By Chenayi Mutambasere
Contrary to what some may think having to be the one that spells out the impending doom is no easy task. Spelling out the economic disaster that awaits a nation that is your birthright is a thankless task.
From when the rumblings of a new currency began I started to write this piece but the sadness often overwhelmed me. Afterall young Chenayi pushed through A levels only eager to join the Harare working class movement leaving the country was never a thought in my head.
And yet now for so many including myself it seems the only way out….
Here we are 2 years to the anniversary of the coup not a coup or the birth of the new era that became an error. We are marking this occasion with yet another bond moment. Mthuli and Mangudya have partnered to give birth to another baby.
A whole new currency being birthed imminently we are told. ‘lts not a replacement’ its an addition to the expanding brood of Mthuli dollars says the baby daddy…Bond notes, nostro, rtgs, ecocash and now Zvichauya.
After realising we were not open for business that infact if ED had entered America’s Got Talent as a comedian during one of his trips the probability of winning a million dollars and performing in Las Vegas would be much higher than generating any tangible business interests.
So now the OxBridge prof and his counterpart have decided to turn to the Zanuology handbook and go for the only option i.e print more money.
As a side note this blog piece isn’t to tell the Prof or the Gov that it wont work because they infact know it won’t. This seemingly tactical solution is designed as a pacifier (aka dummy) for the roaring economy in crisis .
It has been evident for a while now that Zimbabwe has no fiscus or monetary policy. To use an appropriate metaphor the numerous trips by the presidium, ministry of finance and governor are best likened to the hamster on the wheel moving at pace but very much stationery.
In a few weeks as proclaimed by the comic pastor on behalf of RBZ the banks of Zimbabwe will be awash with new money. This is likely to pacify us through Christmas. Cash machines across the country will be spitting out this pinkish-purplish money. But what will be the impact will this ‘dummy’ last for long? What about its aftermath?
Concurrent currency competition
An introduction of a new currency in Zimbabwe will bring the total of legal tender to 6. Already we know that the more liquid form of these is the most valuable, so that the highest valued is the USD because its easily exchangeable on the international market.
Then followed by the bond because of its liquid status and it carries no transactional cost on a day to day basis. Least desirable being the bank transfers they aren’t instant and rarely used for daily transactions such as grocery shopping. Ecocash is better valued than the bank transfer and is readily available (well mostly) for daily transactions.
So what will happen when this new baby is born. Because Zvichauya will be more widely available as we are told, this will be 1:1 with the bond (anyone else remembers Mangudya’s 2 finger gedye moment). Well here it is again. Zvichauya will devalue the bond further.
Because bond is currently short, traders will automatically prefer the new currency. From a psycho-social perspective why trade in money that is in short supply. This will further devalue the bond note notwithstanding the fact that the bond was initially at par with the usd when it first launched.
This new currency is different to a bond note from a constitutional perspective. A bond note is a representation of money you are owed by the government whereas Zvichauya doesn’t have that baggage. This is a new fully fledged currency which in ceteris paribus should trade freely on the international currency market. Therefore it would by sheer definition command a higher value than the bond note as it is more desirable.
Further Inflation Inevitable
The cocktail of economy surprise announcements, political volatility and lack of judicial reforms will mean businesses have to safeguard their investments. To do this they will allow a mark up on their prices that ensures they can replenish stocks (most of which are international purchases) and also make a margin on sales.
This inflation will eventually result in a self fulfilling prophecy so that their initial fears of reduction in value of zwl are realised. This is a natural logical decision made by businesses operating in unpredictable economies.
Printing Breeds Corruption
In another perspective we mustn’t forget that it was Mugabe’s love of printing that got us here in the first place. In the absence of economic stimulants the government has resorted to printing yet again. The one thing about printing money is that it costs a lot of money.
It is probable that an overseas firm is used to print this money. The low value denomination of the money means a lot of these new notes will be printed. So in a country where a loaf of bread costs 3 ZWL we have no business printing 2 ZWL notes. There are no synergies there and this is likely to cost the country more than is necessary .
With Zimbabwe being one of the highest ranked countries in terms of institutionalised corruption. The government has a high number of its cabinet on the sanctions list due to corruption. Allowing them to print money may be equated to setting the fox amongst the chickens.
With the ambiguity of who is printing, how much they are printing and how the printing will be policed it’s not too far fetched to think that this will result in self-dealing by the profiteering corrupt masters. In the same way we had the Gono boys trading the bearers cheques, to a similar fit dealing the bond notes we await the new traders of zvichauya who will access it long before anyone else has withdrawn it.
The government has created a Gangster’s Paradise whereby the only successful people are mysteriously ‘genius’ businessman or fly by nights Prophets.
In the Zimbabwe of today youngsters don’t chase the dreams they see on TV because there is no electricity to turn it on. If the best they can offer as a solution is this pinkish-purplish paper then certainly some youngsters may never live to see 24 the way things are going.