The futility of Mthuliconomics

We used to have that chap called Gideon Gono at the Reserve Bank of Zimbabwe. He was always full of energy, busy doing things that never solved any problem. The cynics called that egonomics.

Gono was the de facto prime minister of Zimbabwe. He took orders from no-one but the president, and gave orders to everyone but the president. He was a sly and smooth-talking fellow with a penchant for being in all places save the right ones. He is gone now. But egonomics is still there. It's now known as Mthuliconomics.

That's the same thing as saying egonomics with Mthuli Ncube in Gono's stead. An affable professor with less of the Gono ego but the same lofty illusion about what he can do to fix the messy economy. It's not clear what President Emmerson Mnangagwa gave to Ncube to persuade him to be part of the irredeemable dispensation and remain walking like he wants to be part of the futile journey forever.

Just like Gono, Ncube is good at theatrics, hoping from one economic experiment to another with such zeal and calling what he is doing monetary reform. And, like Gono again, he is a liar. He is either lying to himself that he can get things moving again—which makes him a pathological optimist—or is lying to us that things will be okay—which makes him a pathological liar. The simple truth is that nothing will work. And the evidence is everywhere.

Mnangagwa plucked Ncube from the diaspora almost a year ago and made him the Finance minister. Since then, Ncube has served a series of fiscal and monetary policy changes. If you were to keep those changes within the pages of a book, they would work. But Zimbabwe is not a book, nor a classroom. So the policy changes are not working.

Well. Almost all of them. The only exception was the separation of good money — foreign currency — from the bad money — bond currency — in our bank accounts.
But we were not going to hear that good news for too long a time. A couple of months ago, the same Ncube outlawed the local usage of foreign currency — more or less — and turned the financial market into turmoil. Thousands of individuals who had been lured into opening Nostro accounts can no longer enjoy the full benefits of good money. They must change it into the bad money that, for obvious lack of creativity, is now called RTGS.

That's one thing Gono will certainly be remembered for too. Doing one thing today, scrubbing it off tomorrow and then hopping to yet another the day after, et cetera et cetera. But things will never work that way. When Ncube, working in cahoots with John Mangudya at the RBZ as Mnangagwa snoozed through the day, introduced SI 142, the legal instrument used to banish foreign currency, he seemed to assume a number of things.

One, he was under this weird impression, so it looks, that the move would undercut the foreign currency black market and divert all the good money into the formal financial system as people went to the bureaus and banks to change good money into bad money. Forget it. The black market still rules. In fact, there are more youths peddling forex today than they were before SI142. That is because Ncube's arrival didn't bring with it sound economics to create jobs. While the minister thinks that he is managing the fundamentals through his wished monetary and fiscal reforms, the reality tells you that the main things that must be done are not being done. Stabilising the financial market is a good thing. But it's not sufficient to fix the economy. In fact. It's a false solution.

Granted, more good money is now flowing into the formal system. But you don't often hear Ncube and the usual suspects talk about the viability of that system.
That particularly applies to the bureaus. They were banned in 2002 because of a growing culture of indiscretion. While the RBZ has issued a raft of guidelines on how the new bureaus must operate, the reality on the ground is that there are still too many loopholes that the agencies can use to abuse trade in forex. Put aside the fact that most of the agencies are possibly owned by the politically connected. The bureaus can still hoard and divert foreign currency to the black market. There is no reason to believe that it's not happening already.

And Ncube also seems to have assumed that banning foreign currency would stabilise prices. That's not happening. In fact, prices are still rising in both local and foreign currency terms. A bag of chicken feed you bought for US$13 prior to SI142 is now selling for US$22. Traders are pegging the prices against the black market value of the greenback. Prices keep rising, therefore, because of the shifting exchange rates. Worse still, some traders are now marking up prices at three times the value of the interbank rate and using the local currency to buy forex.

That leads to the next point. While Ncube sought to criminalise the use of foreign currency in most of the local transactions, what's happening in fact is that more and more people are turning to forex for trade. That's pretty in defiance of what Mthuli intended. Old grannies in rural areas are paying the maize miller in forex. Downtown retailers are taking forex cash. And so are the bars. But what do you expect when you do a law that doesn't provide penalties as SI142 does?

Besides, Ncube's austerity measures are not working for the majority of the people. We hear that government realised a fiscal surplus of close to a billion local dollars in the first six months of the year or so. That's partly because government is taxing people dry. Yet there is no evidence that the surplus is being put to good use. There is no electricity. There is still no power. Refuse is not being collected. And civil service salaries remain stunted. But that's because a surplus of nothing is just that. Nothing.

That's what happens when you inherit egonometrics and run with it. Nothing moves.

Tawanda Majoni is the national coordinator at Information for Development Trust (IDT) and can be contacted on majonitt@gmail.com