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Zimbabwe's economic recovery plan (Zim Plan)

28 Dec 2018 at 18:35hrs | Views
Stagflation is caused by the simultaneous occurrence of economic stagnation and inflation. This state of economic affairs within a country is characterised by the twin evils of economics, that is to say, inflation and unemployment. Zimbabwe continues to experience both these evils. It is bad that the country is a victim of this evil economic phenomenon.

But what is worse is that Zimbabwe happens to be a victim of further twin evils that are somewhat unique: (i) the US government sanctions against Zimbabwe, that is to say, Zimbabwe Democracy and Economic Recovery Act (Zidera), and (ii) the Zimbabwean government-imposed currency called the bond note.

A cursory look at history reveals that each generation of people within a country faces different challenges during their life time. Each generation has confronted its problems head-on and in most cases prevailed against all odds. The current generation of leaders within Zimbabwe faced the beast of colonialism and defeated it. It would be unfair to expect that same generation that fought against colonialism to fight our own battles now against evils like Zidera and bond notes. That will be stretching their capabilities to the extreme.

On 20 March 1976, that rebel leader Ian Smith, had declared unequivocally: "I don't believe in black majority rule ever in Rhodesia, not in a thousand years".

Yet barely six months later under pressure from the intensification of the liberation war, Smith stunned his white kinsfolk and the world with a televised announcement that he accepted the principle of majority rule in Rhodesia which would take place within two years. That culminated in the Lancaster House peace conference which paved the way for Zimbabwe's 1980 independence. One needs to admire the work of our nationalist leaders, especially their determination to find a solution for their country. The nationalists set a benchmark for future generations to also find solutions for their country notwithstanding ominous odds stacked against them.

Today Zimbabwe faces Zidera which was signed by US president George W. Bush into law in December 2001, allegedly to promote democracy and economic recovery in Zimbabwe. The question which arises of course is: what exactly is wrong with this sanctions law imposed against Zimbabwe?

The answer is that the contentious clauses within Zidera that prejudice ordinary Zimbabweans are to be found in section 4 (c ) of Zidera which specifically compels or coerces US executive directors of each international financial institution to oppose and vote against, (i) any extension by that institution any loan, credit, or guarantee to the government of Zimbabwe (this has invariably been interpreted to include even loans to Zim institutions) , (ii) that US executives must oppose and vote against any cancellation or reduction of indebtedness owed by the government of Zimbabwe to the US or any international financial institution.

These are the two injurious clauses that tend to prejudice Zimbabweans. Anyone who has ever sat on a credit committee of any international bank will tell you that because of these two clauses, Zimbabwe together with its institutions and people are deemed to be under sanctions hence no loan can be extended to them because that will raise the ire of the US government and attract severe punishment to whosoever breaches that directive.

Against the backdrop of the foregoing, and drawing inspiration from the nationalist leadership of the 1970s, the current generation needs to ask these leaders what diplomatic efforts they employed in the 1970s to complement their combat battles. History tells us that our nationalist leaders turned to US diplomats  like Andrew Young (the first black US ambassador to the UN), and the then US secretary of state Henry Kissinger. Moreover, the nationalists also worked with British diplomats like Lord Carrington and Lord Soames, who was assisted by Lord Robin Renwick. Independence was achieved in 1980 after joint and several efforts by the above named diplomats who worked closely with our nationalists in pressurizing Ian Smith and his Rhodesian cohorts.  

Ironically, today Zimbabwe is going through US imposed sanctions and the above folks are still very much alive and well. Logic dictates that the current generation of Zimbabweans must approach these same diplomats (Kissinger, Young, Lord Renwick) and lobby through them for the immediate repeal of the US sanctions against Zimbabwe. They need to be reminded that they played a critical role in liberating Zimbabwe. Most of the aforementioned diplomats still regard the transition from Rhodesia to Zimbabwe as their greatest diplomatic achievements.

Currently, US senator, James Inhofe, has twice referred Zidera to the US Foreign Relations Committee for a potential repeal. He has vigorously argued that Zimbabwe is now ripe for the repeal of Zidera in order to encourage investment and economic recovery. Notwithstanding Trump's unpredictable temperament, it is people like Inhofe that Zimbabweans must try to lobby in order to get the sanctions repealed.

Moreover, the Rhodesian-born, bred and Harare-educated former Vice Chairman of the US Federal Reserve (the US central bank) during the Obama and Trump administrations, Prof Stanley Fischer (who also served as chief economist of the World Bank, deputy managing director of the IMF, and governor of the Bank of Israel) should be approached to assist with lobbying for the repeal of the Zidera sanctions against Zimbabwe. Prof  Fischer speaks highly of his high school days in Harare and how they influenced his future world outlook.

It is my considered opinion that working with the above named individuals, Zidera could be repealed sooner rather than later in order to unleash the economic growth potential of Zimbabwe.

Regarding bond notes, Zimbabweans would recall an ominous press statement that was issued by the Reserve Bank of Zimbabwe (RBZ) on 26 November 2016 which stated that:
"The Reserve Bank of Zimbabwe is pleased to advise the nation of the introduction of bond notes with effect from Monday, 28 November 2016. The bond notes will be released in small denominations of $2 and $5 to fund export incentives of up to 5% which will be paid to exporters…and diaspora remittances"

The fact that the arrival of this abracadabra currency was announced in November is enough to raise the eyebrows of superstitious folks among Zimbabweans. November is a month of mixed fortunes in general, not least because the first world war ended on 11 November 1918.

Removing the bond notes (which have been described by Prof Steve Hanke as the cancer inside Zimbabwe's economic body) should not be tantamount to pushing an elephant up the stairs. The removal of bond notes should not prove to be a herculean exercise. The removal of bond notes (unlike the removal of colonialism) should be fairly easy for Zimbabweans given the fact that they have a government that has unequivocally stated that the voice of the people is sacrosanct, that is to say, "the voice of the people is the voice of God". If Zimbabweans are really serious about removing bond notes (so far they do not seem to be serious), all they need to do is to tell their government that it must remove the bond notes without delay.

On this one, what is required is a social contract between businesses and consumers working through their government to ensure that the removal of bond notes becomes as seamless as possible.

The country simply has to maintain its multicurrency system by restoring it to its pre-bond note status where there was no black market for currencies, no currency speculation, etcetera. The reference price will be properly restored to the US dollar without the distorting effects of the much-maligned bond note.

Alternatively, this could entail the use of the South African rand as the reference currency for pricing of goods given the fact that Zimbabwe's trade with South Africa amounts to at least 80% of the total external transactions.

The rand is already a legal tender in Zimbabwe so its usage does not require any further consultation of whatsoever nature with whomsoever. It merely requires a minister who has the necessary stomach to merely stand up on national television and announce that with effect from tomorrow, goods and services in Zimbabwe will be priced in rands as the currency of denomination.

South African banks operating in Zimbabwe can then be used as a link for the sourcing of rands from South Africa given the millions of Zimbabweans already working in that country. In terms of the transmission of rands from South Africa to Zimbabwe, the people of Zimbabwe will not be prejudiced in any way because the SADC-wide Siress payment system is already in place. The Siress system ensures that transacting within South Africa is now the same as transacting between Johannesburg and Harare. A rand transaction does not go through Mongolia or New York in order to reach Harare. A rand transaction between Johannesburg and Capetown is now the same as a rand transaction between Johannesburg and Bulawayo.

But banks (including the RBZ) do not want ordinary Zimbabweans to know about these facilities that have been implemented specifically to eliminate US$ to Rand conversion charges and commissions simply because banks still levy these charges even though there is no US$ leg in the transaction. So long as people have not discovered this, the banks are too happy to continue charging people for non-existent US$ to rand conversions when in real terms the transaction goes on a straight line without any conversion.   
In conclusion, it has been shown that Zimbabwe currently suffers from the back-breaking sanctions imposed by the US government, and the devastating consequences of an illusory currency called the bond note imposed by the Zimbabwean government. To eliminate these twin evils, Zimbabweans need to learn from their own nationalist leaders and put their ideological differences aside, and lobby for the removal of sanctions against their country. Furthermore, the Zimbabwean government pronounced that the voice of the people is the voice of God. If Zimbabweans are serious about the removal of bond notes, then this is the best opportune time for them to test the validity of the supposed equivalence between their voice and that of God, by unambiguously demanding the removal of the bond notes.

I refer to this simple proposal above as the Zimbabwe Economic Recovery Plan (ZimPlan). The idea is to reorient our people towards solutions driven ideas rather than endlessly complaining without suggesting solutions.

Ndlovu is an award-winning economist. He writes in his personal capacity and can be reached on collsndlovu@gmail.com



Source - Colls Ndlovu, economist
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