“TIS a lesson you should heed, try, try again. If at first you don’t succeed, try, try again.”
This is part of a famous poem many people grew up reciting. It was penned by 19th century British author and philanthropist William Edward Hickson to encourage perseverance in the face of adversity.
The importance of this poem has been brought to the fore by Statutory Instrument (SI) 127 of 2021 which all but confirms government’s habit of groping in the dark, imposing one bad policy after another without taking time to find out why its policies are failing to jumpstart the economy and usher in a better life for citizens.
As a recap, government last week legislated SI 127 of 2021 for purposes of sprucing up the Zimbabwe dollar and stopping businesses from using the parallel market rate of US$1:$130, which is nearly 53% higher than the official one. This will be encouraged through punitive civil penalties that can result in jail time if not honoured.
Businesses to be affected are those that quote Zimdollar prices for goods and services, offer discount for foreign currency transactions, charge Zimdollar prices pegged on the parallel market rate, receive foreign currency but receipt as Zimdollar, and abuse foreign currency from the auction system.
While it’s good that government wants to support the Zimdollar, simple economics dictates that the acceptance of the local currency should be a function of market forces, not government intervention.
As such, since the introduction of the legislation, prices have gone up because if businesses are to charge for goods or services using the official rate of US$1:$85 compared to the more lucrative parallel one, it only makes sense to raise prices. After all, businesses are in it for profit and not charity. Further, if the official rate is being shoved down businesses throats, companies that pay workers pegged on the parallel foreign currency rate now have a right to reduce wages through pegging the salaries on the official exchange rate.
Lastly, if a business refuses to sell goods or services in Zimdollars, customers can report that firm, resulting in penalties and possibly, jail time for its directors.
And this will particularly hurt the real estate sector, where the Zimdollar is mostly shunned.
Instead of introducing the legislation, government could have tried to understand why businesses were offering discounts for foreign currency transactions or pegging prices on the parallel market rate.
By understanding these two scenarios alone, government would then be able to effectively introduce legislation that supports economic growth. Just recently, retailers called for “pro-poor policies” in the Treasury’s next raft of economic measures as the businesses cited declining revenue caused by low consumer spending.
The government “of the people” should increase the income tax-free threshold while also raising the minimum wage to cover the cost of living that covers school fees and accommodation for families.
It should also stop increasing the price of fuel when it is globally cheaper, the most it has ever been in the past decade. Further, government should make tariffs on public utility services cheaper, offer programmes that support the vulnerable to become more economically self-sufficient, increase infrastructure spending to create jobs, and invest in entrepreneurship programmes.
Government can incentivise companies to hire more people by granting more contracts to companies that attain a certain quota of staff. Government must also introduce more taxes on high-income earners and ensure State tertiary institutions tuition fees are within the reach of vulnerable students.
It should abandon the Zimdollar until it is adequately supported and introduce a cheaper more stable currency such as the South African rand, something our neighbours said was possible even without being a member of the Common Monetary Area, which links South Africa, Namibia, Lesotho and Eswatini into a monetary union.
This would control inflation and restore consumers’ buying power.