Financial Sector Spotlight: War by other means

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Wilkins Micawber is a fictional character from Charles Dickens’s 1850 novel David Copperfield. He was modelled on Dickens’s own father, John Dickens, who like Micawber was incarcerated in debtors’ prison after failing to meet his creditors’ demands.

Yes, they had prisons for debtors back in those days! Imagine how many people would be walking free in Zimbabwe of today if we still had these debtors’ prisons. We have come a long way, haven’t we?

Micawber is known for asserting his faith that “something will turn up”, so over time his name has become synonymous with someone who lives in hopeful expectation of better fortune. Such a person is described as Micawberish.

Micawber’s erstwhile circumstances have, sadly, become the current circumstances of many Zimbabweans — we wait and hope for something better.

In the meantime, we hop gingerly from one paycheck to the next, from one microfinance lender to another, borrowing left, right and centre in order to make ends meet.

But alas, as soon as we have made the ends meet, we discover that someone has moved them! It could be a retailer raising prices or a lender raising interest rates.

Debt has become a de facto part of our life — households are in debt, companies we work for are in debt, the Reserve Bank of Zimbabwe (RBZ) is in debt and the country is in debt!

Most of us now live on the basis of the second part of Micawber’s principle, which is itself based upon Micawber’s observation:

“Annual income twenty pounds, annual expenditure nineteen pounds and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery”.

Last week, as I planned for this article, the pervasiveness of debt in Zimbabwe was confirmed in the crudest possible way by a newspaper advertisement for mobile gadgets by one of the top local mobile telephone companies.

It boldly declared Chikwereti hachiurayi! Ndomararamiro acho mazuvano! This crudity, which loosely translates to “Debt does not kill! It’s how we live life these days”, is exactly why we need some form of debt counseling framework urgently. When consumers are enticed with such playfully deceitful messages, which are designed to make them binge on debt regardless of the consequences because “it’s now a way of life,” it is time for the regulators or consumer watchdogs to act.

At country level, government has engaged experts from the African Development Bank to provide technical assistance in the area of debt management while the Zimbabwe Aid and Debt Management Office has been created in the Ministry of Finance to promote principles of prudent debt management, sustainable borrowing and effective utilisation of borrowed resources.

This shows the government realises the seriousness of its debt problem and that it needs “counselling” in order to get out of the problem. Why are similar initiatives not being implemented in order to protect individual borrowers already trapped in debt cycles, or those who will soon be driven into that state of desperation by the current liquidity challenges?

It is often said that when you find yourself in a hole, the first thing you must do is to stop digging, but somehow some borrowers think that by continuing to borrow, they can somehow climb out of debt.

When you have a drug problem, it is a disorder called addiction, so you check into rehabilitation, instead of trying new types of drugs!

In the film War by other Means by John Pilger, we learn that not all wars are carried out at the barrel of a gun; some are executed by the monetary policies of global banking institutions.

Instead of bombs, the film argues, it has been discovered that debt is a far more powerful weapon to control and maintain the power of global economic interests.

I couldn’t agree more. Even the Bible has a very clear perspective on this burdensome aspect of debt.

Proverbs chapter 22 verse 7 says: “The rich ruleth over the poor, and the borrower is servant to the lender.”

That said, it must be acknowledged debt is a double-edged sword with good and bad characteristics, but either way its burden falls to those least responsible for it. In the right hands, debt can be a formidable force of good.

AgriTrade for instance, is a commercial credit facility administered by CABS, Trust Bank and MicroKing Finance that provides liquidity for agri-businesses working with smallholder farmers.

It seeks to empower and liberate. By providing credit for businesses in communal agriculture, it seeks to uplift and sustain the livelihoods of those who would ordinarily receive the scant attention of mainstream lenders.

In the hands of a loan shark, on the other hand, debt becomes something else — entirely unrecognisable, if not downright menacing. Under those circumstances, debt becomes a heady cocktail of financial despair and desperation; extortionate interest rates and pound-of-flesh security arrangements akin to Antonio’s debt to Shylock in William Shakespeare’s The Merchant of Venice. It becomes a war for redistribution of wealth — by other means!

In the meantime, the debt chickens are coming home to roost in many ways in Zimbabwe. For individuals, the chickens are in the form of numerous lenders who queue up on pay day only to discover “co-lenders” they were never made aware of and who haven’t been paid for some time as well.

For companies the chickens are either in the form of foreclosures or debt restructurings, for the RBZ they take the form of the looming debt audit and the creation of an special purpose vehicle to take over the debt while for the government they could assume the form of the ignominy of highly indebted poor countries candidacy, lack of creditworthiness or the high cost of credit.

In later years, Micawber emigrated to Australia and began a new life, ironically as a banker and a successful government magistrate.

Will Zimbabweans be able to find new life after debt, without emigrating to far-off lands in anticipation of something better?

Weigh in with your insights on omen.muza@gmail.com.

Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory company with interests in banking and agriculture as well as the convergence area between them.