The government’s on-going crackdown against financial institutions to stem the collapse of the Zimbabwe dollar will only worsen the economic crisis facing the country instead of solving it.
President Emmerson Mnangagwa, who after the 2017 coup declared that Zimbabwe was open for businesses following years of ruinous economic policies by the ruling Zanu PF, on May 7 banned banks from doing their core business which is lending.
Mnangagwa said the shock measures were meant to cripple speculators whom he said were behind the rapid collapse of the local currency, which was reintroduced in 2019.
The negative effects of the ban on the economy were immediately felt.
Companies such as Tongaat Hullett, one of the major producers of sugar in Zimbabwe, announced that they had stopped credit sales and advances to suppliers.
Dairiboard Holdings said it had stopped payment of dividends that were declared recently.
Some agro processing companies advised suppliers that they were suspending advance payments in light of Mnangagwa’s directive.
The companies said they normally funded the advances from loan proceeds, which they received from banks and the ban meant that the taps had been abruptly closed.
Stung by the unfolding crisis, the Reserve Bank of Zimbabwe (RBZ) on Thursday announced that suspension of lending did not apply to marketable commodities in what was a clear contradiction of Mnangagwa’s announcement.
The RBZ said: “suspension of lending facilities does not apply to marketable commodities such as tobacco, cotton, sugar, maize, etc.”
However, it was a case of too little too late from the central bank. The horses had already bolted.
Mnangagwa’s order has destroyed the little confidence that his government has the wherewithal to address the economic crisis that has been raging for the past two decades.
His claim that Zimbabwe is open for business has been exposed as a façade.
The onslaught against banks and other private businesses are clearly driven by political imperatives than sound economic interventions.
Mnangagwa’s Zanu PF believes that there are invisible forces out to remove it from power, hence the cries about sabotage in the on-going debate about the currency crisis.
Previously the government has come hard on enterprises such as Ecocash and the Zimbabwe Stock Exchange under the mistaken assumption that they were behind the collapse of the Zimbabwe dollar.
Yet credible investigations have revealed that Zimbabwe’s currency problems are precipitated by business people that have deep connections with the ruling party, who use their connections and government contracts to manipulate the vulnerable dollar.
The banks are being unfairly targeted and the consequences will be very dire for the wider economy.