The general principle the world over is that treasury leads the public debate on the adoption of national economic policies, not just as a way of consulting the public but also as a research mechanism. As things stand now business and the general public do not know what policy exists — if any is in place — to address the problem of low liquidity.
At some point in the early days of this government various options were tossed around. Among them was for Zimbabwe to join the Rand Monetary Union. The proponents of this view were never provided a platform for robust and conclusive debate on the subject. The buck stops at the treasury’s doorstep. Of course there were some who were of the view that we should deal with the country risk first and all other things will naturally align. Whichever view one holds, from a strategic planning point of view some approaches will fall into the short-term while others constitute long-term strategy.
The point is we need a solution now. The business community is frustrated, so are the employees, investors, civil servants and consumers in general. In a nutshell low liquidity affects everyone particularly the vulnerable. How can the economic wheel turn without this important lubricant?
After adopting foreign currency as our medium of exchange, dealing with the cash scarcity should have been the first priority for government. We need to debate exhaustively within a short period of time the merits and demerits of joining RMU. A do-nothing strategy does not work but worsens our situation.
Government must have a clear-cut policy on solving economic ills. At the moment the approach is rather confusing and skewed towards political considerations. Where is the policy that encourages locals to channel the little money in circulation into the productive sector?
The Zimbabwe Stock Exchange (ZSE) mirrors lack of strong policy guidance on this issue. It is common knowledge among economists and financial analysts that the secondary markets provide liquidity to the primary markets. Thus, primary markets feed into our industries. Obviously this should help corporations mop the little cash there is in the market in order to finance growth projects and recurrent expenditure.
As a domestic investment policy it might be necessary to examine the activities of ZSE with a view of making stocks affordable to low income earners such as civil servants. For instance some stocks on the ZSE are way too expensive yet the same corporations fail to raise funds for their expansion projects and working capital requirements. Are they not hostile takeovers by underwriters who in the majority of cases are foreign conglomerates? Ignoring activities of the ZSE flies directly in the face of Indigenisation minister Saviour Kasukuwere’s Indigenisation Act.
For me the most important outstanding issue of the global political agreement is the formation of the National Economic Council. This body must be operational as a matter of urgency so that government obtains wise counsel on economic matters. Can the inclusive government listen to the cries of owners and employees of Dunlop, United Refineries, National Foods, Belmont Leather, Archer Clothing etc where workers sometimes go for months without salaries due to raw material shortages as a result of low liquidity. Finance minister Tendai Biti certainly has the right attitude but wrong aptitude. I do not think that it would take us this long to establish networks or forums through which economic policies can be crafted quickly in response to the goings-on even at company level. Talk to the Zimbabwe National Chamber of Commerce and Confederation of Zimbabwe Industries and they will make recommendations to government as far as the issue of liquidity is concerned. You will get the impression that there is a dire need for bridging policies formulation and implementation.
The inclusive government must sing from the same hymnbook. It must avoid sending conflicting signals to the market. Cabinet sits on Tuesdays fundamentally to establish a common position on issues of national interest. The confusion around the Indigenisation Act — currently being panel beaten — should be avoided. Zimbabwe should deal with inequality head-on, be it social or economic. However, it makes no sense to adopt policies that seek to make someone better off by simultaneously making another worse off.
The total value of our mining sector stands at about US$20 billion. Localising 51% means transferring US$11 billion to the locals. This sounds wonderful but how do we mobilise US$11 billion for our indigenous people in this economic environment. Good policies at the wrong time will throw the whole economy off the rails.
The principals, President Robert Mugabe, Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutambara, have tried to lure investors to the country but the problem is that investors tend to take counsel from the Chinese proverb which says “listen to what a person says and watch what he does”.
Victor Nyoni is a National University of Science and Technology finance student and can be contacted on: mlingani @yahoo.com or 0912380305.
By Victor Nyoni