Zimbabwe’s economic meltdown, or it’s just a hiccup

IN the past few days, the nation has been thrown into so much uncertainty and this has since caused so many people to start preparing for the worst, as they have begun hoarding goods with memories of 2008 still fresh in the minds of many. All this appears to be a domino effect sparked off by the monetary policy statement. The delivery of this address came with the imposition of a 2% tax for each dollar on electronic transactions and the separation of accounts into foreign currency and local currency accounts. As would have been expected, this was not welcomed by the majority. The Law Society of Zimbabwe accused the new Finance minister Mthuli Ncube of violating certain provisions of the Finance Act, which require him to seek the necessary amendment to the Act before introducing this tax.

Opinion: Thabani Mnyama

Ncube was accused of violating section 22G of the Finance Act which, to paraphrase, stipulates that on each transaction exceeding $10, there is a mandatory 5 cents tax to be imposed and this can only be changed through an Act of Parliament, as opposed to how the minister tried to do it, which was through a Government Gazette. Moving away from the legal aspect of this move by Ncube, the market did not react well to this announcement. Prices went up, basic commodities like cooking oil vanished from the shelves and when they could be found, they had a new price tag, which had risen from around $3,70 per two litres to about $10-$15 per two litres. Bread, which was $1 per loaf, went up to $1,55.
This alone went on to prove that no matter how much the government could deny it, the parallel market exists and is a force to reckon with in all things economical. Reserve Bank Zimbabwe governor John Mangudya has tried to convince people that the United States dollar and the bond note are 1:1. I’m sure that by now, he has seen the error in his assertion. One thing worth noting is that the governor previously promised the country to resign if the bond note did not work yet here we are, still calling him our governor.

Ncube has attributed the current developments in the market to the economy “self-dollarising”. The minister, during his time at Chatham House in London, said: “On the currency front, I think the market is doing all the work for me, I don’t have to announce…it’s very clear that the economy is self-dollarising.” However, most cannot help but feel that this is a repeat of 2008 where they woke up to find that their money had lost its value as the previous regime invaded people’s foreign currency accounts. One positive that has come from Ncube is that unlike his predecessors, he has shown a fair deal of honesty, for example, he did not argue with how the Real Time Gross Settlement exchange rate and bond note exchange rate are not at par, contrary to the narrative the governor has been pushing. This begs the question: will the minister be given enough room to implement the proper measures to resuscitate the Zimbabwean economy, or like his predecessors, politics will become an obstacle until he is swallowed up by a bad system?

APA president Nkosana Moyo, whom many respect for his expertise in all things finance, issued a Press statement with regards to the monetary policy. He pointed out that the appointment of someone like Ncube was from an APA script, seeing as they pride themselves in meritocracy as opposed to the populism approach when making appointments. He pointed out that this must be the first time we have been treated to Treasury and central bank putting up an appearance of co-ordination and that this was a good attempt at transparency, as for the first time, people have been made aware of the extent to which government is in debt. Moyo believes that pursuant to this, they should have availed a detailed and line-by-line accounting of where the money (debt) went to. Failure to do this did not inspire much confidence, as many people asked the same questions to avoid the same from happening with this current regime, but no answers came through.

Ncube has been criticised for over-burdening the populace with over taxation. By so doing, he failed to curb the real problems at their roots, one of which is fiscal indiscipline. The government is notorious for over spending. Cutting down on taxes would force the government to live within its means and to cut down on unnecessary expenditure, knowing that they do not have the money to spend. To quote Tendai Biti from the MDC, “…the government should only eat what they kill…”.

Parliament spared us not, as we were treated to some dramatic moments in relation to the current situation. Joseph Chinotimba blamed the price hikes on MDC Alliance youths chanting their slogans in town. This type of decorum in the august house, given the situation, is counterproductive and leaves much to be desired. One would have thought, given the new dispensation’s mantra, we would have a more effective Parliament, which is productive and deals with the crux of our problems. However, if this behaviour by Chinotimba is going to persist, then we will always have legislators who deviate from the real problems and waste tax payers’ hard worked for money and time without producing any tangible results.

Ncube recently reassured the nation that measures would be implemented to protect their money and to avoid a repeat of the 2008 situation. However, most people are not convinced and believe that the situation is only going to get worse. Experts are even divided on opinions, as some believe the worst is here and others believe this is only temporary before things change for good, once and for all. Given how Ncube has shown himself to be principled, in the event that the government sabotages his efforts to actually implement necessary changes and cut down on its expenditure, are we going to see a repeat of the Nkosana Moyo situation in which he chose principle and resigned, preferring not to work under the Robert Mugabe administration, or he will hold on till the very end, regardless of what may happen? Whatever decisions he will make in trying to resuscitate the economy, will prove his calibre…just saying.

 Thabani Mnyama is a lawyer and academic. He writes in his own capacity on politics, policies and law. He is an analyst; policy advisor and you can reach him via email: revtj@outlook.fr or follow him on twitter @advocatemnyama