Q: What do you make of the 2 percent tax on electronic transactions imposed by Finance and Economic Development minister Mthuli Ncube?
A: Well, the decision to impose that tax, to vary that tax from 5 cents a transaction to 2 cents in a dollar, I think is a disaster, ill-thought, ill-informed, ill-founded and we are paying the price for it.
(Mthuli) Ncube is paying the price of it, because the response to that tax has been cataclysmic.
It knighted a chain reaction which he possibly could have foreseen. Prices have shot up, our inflation is way above 200 percent, goods have disappeared, and there are snake queues for gas in every quarter of Zimbabwe.
Q: There has been a legal challenge to the 2 percent tax?
A: The court applications have been filed. It is blatantly illegal.
Q: Are you saying this was a purely wrong decision?
A: From a purely economic point of view, it was a wrong decision and that’s why I question Mthuli’s qualification and ability as an economist.
The challenge in Zimbabwe is of course that of the budget deficit, but the deficit has been created not because we are collecting less revenue, we collect around $400 million a month.
That’s a lot of money. The problem is actually the expenditure.
We are just spending and spending and spending, so if we were to go through structural reform, the major challenge should be retrenchment of your major expenditure lines.
We are spending too much on the wage bill, 90 or 95 percent is spent on over 200 000 workers on wage bill, so we have to reduce the wage bill from what it is right now, namely 95 percent total of expenditure to at least 30 percent of total expenditure, from the 25 percent of GDP wage bill to at least 7 percent of GDP.
Then you have got government appetite, it is killing this economy. Zanu PF’s insatiable appetite for goodies is killing this economy.
They spend on luxury jets, joints to the UN, Singapore, South Africa and Bali. The delegation in Bali spent 12 days.
What were they doing….? It’s ridiculous.
Q: What needs to be done to contain this runaway expenditure by the executive?
A: We have to decapitate Zanu PF’s insatiable appetite for goodies. We have to devalue their appetite for champagne, for nice expensive perfumes and holidays, because it is costing the economy.
Look at their vehicles, if you go to Sam Levy Village, the most expensive cars belong to someone who is in government.
So, that has to be entrenched but it requires political courage and conviction; and its certainly not there in Zimbabwe, in Mthuli Ncube and Emmerson Mnangagwa.
Thirdly, we have to deal with corruption in parastatals; millions of dollars are being lost in the parastatals.
Air Zimbabwe is making losses like $12 million a month but government keeps financing and funding it. We are spending billions of dollars through the GMB and the GMB perennially makes losses.
It is a dysfunctional institution. GMB and Air Zimbabwe alone are symptoms, indices reflective of what is happening in our country. The point I’m making here is the focus should not be on sources of revenue but curtailing expenditure; secondly, management of the economy.
Vane huyanga,vanotoda kubikirwa (They are clumsy, they are highly immoral. They need to be exorcised at a traditional ceremony.) They can’t manage the economy.
Q: Minister Ncube has said the people have to shoulder the pain of transformation, because no pain no gain.
A: They should take the pain. Are we the ones hiring luxury jets? Are we the ones driving limousines?
Are we the ones building castles on top of sands because of corruption? So why should people feel the pain?
The pain should be suffered by the regime. They must retrench expenditure. They must undergo structural reform.
They themselves created the mess, they must undo the mess, but unfortunately, they can’t undo the mess because undoing the mess means carrying out real reforms, but if they have to carry out real reform this country actually requires, it will have political implications.
They will be reforming themselves out of power.
As (Russian communist revolutionary, politician, and political theorist) Lenin says, “No class commits suicide.” They will never reform themselves out of power.
Q: What is your take on the debt overhang that Zimbabwe currently has?
A: Debt is what really worries me, because it means tax on future generations. So, your children, your grandchildren have to pay this debt. I said in Parliament the other day, a little child that is being born in Mbuya Nehanda Maternity right now has a debt of over $200 000. We are mortgaging future generations.
Is it right to mortgage future generations?
If you were to build roads, power stations, bullet trains, spaghetti roads, future generations would also use those stations.
Ninety percent of the roads we are using in Zimbabwe were built before 1980 but these people are borrowing for consumption, to buy cars, to buy perfumes for their girlfriends and boyfriends. That is ridiculous.
We have gotten so bad that our domestic debt is suddenly higher than our external sovereign debt; that is ridiculous.
That is unheard of. I am yet to research on it and ask my friends overseas if this is possible. I don’t know of a situation like this. Your external debt must be more than your domestic debt.
Your external debt is USD and your domestic debt is hard currency accrued in domestic currency. In the olden days, it will be acquired by the Zimdollar and now it is the bond note and the RTGS and so forth.
When you see your domestic debt now exceeding your external debt, munengozi, munemashavi, munofanirwa kubikirwa doro remadzinza (it means you have an avenging spirit, you must convene a traditional ceremony to exorcise you of theft), it’s unbelievable. I’m yet to find a metaphor to explain this because it can’t happen, it is an aberration.
The thing which affects me about debt is the lack of a strategic solution to this debt problem.
This (Mthuli) Ncube is a total disaster. I was reading in the State-run media that he was pushing for Highly Indebted Poor country (HIPC) (a group of developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank) as a solution.
However, in his own midterm policy, he doesn’t talk about this, he talks about the discredited Lima process, the October 8th 2015 plan in Peru.
Q: Is the Finance minister’s TSP (Transitional Stabilisation Programme) a feasible programme?
A: How does someone take a 388-paged TSP document for those white people to read in Bali (where the annual meetings of the International Monetary Fund and World Bank Group were held last week), you can summarise that in 4 pages?
In the TSP, he does something that is terrible, which many Zimbabweans don’t know about.
He rebased our economy from $13 billion to $25 billion. So, when ED says I want to be a middle income by 2013, he has already done it, he should go home.
Mthuli just woke up one morning … and suddenly said we are a $25 billion economy.
When you divide your population by the GDP, we are now per capita income of $1 700 which is middle income. Tell that to the woman selling tomatoes.
It is ridiculous and madness. How do you rebase an economy without empirical study tested by international institutions?
Zimstat doesn’t have the capacity because it’s a data and scientific issue. It’s not throwing bones, it’s pure science. So, you cannot say you have rebased without the authentication of the World Bank and IMF.
HIPC is only for low income. How does he talk about HIPC when he has put the road block by rebasing the economy to a middle income?
They now have a domestic debt of $10 billion and you have nothing to show for it. Not even a tuckshop to show for it. No hospital to show for it. Zanu are criminals. It’s a mafia and gangster State.
Q: What would you do as MDC?
A: Everything which we are talking about, bond notes and so forth, it is no longer economics but politics.
The cataleptic overblown response of Mthuli’s announcement on October 1 was disproportionate. It was an atomic bomb.
People have no confidence and no trust that it is why. We have to resolve the politics and crisis of legitimacy affecting the country. Without it we are going nowhere.
ED has to talk to (MDC leader Nelson) Chamisa. In 2013, 2014 I spoke about a transitional national authority — some authority to run our country until the election.
“Without it, we are in a big hole. The truth of the matter is that problems are never solved by the same minds that created them.
The truth is Zanu PF on its own can’t run this country because no one trusts them. They were caught in flagrance by the people.
Mthuli came with his impressive professional qualifications and people gave him the benefit of doubt before he opened his mouth.
I am not a prophet but I don’t think he will be around after 6 months. The only reason he might remain around, is because he would have totally surrendered and succumbed to Zanu PF.
We have to resolve the political issues. We have to resolve the issue of legitimacy; State capture like in the judiciary and resolve militarisation of our country. We have to resolve issues around political and legislative reform.
But coming to the economics, it has to be the management of the economy. I’m so unhappy. We have to restore macroeconomic stability. As we have said we have to pursue (MDC Alliance’s economic blueprint) SMART.
Q: You are credited with spearheading Zimbabwe’s tentative development over the GNU underpinned by the emergency reforms you ushered in that stabilised the country, saved the economy and ultimately gave Zimbabwe some of Africa’s most impressive growth statistics. What is it that you did when you were the minister of Finance that is not being applied today?
A: When I was minister of Finance, I believed in cash budget.
You spend that which you have.
I believed in fiscal budget, fiscal consolidation. Eat what you kill. They thought it was a joke, it was not.
Mthuli’s problem is that he is a coward, he is a weakling and a weakling can’t run this economy.
The first time when I went into the ministry of Finance, we collected $4 million, the next month February, $15 million, March $30 million, April $45 million, May/June, we collected $90 million.
We managed because I was very clear and I would say “No” with regards to mismanagement of money. If the word “No” does not exist in your lexicon or dictionary, you have no business running the affairs of this country.
I’m afraid now if you are a political appointee, appointed on the basis of patronage, you can’t say no. That was former Finance minister (Patrick) Chinamasa’s problem and it is Mthuli’s problem. That has been the problem of every Zanu PF minister with the possible exception of Simba Makoni and when he said No they jettisoned him
Q: How much did you leave in the State coffers when you left the ministry in 2013?
A: We had a modest deficit in 2013 of under $200 million but what people forget is that 2013 time, we had three elections, the census, then the constitutional referendum in March and the national elections.
Those things are expensive and humongous, they cost money, yet we managed a modest economy. And we always had surplus.
So, it’s about management. Sanctions were there, US dollars were there, lest they use that as a scapegoat.
Q: Some people are calling for a debt audit. Do you think government will concede to this call?
A: I support the call for a thorough audit of this domestic debt. Never, I don’t think they will. People who steal don’t allow audits.
The Constitution says that there should be a land-audit, it’s not there. You can check the statutory land audit, in section 16 of the constitution.
But we will see, I am the chairman of the Public Accounts Committee, so we will see what Parliament is going to do in that direction.
Q: What does the government need to do to resuscitate the economy?
A: Our economy is like a sickly cow and if you study the history of our country, it has been like that ever since, slumps and booms. We have to pursue an anti-sickly cow, fiscal policy.
It has to be upward and uninterrupted, we have to pursue SMART. People have to have confidence in you.
Zanu PF supporters think that the turn-around of the economy was the USD but it wasn’t, it was things we did in particular, management of the economy.
We ate what we killed. People thought I was joking.
The fiscal deficit is the cause of havoc. People are spending money they don’t have.
The biggest challenge in the economy has been mismanagement not small resources.
Many countries survive on low budget the budgets, e.g. Sierra Leon, Malawi, Swaziland and Lesotho.
Their budgets are nothing to write home about. They don’t collect the kind of money we collect. Some have budgets less than $500 million and yet our budget is S4 billion, so on the revenue side, we should manage.
Firstly we need to have fiscal consolidation, pursuit of an anti-sickly-cow fiscal policy, return to cash budgeting in other words, return to “we eat what we kill”.
Secondly, supply-side reform — we have to concentrate every ounce of energy in ensuring that we kick-start the economy, companies start producing, new mines are opened and old mines are retooled, capitalised and modernised. That is key.
FDI must come in, in all its forms, including portfolio investments. We have to address Zimbabwe’s competitiveness.
On the index we are rated 176 out of 180, we are only doing better than countries like Afghanistan and Syria, which is just regrettable.
We have to grow the economy in real terms at the rate of 10 percent per annum.
Without that, we are doomed. We have a growing population, so our population is going to double up by 2045, the population will be close to 30 million, that’s a huge number.
You have to have the economy to absorb these children that we are going to produce.
We are producing less jobs than the rate of the population growth. Last week was graduation day and 300 000 students graduated.
They were happy and singing, but I wasn’t happy with them because they are entering the job market but a market of the unemployed, the theatre of the unemployed.
The economy needs to create 50 000 jobs for it to compete with the job market. We have to grow the economy because of the development deficit.
We have been de-developing our country under the 40 years of Zanu PF, going in reverse.
Others have been contracting and we have been devaluing, so that’s why if you move around Harare, you will not see a crane, there used to be one at (prophet Emmanuel) Makandiwa’s church, but I don’t see it anymore.
Whereas if you go to other countries like Botswana and go back again after a little while you will get lost because of the massive development happening there.
The result now is a huge development deficit. We have to catch up internally and externally.
The third area of reform, we have to address is the monetary mess that we are in. We need to demonetise the bond note.
We need to scrap the bond note completely. We need to protect people’s RTGS balances.
We have to ring-fence those values. We need to re-dollarise, build the stock of foreign currency again. Lastly, we need to join the Rand Monetary Union but it is in stages.
Q: We have started seeing the currency black market going haywire.
A: The black market is here to stay, they have created distortions.
Q: Who do you think is behind the currency black market?
A: It’s the government. When the rate shoots up to $600 and the average person who is employed earns $400, that money is not from an ordinary person because an ordinary person can’t afford to take his salary.
Also, it means that the small company is not in the game.
So, the only person with the muscle to enter the black market on that scale is the government.
The biggest money changer is the government. It’s a criminal State. It’s a bandit state.
Companies will not do that at a large scale because if it is reaches $600, it is defying any economic law.
Companies can buy at $190. They can buy because they will also be comparing with the rand, but $600, its now just pure absolute arbitrage so the companies that engage stop. So, the only other player which will continue is the government.
The government invents bond notes and creates the hot air which they call RTGS so the parallel market has been fuelled by the hot air in circulation; and the owner and the generator of the hot air is the government.
That is why in the past few days, the rate has gone down because they stopped buying when they managed to get rid of the fuel queues. It’s going to be a cycle. It’s terrible economics.
It’s inedible, no one can eat it. It’s a poisoned chalice.
Q: We have been seeing massive price hikes and panic buying, what are your thoughts?
A: People are calling it panic buying but it’s not. Economics is the study of human behaviour.
The ordinary average person knows that we are a huge supermarket of South Africa.
Even our tooth paste is from SA. The ordinary person knows that if there is no forex, there will be no supply, so they go and grab what they can get. It is called supply and demand which is the basic law of economics.
It’s not panic buying, its normal economics.
Remember, Zimbabweans are not fools, they have lived this before— some few years ago.
It’s anticipation, that’s why I told you that its lack of confidence, they don’t trust that supermarkets are going to restock because they know that if the supermarket doesn’t have foreign currency, it’s not going to restock, so they will go and hoard.
That’s why there are thousands of people in Beitbridge and Musina. There are thousands of Zimbabweans driving to Chimoio to that huge Shoprite in Chimoio.
Q: We have also seen some products disappearing from the shelves.
A: Nobody trusts the government, even the retailers.
They are cost-cutting because the price of the US is going up, so when you sell a product now, your gross income of that sale is not enough for you to restock, so the best thing is to take that money, sit on it and wait for price stability.
Q: Should we anticipate better days ahead?
A: I don’t know who still listens to this government. If someone cuts your nose and says he will put it back, you yourself would be crazy to believe.
It is government that has caused this crisis, (Mthuli) Ncube single-handedly.
I hope some clever lawyer will sue him personally for this economic mismanagement.
You can’t expect the same government to say “quiet my child, everything will be OK.”
But you have just cut my nose. That is a lot of rubbish.
The prices can’t go down because the cost of the USD can’t go down, and the USD cost can’t go down because we are not importing anything that will increase our supply, and we are not attracting any FDI or oversees development assistance.
That is why people are hoarding and are very numb at the moment, full of anxiety and pressure.
When I was speaking to you, I must have said I’m unhappy four times because I know the storm that is coming — Hurricane Gilbert (the most intense Atlantic hurricane on record until it was surpassed in 2005 by Hurricane Wilma. Daily News.