Opinion / Columnist
Mr. President, you'll never fix the economy when you behave like a witchdoctor!
03 Oct 2024 at 10:45hrs | Views
When I was listening to President Emmerson Dambudzo Mnangagwa delivering his State of the Nation Address (SONA) yesterday, I hoped he would finally provide solutions to the country's economic crisis.
This is in light of a local currency, only introduced five months ago, already on a downward spiral.
Last week alone, the Reserve Bank of Zimbabwe (RBZ) devalued the Zimbabwe Gold (ZWG or ZiG) by 43%, from 13.99 to 24.39 to the US dollar.
On the more reflective parallel market, the local currency has been trading more dismally, where it is currently at ZWG50 to the greenback.
As a result of these developments, the prices of goods and services have expectedly increased in spectacular fashion, thereby significantly eroding the already poor salaries earned by the bulk of ordinary Zimbabweans.
Therefore, when the president had the opportunity to address the nation yesterday, we were all expecting him to make the currency issue number one priority.
I am quite sure that the vast majority of Zimbabweans would want to understand why a currency supposedly backed by gold, other minerals, and foreign currency reserves is so unstable.
Why is it that, in spite of global gold prices on the increase, our own 'gold-backed' currency is on a downward trajectory?
Yet, instead of providing a detailed and accurate diagnosis on what was ailing the ZiG, Mnangagwa decided to blame everyone else besides his own administration.
When one visits a medical doctor, he expects to see logical and science-backed investigations and diagnoses as well and remedies.
However, this is usually not the case when one goes to a so-called 'witchdoctor', who will likely blame the patient's 'enemies', including his own relatives and friends, for his myriad of misfortunes.
There is hardly any scientific solution proffered by a 'witchdoctor'.
It is always about finding those 'enemies' who hate or are jealous of his patient such that they have resorted to all manner of 'magical' mischief to cause him great harm.
To directly receive articles from Tendai Ruben Mbofana, please join his WhatsApp Group on: https://chat.whatsapp.com/CBQVPGODBPQG969OBVLyeT
This is exactly what we witnessed with Mnangagwa in this SONA, in relation to the perennial currency crises that have dogged Zimbabwe for the past two-and-a-half decades.
The president elected to point the accusing finger at supposed 'speculators' and the 'parallel market', whom he blamed for the currency volatilities.
As the head of state, who presides over the government, surely he could have done a better job.
Why act as a 'witchdoctor' in an issue that requires a science and evidence-backed diagnosis and remedy?
For starters, did Mnangagwa ever bother questioning why there are those who have resorted to speculative tendencies in our economy?
Has he ever wondered the reasons behind the 'parallel market' thriving and blooming in Zimbabwe?
Speculative tendencies in an economy refer to behaviors or activities driven by speculation.
These may involve making investments or decisions based on anticipated future price movements or market trends rather than fundamental analysis or intrinsic value.
We have witnessed this in the pegging of prices in major retailers such as OK Zimbabwe, Pick n Pay, and Spar supermarkets, whose US dollar and ZiG prices have increased markedly in recent days.
Instead of rushing to blaming them for this undoubtedly speculative behavior, should the president not have first investigated the reasons?
If he had done what is expected of him as the head of state, the answer would have come to him.
There is a shortage of US dollars on the official market.
As such, these companies - who, by law, are forced to use the artificially-pegged official exchange rate in selling their products - have challenges in sourcing US dollars they need to restock from our banking system.
They then have to go to the 'black market' where the greenback is readily available - but at a much higher exchange rate that the one they used when selling their products.
This then presences a conundrum.
To resolve this problem, these supermarkets then resort to increasing their US dollar prices to make up for the loses incurred by the gaps between the official and parallel exchange rates.
Therefore, instead of faulting these companies for speculative behavior, the president should have put in place sound measures to ensure that there were always adequate stocks of US dollars in the formal market.
In so doing, these major supermarkets will not have any reason to go to the 'black market' for their US dollar needs, and as such, not see the need to increase their prices.
On the issue of the 'parallel market', Mnangagwa should have also shown leadership by providing the necessary science-backed solutions.
We all know why this market is thriving - regardless of the government's feverish attempts to crush it.
The number one reason the 'black market' will never die in Zimbabwe is because of the government's propensity to artificially fix the exchange rate.
No one can deny that the ZWG13 to the US dollar rate, which prevailed since the ZiG was introduced in 5th April 2024 until its devaluation last week, was rigged and unrealistic.
It was clear that the claims that the currency was gold-backed and the exchange rate determined by the price of the precious mineral was all a big lie.
This fact was proven by the government itself through the RBZ devaluation of the local currency.
If the ZiG had genuinely been backed by gold, and the rate determined by the price of this yellow metal, then it should have actually been strengthening due to the firming price of gold on the international market.
In fact, on 30th June 2024, the price of gold stood at US$2324.98 per ounce.
On 1st September 2024, it had risen to US$2502.77 and then on 24th September gone up again to US$2658.08 per ounce.
Yet, here we have the RBZ actually devaluing the ZiG.
What does that say about this claim that the currency is backed by gold?
More importantly, what does this do to the public's confidence in the ZiG and trust in their government?
Is there, then, any wonder Zimbabweans would not only reject the local currency but also offload it on the more reflective parallel market?
So, Mr. President, who is to blame for the mess in which we find ourselves as a country?
What is needed urgently is not a 'witchdoctor mentality', of seeking to find 'enemies' and 'detractors' in every corner.
Zimbabwe now needs a leader who studies the economic fundamentals from a scientific perspective.
Only that way can a proper and accurate diagnosis and remedy be found.
The local currency can only survive and even thrive when the economic fundamentals are fixed.
We need trust issues to be immediately addressed - with the government itself playing a leading role in exhibiting confidence in the ZiG by accepting it for passport fees, fuel sales, and other transactions which are currently exclusively in the US dollar.
The Mnangagwa administration has to put in place genuine policies that attract meaningful investment in the manufacturing sector so as to boost our exports.
Surely, it does not make any sense that a country that wants to be taken seriously as having its own currency can back it with a measly US$370 million in gold and foreign currency reserves.
Zimbabwe actually requires between US$3-6 billion in gold and foreign currency reserves to even dream of a stable currency.
There is also a need to fight corruption at every level without fear or favor, which has been the number one deterrent to legitimate foreign direct investment and accountability in our extractive sector.
We can not afford to lose US$2 billion every year through corruption and the smuggling of our minerals.
We have to provide a lasting solution to the seemingly unending electricity crisis bedeviling the country, which has not only dissuaded investment but also hampered production and productivity.
These issues have absolutely nothing to do with speculators, the parallel market, or 'saboteurs'.
This has everything to do with the government in office.
Once these economic fundamentals are fixed, the 'black market' will also die a natural death as Zimbabweans trust their currency's strength and accept it.
Zvechin'anga hazvishande apa!
© Tendai Ruben Mbofana is a social justice advocate and writer. Please feel free to WhatsApp or Call: +263715667700 | +263782283975, or email: mbofana.tendairuben73@gmail.com, or visit website: https://mbofanatendairuben.news.blog/
This is in light of a local currency, only introduced five months ago, already on a downward spiral.
Last week alone, the Reserve Bank of Zimbabwe (RBZ) devalued the Zimbabwe Gold (ZWG or ZiG) by 43%, from 13.99 to 24.39 to the US dollar.
On the more reflective parallel market, the local currency has been trading more dismally, where it is currently at ZWG50 to the greenback.
As a result of these developments, the prices of goods and services have expectedly increased in spectacular fashion, thereby significantly eroding the already poor salaries earned by the bulk of ordinary Zimbabweans.
Therefore, when the president had the opportunity to address the nation yesterday, we were all expecting him to make the currency issue number one priority.
I am quite sure that the vast majority of Zimbabweans would want to understand why a currency supposedly backed by gold, other minerals, and foreign currency reserves is so unstable.
Why is it that, in spite of global gold prices on the increase, our own 'gold-backed' currency is on a downward trajectory?
Yet, instead of providing a detailed and accurate diagnosis on what was ailing the ZiG, Mnangagwa decided to blame everyone else besides his own administration.
When one visits a medical doctor, he expects to see logical and science-backed investigations and diagnoses as well and remedies.
However, this is usually not the case when one goes to a so-called 'witchdoctor', who will likely blame the patient's 'enemies', including his own relatives and friends, for his myriad of misfortunes.
There is hardly any scientific solution proffered by a 'witchdoctor'.
It is always about finding those 'enemies' who hate or are jealous of his patient such that they have resorted to all manner of 'magical' mischief to cause him great harm.
To directly receive articles from Tendai Ruben Mbofana, please join his WhatsApp Group on: https://chat.whatsapp.com/CBQVPGODBPQG969OBVLyeT
This is exactly what we witnessed with Mnangagwa in this SONA, in relation to the perennial currency crises that have dogged Zimbabwe for the past two-and-a-half decades.
The president elected to point the accusing finger at supposed 'speculators' and the 'parallel market', whom he blamed for the currency volatilities.
As the head of state, who presides over the government, surely he could have done a better job.
Why act as a 'witchdoctor' in an issue that requires a science and evidence-backed diagnosis and remedy?
For starters, did Mnangagwa ever bother questioning why there are those who have resorted to speculative tendencies in our economy?
Has he ever wondered the reasons behind the 'parallel market' thriving and blooming in Zimbabwe?
Speculative tendencies in an economy refer to behaviors or activities driven by speculation.
These may involve making investments or decisions based on anticipated future price movements or market trends rather than fundamental analysis or intrinsic value.
We have witnessed this in the pegging of prices in major retailers such as OK Zimbabwe, Pick n Pay, and Spar supermarkets, whose US dollar and ZiG prices have increased markedly in recent days.
Instead of rushing to blaming them for this undoubtedly speculative behavior, should the president not have first investigated the reasons?
If he had done what is expected of him as the head of state, the answer would have come to him.
There is a shortage of US dollars on the official market.
As such, these companies - who, by law, are forced to use the artificially-pegged official exchange rate in selling their products - have challenges in sourcing US dollars they need to restock from our banking system.
They then have to go to the 'black market' where the greenback is readily available - but at a much higher exchange rate that the one they used when selling their products.
This then presences a conundrum.
To resolve this problem, these supermarkets then resort to increasing their US dollar prices to make up for the loses incurred by the gaps between the official and parallel exchange rates.
Therefore, instead of faulting these companies for speculative behavior, the president should have put in place sound measures to ensure that there were always adequate stocks of US dollars in the formal market.
On the issue of the 'parallel market', Mnangagwa should have also shown leadership by providing the necessary science-backed solutions.
We all know why this market is thriving - regardless of the government's feverish attempts to crush it.
The number one reason the 'black market' will never die in Zimbabwe is because of the government's propensity to artificially fix the exchange rate.
No one can deny that the ZWG13 to the US dollar rate, which prevailed since the ZiG was introduced in 5th April 2024 until its devaluation last week, was rigged and unrealistic.
It was clear that the claims that the currency was gold-backed and the exchange rate determined by the price of the precious mineral was all a big lie.
This fact was proven by the government itself through the RBZ devaluation of the local currency.
If the ZiG had genuinely been backed by gold, and the rate determined by the price of this yellow metal, then it should have actually been strengthening due to the firming price of gold on the international market.
In fact, on 30th June 2024, the price of gold stood at US$2324.98 per ounce.
On 1st September 2024, it had risen to US$2502.77 and then on 24th September gone up again to US$2658.08 per ounce.
Yet, here we have the RBZ actually devaluing the ZiG.
What does that say about this claim that the currency is backed by gold?
More importantly, what does this do to the public's confidence in the ZiG and trust in their government?
Is there, then, any wonder Zimbabweans would not only reject the local currency but also offload it on the more reflective parallel market?
So, Mr. President, who is to blame for the mess in which we find ourselves as a country?
What is needed urgently is not a 'witchdoctor mentality', of seeking to find 'enemies' and 'detractors' in every corner.
Zimbabwe now needs a leader who studies the economic fundamentals from a scientific perspective.
Only that way can a proper and accurate diagnosis and remedy be found.
The local currency can only survive and even thrive when the economic fundamentals are fixed.
We need trust issues to be immediately addressed - with the government itself playing a leading role in exhibiting confidence in the ZiG by accepting it for passport fees, fuel sales, and other transactions which are currently exclusively in the US dollar.
The Mnangagwa administration has to put in place genuine policies that attract meaningful investment in the manufacturing sector so as to boost our exports.
Surely, it does not make any sense that a country that wants to be taken seriously as having its own currency can back it with a measly US$370 million in gold and foreign currency reserves.
Zimbabwe actually requires between US$3-6 billion in gold and foreign currency reserves to even dream of a stable currency.
There is also a need to fight corruption at every level without fear or favor, which has been the number one deterrent to legitimate foreign direct investment and accountability in our extractive sector.
We can not afford to lose US$2 billion every year through corruption and the smuggling of our minerals.
We have to provide a lasting solution to the seemingly unending electricity crisis bedeviling the country, which has not only dissuaded investment but also hampered production and productivity.
These issues have absolutely nothing to do with speculators, the parallel market, or 'saboteurs'.
This has everything to do with the government in office.
Once these economic fundamentals are fixed, the 'black market' will also die a natural death as Zimbabweans trust their currency's strength and accept it.
Zvechin'anga hazvishande apa!
© Tendai Ruben Mbofana is a social justice advocate and writer. Please feel free to WhatsApp or Call: +263715667700 | +263782283975, or email: mbofana.tendairuben73@gmail.com, or visit website: https://mbofanatendairuben.news.blog/
Source - Tendai Ruben Mbofana
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