PRESIDENT Emmerson Mnangagwa has an uncanny ability to frequently put his foot in the mouth, sometimes without harm but his recent episode on structured currency has left a trail of economic disaster. Does he ever learn when to talk and when to keep his mouth shut?
Zimbabwe has been having currency issues for over a decade now and it seems harder than ever to de-dollarise after the Zanu PF January 2009 decision to save their bacon. Dollarisation was a decision foisted on the party by the hyperinflationary environment.
In February, Mnangagwa made comments that Zimbabwe was close to launching a new structured currency. The announcement caused panic in the markets, a country that has had many local currencies since 2008 and all going the same direction — death by hyperinflation and disuse.
With many people still alive to the arbitrary change of the hard currencies into the local currencies, not once but twice — 2009 and 2019 — many started a run-in on the banks to make withdrawals.
Not many people believe and trust the Zanu PF government, a government that charges some services exclusively in United States dollars, yet want the citizens and business to embrace local currency.
It cannot be independently verified how much foreign currency was withdrawn this week, but it is a fact banks were overwhelmed and in certain instances ran out of money.
More importantly, we know that most of the big spenders use cash and they are not banked locally. Examples that quickly come to mind is Wicknell Chivhayo’s donation of US$1 million cash to Nehemiah Mutendi at ZCC church Easter celebrations. Curious enough, Chivhayo was in the company of Mnangagwa when he donated the cash.
One cannot say much, but Mnangagwa's choice of friends and hangers on leaves a lot to be desired. From Chivhayo to Delish Nguwaya, Henrietta Rushwaya to Uebert Angel, among others, show the President’s judgment on optics.
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In his first Cabinet meeting this year, Mnangagwa spoke of the currency reforms. “The fiscal and monetary authorities will be implementing a raft of policy measures to arrest price increases, stabilise the foreign exchange rate, maintain the value of our currency and ultimately encourage service. We shall soon be announcing the introduction of our structured currency,” Cabinet said.
It is interesting that the Monetary Policy Statement (MPS) that was due by the end of February at latest was only delivered yesterday afternoon. Mnangagwa had to bring forward governor John Mangudya’s retirement by a month in order for his successor John Mushayavanhu to prepare the MPS.
We cannot exhaustively comment on the structured currency before the MPS is in the public domain, but we will try by piecing information in the public so far.
Government said they have US$575 million to defend the new currency. The money is broken down as US$175 million in gold and other precious minerals reserves, US$100 million in cash at the central bank and US$300 million with the Treasury. This money is too little, it is not enough to be a month’s import cover.
Will the new currency hold with a government with an insatiable appetite for expenditure? That is the big question that Mnangagwa has not answered. Can he be trusted to be thrifty? Is he not a man in a rush to complete signature projects even if it leaves the country deep in debt?
The structured currency’s weakness is the people leading the process. Mnangagwa is big on talk and less on action. How many still remember the mega deals that were announced every two days soon after the November 2017 coup? Finance minister Mthuli Ncube had promised to deal with the ZWL$ and return to dollarisation then flipped to mono-currency and finally flopped to where he started — multiple currencies.
To make matters worse, Mnangagwa declared a national state of disaster earlier this week, due to El Nino induced drought. He has set out a US$2 billion begging bowl. However, this is the same man in January and early February who spoke about Zimbabwe being food secure and was not going to seek food aid.
If Mnangagwa cannot be trusted to be speaking the truth about drought, which everyone could smell and see as early as January, how can the citizens trust him about money which they can see or touch when it’s stored in the central bank vaults?
Some two years ago, the government introduced a statutory instrument that compelled miners to pay part of their tax obligations in the mineral they mined. There has been no update how much minerals are there now and guess what, boom RBZ has 1,1 tonnes of gold as reserves. Only that over all these years? Zimbabwe produces on average 30 tonnes of gold annually.
Mnangagwa has to regain the confidence of the citizens. This can be gained by leading a clean government, not hobnobbing with seedy characters. A government that can account for every cent from the national fiscus. A government that accepts its own currency for all its goods and services to the people. A government that does not print money to prop itself when it feels like losing power. That is the only way a new currency can be acceptable by the citizens.
And above all, a president who speaks less and does more. A president who does not always want to break the good news way before time. Message discipline is needed, especially in economics.
- Paidamoyo Muzulu is a journalist based in Harare. He writes here in his personal capacity.
