THE macro-economic environment has undergone some rapid developments over the last 12 months. At the centre of all the changes and policy interventions over this period was the transition to the reintroduction of the Zimbabwean dollar as the functional currency for the economy, from the multi-currency system that had been in use since February 2009. On 24 June 2019, via Statutory Instrument 142 of 2019, the Zimbabwean dollar was re-introduced as the sole legal tender in any transaction in this country. The need for currency reforms had become clear, after a form of pseudo money had emerged:
In the pricing of goods, multiple prices were quoted for the same goods or services depending on how it was settled. Such price distortions cause very serious inefficiencies in trade and industry. If any holder of foreign currencies — foreigner or local — wanted to invest or transact in the local market formally they were discouraged by the potential loss they would incur as their real currency morphed into some form of other pseudo currency whilst they transacted.
Exporters became much less competitive. All other producers and traders faced similar challenge in terms of how they would procure, cost and price their goods.
Those that sought to invest on the financial markets or any other asset to get returns or to simply store value were also discouraged by the lack of clarity about the currency they were dealing in. The pseudo currency that had emerged had, anyway, started to have a life of its own without proper legislation to back it up, even as the market recognised that it was a separate form of currency.
Outside the currency issues that had begun to affect fundamentals such as mechanisms for efficient price discovery, efficient allocation of resources and the promotion of production and productivity, it had also become difficult to determine what unit of account the pseudo money was.
The re-introduction of the local currency was therefore an effort to re-establish the usual levers that operate in any normal economy and that authorities rely on to facilitate and stimulate desired economic activity.
The reintroduction of the Zimbabwean dollar also necessitated the promotion of an efficient and transparent foreign exchange market. The local unit was to immediately face the test of its value soon after it was reintroduced.
This is where we are now, but by no means the last milestone. Currency, fiscal and monetary reforms are but one part; the bigger part is how these get translated into real drivers of economic growth. The ultimate aim in any economy is to register economic growth that makes a practical difference by way of enhancing the opportunities it provides to its citizens to prosper.
In the next phase, the policies to be written, the behaviours and culture to be promoted and the guide post of any initiative to be adopted would ideally need to focus on production and productivity. We need to produce more than we consume. As we produce, we need to always seek productive, efficient ways to utilise the resources we have, so that we can compete well in the export markets. Production and productivity were always part of how we were “wired” as a society.
Somehow we seemed to begin losing this ethic as non-productive “quick buck, high consumptive” tendencies crept in.
As banks and financial service providers, we have a role to play as the economy navigates this transition. In the next phase, we should expect to be relied on — more than before — to ensure that the allocation of resources promotes more production than consumption and that efficient businesses are showcased to a broader base of potential investors.
We should expect to be relied on to assist in the mobilisation of more resources, within our intermediation role, through efficient and transparent money and capital markets. We should expect to be relied on to assist in creating an environment in which more equity and venture capital can start to participate meaningfully.
We should expect to be relied on to promote the right business practices amongst operators who are our clients, so that as a financial system we naturally attract more investment from both locals and foreigners.
Financial inclusion will remain paramount to facilitate broader participation in the economy, which also starts to get more formalised so that contribution to the overall economic performance is recognised and felt. Our transaction products will continue to be challenged to align to the needs of all operators, corporate or individual.
I do not doubt that we stand ready in our various spaces to play the supportive role that will see this economy prosper again. At First Capital Bank we are guided by our purpose which is to “enable people to achieve their extraordinary”.
We take this commitment seriously. We always seek to ensure that our organisational agenda, in all our efforts and the products and services we offer, is aligned to the needs and priorities of the communities we exist to serve. — #BeliefComesFirst.