MTHULI Ncube, Zimbabwe’s newly appointed Finance minister, is probably the most decorated treasury chief on the African continent today.
His glittering curriculum vitae — a showcase of sterling accomplishments in the corporate world and in academia — confirms without a doubt that he has the intellectual capacity, experience and energy for one of the toughest jobs on the continent. Fixing a broken economy is no picnic.
Not many ministers have attained a PhD in Mathematical Finance from Cambridge University, headed a great university business school and taught at Oxford and London School of Economics. You would be hard-pressed to find a minister who has such credentials and indeed who is former chief economist and vice-president of the African Development Bank. More importantly, Ncube appears to have hit the ground running and his dose of enthusiasm is so infectious it has since been nicknamed “Mthuliphoria” by bemused onlookers. His remarks on the need for major fiscal and monetary policy reforms as well as his thoughts on the currency issue have generated debate.
However, the good story ends there. Although we welcome Ncube’s enthusiasm, it is important for him to tread with caution. A healthy reality check will do him no harm.
We know he means well, but he may find it useful to guard against sounding rather naïve. For starters, impossible deadlines are not a good way of opening one’s account on the national political stage. And although Ncube may be touted as a “technocrat” — which he is — the lofty post he has just landed is a political one and will require crafty manoeuvring. Secondly, the Zanu PF approach to economic management — its voodoo economics and snake-oil policies — are usually at odds with the logic of conventional economics.
To qualify for Rand Monetary Area membership, Zimbabwe must fulfil a list of stringent “convergence criteria” requirements. One of them is that the country must have its own domestic currency — which Zimbabwe obviously does not have. Another benchmark is that the country’s debt must not exceed 7,5% of the gross domestic product. We all know that Zimbabwe fares dismally on that front.
As for the bringing back of the Zimbabwe dollar by year-end, this proposition is dead in the water. For that to happen, the country must fulfil two important requirements: there must be adequate reserves, in other words the country’s import cover has to satisfy a certain threshold, preferably six or more months at the minimum. Zimbabwe’s import cover, according to rating agencies, is barely two weeks, compared to neighbouring Botswana which has 13 months’ cover. Dollarisation is also very complicated.
Dumping the bond note by the end of 2018 — is a non-starter. In the absence of a rescue package from China or some other deep-pocketed financier, the Zimbabwean government relies on quasi-currency instruments, namely Real-Time Gross Settlement (RTGS) balances and Treasury Bills (TBs), to fund a bloated wage bill and other recurrent expenditure.
In fact, without the phantom money generated by virtual RTGS balances and TBs, the government cannot survive a day longer. Ncube could soon learn that regime preservation is the first law of Zanuism.