Pfumvudza, bond notes: ED’s saviour

THE gigantic lake Tugwi-Mukosi is spilling. This is a rare phenomenon for a water body so big to spill less than four years after commissioning.

Paidamoyo Muzulu

It holds a promise that is too big to hide or ignore, a promise of water security for agriculture for the next three years even if there are three consecutive droughts.

This is a lake that the Rhodesian colonial government had planned, but could not deliver because of the liberation struggle waged by the majority black citizens. However, the project held a big promise — a promise of revolutionarising agriculture in Masvingo and the lowveld.

The lake can irrigate a massive
100 000 hectares of land. Sugar plantations in the region — Triangle, Hippo Valley and Mkwasine — can all expand their production. The dead capital of Naunetsi Ranch can now be rescued and the land start producing. New fisheries and tourist resorts can also be set up and change the face of economic opportunity in the region.

This is a bit futuristic and probably bigger than the capabilities of the present administration. However, the reality is most fields are lush green across the country and the prospect of the biggest harvest in the last two decades beckons. A successful agricultural season may just be the tonic needed to restart the economic revolution Zimbabwe sorely needs.

Agriculture has backward and forward linkages in the economy. If done well, it creates massive employment opportunities, supports the agro-chemicals industries, but more importantly, changes the skylines of Harare, Bulawayo and other urban centres’ industrial sites.

The boilers in the industrial areas will start belching smoke into the cloudless sky, men and women working in shifts to produce merchandise and revival of the glorious manufacturing sector, a sector that gave Zimbabwe a place of pride on the world map for producing luxurious cotton clothes, a home to Nestle and Colgate Palmolive products, world renowned Mazoe orange juice, among other products.

The revival of Zimbabwe’s economy lies in a controversial policy position —the much-maligned reintroduction of a local currency — Zimbabwean dollar — after a decade long dalliance with the United States greenback.

Industrialists and merchandisers wont to profiteering and general populace enjoying the rare privilege of having an international currency in their back pockets and purses vehemently resisted the move.

Some big players engaged in direct sabotage of the new currency, weakening it on the parallel market with the intention to bury it within a year of reintroduction. A combination of the Treasury and central bank tenacity is beginning to yield results.

Treasury proclaimed a mono-currency policy position, but has somehow weakened it after pressure from certain quarters to allow dual pricing of goods in Zimbabwe dollars and the greenback.

The monetary authorities saved the currency collapse by introducing the weekly currency auction by the central bank. For the past six months, the bond note has held steady against the greenback hovering between 80 and 83 to the dollar. The parallel market is still around 100 to 110 to the dollar, a fair exchange similar to the Japanese yen against the greenback.

Had this bold decision not been done, the bond note would be now be history. If it survived by any sheer political force, it would be 2008 again, a worthless currency not worth the value of the paper it is written on.

The authorities should do more to control money supply, monitor the markets and severely punish the errant players like when Sakunda Holdings dumped Treasury Bills on the markets, mopping all the liquidity in the market and determining the black-market rate almost unilaterally, so we are told, according to the chairman of the Parliamentary Public Accounts Committee, Tendai Biti.

The closure of the EcoCash merchant accounts exposed how rotten the financial system was. Nearly $700 million lies frozen by the central bank with no one claiming it — it could only be the big players who were using their runner boys.

The currency position’s substantial success should be built on to kickstart the manufacturing sector. However, there is the risk — a temptation — among the farmers asking to be paid in greenbacks for their produce.

If the economy is to be revived, this should be resisted, especially that most have produced using government guaranteed loans.

The success of the economic revival depends more on how the administration behaves — not bending to populist decisions. The book, Confessions of an Economic Hitman, reveals how the Bretton Woods institutions have been used to ransack economies of countries in the crosshairs of the United States. This is further corroborated in Naomi Klein’s book, The Shock Doctrine and the Rise of Disaster Capitalism.

Zimbabwe, like all other nations, needs the flexibility of quantitative easing — the ability of the central bank to print money when the economy stalls and stimulate economic activity. This is impossible when using the greenback, the country will be dependent on foreign loans and grants which is unsustainable.

Can the administration be thrifty and use conservatively the forex receipts from the promising bumper agriculture harvest? We are lucky as a country because of COVID-19 lockdowns that the Emmerson Mnangagwa administration is not travelling as often as it would have wanted, thus saving Treasury significant sums in transport and subsistence allowance.

The Office of the President and Cabinet has a huge budget for foreign travel and for once nature has intervened. Can the administration build on that?

The temptation is high, especially with elections looming high on the horizon and some of the ministers still used to opulence, that all economic prudence can be thrown to the wind at the altar of political expediency.

For now, Pfumvudza and the bond note have played their part to sustain the coup administration.

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