BY Brian Sedze DEAR President Emmerson Mnangagwa
Your Excellency, as things stand right now you have to make hard currency decision sooner than later as doing that in 2023 will cause so much economic pain that may cause a huge protest vote which may send you home.
The country needs to run on one currency to stop arbitrage, structural deformities and subsidies.
Your Excellency, one of the false equivalence that has emerged after the bread price increase is that because bread was 90 cents under the late former President Robert Gabriel Mugabe and by inference his economic management was better and that, therefore, we have to go back to a US dollar economy, including the often talked about US$540 basic salary for most civil servants.
That comparison is flawed and may lead to people desiring solutions that are not feasible because they are based on a false premise.
Your Excellency, the economy stabilised between 2009 and 2013 because of austerity with no significant expansion. In fact, most started with a US$100 salary for six months. Those were hard and bold decisions.
The self-dollarisation in 2008 and then later dollarisation in 2009 may be an albatross on our neck. Many cannot imagine an economy solely run on the US dollar despite every country in the world having its own currency.
Stability was achieved during the Government of National Unity era with lots of austerity. That austerity doesn’t grow the economy and it turned the economy into a huge supermarket for South Africa, China and Zambia.
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Your Excellency, after the force-fed elections on the Jealousy Mawarire Court victory (those elections should have been avoided) the Mugabe team abandoned the austerity and pursued expansionary policies in both debt accumulation, welfare economy, agriculture support and heavy subsidies. In fact, government was subsidising every purchase.
It did that by using the facade of currency remaining at 1:1. The money for the Mugabe era at 1:1 simply did not exist.
It basically broadened the money supply by creating phantom money in the banking system (m3) which they made equivalent to the US dollar.
Your Excellency, so each and everyday we purchased bread, fuel, mealie-meal etc we were doing so using money created by the central bank which didn’t exist in real sense. So it was a big hole everyday. It was not going to last and somehow it had an expiry date.
So that hole that was dug required drastic action but I didn’t expect it to be so drastic as to allow central bank governor John Mangundya to rob everyone by wiping out our phantom yet contractual US$ within weeks.
Your Excellency, you are subsidising a network with arbitrages on a false auction system and rate. Fact is there is no need to produce when you can make 200% profit from trading currency.
Currency is currently the business of buying at auction and selling at alternative markets.
Your Excellency, Eddie Cross is no longer a favourite of many as some see him as a person who committed a crime by mollycoddling with you, but he is right when he says we can’t run on two currencies and expect to have a meaningful economy. Zimbabwe needs to have its own currency.
It is impossible to compare economic eras in Zimbabwe because we have no constant and variables often change weekly since 2014.
Since 1997 this economy was all trial and error. In fact, the economy was so mismanaged that people now believe in short-term joys and not sustainable economic policies.
Your Excellency, you have to make very tough and bold decisions on currency. It will cause pain to either industry or the general public and not both but it is a bridge which has to be crossed. The US dollar kills industry and the Zimdollar kills masses, you have to choose who has to absorb pain on the transition to one currency.
It is also either short-term pain and long-term gain or the reverse but you are prevaricating.
That decision is required now. Trying to do it in 2023 will be catastrophic for you. You must not believe these ghost saboteurs. If they are, it is because you have failed to make bold decisions.
Your Excellency, the decisions you have to make may cause immediate pain but medium-term benefit. You have to choose a camp to punish and to please during currency transition. It will not be both. This ruling by decree and statutory instruments is at the moment causing pain to everyone.
Your Excellency, your team must advise you correctly.
- Brian Sedze is a strategy consultant and president of Free Enterprise Initiative. He can be contacted on [email protected]
