echoes CONWAY TUTANI
The record needs to be set straight that Finance minister Mthuli Ncube has done nothing outrageous and/or unprecedented by banning the use of foreign currencies in domestic transactions.
According to Wikipedia, this is a measure resorted to by governments all over the world in certain circumstances. Wikipedia says:
“Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents, on the purchase/sale of local currency by non-residents, or the transfers of any currency across national borders. These controls allow countries to better manage their economies by controlling the in-flow and out-flow of currency, which may otherwise create exchange rate volatility. Countries with weak and/or developing economies generally use foreign exchange controls to limit speculation against their currencies.”
Zimbabwe is exactly in such a position, and so needs that prescription. It’s the same medicine for the same disease. So, the idea and principle behind Ncube’s decision is economically sound. Turning to the United States, yes, forex trading is allowed there, but the industry is much more regulated nowadays to prevent excessive trading and speculation that can drastically magnify risks and losses.
For forex trading, the US Commodities and Futures Trading Commission is the regulatory body. Yes, there is no laissez faire; there are stringent regulations and restrictions. As one can see, the economic prescription is the same whether one is in Zimbabwe or in the US. So, forex controls do not make Zimbabwe any less democratic — as some elements in civil society allege — or the US any more despotic.
Ncube described the latest abolishment of the multi-currency as an attempt by government to resolve the problem where prices are indicated in US dollars yet the majority of people earn local currency (Real Time Gross Settlement dollars), which has since been renamed Zimbabwe dollars.
“That is profiteering (indexing prices to US dollar parallel market rates). These people are traders, actually they are not even hedging, they are traders and the moment they get the US dollars, they get them out.
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“So, they are traders, they are not even hedging because when you hedge, you hedge for real. They are traders who are trading on the parallel market and we are going to raise interest rates (to discourage speculative borrowing),” the minister said.
These restrictions are necessary so that the tiny minority who have regular access to forex do not distort the market to the massive disadvantage of the overwhelming majority who don’t have access to forex. A balance has to be struck to attain equilibrium in favour of the majority.
Fortunately, some people are beginning to see that in its clarity and separating the economics of the matter from partisan politics. I heard one such “born-again person”, so to speak, begging to differ with others, saying ordinary people should welcome the re-monetisation of the local currency, and not be swayed by those employed by non-governmental organisations (NGOs), who naturally want the current situation to continue because they earn US dollars.
This could signal the change of the narrative from airy-fairy, impractical and foolishly idealistic notions to pragmatic issues. It’s a sign of political maturity when people begin to realise that they are not on the same page, not in the same boat with those US dollar cash-rich NGO staffers who are egging them on to cut their nose to spite the face; and that they are not in the same difficult circumstances with underpaying employers and overpricing firms.
Observed a fellow Zimbabwean this week: “Most of the people commenting against the return of Zim dollar are on social media and enjoying foreign beers and whiskies in bars and hotels they don’t own nor have shares in — they are called consumers and US dollar is best currency, hence the bitterness.” One of the critics contrived to twist the directive from the minister, saying: “Your nostros/foreign currency account balances will be liquidated if you want to use the money in Zimbabwe. No more cash withdrawals!”
Fortunately, fellow Zimbabwean Shingai Ndoro exposed this falsehood with his sober take: “Your FCA nostro account is usable when you travel outside of the country. You can also do your online payments for foreign goods and services while you are here. You will no longer require forex locally since all goods and services will be paid for in local currency. Pane chaipa here? (What’s wrong with that?)”
Just like NGOs, many private companies — who are among the staunchest critics of Ncube’s latest move because they have been reaping and ripping off from it — have been engaged in speculative and profiteering tendencies where even the prices of products that are produced locally using locally produced raw materials were being indexed to the prevailing parallel market exchange rates of the foreign currencies. These employers trade in forex, but they don’t want to pay salaries in US dollars — why? They sell goods and services in US dollars, but don’t want to pay taxes in US dollars — why?
Ncube said: “What are we doing (in most instances) is that all the domestic market raw materials are here and you are paying your workers in RTGS. You know what? These companies that are profiteering with earnings growth of 70%-80%, are they increasing wages for their workers? They are not.”
Ncube questioned why the private sector, despite reporting huge profits, were not adjusting the salaries of their employees. He said government was working on improving earnings for its workers and, likewise, the private sector should also have a duty to look after its workers. Indeed, these employers trade in forex but they don’t want to pay salaries in US — why? Need it be said again that it’s not coincidental that speculators hiding behind the people whose suffering they are causing don’t want the ban on the US dollar in everyday transactions?
“They have a responsibility to their employees. Why are they not looking at their employees and paying them properly? Why are the employees not marching in the streets to say pay us properly?” he said.
Indeed, it’s high time private sector employees marched against the real culprits — their exploitative employers — while Ncube carries out his end of the bargain using the tried and tested the global template of forex controls. All in all, a fair-minded Zimbabwean observed: “We, here in the Diaspora, we are sending money and that money has been going into the streets. We need to take our financial system from the streets and operate from banking vaults.”
That’s exactly what Ncube is trying to achieve by making the Zimbabwe dollar the only legal tender for domestic transactions. Zimbabwe needs its own official currency, period. This obsession with the US dollar is unsustainable from an economic point of view. The US dollar should be traded in banks only. We need our own currency going forward. The price madness should be stopped by market forces as usage of the Zim dollar increases. It’s a process, not an event as some sections of the media are making it out to be with headlines screaming failure.
It’s up to us to make the Zimbabwe dollar work — it’s all in our hands.
