FILE PHOTO – Illegal money changers pose while exchanging a new Zimbabwe bond note (L) and U.S. dollar notes in the capital Harare, Zimbabwe, November 28, 2016. REUTERS/Philimon Bulawayo
Anyone who has owned a boat on Kariba knows very well how quickly a flat dead body of water can become a raging storm on a lake. The waves are not like those at sea, the tops of each wave are close together and the water can get very rough, very quickly. It was a small boat and although all on board knew the lake well, they were terrified that they would not survive.
Jesus had no such qualms and he slept in the boat, oblivious to the storm and the waves. Eventually, even though they knew he was tired, the Disciples got up their courage and shook him awake with the question “Lord, do you not care that we might perish in this storm?” The Bible says he woke up, looked about him and then rebuked the wind and the waves and there was instant calm. The Disciples watched in awe and their reaction to this extraordinary event, was to ask among themselves in a whisper “Who is this man that the wind and the waves obey his instructions?”
Small boat, small sea, major lesson.
Zimbabwe is a tiny country with a GDP less than a third of the garbage collection budget of New York. This is both a weakness and a strength – storms come up fast, but they can fade away just as quickly. Because we are such a small country, it does not take much to change things. The other lesson for me from the above story is that we are all in the same boat, no point in yelling at the wind and the rain, wake up the boss and get him engaged in trying to fix the problem. It would help of course if the “Boss” was the Son of God and had unlimited power, but the principle still applies – solutions take leadership.
In the past month, after a brief respite and some stability, the exchange rate and the rate of inflation has suddenly exploded. Those of us who watch the situation closely and monitor statistics and events were taken by surprise, both by the speed of the changes and their magnitude. Suddenly we were in a storm, in a small boat and it looked as if we were all going to have to swim.
Just what happened and how do we restore calm so that we can make progress and reach the shore in one piece?
The first thing is to understand what happened in the years leading up to 2018. During the short time from the collapse of the GNU to 2018, we lived a lifestyle that was actually unsustainable – the things that made this so were in two main areas; one was the massive transfer of wealth and value from our exporters to consumers in the form of subsidies created by the false exchange rate being paid to exporters for their hard currency. The second was the creation of vast sums of money by the Reserve Bank which they claimed was USD. By 2018 this mountain of false currency – in essence, electronic air, reached 23 000 000 000 “dollars”.
We have had a program called “Command Agriculture” for three years. To fund this program, the Reserve Bank has printed money – large sums of money, which have been used to buy inputs and then finance our new farmers – all one million of them so that they can become more productive. The program has been only partly successful – in 2017/18, we saw agricultural output rise strongly and everyone thought this was the solution to chronic food shortages. But at a cost and less than 30 per cent of all farmers paid back their loans. Many just took them and used them for lifestyle maintenance.
But from a macroeconomic point of view they got away with it because they called the money so created “US dollars” even though it was just credits created on a computer. It just added to the mountain of debt that was to haunt the new Minister of Finance in 2018. Because we had faith in the US dollar we lived as if this fountain of currency would never dry up.
Then the new Minister came into office and said that the currency mountain was not US dollars – it was not even closely related. What was it? It was air, no more, no less. When he did that the whole mountain collapsed and in 4 months we went from having US$23 billion in our accounts to the equivalent of US$4 billion. Was even that sum its real value? No one knew, and because there was no market for the stuff, value discovery was anyone’s guess.
So we get the “willing seller, willing buyer” adage in February 2019 along with the “Interbank Market” for hard currency. We all breathed a sigh of relief – now we had a real market which would show us just how rich or poor we are. The problem was that the market was never formalised and all the mechanisms used for many years to artificially establish exchange rates remained in place. Eventually some sort of market emerged but so narrow it was easily influenced by small changes in supply and demand. But it was beginning to work. Business reported they could buy their foreign exchange needs off the market and our export industries, that had been going broke up to 2018, saw a dramatic turnaround in their fortunes.
The problem was that when it came to planting time again – the spectre of Command Agriculture put its head up and demanded to be fed – as had happened in previous years. As the regime dilly dallied, the deadline for planting drew ever closer, eventually they took the plunge and printed several billion dollars in RTGS dollars and transferred this flood of new money to those who had managed Command in previous years.
The problem was, the whole system had changed and there was no safety net to maintain the market value of the currency, which then simply crashed. In economic terms we refer to the correlation between different elements – in our case any increase in money supply has an immediate and direct impact on the exchange rate and this then in turn is translated to an increase in prices. One, two, three whammies, all in tandem and close behind each other.
The impact was immediate after the first few breathes of wind, the wind picked up and in a very short space of time we were in a raging sea with all of us hanging onto the side of the boat and wishing we were elsewhere.
A few individuals went forward and shook awake the Minister of Finance and the President. We said you have to take some action or else this whole boat will sink. Action was taken and immediately the storm quietened down – rates fell back from 20 to 1 to 15 and stabilised – but it’s the stability of the aftermath of a storm at sea and we are all evaluating where we are and how much damage has been done. It is not pretty. We are all asking how long to landfall?
Several lessons come to mind about the miracle in the boat with Christ. The first is that we need faith, we need to think that if we go forward and shake his shoulder and get Him awake, He will do something. In my own life I have discovered what a Professor at Cambridge once described after his conversion to Christianity when he wrote a book about it and called it “Good God, it Works”.
The second is that we need to recognise that we are all in this boat together and we sink or swim, together. We need to work as a Nation to find our way forward and to solve our problems – right now is not the time for squabbles and fights, we need to discover each other and put our country first.
The third lesson is do not be surprised if things come back to normal much faster than we think possible. I still think we are on the right track, the fundamentals are all in place and because we are such a small boat, our problems can be solved relatively easily. But to get to the shore, we need to row together.
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