Zimbabwe's muscle-conomics: The Case of Delta and Civil Servants

In a joint press release on January 3 by the central bank and Delta Corporation, whose arm is the country's biggest beverages maker, backtracked on its decision to sell its products in hard currency. This had been its own response to the prevailing liquidity crunch that has hit all and sundry in the country. By far and large, it is definitely not in the interest of the country that such a company be forced to close shop. The jobs at stake, the company's much needed tax contributions, the availability and monopoly of its products on the market. This is why the meeting on 3 January was high level, feeding into Delta Corporation's sacred place in the market, if not the country.  

In the press release, Delta Corporation decided that it will no longer insist on hard currency for the sale of products by its beverages arm, and in turn the central bank will ENDEVOUR to provide the much-needed foreign currency. The muscle-conomics that played out in this episode speak to the situation our country finds itself in going forward. For its part, Delta invested about $600 million in plant and equipment, vehicles and ancillary services since 2009 and that there was every need to protect this investment. It does make sense.

Optimism abound as at November 2017 going into the first quarter of 2018, the strongman who had dominated politics since attainment of independence was gone. The utterings of the country's new leadership were politically correct at the time and the democratic trajectory seemed to be taking shape finally. Could it be that Zimbabweans had seen one too many cunning politicians and suffered at their hands for too long, or that they are just a clever lot, going into the elections the leadership of the country had all but been hanging on a thread, having decimated the optimism and celebrations that had buoyed their inauguration into office. The truth of the matter is, nobody in the majority wanted any of the DNA from the old administration, not even a reformed bunch. Any of the ruling party was too deep into its self-created mess to fix it.

The disputed election of 2018 broke the camel's back. Its consequences are what the country will have to live with, dance to, for the period till the next administration is inaugurated. The sequences of events and the rate they are moving at in the administration halls are quite alarming and scary.

The tragedy of it all is that the administration still needs to wake up to the fact that on the civilian levers of power diplomacy wins the day, and not the muscle-conomics we are seeing at a quicker rate recently. One can get away with such in politics, but the economy cannot be muscled just like that. Was it not Chamisa who was told in unparliamentary fashion that a fired bullet cannot be withdrawn? Sure, we all forgot about that, it was politics at play. But the manner and form in which the doctors' wage negotiations seeking to end the strike that has crippled the country's public health sector for over a month puts paid to the view that Zimbabwe's economy is trading on icy waters. The concerns of the doctors date from an initial agreement back in 2014 which the previous administration failed to honour. Further, theirs are genuine demands that only seek to improve the state of health care delivery in the country, as well as their own livelihoods wary of the prevailing economic constraints which we are all seeing. Muscle-conomics will not work as has resultantly paralysed the health delivery system in so short a time. It is not believed that the government is in a position to meet all the doctors' demands, but the doctors are reasonable people and open to negotiate or postpone some demands off the table. In fact, Nick Mangwana has just released a statement that government will not be in a position to pay civil servants in hard currency. What this means is that teachers are likely joining the industrial action, it is a state of chaos. There is every risk for an uprising.

Delta Corporation answered a business call that demanded that its products be sold in hard currency to avail much needed capacity to not only stay afloat and sound but protect its investments. Soon after the meeting yesterday, Delta is prompted to hastily reverse their initial decision. Anybody will not take long for three guesses as to what the executives of Delta could have been told in that meeting! The central bank too has its currency reserves depleted, hence the austerity measures by the finance chief as well as the newly introduced 2% tax, the arrangement between Delta and the central bank is not sustainable in the short to medium term. It is true that international lending institutions have closed credit lines to the country, even China is now hesitant; It is true that the central bank has depleted reserves of hard currency; It is true that if one imports by US$ but then sells those very same products in bond notes, relying on a banker who has none and cannot be borrowed any, one will sure be forced out of business in the foreseeable future and will have to close shop. By now the government could have offered the doctors their salaries in hard currency if it had. The state of affairs the country finds itself in today is as a result of a culmination of muscle-conomic policies and interventions that the leadership of the country has implemented over the years to rig the economy. The Delta-Central Bank agreement, is one purely banked on a dream.

The economy has been on a fast deterioration highway since the disputed elections. While it is acknowledged that the current administration inherited most of the ills from the previous administration, but to the extent that they too were part of the system and chose to continue with the same power retaining schemes of the old order as noted in the last elections, the exemption is taken away. The reported recent security sector meeting to decide on a raft of measures to counter the fertile conditions for a popular uprising speaks to the dangerous times we face as a country going forward. The remarks of the Zanu PF youth league boss last month must not be taken lightly, they too must be taken in the wider context of things as to what we should expect going forward.

The country's best foot forward is a national engagement process to panel beat a transitional framework based on national consensus with the aim to instil confidence in the markets. Government is not there to muscle economics, the markets can and will run as per their laws of demand, supply and fair competition. The hyperinflationary environment at hand is as a result of these that have gone beyond redemption. Investment will not flow if there is no confidence in the security of investments as is the case at the moment. Security of investments can only be guaranteed by an administration that is legitimate and draws its mandate from the people, not one that is living on borrowed times and exposed to popular uprisings. Things change overnight, Mugabe's story stands true to this.

Robert Sigauke is a political commentator, author, legal professional and entrepreneur. He writes from Cape Town and can be contacted on dialogue@highveldmail.co.za  WhatsApp +27713348876