HIS has been a long week, where the Executive and capital are engaged in mortal combat over exchange rates and pricing of goods. Capital has come out loud and clear saying the new monetary measures announced by President Emmerson Mnangagwa last Sunday would not work and they need to be set aside or the economy would implode. Is Mnangagwa ready to defend his policy position?
Last Saturday, Mnangagwa without prior warning addressed the nation. He decreed banks to temporarily stop processing new loans to government, companies and individuals. In addition, the President said stockbrokers could no longer use third-party accounts in settling trades and that public transport in urban areas would be re-opened to private players.
These are not easy times. The economy is in a tailspin, prices of basic commodities are spiking and the population is becoming restless. Worse still, a general election is just 12 months away. Mnangagwa had to act and he did act.
However, banks were the first off the blocks to say the new measures to rescue the economy were not feasible.
BancABC in an analysis which it immediately recanted after it was released revealed what the sector was thinking.
“Bank lending is the core function of the banks’ financial intermediation process. Banning lending activities will threaten the survival of banks as this will wipe out 20-50% of their incomes. Consequently, this could push banks to embark on risk/or non-permissible activities to compensate for loss of incomes,” the bank said.
One wonders what are those non-permissible activities that banks can engage in to compensate for loss of income.
The answer is not far. In the same analysis, the bank noted that 60% of financial institutions’ revenues came from non-interest income. This means most of their revenues do not come from lending money despite their claim that lending is a core function of the banks.
Banks are back to the former central bank governor Gideon Gono’s era of speculating, dabbling in forex exchange, buying land banks, investing in properties among other things. These are the things that bring 60% of their income.
The Zimbabwe National Chamber of Commerce in a separate analysis during the week admitted there were errant businesses, but they should be dealt with privately.
“We also strongly urge the bank (RBZ) to engage privately all errant business players who are abusing exchange control regulations in liaison with the Chamber to instil market discipline and inspire confidence,” the chamber said.
The Zimbabwe National Chamber of Commerce (ZNCC) does not believe that these errant players should be sanctioned for breaching regulations. It argues they should be rehabilitated privately, yet the chaos they are causing is wreaking havoc across the country.
That should be rich coming from the capital. They want to have their cake and eat it. They are not reformed, they are a law unto themselves.
The poor are on their own. Capital looks after itself.
In a rare interview with a daily newspaper Presidential spokesperson George Charamba managed to locate the problem.
“We have seen an upward trend in pricing both in local currency and United States dollars, which is supposed to be the anchor currency. What that does is to suggest there is more to the story than simply the relationship between the two currencies,” Charamba said.
He further posited that Zimbabwe’s economic structure was skewed and far from a perfect economy to be left to the whims of free market economics.
“Once you get to that level, you are now dealing with what we call the structure of the economy. My contention is that Zimbabwe is suffering from an imperfect market structure,” he said.
Charamba showed that he understood what has to be done when he suggested a solution: “Can you imagine what we can achieve by setting up a US$20 million fund to create new enterprises to make sure there is price stability and make sure that the consumer is protected?”
This is a complete departure from the free-market economics that Mnangagwa preached when he came into power via the November 2017 coup. Charamba implies that the State is willing to sponsor competition to the oligarchs. Or alternatively, there should be some sectors where the State should have vested interest like food processing and manufacturing industries so that the State protects the poor from the rapacious capitalists.
The big question is: Is Mnangagwa after dabbling in neoliberal economics ready to stare the beast of capitalism in the eye and tell it to go to hell or he will back down after some perfunctory censure of capital.
Will Mnangagwa fall into the trap of dealing with errant banks and businesses in private as advocated by the ZNCC and give the impression to the voters that he is a quisling when confronted by capital?
For once he has to grow a spine and stand up to capital. This is not new. In the United States and Western Europe they have antitrust laws that break up monopolies. There are some companies that are too big and need to be broken up to introduce competition so that the country is never held to ransom by a few men/women because they have money.
This is not a stroll in the park. How Mnangagwa deals with capital now will define his presidency. Will he want to be recognised as the President who acquiesced to capital and sold out the people or the man who stood for the majority poor?
As the late former President Robert Mugabe would say, these actions and positions need indoda sibili (real man). Now is the time Mnangagwa has to grow a spine or join the queue of self-preserving cowards.