Zimbabwe News and Internet Radio

Hopewell Chin’ono: Gunboat Economics can’t stop illegal black market foreign exchange trading

By Hopewell Chin’ono

The little bit of economics that I did at Advanced Level and subsequent economic reporting modules at university taught me that the new law meant to sent illegal foreign exchange dealers to jail for ten years will NEVER work.

File picture of forex dealers in Zimbabwe
File picture of forex dealers in Zimbabwe

Economic activity cannot be controlled and determined by jail threats without addressing the flawed economic fundamentals.

President Emmerson Mnangagwa said the law that will be promulgated using his Presidential executive powers would address the foreign exchange black market trading by instilling the fear of incarceration into the illegal traders.

The president is either being ill advised or these are quick fixes of a desperate situation in my considered view, because as long as the demand for foreign exchange exists, the trading will continue regardless of the jail fear factor.

The cost of trading at the black market will initially go down due to the fear factor, and then it will subsequently go up when the inevitable demand kicks in.

This will happen inside a week at the very most because most businesses are now demanding foreign exchange for payment of goods and services including businesses linked to top officials in the current administration.

Legislation cannot stop a mother from looking for foreign exchange to buy medication for her dying child.

It will also not stop a parent wanting to pay university fees for her daughter at a South African university.

These issues like the urgent need for medication and hospital treatment are human requirements that when not fulfilled as required by Mother Nature, they will create a new national crisis of their own with people dying everyday.

More importantly, the foreign exchange that the government uses to pay for services like hiring a plane for the president to go on his foreign trips comes off that very black market too.

So Number One citizen must start by also cutting on unnecessary foreign trips like the recent one to Guinea.

It costs huge amounts of money to hire planes that are paid for in foreign exchange, then the per diems for his team and on top of that, the hotel bills.

Donald Trump who runs the biggest economy in the world travels less than our African presidents and yet the United States of America has the resources to absorb such travel.

Former Ghanaian President, John Kufuor told me in 2008 when he was still president of that country, that the cost of travel by African politicians alone could revolutionize Africa’s health and education sectors.

He bemoaned the comical trips made by his counterparts jokingly saying that they have the most air miles competing with airline pilots.

The current Nigerian Transport Minister and President Muhammadu Buhari’s elections campaign director, Rotimi Amaechi, told me on one of my news reporting sojourns to Nigeria that most of these trips are used by bureaucrats around Presidents to siphon the much needed foreign exchange.

So ED needs to tighten his own belt, but this is difficult because as I said in my article yesterday, the very same team that worked for and advised former President Robert Mugabe is still the same team doing the same job for President Emmerson Mnangagwa.

Consequently, without change and fresh ideas, change will only happen in our thoughts and not in real life.

As I have always said quoting from the late great Bob Marley, the change that we are expecting will remain but a fleeting illusion to be pursued, but never attained.

Money that pays for our fuel also comes from that very black market, the big fuel guys also send folks onto the black market.

The Central Intelligence Organisation (CIO) knows this economic reality and I see no reason why they can’t tell the President who is their direct boss.

So all these folks will presumably also have to do time in jail, which of course as we all know, it is not an achievable reality.

Gold mines like Rio Tinto have shut down their operations because the central bank was paying them in RTGS balances, and yet their daily productivity relies on foreign sourced chemicals paid for in greenbacks.

That trading of gold will also go underground as it always does, we have a clear historical record of how this will pan out but our government seems to be driving a vehicle without a rear view mirror.

Nobody will settle for a useless currency like the Bond Note or RTGS when it is not meaningfully convertible.

If the President bans the use of the greenback or any other currencies, the shelves will be empty in less than a week.

Economics dzine nharo Madzimai nemadzishe. Hadzi tyisidzirike, you can’t intimidate economics into behaving as you wish, it is an area underpinned by logical fundamentals.

Foreign Direct Investment that brings foreign exchange expecting solid economic fundamentals is the worst coward, where it feels threatened by politics, it will simply avoid such countries and it will create bigger headaches for the governing authorities.

Recently the government of Zimbabwe removed the import ban to enable citizens to import goods from South Africa and surrounding countries, where will these citizens get the foreign exchange from when they are all paid in RTGS?

These are what I call economic and political distortions that arise from the lack of a well coordinated thought process.

I have NO doubt that the President wants to succeed and leave behind an economic legacy better than the one left by his former boss Robert Mugabe, it is a normal human desire.

However I don’t see how that will happen with the “Arsene Wengers” around him, he needs a new team of advisors at state level and he also needs a bureaucracy motivated by national successes not individual and personal desires.

Short of that happening, we will be here everyday talking about the next crisis and the next unworkable solution arising from government and the Presidency.

The government and the President should first answer this question; where do they think the populace will get the US Dollars to purchase medication which is now openly only being sold in foreign exchange?

Are they not aware that the same citizens are not being paid in US Dollars but in the local but unconvertible Bond and RTGS currencies?

Are they not aware that the Reserve Bank of Zimbabwe is not allocating foreign exchange to individuals for such life and death situations like hospital treatment and medication purchase?

As Tuku said, don’t worry about the headache, “…tsvaga chaita musoro uteme.”

(Look for the underlying cause of that headache and not focus on painkillers).

The prospect of a ten-year jail term will simply make the cost of buying the greenback on the black market higher.

I also wonder if the officials that travel with the President and are paid per diems in US dollars can account for how they eventually convert their change when they come back home.

They too face the same prospect as the illegal money changers but we know that they are smarter than that, just a thought.

Hopewell Chin’ono is an award winning Zimbabwean international Journalist and Documentary Filmmaker. He is a Harvard University Nieman Fellow and a CNN African Journalist of the year.

He is also a Fellow at the University of Oxford’s Africa leadership Institute.

Hopewell has a new documentary film looking at mental illness in Zimbabwe called State of Mind, which was launched to critical acclaim.

Hopewell can be contacted at [email protected] or on Twitter @daddyhope