constricted economy. They prescribe daily banking of trade receipts, which must place the banking sector under unrealistic and excessive pressure, and contain many other draconian, counter-productive regulations. Once again government resorts to a defective hammer which cannot break the nut, but when it fails to do so, it will undoubtedly find someone else to blame.

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