The last thing needed is a taskforce
HARDLY a week goes past without the government announcing some disastrous new economic policy that is calculated to make life more difficult for the business community while at the same time discouraging investment, growth and employment.
The announcement on Wednesday that government had formed a taskforce to address the problem of foreign currency shortages will, we can be sure, compound the crisis rather than solve it.
The whole exercise is premised on the assumption that exporting companies are externalising their earnings at the expense of the fiscus. The example given is tourism where, it is claimed, earnings of US$2 million a month don’t reflect the upswing government claims to detect.
In other words, the self-deception government is engaging in regarding the thousands of tourists it thinks are flooding the country has become the basis for a policy of harassing companies in the tourism sector who are going to be asked why they are not declaring receipts from tourists they — and everybody else — know to be non-existent.
Heading the taskforce will be cabinet minister Joyce Mujuru. She will be joined by Herbert Murerewa, Jonathan Moyo, Nicholas Goche and Samuel Mumbengegwi. Other members include Edward Chindori-Chininga, Joseph Made, Francis Nhema and Kembo Mohadi.
While it can be safely said Murerwa, Chindori-Chininga and Francis Nhema have some idea of where the forex problem begins and ends — and it is not with the business sector — the rest of the taskforce can be written off as clueless. What grasp does Mujuru have of how a modern economy works? And how useful will Made’s views be, given his appalling record at the Agriculture ministry? Will Moyo be looking for anything other than a scapegoat for government’s economic mismanagement?
This is a case once again of the blind leading the blind. The root cause of economic instability does not lie in the unaccountability for foreign currency. It lies in the unaccountability of a government intent upon imposing its discredited and unworkable economic mantras upon the nation. That includes stoking runaway inflation by a policy of “tax and spend”.
It is for example claimed in official circles that business is generating more forex today than three years ago. In fact, total exports have declined from US$3,1 billion in 1996 to an estimated US$1,2 billion in 2002.
Every minister and businessman knows what lies at the root of the forex crisis — an unrealistic exchange rate. When the official rate is $824 for a US dollar and the parallel market offers $6 000, it is hardly surprising exporters will be inclined to avoid the rate that cheats them of their earnings.
Ministers can obtain forex relatively cheaply whenever they like. They can then sell it on the parallel market. Ordinary Zimbabweans will be told by their bank that there is no forex available at the official rate. Offer to buy it at the parallel rate and it will quickly materialise. This prejudices the honest exporter.
The gold producer, for instance, has to buy his inputs on the parallel market. But he is being asked to remit his earnings at a rate only marginally above the official rate. He thus loses heavily, as does every other businessman operating in accordance with the prescribed system.
The Parliamentary Portfolio Committee on Agriculture, Water Development, Rural Resources and Resettlement commented recently on the disastrous impact of an unrealistic exchange rate on agricultural producers.
The committee said farmers were sourcing foreign currency on the parallel market to import spare parts and raw materials but were paid at a lower exchange rate for their export returns.
So why does government stick to such a rigid formula when it clearly isn’t working? Because it is intent on persisting with the polemics of “Zimbabwe under siege”. That the myriad problems we face are of someone else’s making. That is why President Mugabe himself has ordained the fixed exchange rate. It is part of an official mythology.
But no amount of coercion will get businessmen — least of all those affiliated to the ruling party — to operate in the fictional world of an exchange rate that bears no relationship to market realities.
Economies cannot be run on the basis of denial. The market, which takes account of factors such as inflation, is already telling us what the real exchange rate should be.
Thanks to the very people who make up the forex taskforce Zimbabwe’s economy is on a slide while those of our trade partners are stable. The last thing we need is a taskforce of spin-doctors and ministers with a record of administrative failure apportioning blame. What we need are economic policies that create confidence and stability. And leaders who understand that.