Hopewell Chin’ono: Market forces and not Command Economics and threats determine prices and exchange rates

By Hopewell Chin’ono

That we were sold a political illusion and that our purported magical dream was deferred in November 2017 to an unforeseen date is now beyond any doubt of any sane mind and reasonable Zimbabwean citizen both home and abroad.

What we thought we would get was a point of departure from the Robert Mugabe style and type of leadership.

What we have gotten instead is a political and economic regression into the dark and brutal past bookmarked with violence and grand corruption.

Instead of a progressive State, we now have a crude version of Robert Mugabe’s rule underpinned by brutal force that includes the use of live ammunition on civilian citizens and menacing threats to investors and the business community.

What a spectacular tragic loss of goodwill and a total squandering of a glorious historical moment that could have united our country, and underpinned the growth of our broken economy back into continental economic reckoning.

If anyone was still dreaming they can now wake up and face the political and economic realities before us that continue to wildly entrench all the worst nightmares that we experienced under Robert Mugabe.

The fact that we are living in a scary time is also not in doubt, our current economic reality is a total opposite of what thousands of Zimbabweans who marched alongside the soldiers expected.

They thought that they would get an expedited economic transformation because they knew that what stalled Zimbabwe’s economy was Robert Mugabe’s refusal to implement political and economic reforms.

This is something that his political cronies in ZANU PF who removed him from power in a military coup deceitfully said they would now do, and yet it has turned out to be a monumental political con.

We still have a growing mountain of local State debt and international arrears owed to the World Bank and related lending institutions.

We have seen a total flagrant abuse of property rights and the Rule of Law exemplified by the Gaika Mine invasion in Kwekwe and a subsequent total disregard of court orders by people close to the President.

When such things happen, local and international capital disappears because nobody wants to invest in a country where their investment is not guaranteed protection at law, and fair arbitration whose outcomes are respected whenever there is a dispute.

The Gaika Mine case has seen the State Security Minister Owen “Mudha” Ncube writing letters authorizing the re-invasion of the mine in violation of a flurry of court orders to the contrary.

This shouldn’t surprise us because men and women who were the cornerstone and foundation pillars of Robert Mugabe’s rule for 37 uninterrupted years are now running the country independent of their former boss, back to the future.

Twenty-four hours ago the Vice President and architect of the military coup that removed Robert Mugabe, General Constantino Chiwenga, accused some business people of being “financial terrorists” in a menacing and uncompromising message that he delivered at the Zimbabwe International Trade Fair (ZITF).

As a social commentator observed today, if you are trying to show the world that you are indeed open for business as President Emmerson Mnangagwa preaches all the time, having a coup plotting retired General declare business persons as terrorists at your biggest trade fair is the last thing any government should want to do.

General Chiwenga’s threat to take action comes at a time when the top leadership of ZANUPF has been exposed on numerous occasions as the capstones of corruption in Zimbabwe.

None of them or their surrogates has ever been sufficiently prosecuted and send to jail for corruption or its related cousins.

It has been what local youths in Zimbabwe have now termed “Catch and Release” cases where the corrupt political elites are put before the courts, and their cases deliberately bungled by the equally corrupt prosecutors.

The fight against corruption has become bogus and comical in the eyes of any serious reader and follower of Zimbabwean politics.

A country’s ruling political leadership is meant to derive its daily legitimacy and moral worthiness from how it runs the State and deliver on its electoral promises especially on the social security side.

The current Emmerson Mnangagwa government has not delivered on any of its major electoral promises, especially on political reforms that are meant to unlock international legitimacy that would give access to the badly needed international loans that can jump start the moribund economy.

The catastrophic lack of urgency and sincerity by the Zimbabwean government has seen serious business people like Nigerian billionaire Aliko Dangote walk away from investing in Zimbabwe because the leadership demanded bribes and kickbacks.

I have spoken to foreign ambassadors who have tried to bring projects to Zimbabwe but gave up when the authorities started asking for kickbacks, one such project was taken to Namibia instead.

The President mentioned that one of his current ministers was demanding kickbacks to arrange meetings for investors with the President himself, but none of his ministers has gotten the boot since that disclosure.

That in itself is a tacit approval of corrupt behavior within the political elite circles because if a President announces such damning allegations, and yet fails to act or explain why he hasn’t acted, it opens the floodgates for more corrupt activities within his cabinet, civil service and the administration in general.

Choice of words and language is very important in setting the tone of how a country is regarded through the words of its political leadership.

Yesterday’s threat by the Vice President has dented the country’s investor friendly message of being open for business.

Although the open for business line is mere rhetoric, it was managing to get a few investors interested in taking a look at the country’s investment portfolio.

When investors or business people commit financial crimes, due process must be followed and not empty threats that have the ability to push away investment and business confidence.

Strive Masiyiwa and Botswana president Mokgweetsi Masisi

The advice given to the Zimbabwean government by the Executive Director & CEO of the Rwanda Development Board (RDB) Clare Akamanzi on how to attract Foreign Direct Investment (FDI) has hardly been acted upon, every failure in Zimbabwe is blamed on sanctions.

The country’s political leadership and their praise singers take NO responsibility whatsoever for their very own fatal political and economic policy mistakes, omissions and inherently corrupt behavior.

The level of dishonest is breathtaking, whilst the Vice President is busy accusing the private sector business people of “financial terrorism,” government owned companies are raising the cost of accessing their own services.

Vice President Constantino Chiwenga threatens businesses

The government owned cellular phone company, Net One, increased its tariffs by eighty percent making the cost of accessing Internet services and making phone calls beyond the reach of the general public whose salaries remain stagnant.

Had a private individual owned it, Net One would have fitted the unfortunate description by the Vice President of a “financial terrorist.”

This is yet another show of a duplicitous behavior by our government, something that social commentators on Zimbabwe are now accustomed to.

The Zimbabwean government controls the central bank known locally as the Reserve Bank of Zimbabwe (RBZ), that is where the foreign exchange deals in this country are determined and controlled with the implicit approval or direction from the ruling ZANUPF Government.

Just to show how dishonest this government is in its uncoordinated narratives, we currently have tobacco farmers who are complaining about the payment system of their produce at the tobacco floors.

Some government ministers have blamed the traders and some blamed even the commercial banks, and yet the government is fully responsible for what is happening.

Tobacco merchants who buy the leaf at the tobacco floors borrow money from international financiers in order not to crowd local borrowers out of the market.

If a merchant borrows say US$1000 from Standard Chartered in Britain, the money is wired to Zimbabwe and all of it is surrendered to the RBZ.

The merchant is then given RTGS Dollars at the controlled bank rate that they then use to go and buy their tobacco on the tobacco floors in Harare.

The tobacco farmer is supposed to get fifty percent of his or her money in RTGS Dollars and the rest in US Dollars.

The reason why tobacco farmers are complaining is that the cost of buying inputs for the next season is based on a black market rate in the shops and yet the merchant pays them using the official controlled bank rate.

Consequently the tobacco farmer is supposed to get the US Dollar component of their sales through the RBZ via their bank, and when that happens they are supposed to spend all of it inside 30 days or it is automatically transferred into RTGS Dollars at that day’s official controlled exchange rate.

The official exchange rate as of today is at RTGS3.20 to the US Dollar and the black market rate is at RTGS4.75 to the US Dollar.

This means that their earnings will be ruined by the currency distortions and they wont be able to prepare for the next season let alone budget for their household needs for next month.

When the tobacco merchant who buys from the farmer exports to Philip Morris or the Chinese market abroad, Standard Chartered UK will withhold its money that it advanced to him or her including interest accrued.

When merchants export tobacco they immediately discharge the Customs Declaration 1 forms (CD1) using loan drawdowns.

Only the value addition component is remitted back into Zimbabwe.

Value addition is retained at 80% which they normally use to pay their dividend.

The other proceeds pay off offshore loans through evidence accounts abroad.

So for instance if a merchant has borrowed US$1 million from offshore which they use to purchase the tobacco leaf in Zimbabwe, and the value addition component is US$200k, 80% retention is only calculated on the $200k.

That is US$160k and the balance of US$40k is surrendered to RBZ.

This is the foreign exchange that our leadership uses to fly around the world getting hospital treatment and the foreign exchange used to charter planes for Grace Mugabe to fly back home and also to send former President Robert Mugabe to Singapore for treatment.

It also manifests itself in the million dollar cars that we see blessing the streets of Harare, the Bentleys and the Maseratis that we see parked outside Munhumutapa Building, the Range Rovers that our ministers drive not in ones or twos but threes.

That is the money that buys diamond rings and houses in Dubai and Sandton, South Africa.

Now who are the real financial terrorists folks?

What we are seeing is a leadership that either refuses to take sound advice or has a terrible pool of advisors.

The country’s top citizen (The President) and his two deputies must be advised by the best brains available in the country, currently that is not the case.

They are surrounded by a bunch of friends, relatives, homeboys, business associates, remnants from Mugabe’s days and not what ordinarily should be a proper Presidential team in the mould of people like James Manyika who advised Barack Obama.

That in my view is not how a country should be run at all because there is a strong positive relationship between a country’s prosperity and the people around the President.

I do not expect the Vice President to know everything because nobody does, but I don’t expect him to make such fundamentally flawed statements if he has the right team of advisors around him.

Business is not able to access foreign exchange from the banks at the official rates, they are buying it from the black market.

Their prices will therefore be in tandem with the cost of acquiring the greenback on that black market or what Finance Minister Mthuli Ncube likes to call the alternative market. If they are forced to lower their prices below a profit margin, they will simply close shop as they did in 2007/08.

Economics is controlled by market forces and not by bellicose threats and commandments.

What Zimbabwe needs are genuine political and economic reforms that can attract the investment dollars that will create jobs and factories resulting in a wider tax base for the government.

This investment will be in the form of US Dollars that will also cornerstone our currency reforms and subsequent local currency unit, nothing more, nothing less.

This should be coupled with the respect for the Rule of Law, property rights and guaranteed public safety and not threats from politicians or their state security surrogates.

Once this is done, Zimbabwe will have a first-world competitiveness edge over its neighbors that will create a robust economy and propel economic growth because it has the intellectual capital.

Anything else is a pipe dream that will only give birth to social upheavals and unimaginable political turmoil, something that many hardliners around the Presidency have thrived on at the expense of the country’s progress.

Hopewell Chin’ono is an award winning Zimbabwean international Journalist and Documentary Filmmaker.

He is a Harvard University Nieman Fellow, CNN African Journalist of the year and CNN Television Journalism Fellow. 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.

The late superstar Oliver Mtukudzi wrote the sound track for State of Mind.

It was recently nominated for a big award at the Festival International du Film Pan-Africain de Cannes in France, in the UK at the Heart of England International Film Festival and in Texas at The US African Film Festival (TAFF).

You can watch the State of Mind trailer below.