IT has been clear since radical currency reforms were effected in February 2019 that inflation, along with the parallel market exchange rate would derail prospects for Zimbabwe’s recovery.
These two factors, along with foreign currency shortages, rapid growth in money supply, power shortages and a weak banking sector were behind the catastrophic economic failure that hit Zimbabwe during the decade to December 2008.
The truth is, a people who are willing to learn from the past can determine how the future shapes. But companies have demonstrated that they are not ready to learn from the past. This can be seen in the way authorities have handled the economy in the past decade, and how businesses have reacted to the crisis by manipulating exchange rates for personal gain.
Yesterday’s threats by Finance minister Mthuli Ncube to crackdown on foreign currency abusing businesses is an indication that the economy is feeling the heat, after the manipulation. Only last week, the central bank revised annual inflation targets upwards before lining up a sea of fresh policy proposals to government, as they scurried to stem a ‘worrisome’ surge in parallel market rates.
Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya maintained the 7,8% growth target announced in July, saying bullish international commodity prices and a good agricultural season were still giving Zimbabwe’s under-fire economy impetus to ride out fresh headwinds. But he revised annual inflation to a year-end figure of between 35 to 53%, up from the revised end targets of between 25 and 35%.
The economic situation is volatile, and any moves that further hurt both companies and individuals are unwelcome. The fact that government has started acknowledging that Zimbabwe is in trouble should be a source of worry, and businesses must position for turbulent times ahead.
But we urge authorities not to panic.
The correct way to handle the volatilities would be to review all forms of hurdles confronting the economy, address them transparently and cool off the rage. Authorities already know what must be done, but they must learn to pull in one direction with business, if Zimbabwe is to address its multiple problems.
They need to roll out policies that promote industrial growth and exports, they need to put to an end current foreign currency shortages, and they must address power shortages, which have recently intensified and affected both domestic consumers and those in industries.
Once these are addressed, the rest of the things will fall into place, and the economy can begin to mend. But threats and coercion, as seen in Ncube’s warning yesterday, will simply not work. Again, this was demonstrated during the first phase of the economic crisis, when government agencies pushed through damaging price controls, which pushed formal businesses into the black market and sparked rocketing prices.
The problems bedevilling Zimbabwe now, begun during that era, and Ncube and his team must avoid falling into the same trap.