PRESIDENT Emmerson Mnangagwa’s regime fears mass social unrest and has placed security forces on high alert, as economic deterioration inexorably accelerates, amid a wave of price increases. The meltdown has seen panicky top government officials taking turns to target and intimidate business over surging inflation.
BY BRIDGET MANANAVIRE/TINASHE KAIRIZA/NYASHA CHINGONO
Zimbabwe’s inflation rate peaked to 66,8% in March 2019 from 59,39% the previous month.
In January it was 56,9% — signifying the highest rates since the 2008-2009 hyperinflation era at the height of the economic collapse.
This has raised the spectre of 2008. Mnangagwa, Vice-President Constantino Chiwenga, Finance minister Mthuli Ncube and Foreign Affairs minister Sibusiso Moyo have come out guns blazing against business over price hikes, making threatening remarks against corporates.
Chiwenga this week stepped up the hostile anti-business rhetoric, describing companies’ pricing regimes as “financial terrorism”. Mnangagwa has brandished price controls as a possible weapon of choice to deploy against business, although he said government, as a matter of policy, does not want to go that route, which led to massive shortages and hyperinflation in 2008.
Officials’ threats against business come at a time the Zimbabwe Council of Churches (ZCC), led by its general-secretary Kenneth Mtata, called an urgent meeting with state security service chiefs on Tuesday to discuss the current situation.
The clerics warned the worsening economic environment in the country was now fast becoming a grave security threat.
The clergy team also advised the securocrats that there was need for an urgent all-stakeholder dialogue to deliberate on how to address the economic crisis.
Mtata, who is also spearheading a national political dialogue process, confirmed the meeting and discussions with security bosses in an interview with the Zimbabwe Independent this week.
“We have started knocking on some doors which we think are important, so that we can go back to this (national dialogue) process. The economy is now a security threat,” Mtata said.
“The way things are going; if prices continue the way they are going up, that is something that we are really afraid of as we may come to a point where the majority of the population does not know whether they are going or coming back. If the majority of citizens are not sure if the situation is changing for the better and then they reach a frustration point where they say they have nothing to lose; that becomes a dangerous turn.”
Official statistics have shown that some basic commodities have skyrocketed by nearly 200% during the period between October last year and April this year. Giving oral evidence before a Parliamentary Portfolio Committee on Information Communication Technology and Courier Services chaired by Kuwadzana East legislator Chalton Hwende (MDC-Alliance) earlier this month, Mangudya also castigated business for hiking prices.
“You do not need to track the exchange rate on a daily basis. If your cost of production is 20% foreign currency, I think it would be wrong to use exchange rate as a price-determining factor, which I see in Zimbabwe,” Mangudya said.
“In South Africa, you hear that every day, the rand has moved from 12 to 13, 14 or whatever to the US dollar, but they do not change the price because of movement of exchange rate. If you go to Zambia, the kwacha moves from 9, 10, they do not change the price. We do not necessarily want this tracking mechanism. I think it is a disease that needs to be removed in this country. Yes, we know that Zimbabwe depends on foreign currency, but let us not over-emphasise that dependency.”
Ncube has also weighed in, accusing business of profiteering by using the exchange rate as a benchmark for pricing. “It is actually bad economics to link price increases to the exchange rate. That’s not how you do it, it is profiteering,” he told reporters earlier this month.
Ncube attacked business on the same issue yet again at the ZITF this week. “Please, it is bad economics, very bad economics where you tie price increases directly to the exchange rate. Good economics says tie prices around a consumption basket, you don’t earn your salary to go and buy US dollars. So, inflation thinking should be hinged around consumption basket and not US dollars,” he said.
In his Independence Day speech, Mnangagwa slammed business over the price increases.
“Government is alarmed by the recent wanton and indiscriminate increases of prices which have brought about untold suffering to the people. This conduct by stakeholders in business, industry and commerce is inhumane, unethical, unpatriotic and goes against the grain of economic dialogue which the Second Republic has espoused. Government remains determined to restore the purchasing power to all workers,” Mnangagwa said.
Vice-President Constantino Chiwenga this week issued an ominous threat to business, describing them as financial terrorists. “I want to give a stern warning to those practising financial terrorism in the country. We will react accordingly as government and nobody should claim that they were not warned. We’ll take very strict measures,” said Chiwenga.
Business has, however, reacted angrily to the government’s accusations, pointing out that the price increases are a result of toxic policies.
The chairperson of the Presidential Advisory Council and prominent industrialist, Joe Mutizwa, yesterday declined to say whether or not his panel has given Mnangagwa advice on prices. “You will appreciate that I advise the President in confidence. At this point, it would not be proper to comment on that,” Mutizwa said.
The threats by government are reminiscent of former president Robert Mugabe’s propensity to blame business over prices and inflation.
Mugabe in 2008 formed a pricing commission, chaired by Goodwills Masimirembwa, which imposed price controls, resulting in massive shortages and empty shelves. The International Monetary Fund (IMF) has predicted that Zimbabwe will slide into recession this year. Previous forecasts by the IMF had projected growth of at least 4,2%, but now the economy is seen contracting by as much as 5,2%.
Annual inflation has been galloping, while purchasing power and aggregate demand have resultantly plunged. Due to exchange rate movements and differentials, salaries and wages have gone down almost four times in real terms.
Company balance sheets, value, stocks, pensions and savings have been badly eroded.
Local companies with foreign debts could become insolvent and close shop as their liabilities have multiplied by up to 400% due to the adjustment of the exchange rate by the RBZ in February.
Volatility, which provides a measure of price uncertainty in the market, has been rising and companies have reacted by delaying investment and other decisions as they intensified risk management activities. The poor have been the hardest hit by price spikes, rising inflation and eroding incomes. The situation has been exacerbated by exchange rate volatility. Zimbabweans are now languishing deeper in poverty. ZimStats figures show poverty levels in Zimbabwe have reached alarming proportions. Poverty headcount ratio at national poverty line (percentage of the population) is rising.
Economist Godfrey Kanyenze said threats by the government against business raise déjà vu. “History is repeating itself. If you go back to 2004, businesspeople were called economic saboteurs,” Kanyenze said. “Government has a knack for blaming either sanctions or business whenever there is a crisis. When you float the exchange rate and when there is no foreign currency, the prices will go one way – up. It’s not rocket science.”
Economic analyst and Zimbabwe Independent columnist Victor Bhoroma points to the low confidence in the market as a major factor to the economic crisis. “As Zimbabwe’s economy wobbles on the brink of recession, the cost of low confidence in the market is taking a huge toll on various policies to resuscitate the economy. Prices for most consumer foodstuffs, industrial products and services have been skyrocketing since the October 2018 monitory policy statement with official inflation rate hitting 66,8% in March 2019,” Bhoroma says. (l See Page 3).