EDITORIAL COMMENT : Forex auction firm foundation for growth

Source: EDITORIAL COMMENT : Forex auction firm foundation for growth | Herald (Opinion)

The recovery of the economy after more intense phases of the lockdown and the general strength of the economy was displayed in spectacular fashion this week at the Reserve Bank of Zimbabwe’s (RBZ) foreign currency auction.

Not only was the record for bids and allotments spectacularly smashed, with US$31,6 million bid for and allotted, but with around two thirds of that sum going on raw materials (US$13,9 million) and on machinery and equipment (US$5,9 million).

The figures show two things, first that our productive sectors needed, and were able to buy, the essentials they needed not just to stay in production, but to expand production, and secondly that Zimbabwe does generate enough foreign currency to buy without raising a sweat the critical imports to expand its economy.

The last three auctions saw the weekly bids and allotments hitting new records, with this week a 50 percent jump in bids, yet the RBZ managing to fund those bids.

And all this expansion in business was causing last-minute changes in the exchange rate over the last six weeks, a combined change of just under one percent, with that stability far more important than the fact that this one percent change was in fact a total firming of the local currency.

Although four weeks of trivial firming is an added bonus, showing as it does that the market has a lot more faith in the Zimbabwe dollar than it did at the start of the auction system three months ago.

We have reached the stage where importers of the goods and services Zimbabwe needs are pretty well guaranteed they can get their foreign currency, and can predict the rate they have to use to buy it rather precisely.

The double achievement in a growing economy reflects a lot of credit on the RBZ, Ministry of Finance and Economic Development and private sector.

The ability of the monetary authorities to fund the auctions came about because exports have been growing in value.

Among other things, the Covid-19 pandemic has pushed up the world price of gold, but the rest of our exports have not been significantly affected since we tend to produce for export the things that everyone else needs in good and bad times.

The Government itself, by showing that it can cope with serious strains on the economy and on its budget with the effects of Covid-19 added to the effects of the last two years of drought and the damage wrought by Cyclone Idai, has helped immeasurably in creating this confidence.

The anti-corruption drive has played its part as well; those arrested might well, with their expensive lawyers, be able to spin out the legal processes and postpone their day of reckoning.

But the fact that investigation for past sins of commission and omission are intensifying must be making those susceptible to corruption think seriously. So the leaks to thieves are being plugged.

The Government is being far more careful about how it spends as well.

The huge reforms in the funding of farmer inputs, making sure that the real producers are getting the money, not those who just buy and sell bags of seed and fertiliser, also helps.

But the auctions are now providing positive reinforcement by ensuring that farmers who are privately funded, through the banks or their own money, can buy what they need opening, rather than in secret from the black market means that cheats do not really have a market.

The sanctions system, and especially the sanctions that prevent Zimbabwe tapping the sort of help and credit that most countries get when they take reform seriously, has slowed down the progress.

But on the other hand, being forced to go it alone makes our achievements even greater.

It meant we had to be ultra-efficient and take the whole process very seriously indeed.

We could not rely on someone else bailing us out, and perhaps be tempted to rely on bail outs rather than on major structural reforms and a complete change in attitude.

This will stand us in good stead when sanctions do go, as they must at some stage.

Just like we wanted our farmers to show they were serious before we give them any more money, so international finance agencies and global banks will know Zimbabwe is deadly serious about reform, is ready to make the sacrifices to clean up its act, and generally speaking is a good commercial bet when we start tapping the markets to accelerate our growth

The end of sanctions will not signal help we need to survive, or even to grow, but will simply open one of the many extra avenues we need in our race to prosperity. When sanctions go we will not be running around with a begging bowl, but instead seeking good business deals.

The conceptual changes we have all faced in the last few months have also built up our strengths, with the biggest one being a general acceptance that we all have to pull together and generally, with a bit of auditing thrown in because we are now prudent people, trust each other a lot more.

The way the economy is pulling out of the lockdown, and dealing with Covid-19, is a major signal of these attitude changes.

President Mnangagwa noted that there was a far closer relationship between Government and private sector as a result of a joint response, and he was impressed over the inventiveness and willingness to buckle down of the productive sectors.

And this has not just been in big companies and in universities wanting to show off their intellectual problem-solving resources. Even our informal sector has embraced the new normal.

Go to a major market, public or private, and you will find a single entrance and a single exit, temperature checks and sanitising, and stallholders wearing masks and wanting their colleagues and customers standing at least a metre away.

Even the pavement traders, technically illegal as they have always been, space themselves out, wear masks, discourage crowding and hope by this to make their tiny incomes, keep their health and gain a little tolerance.

Adversity can teach us, as we learnt in the liberation war, that we all need each other and we need to trust each other. No one liked the lockdown rules, but everyone now sees the point.

The Government’s response, to put in the rules its experts advised and then allow the economy and services to reopen as it became obvious that we were moving from coercion to sensible self-interest, was smart.

We have done this a lot better than most countries, just as we managed our economic reforms a lot better than others.

We now need to build on this new-found trust, and new-found culture of working together.

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