It’s a huge leap of faith

Candid Comment with Joram Nyathi


LAST week I wrote about Zimbabwe’s dubious distinction in winning an award for agricultural production. There has since been a consolidation of that record with the country setting an unassailable lead in the inflation stakes.

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The latest figure from the Central Statistical Office released on Friday was a mind-numbing 782%.
 
I don’t know if it is necessary for me to say what I would do if I were Finance minister Herbert Murerwa. On Wednesday he had attended a meeting in Washington of the IMF board with RBZ governor Gideon Gono where they were told “well done for clearing your country’s arrears under the General Resources account, but sorry, there won’t be any money coming your way anytime soon”.
 
It doesn’t matter how nicely it was expressed.

We had a serious discussion about Gono’s appointment as Reserve Bank governor in 2003. The general line of discussion was whether he would be able to change the course of the collapsing economy. My argument was that he should have been given carte blanche to do what ever was necessary to reverse the decline otherwise why would he want to sully his reputation. He was hailed in the media as a turnaround strategist after he turned the CBZ into a blue-chip bank in record time.
 
President Mugabe reputedly slammed the previous RBZ governor Leonard Tsumba for relying on textbook concepts when what was needed were home-grown solutions.

It’s turning out that Gono is no different from his predecessors except that he has been allowed to commit the sin that others were condemned for — to devalue the currency to a worthless piece of paper. Former Finance minister Simba Makoni was labelled an economic saboteur for proposing the same.  But the politics haven’t changed a bit.

I have never believed in the efficacy of devaluation unless you really have something big to export. The decimation of Zimbabwe’s agriculture has seriously undercut industrial and commercial production to a point where there is very little business to justify random devaluation.

The inflows from the diaspora don’t justify the pain we are being subjected to. When do you stop once you succumb to the speculative demands of the few people in the diaspora who promise to fill the country’s foreign currency reserves if there is sufficient devaluation?
 
Part of Gono’s undoing is that Mugabe’s verbal support is not backed by concrete policies on the political front.

Witness how much he is fighting to restore relations with the international community while Mugabe attacks the same countries that want to help us. How do you hope to get balance-of-payments support from the IMF when your government attacks the same institution as enemies of Zimbabwe? How do you achieve macroeconomic stability when government is obsessed with having its finger in every piece of the pie?
 
After destroying agriculture and rendering land almost valueless through nationalisation, government has now set its sights on mining where it is demanding a free shareholding of up to 51% for certain minerals. Given the cost of mining investment, that ill-advised policy can only be a huge turn-off for potential investors.

Friday’s inflation data set a record for the country since Gono assumed control at the RBZ. For once his forecast of 800% was nearly correct. Our nearest competitor in the inflation stakes is Iraq with 40%. That is a country at war in which on average 10 people are blown to smithereens by bombs in Baghdad every day.

Our closest rivals on the African continent are fellow basket-cases like Angola and Zambia. But they are very poor competition at 17,7% and 19% respectively. We all know that Angola has just emerged from a long civil war while in terms of resources Zambia has never significantly recovered since the collapse of copper prices in the 1970s. But at least they are looking up.
 
Zimbabwe has enjoyed relative peace for all the 26 years of Independence until government itself declared war against commercial farming in 1999. It is no consolation that at one point countries like Yugoslavia or Bolivia had inflation going up by 1 000% every day. The issue is that we should never have got to where we are if we were pursuing modestly prudent economic policies. It is as if we were trying to reinvent the wheel merely to prove that we are a sovereign state.

That experiment has reportedly taken the country’s GDP back to 1953 levels. As if to crown our wonderful achievement, the country’s name is not only the last in the alphabet but we also sit snugly at the very bottom of the inflation heap at number 223. That puts our nearest rival, war-wrecked Iraq 742 percentage points away.
 
Our nemesis that we are always eager to challenge to a duel, the United Kingdom and the European Union, have an inflation average of 2,2%. That’s how badly different we are and there is definitely no economic turnaround in sight. We can only hope that Gono will achieve his target of 200% inflation by year-end. It is a huge leap of faith even for the most optimistic patriot given the state of agriculture and our limited foreign currency generation capacity.
 
So long as Gono cannot convince his principals to change their politics, we are doomed. What is needed is  a whole new culture of doing business and the harnessing of all available resources to move forward. Gono’s piece-meal selection of variable symptoms as “enemies” is at worst an excuse for doing nothing and at best an alibi for failure.
 
His advisors should tell him these elementary truths.