Just days before he died of colon cancer, I went to Morgan Tsvangirai’s home, and we had a breakfast outside in the garden. It was a typical Zimbabwe day, air crisp and dry with deep blue sky. He knew he did not have long and we talked about what we had been through since he had called me in 1999 and asked me to join the new Party. We reminisced about his years in the Trade Union Movement and then the MDC. He was feeling down in the fact that we had not achieved everything we set out to do. I said to him that we had brought back democracy to Zimbabwe which had been a one-Party State in 2000 and that, forever, would be his legacy.
In 2017 when finally, Mr Mugabe was forced into retirement and was replaced by Emmerson Mnangagwa, the country rejoiced, and he promised real change when he was sworn in as President. We were disappointed when opposition within the ruling Party who did not want change and perhaps feared change, resisted the reforms and after a short struggle the reforms were put aside so as to concentrate on winning the next election in July 2018.
Since then, the new Government of what we call “the Second Republic” has seen many changes. We have had two elections in which the ruling Party risked defeat by allowing a genuine election and counting the vote properly. In both cases they retained power with the President being elected by a significant, but narrow margin. We have struggled with the legacy of the Mugabe era – currency instability, unserviced debt, international isolation, collapsed agriculture and infrastructures and an industrial sector that is uncompetitive and struggling with old machinery and outdated technology.
In addition to all these problems, during the Mugabe years, corruption in many different forms were allowed to thrive. In our case, the beneficiaries of the corrupt, in most cases banked their illicit gains outside the country. Even the President did so, fearing insecurity in his old age and the welfare of his family. The costs were and are, enormous. Transparency International, an agency that tracks corruption internationally estimates that up to US$100 billion dollars has left Zimbabwe as the illicit gains from corruption. Mr Mugabe knew what was going on, kept secret files on everyone that he used to threaten when they disagreed with him. In one famous speech he claimed that US$15 000 000 000 was “missing” from the diamond mines in Marange. My own estimate today, is that the actual figure is more like US$23 billion, and it continues.
After 2018, the new President was able to get control of the Party and Government and started to work on reform. The figures ranged against him were powerful and influential and he initially allowed the corruption to continue. But the distortions in policy and the continued outflow of hard currency on a scale never seen before, has made his job increasingly difficult. The time has come when he has to consider Chinja Maitiro in a very real sense, we simply cannot continue go on as we are today.
The problems we face are multiple. We have issued a new currency, the ZIG, and stated that we would defend it at all costs. We are losing that battle and the currency is already 80 per cent depreciated, If we do nothing fundamental, it is, like its predeceases doomed. Arbitrage opportunities are back, the formal sector is in deep trouble, the informal sector, thriving. People are holding onto their hard currency and dumping the ZIG. The latter is not convertible and the interbank market is tiny and cannot meet our needs for currency to import what we need.
We need US$150 million a week to import our essentials. The banks are struggling to find US$20 million. Bank credit is simply not available and critical working capital needs are not being funded. We may well have a decent wet season this year, but if we cannot fund our farmers, we will have another year of rural poverty and hunger. Our immediate crisis is that if we do not move quickly, we will see widespread company closures, food shortages and empty shelves. Our power crisis is severe with us only able to meet half our estimated demand.
No point is simply listing our problems, tell us what to do! My suggestions are the same as always – use the power of the market, trust the market. I would suggest the following immediate changes: –
- Stop servicing all creditors and say that this moratorium will last a year while we work through what needs to be done to get us back on our feet and stable. Establish a high-level Committee to negotiate a payment schedule for all creditors, large and small, corporate or sovereign once the moratorium is lifted.
- Instruct all Government Ministries to work within their agreed budgets, no over runs and close attention to their cash flows, you spend only what you are allocated from the national purse.
- Make all taxes, levies and other charges by Government and local Government payable in local currency.
- Completely liberalise the interbank market and float the currency.
- Lift all exchange controls on the current account and tell all importers and others to secure their needs for hard currency from their banks.
- Require the State to secure their hard currency needs from the market and not the Reserve Bank, paying for it at the market rate in local currency.
- Instruct the Reserve Bank to adjust the liquidation rates on all foreign exchange earnings and inflows and to channel the proceeds to the Interbank market until the ZIG stabilises at an exchange rate acceptable to the Bank. If that eventually results in all foreign exchange inflows being liquidated on arrival then let the market determine the exchange rate and demonetise the US dollar.
- Set a target exchange rate and start buying in hard currency for reserves.
- Make the ZIG the sole currency for domestic transactions.
- To support this program, which should restore monetary and fiscal stability in 6 months or less, we must start to work seriously on the corrupt shrinkages that are at present rampant. The market for raw gold should be completely liberalised and exports in all forms banned with severe penalties. Establish a market for refined gold at the Falls.
- Get tough on corruption in all forms, even establishing Courts to deal expeditiously with all accused of corrupt activity.
- Shrinkage in the liquid petroleum industry is thought to exceed US$2 billion a year and should be dealt with using all the measures required including market forces.
- Deal with all smuggling across borders that avoids paying taxes and levies and duty.
- Tell all State-owned companies that they must meet their needs from the market and will not be supported in any way by the State. If they cannot survive, then dispose of the Company and its assets.
All my friends say that this is too radical, but my friends, when you are in the Emergency Room at the hospital, you do what is necessary to save life. Half measures do not work, we have to fix a system that once served us well, but which is now broken and needs surgery.
Eddie Cross
Harare, 31August 2024
Post published in: Featured