Source: Govt clueless on economy – The Zimbabwe Independent May 3, 2019
PRESIDENT Emmerson Mnangagwa’s administration looks increasingly clueless on how to contain consequences of its disastrous economic policies introduced by Finance minister Mthuli Ncube through the Transitional Stabilisation Programme (TSP) which, coupled with his reckless utterances against business of late, have fueled a wave of price spikes and runaway inflation.
ANDREW KUNAMBURA/LISA TAZVIINGA
TSP mirrors the ideals of structural adjustment programmes espoused by international financial institutions, particularly the World Bank and the International Monetary Fund, which highlight the free market, non-intervention, tightening the state’s purse, devaluation, property rights and retrenchment.
It has had devastating effects on the economy as evidenced by runaway inflation and a skewed exchange rate which strongly favours the United States dollar against the local RTGS dollar.
Even before introducing the TSP, Ncube rattled the market after he made a series of comments regarding bond notes, which he said he would demonetise while proposing the introduction of a new currency.
His intervention triggered the current mayhem in the markets.
The government, in an attempt to ensure political survival, now faces two options to contain the situation which are highly antagonistic to the neoliberal principles: price controls or command economics.
“The government is split between interventionism and neoliberalism; its policies are geared on reforms meant to attract support from the international community, without which they won’t succeed. At the same time they realise that politics is a game of numbers and, once you lose the majority, you are out of the game. So that is why they are trying to have an ideological and policy mix,” said University of Zimbabwe political science lecturer Lawrence Mhandara.
The country’s leaders and analysts have warned against price controls, saying the move could see basic goods disappearing from shop shelves, triggering an uprisings.
And in a pre-emptive move on Monday, government warned it would not hesitate to viciously crack down on any form of dissent, something it has previously shown it is capable of.
Official statistics show that some basic commodities have shot up by nearly 200% during the period between October last year when Ncube’s policies began to take hold, and April this year.
With reality now hitting home and panic gripping the corridors of power, senior government people, including Mnangagwa, his co-deputy Constantino Chiwenga and en turns to threaten businesses.
“Government is alarmed by the recent wanton and indiscriminate increases of prices which have brought about untold suffering to the people. This conduct by stakeholders in business, industry and commerce is inhumane, unethical, unpatriotic and goes against the grain of economic dialogue which the Second Republic has espoused. Government remains determined to restore the purchasing power of all workers,” Mnangagwa said in his Independence Day speech in Harare on April 18.
“We would want to make this warning today. Those who’re doing this exercise, we already know. If one tries to practise financial terrorism in Zimbabwe, we will react appropriately and no-one should cry that he has not been treated fairly.”
What one may find perplexing about these utterances is the fact that some of the ‘financial terrorists, economic saboteurs and unpatriotic businesspeople” appear to include companies in which the very government has stakes, as they have also joined in the price hiking frenzy.
Not long after these threats were issued, companies such as NetOne and Telecel steeply increased their airtime and data tariffs.
What is clear is that despite these empty threats, government cannot afford to introduce price controls, but its only other option, subsidies appears impractical and bereft of economic logic.
The threats to impose price controls are reminiscent of former president Robert Mugabe’s propensity to blame business for prices increases in the face of galloping inflation. Mugabe’s Incomes and Pricing Commission, which imposed price controls, resulted in empty shelves.
Intervention would imply that governMnangagwa is now in a dilemma in terms of trying to balance between Zanu PF’s traditional interventionist policy and the neoliberalist framework of a free market economy.
Former legislator and economist Eddie Cross weighed in, saying: “We must put our house in order first, the Reserve Bank must cooperate with Mthuli (Ncube) and allow the market to find its own level. Use of the rand as our base currency is not possible, it would not stabilise the country and get it out of its present difficulties,” he said.
Economist John Robertson proffered possible solutions to the current economic malaise.
“The price madness would best be curbed by requiring all the banks to adopt the same exchange rate every day and to supply foreign currency to their clients at that same rate all day. For that to be possible, banks will need more dependable supplies of foreign exchange to meet their clients’ needs,” he said
“Encouraging the investment needed to increase supply of locally made goods calls for far better investment incentives than we have. We should be copying the best in the world, which would mean offering investors a warm welcome, instead of discouraging them with demands that they pay for all sorts of licences and permits and wait for years to get official approval. We should be saying to them, ‘Whatever you know you can make, we want you to make it here, provided only that you do not make weapons of war or narcotics.”
Researcher Admire Mare said Zimbabwe was in dire need of an epoch-defining policy turnaround strategy.
“The Zimbabwean problem is multi-layered with political, economic and social dimensions. Addressing it will require a root and branch approach – there is need for seismic political and economic reforms. It is possible that after the comprehensive currency reforms the country may experience some modicum of growth, however salaries are not catching up with depreciating local currency, this is making life unbearable for Zimbabweans,” Mare said.