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Eric Bloch Column

Godzilla strikes yet again

GODZILLA was a fictional, maniacal ape that strove to destroy the city of New York.

I would not have the temerity to suggest that the chairman of

the National Incomes and Pricing Commission (NIPC), Godwills Masimirembwa, is Godzilla reincarnate, and especially so because he is not.

Nevertheless, he is determinedly destroying Zimbabwe’s already severely emaciated economy as Godzilla sought to destroy mankind, cities and thereby, economies.

Although there is some similarity in names, Masimirembwa is not Godzilla, but his actions are pronouncedly reminiscent of Godzilla’s, to an extent that it appears that Godzilla is striking yet again.

Only a few weeks ago, not long after Masimirembwa was appointed, this column expressed grave concern at his first policy enunciations, which demonstrated a gross unawareness of economic realities and, if implemented, such policies could only grievously exacerbate the distraught state of the economy, and the consequential extreme hardships and suffering of almost all of Zimbabwe’s oppressed population.

This column was not alone in voicing those concerns, which were emphatically expressed by most of commerce and industry, economists, and many others.

Clearly, however, all those forebodings of encroaching intensified catastrophe went unheard, and hence went unheeded, and the disastrous policies have been progressively pursued.

And, as they were implemented, so the foreshadowed economic decline continues.

As a result of the abysmal determination to pursue endlessly policies which have naught but negative consequences, product scarcities have intensified, inflation has soared, an increasing number of businesses have been reduced to minimal levels of operations, whilst others have closed, unemployment has become ever greater in extent, the brain drain continues to gain momentum, both foreign direct investment and domestic investment have virtually ceased, fiscal revenues have markedly diminished in real terms, and these are but a few of the repercussions of the hearing disability of government, of NIPC, and of its chairman.

Not satisfied with the extent that NIPC, aided and abetted by its governmental master, has accelerated the implosion of Zimbabwe’s economy, on November 9, Masimirembwa informed businesses that they have until November 22 to dispose of any stockholdings of imported products, at the then existing prices, whereafter a new pricing model would become effective, based upon the official exchange rate.

Concurrently he stated that the practice of sourcing foreign currency on the black market, and factoring the costs thereof into selling prices, would “no longer be acceptable”.

With astounding naivety he said that “it is the duty of companies to generate foreign exchange rather than expect handouts from central bank”, and demanded that prices should not be indexed using parallel market rates.

He further, very commendably, stated that “NIPC is keen to work with business”, but regrettably the actions belie the words for, in reality, the stance of NIPC is one which can only assure the demise of almost all businesses.

Masimirembwa failed to explain to business how they can fulfill their “duty” to generate foreign exchange when they are obliged to sell 35% of that foreign exchange to the Reserve Bank of Zimbabwe (RBZ) at a specious rate of US$1: $285 000.

Admittedly, RBZ has valiantly striven to minimise the prejudice of a government which steadfastly refuses to effect realistic currency devaluation, and which very belatedly, 10 weeks ago, devalued to a niggardly and ludicrously unreal US$1: $30 000.

However, even RBZ’s courageous rate adjustment did not suffice to address the extent that Zimbabwe’s currency has actually devalued.

According to the Central Statistical Office, inflation for the year to October 31 was 14 840, 6 %, but the exchange rate has not moved by 14 840, 6 % in that year.

If businesses’ costs have risen to such an extent, does Masimirembwa seriously believe that they can export without a commensurate exchange rate movement? Surely not!

In like manner, he is being ingenious in the extreme if he believes that businesses can afford to sell imports at a 50% mark-up, and that manufacturers can be viable by using “an investment window”, as a basis for costing, which translates to 270%.

Even if businesses do not source their imports through alternative markets, which most have no choice but to do in the absence of export viability, and with absolutely no allocations of currency from RBZ, that decreed costing base is grossly disparate to actual, inflation driven costs.

If manufacturers and importers are precluded from selling their goods at prices which wholly recoup the costs thereof, fully recover operating and finance costs, yield a reasonable return upon investment sufficient to maintain the real value of that investment, plus an inflation-related return thereon, then they are forced to discontinue operations.

In consequence, the already near-bare shelves of Zimbabwe’s supermarkets and other shops will be even emptier, that emptiness intensified by non-availability of imported products to substitute for those no longer locally produced.

The worsened levels of scarcities can only result in two things, the first being ever-greater discomfort, suffering and misery for more and more of the population, and the second being that the black market will thrive even more than heretofore.

As the virility of the black market intensifies, with demand progressively outpacing supply to an ever greater extent, inflation will become even more than presently the horrendous, highest in the world, circumstance further decimating the economy, crippling the already insolvent fiscus, and reducing Zimbabweans to all-time lows on the scale of economic wellbeing.

Deaths through malnutrition, non-treated health deficiencies, and the like, will increase, and the economy will be reduced to one reminiscent of the stone-age era of barter only.

The only positive results will be that NIPC will cease to exist, for there will be no incomes or prices to control and Masimirembwa will be out of a job.

If he wishes to avoid those results, he and his colleagues as well as government as a whole, must get real!

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