We declare war against greed

Source: We declare war against greed | Sunday Mail (Top Stories)

At no time in our recent past has the country’s economic vitals looked any healthier.

Between January and June this year, exports topped US$2,5 billion, which represents a 35 percent improvement from the US$1,86 billion realised in the same period a year ago.

Looked at differently, it means the country had generated US$640 million more in shipments than it had during the same six-month period in 2020.

And while the country used to spend a fortune importing maize and wheat over the years, this will not be the case this year, especially after a stellar agricultural season characterised by a record harvest.

At more than 2,8 million tonnes, the country has more than enough maize to see it to the next harvest, while forecast wheat output at 300 000 tonnes would naturally also mean the same.

Experts suggest that the country might possibly save US$300 million this year through import substitution.

Industry, especially the long-suffering manufacturing sector, has been recovering, and expects capacity utilisation to soar to 61 percent by year-end.

A lot is going on for the economy.

This is what economists mean when they say our economic fundamentals are strong.

The continued loss of value of the Zimbabwe dollar is, therefore, surprising.

While the official exchange rate, which is largely determined by the foreign currency auction market introduced on June 23 last year, has stabilised at US$1:$86, the rate on the alternative market has deteriorated to anything between $140 to $160 against the greenback.

This is problematic.

Retailers and other service providers are invariably indexing their goods and services to the parallel market rate, and this is quite discomforting to
consumers and the general public, most of whom have to bear the brunt of
wildly galloping prices against the backdrop of stubbornly static wages and salaries.

Not only does this make labour restive, but it undermines the value of the local currency and reduces its estimation in the eyes of the transacting public.

And the market-wide impact of this loss in value is as punitive as it is pervasive, since its effects can be felt by ordinary farmers and major corporates, including everyone in between.

However, what is worrying is the fact that there isn’t any compelling reason or explanation why the local currency should be losing value.

Clearly, there seems to be more than enough US dollars around to defend the value of the local unit, as banks are sitting on a US$1,7 billion cash pile, while the close to US$1 billion injection by the International Monetary Fund (IMF) would have ordinarily been expected to boost market sentiment.

Critical questions, therefore, remain answered.

What and who is causing the exchange rate to move?

If companies are getting most of their foreign currency from the auction, why then are almost all products in the market, including major retailers, pegged to black market rates?

What percentage of US dollars are being traded on the parallel market relative to the auction?

While it is apparent that the foreign currency auction market needs to be refined to restore its utilitarian value and vibrancy, it is also clear that unchecked market indiscipline and unbridled greed have equally become a major stumbling block.

It is heartening and reassuring that the Government has begun to act by determinedly clamping down on some of the major players that are speculating on the exchange rate.

The warning from the Vice President Constantino Chiwenga to illegal forex dealers was clear.

“Businesses should not be hoodwinked by some malcontents that are operating on the parallel foreign exchange market where foreign exchange arbitrage has become their lucrative business at the expense of the stability of the economy,” he said.

“Already a number of them have been brought to book and many more shall follow suit as we intensify our efforts to deal with those who are counterproductive to the sustainable growth of the economy.”

Successfully dealing with some of the aberrations in the market would necessarily have to take a concerted multi-agency approach involving the Reserve Bank of Zimbabwe (RBZ), the Financial Intelligence Unit (FIU), Zimra, the private sector and law enforcement agents.

Most importantly, for a country where most transactions are now being processed electronically, it should be easier to establish systems to trace, detect, flag and take remedial action.

And penalties have to deterrently severe.

In some jurisdictions, it is not uncommon for suspicious transactions to be frozen, only to be unfrozen after satisfactory explanations.

We simply cannot allow the actions of a greedy few to undermine our common values and interests.

We have to declare war against greed and indiscipline, and fight it to the end.