ZIMBABWE has never missed an election since independence and one can confidently say that the 2008 elections will be held on schedule notwithstanding the sentiments expressed by the opposition Movement for Democratic Change (MDC).
Only last week, Africa celebrated the 44th anniversary of the founding of the Organisation of African Unity, which was in July 2002, succeeded by the present Africa Union.
The leaders of the then independent Africa made history and gave significant impetus to the continent’s collective but incomplete struggle for independence by establishing this pan-African body.
More than four decades later, the dreams of the founding fathers of the Africa project have been realised only to the extent of decolonising the continent from colonial hegemony.
Africa is still a victim of social inequality, exclusion, bad governance and corruption. Even with the end of the Cold War, Africa remains a challenged continent.
The hope that foundation of Africa’s post-colonial states would be based on the consolidation of democracy, the rule of law, good governance, respect of constitutionalism and the observance of human rights has been sufficiently discredited by Africa’s founding fathers and their successors to give credence to the observation that the continent is cursed.
From renaissance Italy to Dubai, the development of the world’s wealthy nations that are meeting in Germany this week has been driven by a combination of responsible and responsive government intervention coupled with strategically timed private sector investments.
History has shown repeatedly that no amount of force can induce capital investment in environments where returns are not assured on a sustainable and predictable basis. No nation can ever be stronger than the strength of its citizens who often achieve the collective desire for progress through self interest and initiative.
The logic that one cannot strengthen the weak by weakening the strong is equally valid for Africa and yet Africa’s leaders have made it a habit to target the rich countries at a global level and the business sector at the national level for ridicule in the misplaced hope that doing so will distract the attention of the governed from holding them accountable for condemning the continent to a lower standard of leaving.
I have often observed that even if all the rich nations were tsunamied and wiped from the face of the earth, the condition of the poor will not materially change. Equally, even if the rich were to be eliminated, the poor may remain where they are and more importantly may have no hope for a better life.
If the above is true, why would leaders with a demonstrated track record of failed policies and programs seek to entrench themselves in power? It is important that conversations be started among Africans on the key ideological questions that should inform the strategic options for the continent.
Some often hold the position that the poor are poor because of the rich or the conspiracy of the rich nations and, therefore, it is the responsibility of the government to intervene in order to level the playing field. At the global level, the expectation is that multilateral institutions should be used as instruments for challenging and reforming the governance model and architecture while at a national level, the view is that the state in the name of the people must be the custodian of national morality and economic progress. There are many who see in the government a friend of the masses and in business a parasite of the people.
This often leads one to wonder what, if any, is the role of business in social and economic progress. In Africa, the political elites often hold the view that it is a privilege to operate a business in the continent and not a right. The logic advanced is that the output of any human endeavor ultimately belongs to society and the state as a representative of the nation has unfettered rights to private property under what ever construction.
To the extent that most African states share a common colonial heritage, most of the continent’s leaders often benefit from the colonial legacy by constantly reminding their subjects of the risks of colonial resurrection through opposition parties that are often labeled as surrogates and puppets of the rich and powerful nations.
Zimbabwe provides a classic case study for anyone to better appreciate how incumbent parties that have liberation credentials can stay in power indefinitely using state power as a carrot and stick. I set out below my observations of how the Reserve Bank of Zimbabwe (RBZ) has now been transformed into an election agent for the decisive 2008 elections and how the opposition may not have any chance in hell to prevail.
On Wednesday last week, the state-run Herald newspaper carried an article entitled “RBZ in drive to create jobs” which best illustrates the unfolding drama in Zimbabwean politics. It was reported that the RBZ had embarked on a massive project that will see it setting up institutions throughout the country that manufacture animal-drawn farming implements. It was also reported that the RBZ and not the government was conducting the project in collaboration with technical colleges under the mechanisation programme.
This is what the RBZ governor Dr Gideon Gono was reported to have told Zimbabwe’s elected representatives:
"We are going to set up the institutions in 62 districts of the country as a way to create employment for the youths as well as to bolster agricultural production. Communal farmers contribute to the country’s national food security so we decided to recognise them and assist them improve their traditional way of farming through the provision of these implements.
"We will provide them with the working capital and equipment for them to start running the businesses. It’s time now that we stopped importing maize and even wheat, wasting the little foreign currency we have. We have to produce and this we can do as we have the capacity."
The political import of the Governor’s comments to a parliamentary portfolio committee in an election season that has already begun in Zimbabwe requires a critical evaluation. While it is evident that the role of the RBZ in Zimbabwe is inconsistent with its charter, it is not clear what, if any, is the role of the cabinet of Zimbabwe.
The President is the head of state and government and one would expect that he would be the one responsible for overseeing the operation of the civil service and government agencies and would be at the centre of any new initiative to expand the services of the government to the people. It is common cause that the RBZ has been at the forefront of advancing the logic that the end justifies the means and, therefore, there is no rationale for parliamentary oversight into the allocation of national resources to certain projects and initiatives.
In this vein, one can understand the implications of the RBZ confusing voters with seemingly harmless infrastructural and hardware support. Would the beneficiaries of such irregular government interventions be in any position to punish the ruling party on election day?
On May 24, 2007, another article appeared in the Herald entitled: “No going back on forex surrender requirements” in which the Governor of the RBZ was reported in one of his on the spot guidance tours at Renco Mine to be saying that the RBZ would not succumb to any pressures seeking the revision of the 40 percent foreign exchange surrender requirements for exporters. This is what the Governor is reported to have said:
"The levelling of the playing field in this regard seems to have jolted a player or two in the platinum sector and these seem to have chosen a defiance route and are geared to protect their entrenched position through extensive lobbying of various political figures, the international community, certain banks and other stakeholders to garner support for the confrontational route they have chosen.
"The management of our economic affairs will not be dictated to us by outsiders. To invite outsiders to intervene in domestic disputes such as that emanating from some requirements announced legitimately by a legitimate central bank, in legitimate circumstances, for legitimate purposes, will produce illegitimate results which this Governor will not tolerate.
"I seem to have stepped on raw nerves of some of these guys. When policies are revised in their favour, they see nothing wrong but when we announce certain policies which may not go down well with them but are for the good of the economy, they become very defiant,"
"For instance, this economy is facing drought conditions. This economy is facing shortages of medical drugs, this economy needs to retool in many areas of local authority, parastatal and government operations. This economy requires fuel, fertilizer and electricity among other foreign exchange-driven demands."
Those with genuine difficulties with the new foreign exchange surrender requirements would be engaged "in as sober a manner as possible rather than through antagonistic boardroom resolutions", he said.
On May 27, 2007, the Herald reported that the platinum mining companies had agreed to the extortion. To the extent that Gono’s methods of inducing demanded and expected economic behaviour seems to produce the results ahead of the forthcoming elections, it is clearly unlikely that any pocket of resistance to regime continuity will be left.
The platinum companies like their brothers and sisters operating in an environment where a Governor of the central bank can issue public ultimatums as an intimidation tactic should naturally be in a state of shock and may have been persuaded in closed doors to accept the prescription on the promise that they would be beneficiaries of selectively determined exchange rates that are often given to compliant players at the sole discretion of the Governor.
In such an environment the playing field can never be expected to be level. The threats of the nature given by the Governor suggest that blind obedience to policy dictates is the order of the day.
In such an environment where hyperinflation and associated economic challenges are expected to be the real variables to determine the continuity of the incumbent, the role of an activist and partisan Governor of the central bank can be better understood. Anyone who dares challenge the status quo is assured of the consequences and it will not be surprising that citizens would like obedient sheep be shepherded into political compliance with a predetermined election outcome.
Sunday, May 27, 2007
Monday, May 21, 2007
To quit or not to quit: the leadership question
IF THE Labour Party was an African party and Tony Blair was its leader, would the party’s interests, and indeed, national interest have overridden the leader’s personal interest to remain in power?
The succession debate is not unique to Africa but what makes Africa unique is that personal interests of incumbents appear to be more important that even national interests. This is not restricted to the Heads of States but even to functionaries like Reserve Bank Governor Gideon Gono in the case of Zimbabwe.
Last Thursday, it was reported in that Gono was under pressure to quit against a background of an acknowledgement that Project Sunrise has left most of Zimbabwe in darkness and condemned the country to unprecedented inflation.
Notwithstanding the fact that the wheels are off in Zimbabwe, Gono hit is reported to have hit out at his critics in parliament and the ruling Zanu F party.
At the centre of the apparent dispute between Gono and the Portfolio Committee on Budget and Finance chaired by Guruve North MP, David Butau, appears to be the management of the national foreign currency resources by one man and the opaque quasi-fiscal activities of the RBZ. This is not the first time Gono has been criticised for monopolising the management of the national loot. Zanu PF at its national conference held in December 2006 passed a similar resolution to no effect.
It is now clear that President Mugabe will not exit as anticipated by his critics. The position taken by President Mugabe is not unusual and, in fact, he has many friends including the outgoing President of the World Bank, Paul Wolfowitz, whose initial reaction to the scandal that has rocked the World Bank was to say that he will not quit only to then succumb to sustained pressure from within and outside the institution. Even when there is overwhelming evidence that the continued stay in office of a leader is not in the best interests of the institution they serve there appears to be a universal attitude of leaders to continue to cling to power at all costs.
To the extent that the behaviour is not unique to Africa, it is important that we interrogate the issue of leadership response to internal and external shocks and crises so that citizens can find better ways of convincing stubborn leaders to vacate office to allow the mission of their institutions or nations to be advanced. Any observer who watched how the Labour Party and presumably Gordon Brown outmanoeuvred Tony Blair would agree that there are important lessons to be learnt on how an institution can democratically remove obsolete and irrelevant leaders.
Even in the Wolfowitz case it was clear from the beginning that his days were numbered but what was instructive is how the Staff Association of the World Bank and other external stakeholders as well as the media worked constructively to remove him. At the end, he conceded on Thursday last week the same day that Gono vowed that he will not quit by saying that he was resigning in the "best interests" of the bank, thus ending a protracted controversy over a generous pay and promotions package for his girlfriend, Shaha Riza.
My focus is not to dwell on the Wolfowitz case but to demonstrate how it is possible to make the necessary leadership changes in the face of recalcitrant leaders who become married for life to the offices they hold. Mr. Wolfowitz said something profound in his resignation statement. It read as follows: "I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership."
Why is it not conceivable that persons like President Mugabe and Gono will not see it in themselves to allow the destiny of Zimbabwe to continue to be written by other leaders when there is evidence that the patient i.e. Zimbabwe remains brain dead in the intensive care unit? Some may argue rightly or wrongly that it would not be in the national interest for a President to throw the towel in the face of problems instead of solving the problems in as much as President Wolfowitz, Blair and even the late Nyerere could have advanced the same self serving argument.
Some have said that “attitude determines altitude” and Zimbabwe’s possibilities can be as elastic as Zimbabweans are realistic enough to appreciate what works and what does not work. In the case of the RBZ, it does not take any genius to understand that any economy that is as micro-managed by a single unaccountable individual is doomed to fail. What is scarier are the justifications advanced to rationalise the destructive policies and actions. Having read what Gono had said to Zimbabwe’s elected representatives; I thought it was important to revisit Gono’s statements to highlight the dangers inherent in the continuation of the current economic strategy if it exists at all.
This is what Gono is reported to have said: “They say the governor is big-headed, he has got ambition. Some hide behind the camouflage of the legislature and bring out their spears so that the governor can be moved. Not before my term is finished!”
“We offer no apologies for interfering in all spheres of the economy. We offer no apology for doing the unorthodox. Those who wrote economic textbooks never experienced Zimbabwe’s land reform.”
“I hardly have a good sleep at night. I sleep facing the stars…why should we be importing food when the RBZ has printed trillions and trillions? We are being told that we cannot produce because we are susceptible to drought.
“It is therefore, illogical and misguided for some sections of society to recommend to government the formation of foreign exchange allocation committees thinking that this would in itself solve the prevailing foreign currency shortages.”
If it is common cause that the Gono medicine is not helping the patient, why would he want to remain in office giving the same dosage to a dying patient? If the Parliament of Zimbabwe is an address through which citizens express their views about the state of the nation, why would Gono adopt the attitude that the Parliament of Zimbabwe does not have a right to know about the allocation of the resources of the nation? Who should have oversight on the operations of the government? Is the budget still the vehicle for allocating resources in Zimbabwe?
Why would Gono have the courage of not offering an explanation for doing what he terms as the unorthodox? Is it Gono’s position that because of the land reform program, democracy should be suspended? Gono’s argument seems to suggest that institutions that should ordinarily inform any democratic society should be suspended in Zimbabwe. If this is accepted, then does a Zimbabwe that is implementing land reform really need a transparent and honest government?
The RBZ is an organ of the state of Zimbabwe and, therefore, it is unprecedented for a Governor to publicly ridicule the Parliament when he is not the Head of State. Even the Head of State would not dare make such statements to a Parliament if the doctrine of the separation of powers is applicable and operational.
Any reasonable Governor should ordinarily have no problems with the recommendation of the portfolio committee for the government to put in place institutional arrangements that would allow a multi-stakeholder framework to be responsible for allocating national resources. Why would Gono be afraid of a foreign exchange allocation committee? Does he have anything to hide? Could it be that one of the unorthodox measures being implemented by the RBZ is corruption?
The probability exists that in an environment where there is no transparency; corruption becomes the order of the day and the perpetrators benefit by pointing the fingers to other people like NMB officials when in truth and fact the worst transgressions may be the order of the day at the RBZ. Is it not possible that the citadel of corruption may now be the RBZ?
We have seen the drama associated with the so-called NMB’s second forex scandal. Could it be the case that the NMB officials were fully aware of the modus operandi in Zimbabwe i.e. the unorthodox where anything goes and with this in mind they proceeded to construct their own external bridge by remitting funds in the same manner that officials of the RBZ may be doing for personal gain?
It is evident that the attitude of President Mugabe to textbook economics is no different from Gono or the other way round. If theoretical economics is no longer relevant in Zimbabwe, then surely trained economists have reason to worry. If the attitude is as expressed by Gono then surely the 2008 elections would be nothing but a sham. Why would President Mugabe bother to get the mandate of the people when his Governor has the courage to tell the representatives of the same people to take a walk? This begs the question of whether a Zimbabwe that is implementing land reform and is under sanctions still needs a democratic dispensation. It is clear from Gono that if he were the President of Zimbabwe, it would be in the national interest to suspend democracy.
The succession debate is not unique to Africa but what makes Africa unique is that personal interests of incumbents appear to be more important that even national interests. This is not restricted to the Heads of States but even to functionaries like Reserve Bank Governor Gideon Gono in the case of Zimbabwe.
Last Thursday, it was reported in that Gono was under pressure to quit against a background of an acknowledgement that Project Sunrise has left most of Zimbabwe in darkness and condemned the country to unprecedented inflation.
Notwithstanding the fact that the wheels are off in Zimbabwe, Gono hit is reported to have hit out at his critics in parliament and the ruling Zanu F party.
At the centre of the apparent dispute between Gono and the Portfolio Committee on Budget and Finance chaired by Guruve North MP, David Butau, appears to be the management of the national foreign currency resources by one man and the opaque quasi-fiscal activities of the RBZ. This is not the first time Gono has been criticised for monopolising the management of the national loot. Zanu PF at its national conference held in December 2006 passed a similar resolution to no effect.
It is now clear that President Mugabe will not exit as anticipated by his critics. The position taken by President Mugabe is not unusual and, in fact, he has many friends including the outgoing President of the World Bank, Paul Wolfowitz, whose initial reaction to the scandal that has rocked the World Bank was to say that he will not quit only to then succumb to sustained pressure from within and outside the institution. Even when there is overwhelming evidence that the continued stay in office of a leader is not in the best interests of the institution they serve there appears to be a universal attitude of leaders to continue to cling to power at all costs.
To the extent that the behaviour is not unique to Africa, it is important that we interrogate the issue of leadership response to internal and external shocks and crises so that citizens can find better ways of convincing stubborn leaders to vacate office to allow the mission of their institutions or nations to be advanced. Any observer who watched how the Labour Party and presumably Gordon Brown outmanoeuvred Tony Blair would agree that there are important lessons to be learnt on how an institution can democratically remove obsolete and irrelevant leaders.
Even in the Wolfowitz case it was clear from the beginning that his days were numbered but what was instructive is how the Staff Association of the World Bank and other external stakeholders as well as the media worked constructively to remove him. At the end, he conceded on Thursday last week the same day that Gono vowed that he will not quit by saying that he was resigning in the "best interests" of the bank, thus ending a protracted controversy over a generous pay and promotions package for his girlfriend, Shaha Riza.
My focus is not to dwell on the Wolfowitz case but to demonstrate how it is possible to make the necessary leadership changes in the face of recalcitrant leaders who become married for life to the offices they hold. Mr. Wolfowitz said something profound in his resignation statement. It read as follows: "I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership."
Why is it not conceivable that persons like President Mugabe and Gono will not see it in themselves to allow the destiny of Zimbabwe to continue to be written by other leaders when there is evidence that the patient i.e. Zimbabwe remains brain dead in the intensive care unit? Some may argue rightly or wrongly that it would not be in the national interest for a President to throw the towel in the face of problems instead of solving the problems in as much as President Wolfowitz, Blair and even the late Nyerere could have advanced the same self serving argument.
Some have said that “attitude determines altitude” and Zimbabwe’s possibilities can be as elastic as Zimbabweans are realistic enough to appreciate what works and what does not work. In the case of the RBZ, it does not take any genius to understand that any economy that is as micro-managed by a single unaccountable individual is doomed to fail. What is scarier are the justifications advanced to rationalise the destructive policies and actions. Having read what Gono had said to Zimbabwe’s elected representatives; I thought it was important to revisit Gono’s statements to highlight the dangers inherent in the continuation of the current economic strategy if it exists at all.
This is what Gono is reported to have said: “They say the governor is big-headed, he has got ambition. Some hide behind the camouflage of the legislature and bring out their spears so that the governor can be moved. Not before my term is finished!”
“We offer no apologies for interfering in all spheres of the economy. We offer no apology for doing the unorthodox. Those who wrote economic textbooks never experienced Zimbabwe’s land reform.”
“I hardly have a good sleep at night. I sleep facing the stars…why should we be importing food when the RBZ has printed trillions and trillions? We are being told that we cannot produce because we are susceptible to drought.
“It is therefore, illogical and misguided for some sections of society to recommend to government the formation of foreign exchange allocation committees thinking that this would in itself solve the prevailing foreign currency shortages.”
If it is common cause that the Gono medicine is not helping the patient, why would he want to remain in office giving the same dosage to a dying patient? If the Parliament of Zimbabwe is an address through which citizens express their views about the state of the nation, why would Gono adopt the attitude that the Parliament of Zimbabwe does not have a right to know about the allocation of the resources of the nation? Who should have oversight on the operations of the government? Is the budget still the vehicle for allocating resources in Zimbabwe?
Why would Gono have the courage of not offering an explanation for doing what he terms as the unorthodox? Is it Gono’s position that because of the land reform program, democracy should be suspended? Gono’s argument seems to suggest that institutions that should ordinarily inform any democratic society should be suspended in Zimbabwe. If this is accepted, then does a Zimbabwe that is implementing land reform really need a transparent and honest government?
The RBZ is an organ of the state of Zimbabwe and, therefore, it is unprecedented for a Governor to publicly ridicule the Parliament when he is not the Head of State. Even the Head of State would not dare make such statements to a Parliament if the doctrine of the separation of powers is applicable and operational.
Any reasonable Governor should ordinarily have no problems with the recommendation of the portfolio committee for the government to put in place institutional arrangements that would allow a multi-stakeholder framework to be responsible for allocating national resources. Why would Gono be afraid of a foreign exchange allocation committee? Does he have anything to hide? Could it be that one of the unorthodox measures being implemented by the RBZ is corruption?
The probability exists that in an environment where there is no transparency; corruption becomes the order of the day and the perpetrators benefit by pointing the fingers to other people like NMB officials when in truth and fact the worst transgressions may be the order of the day at the RBZ. Is it not possible that the citadel of corruption may now be the RBZ?
We have seen the drama associated with the so-called NMB’s second forex scandal. Could it be the case that the NMB officials were fully aware of the modus operandi in Zimbabwe i.e. the unorthodox where anything goes and with this in mind they proceeded to construct their own external bridge by remitting funds in the same manner that officials of the RBZ may be doing for personal gain?
It is evident that the attitude of President Mugabe to textbook economics is no different from Gono or the other way round. If theoretical economics is no longer relevant in Zimbabwe, then surely trained economists have reason to worry. If the attitude is as expressed by Gono then surely the 2008 elections would be nothing but a sham. Why would President Mugabe bother to get the mandate of the people when his Governor has the courage to tell the representatives of the same people to take a walk? This begs the question of whether a Zimbabwe that is implementing land reform and is under sanctions still needs a democratic dispensation. It is clear from Gono that if he were the President of Zimbabwe, it would be in the national interest to suspend democracy.
Monday, May 14, 2007
Business sector cannot remain indifferent to political question
WHILE Tony Blair is now history, Robert Mugabe continues to make history.
The Zimbabwean story will continue to be clouded by the country’s colonial baggage to such an extent that it becomes difficult if not impossible to discuss its current economic and political crisis in isolation of the Blair legacy.
While political actors focus attention on constitutional, transitional power sharing arrangements, and legitimacy, the economy of Zimbabwe ultimately is the victim with no visible salvation.
All the economic indicators show that Zimbabwe is in the intensive care unit and is embarrassingly competing to make a world record as the worst performing country.
The response of the government of Zimbabwe to the crisis has been predictable. Deny any responsibility for the crisis and instead target on a selective basis the usual suspects i.e. the former colonial masters, corrupt businessmen, unpatriotic actions by citizens, and naturally sanctions.
The argument advanced is that the economy is under siege and, therefore, unorthodox economic policies are not only called for by essential to protect the motherland from retrogressing to its former colonial status with the obvious implications on sovereignty.
What is surprising in the Zimbabwean case study is that while the economic indicators are pointing in the opposite direction, the business actors appear to be politically disengaged. The financials of these players appear to be immune from the harsh conditions suggested by the macro-economic indicators. With the exception of the agricultural sector where significant adjustments have been made on asset ownership, one finds no evidence of any significant divestment by any serious economic players as a result of the desperate economic situation.
The economic distortions caused by the current policy framework seem to be of benefit to the market players. Even adjusting for hyperinflation, companies continue to post profits in Zimbabwe.
Against a background of an uncertain future for any businessman operating in Zimbabwe, there has been no visible evidence of business actors switching their allegiances to the opposition. Some have attributed this to fear but could there be something at play. The Zimbabwean economy continues to be dominated by international players who have not shown any sign of jumping ship like what happened in the dying days of apartheid.
The sanctions regime is not targeted at the real economic beneficiaries of the crisis but on political actors. In fact, many investors are busy concluding deals with the seemingly discredited government of Zimbabwe. While some may argue that the government if illegitimate, the business actors seem to be unfazed by this. Even South African investors where the public opinion and particularly the corporate sector want President Mbeki to intervene, appear to be concerned about the distorted economic environment and political situation. They are positively identifying with the government of Zimbabwe’s policies by investing substantial capital in the country.
Notwithstanding the seemingly positive and aggressive posture taken by the private sector in Zimbabwe, concern remains on the impact of economic policies on economic transformation. While the economy is nose diving, at the micro level the businesses do not exhibit the same signs.
Ideologically, President Mugabe’s world view is no different from COSATU, the South African Communist Party and the non-state actors who share the conviction that the state should play a central role in economic activity. In fact, there appears to be consensus between these parties that the state should intervene and market forces should not be trusted as instruments for change. However, these parties do not share the same views on political governance.
Some have argued that the current Zimbabwean crisis is a direct result of the land issue but evidence suggests otherwise. The economic problems of Zimbabwe predate the formation of the MDC and the land issue. No serious discussion has been generated on economic issues presumably because the black majority in not only Zimbabwe but the rest of the continent is alienated from the ownership of assets and the interests informed by such status. Invariably, the focus in Africa is on who occupies the state house rather than what kind of policies are required to make Africa a winning continent.
Nothing demonstrates the challenges of nation building than the attitude to incomes and pricing policies. In the case of Zimbabwe, President Mugabe has never been convinced ideologically that devaluation has any place in a country like Zimbabwe. The control mentality is evident in the manner in which the country has approached the devaluation issue. The mentality predates Gono and is supported by many intellectuals and seemingly informed people.
The question that is often not addressed is whether such policies in practice help the poor or impose a penalty on the very people that are supposed to benefit from such policies. What is evident is that the business sector has largely been immune from the negative impact of the anti-devaluation policies choosing to find innovative and creative ways of circumventing such hurdles through participation in the financially rewarding parallel market.
On the ground, the government has chosen to turn a blind eye to this market at the macro level but has chosen to target a few players who have predominantly been black to cynically demonstrate a seriousness to tackle the negative impact of such policies. The Zimbabwean market has already internalised the sentiment that a no devaluation policy is an invitation to participate in the parallel market.
What is not clear is whether President Mugabe is sufficiently informed about the impracticality of his policy stance. It may be the case that at the ideological level, no one has been able to challenge President Mugabe on the futility of a policy framework that is alienated from the concrete realities on the ground.
To demonstrate the impracticality of the current policies that are informed by antiquated assumptions based on a historically discredited ideology, I have done a simplistic analysis set out below to show that if honesty was the guiding principle in Zimbabwe, no exporter would still be in business begging the question why people would still be investing in the country.
Profit & Loss
Profit & Loss
%
US$/Per Unit
# of Units
Z$ Equivalent
Z$ Equivalent
No inflation
With inflation
Inflation (%)
1000%
Exchange Rate US$1=Z$
15,000
Sales (units)
1000
Sales (Price)
6.67
Sales Revenue
100,050,000
100,050,000
Cost of Sales
Foreign Element
40.0%
2.13
32,016,000
32,016,000
Local Element
60.0%
3.20
48,024,000
480,240,000
Gross Margin
20.0%
1.33
20,010,000
-412,206,000
Other cash expenses
10.0%
0.67
10,005,000
100,050,000
EBITDA
0.67
10,005,000
-512,256,000
I have assumed that this company produces 1,000 units of a product that is exported. The price per unit is assumed at US$6.67 and the exchange rate is assumed at Z$15,000:US$1. The gross margin has been assumed at 20% with cost of sales at US$5.33 split into 40% comprising imported inputs and 60% comprising domestic costs. Operating costs have been assumed at 10% of the sales revenue resulting in earnings before interest, depreciation and amortisation (EBITDA) being US$0.67 per unit.
Using an exchange rate of Z$15,000 to US$1, the EBITDA translates to Z$10,005,000. However, when inflation assumed at 1,000% is taken into account, the same company will post an EBITDA loss of Z$512,256,000. Based on these numbers, if this company does not participate in the black market, there is no way in hell that it will remain in business.
It is clear from the above that in a hyperinflationary environment, no exporter will remain in business under a policy regime that says devaluation is out of the question. If this is the case, why then would the business sector be indifferent to the political question and allow only three individuals i.e. Mugabe, Tsvangirai and Mutambara to crowd out their interests from the political discourse? Could it be the case that through the RBZ, the business sector is operating under a different regime than what is publicly disclosed?
I am informed that the parallel exchange rate is now at Z$38,000 to US$1 while the official exchange rate is pegged at Z$15,000 to US$1. If this is true, can you imagine the impact this has on the vulnerable groups in Zimbabwe who have no foreign currency to trade in the parallel market.
To the extent that President Mugabe does not subscribe to liberal market principles, what policy framework should inform a new Zimbabwe? For 27 years, President Mugabe has not shown any change in terms of his world view and the consequences are telling. What impact would another term have on the patient called Zimbabwe is a question that can only be addressed if an honest assessment of the policy regime that has informed post-colonial Zimbabwe is undertaken and hopefully become part of the conversation of those who believe that Zimbabwe’s problems may largely be self generated.
The Zimbabwean story will continue to be clouded by the country’s colonial baggage to such an extent that it becomes difficult if not impossible to discuss its current economic and political crisis in isolation of the Blair legacy.
While political actors focus attention on constitutional, transitional power sharing arrangements, and legitimacy, the economy of Zimbabwe ultimately is the victim with no visible salvation.
All the economic indicators show that Zimbabwe is in the intensive care unit and is embarrassingly competing to make a world record as the worst performing country.
The response of the government of Zimbabwe to the crisis has been predictable. Deny any responsibility for the crisis and instead target on a selective basis the usual suspects i.e. the former colonial masters, corrupt businessmen, unpatriotic actions by citizens, and naturally sanctions.
The argument advanced is that the economy is under siege and, therefore, unorthodox economic policies are not only called for by essential to protect the motherland from retrogressing to its former colonial status with the obvious implications on sovereignty.
What is surprising in the Zimbabwean case study is that while the economic indicators are pointing in the opposite direction, the business actors appear to be politically disengaged. The financials of these players appear to be immune from the harsh conditions suggested by the macro-economic indicators. With the exception of the agricultural sector where significant adjustments have been made on asset ownership, one finds no evidence of any significant divestment by any serious economic players as a result of the desperate economic situation.
The economic distortions caused by the current policy framework seem to be of benefit to the market players. Even adjusting for hyperinflation, companies continue to post profits in Zimbabwe.
Against a background of an uncertain future for any businessman operating in Zimbabwe, there has been no visible evidence of business actors switching their allegiances to the opposition. Some have attributed this to fear but could there be something at play. The Zimbabwean economy continues to be dominated by international players who have not shown any sign of jumping ship like what happened in the dying days of apartheid.
The sanctions regime is not targeted at the real economic beneficiaries of the crisis but on political actors. In fact, many investors are busy concluding deals with the seemingly discredited government of Zimbabwe. While some may argue that the government if illegitimate, the business actors seem to be unfazed by this. Even South African investors where the public opinion and particularly the corporate sector want President Mbeki to intervene, appear to be concerned about the distorted economic environment and political situation. They are positively identifying with the government of Zimbabwe’s policies by investing substantial capital in the country.
Notwithstanding the seemingly positive and aggressive posture taken by the private sector in Zimbabwe, concern remains on the impact of economic policies on economic transformation. While the economy is nose diving, at the micro level the businesses do not exhibit the same signs.
Ideologically, President Mugabe’s world view is no different from COSATU, the South African Communist Party and the non-state actors who share the conviction that the state should play a central role in economic activity. In fact, there appears to be consensus between these parties that the state should intervene and market forces should not be trusted as instruments for change. However, these parties do not share the same views on political governance.
Some have argued that the current Zimbabwean crisis is a direct result of the land issue but evidence suggests otherwise. The economic problems of Zimbabwe predate the formation of the MDC and the land issue. No serious discussion has been generated on economic issues presumably because the black majority in not only Zimbabwe but the rest of the continent is alienated from the ownership of assets and the interests informed by such status. Invariably, the focus in Africa is on who occupies the state house rather than what kind of policies are required to make Africa a winning continent.
Nothing demonstrates the challenges of nation building than the attitude to incomes and pricing policies. In the case of Zimbabwe, President Mugabe has never been convinced ideologically that devaluation has any place in a country like Zimbabwe. The control mentality is evident in the manner in which the country has approached the devaluation issue. The mentality predates Gono and is supported by many intellectuals and seemingly informed people.
The question that is often not addressed is whether such policies in practice help the poor or impose a penalty on the very people that are supposed to benefit from such policies. What is evident is that the business sector has largely been immune from the negative impact of the anti-devaluation policies choosing to find innovative and creative ways of circumventing such hurdles through participation in the financially rewarding parallel market.
On the ground, the government has chosen to turn a blind eye to this market at the macro level but has chosen to target a few players who have predominantly been black to cynically demonstrate a seriousness to tackle the negative impact of such policies. The Zimbabwean market has already internalised the sentiment that a no devaluation policy is an invitation to participate in the parallel market.
What is not clear is whether President Mugabe is sufficiently informed about the impracticality of his policy stance. It may be the case that at the ideological level, no one has been able to challenge President Mugabe on the futility of a policy framework that is alienated from the concrete realities on the ground.
To demonstrate the impracticality of the current policies that are informed by antiquated assumptions based on a historically discredited ideology, I have done a simplistic analysis set out below to show that if honesty was the guiding principle in Zimbabwe, no exporter would still be in business begging the question why people would still be investing in the country.
Profit & Loss
Profit & Loss
%
US$/Per Unit
# of Units
Z$ Equivalent
Z$ Equivalent
No inflation
With inflation
Inflation (%)
1000%
Exchange Rate US$1=Z$
15,000
Sales (units)
1000
Sales (Price)
6.67
Sales Revenue
100,050,000
100,050,000
Cost of Sales
Foreign Element
40.0%
2.13
32,016,000
32,016,000
Local Element
60.0%
3.20
48,024,000
480,240,000
Gross Margin
20.0%
1.33
20,010,000
-412,206,000
Other cash expenses
10.0%
0.67
10,005,000
100,050,000
EBITDA
0.67
10,005,000
-512,256,000
I have assumed that this company produces 1,000 units of a product that is exported. The price per unit is assumed at US$6.67 and the exchange rate is assumed at Z$15,000:US$1. The gross margin has been assumed at 20% with cost of sales at US$5.33 split into 40% comprising imported inputs and 60% comprising domestic costs. Operating costs have been assumed at 10% of the sales revenue resulting in earnings before interest, depreciation and amortisation (EBITDA) being US$0.67 per unit.
Using an exchange rate of Z$15,000 to US$1, the EBITDA translates to Z$10,005,000. However, when inflation assumed at 1,000% is taken into account, the same company will post an EBITDA loss of Z$512,256,000. Based on these numbers, if this company does not participate in the black market, there is no way in hell that it will remain in business.
It is clear from the above that in a hyperinflationary environment, no exporter will remain in business under a policy regime that says devaluation is out of the question. If this is the case, why then would the business sector be indifferent to the political question and allow only three individuals i.e. Mugabe, Tsvangirai and Mutambara to crowd out their interests from the political discourse? Could it be the case that through the RBZ, the business sector is operating under a different regime than what is publicly disclosed?
I am informed that the parallel exchange rate is now at Z$38,000 to US$1 while the official exchange rate is pegged at Z$15,000 to US$1. If this is true, can you imagine the impact this has on the vulnerable groups in Zimbabwe who have no foreign currency to trade in the parallel market.
To the extent that President Mugabe does not subscribe to liberal market principles, what policy framework should inform a new Zimbabwe? For 27 years, President Mugabe has not shown any change in terms of his world view and the consequences are telling. What impact would another term have on the patient called Zimbabwe is a question that can only be addressed if an honest assessment of the policy regime that has informed post-colonial Zimbabwe is undertaken and hopefully become part of the conversation of those who believe that Zimbabwe’s problems may largely be self generated.
Monday, May 7, 2007
Gono plays Pope and Cop
WHAT a difference a week makes!
My week started on Sunday, April 29 when I read an article published by the Sunday Mail with the title: “Gono pushes for amnesty” and during the week, another article was published by the Herald on 4 May 2007 entitled: “Forex remittance defaulters warned.”
How can the RBZ be pushing for amnesty while at the same time threatening others of punishment for the same offences? It is important that we unpack the amnesty call and attempt to focus on the role of the RBZ in creating confusion and undermining the rule of law in Zimbabwe.
It is evident that the RBZ has now become a critical player in furthering the exploits of the political actors who see no evil in their policies and, therefore, wish to remain in power indefinitely. Why call for amnesty when the criminalisation of the intended beneficiaries of such amnesty was meant to ameliorate the problems of the country? Does it mean that Gono’s policies were misguided? Who should be culpable for the senseless policies?
The Sunday Mail reported that Gono was pushing for an amnesty for some economic fugitives who fled the country in the past few years arguing that this would see the country dedicating its resources to worthwhile economic endeavors. He was reported to have said that the amnesty would earn the Government a lot of goodwill and encourage the "economic fugitives" to deal with their own conscience.
With respect to the justification for the change of policy, he had this to say: "In South Africa, they had amnesty that related to externalisation of foreign exchange which brought in significant sums back into the country. This related to exchange control violations but did not relate to criminal activities. It’s along the same lines that have motivated me to call on us to formally examine that approach because of the knowledge that many Zimbabweans are living in fear because they have skeletons in their cupboards and are just waiting for the law to catch up with them. The call must not be read as a sign of weakness on the part of the central bank but is one in the same spirit of healing, in the spirit of the Social Contract and it’s in the spirit of trying to rebuild our country.
He made the allegations that there are companies and individuals that are under-invoicing exports and over-invoicing imports and violating Exchange Control Regulations. On this issue, he made special mention of the tourism industry as follows:
"In the area of tourism as well as hunting, we are aware of organisations which for one reason or another have kept this country’s proceeds outside and the proposed amnesty is meant to encourage them to deal with their conscience, clean their decks and exorcise the demons that are in their bottom drawers in a manner that will benefit the country.
"The proposal of an amnesty of that kind would obviously need to be predicated on a time frame and conditionalities including the fact that those who had actually been tried and found guilty, but are running away from justice would obviously not be covered by such amnesty."
He then proposed a reconciliation framework involving a number of stakeholders as social partners as a way forward in resolving the Zimbabwean crisis. He said as follows:
"This is also in the spirit of healing and forging a genuine smart partnership which has win-win features and an advancement of the principle of reconciliation as was founded by none other than His Excellency, President Mugabe.
"Such an approach would allow the country to dedicate current scarce resources to present and future transgressions than to be wasting those resources on past and often elusive misdemeanors and playing the cat and mouse game.
"Kune vanhu vakawanda vane hama dzavo whether in business or in their private capacity vasiri kurara mudzimba for fear that one day the law will catch up with them? So such a move will earn the Government tremendous goodwill from a wide spectrum of economic players. In the spirit of the ongoing negotiations for a Social Contract, the idea of an amnesty should be seriously considered."
Gono’s sentiments were given legitimacy by Zimbabwe’s CEO, President Mugabe, when he said: "We are all witness to the futility of trying to turn around our economy in an environment of pointless conflict."
It is evident that President Mugabe genuinely believes that the Zimbabwean crisis is externally driven and there is nothing he would have done differently over the past 27 years to make Zimbabwe a winning country. He is of the view that were it not for the machinations of imperialists and their agents with the support of unpatriotic businessmen, Zimbabwe would be a functional democracy.
There is very little that can be done to change President Mugabe’s world view. This view is not only held by President Mugabe but is evidently held by Gono as well. When he was appointed as Governor of the RBZ, he was quick to target what he termed as “unscrupulous businessmen” as the root cause of the crisis. He then proceeded to cause the amendment of the exchange control regulations and transforming any alleged violations into serious economic crimes. The victims are many and identifiable.
It must be acknowledged, however, that the approach of criminalising rational economic behavior did not start with Gono. The early victims were Enos Nkala, Shadreck Shava, Dzingai Mutumbuka, Maurice Nyagumbo and company who were accused of buying cars at controlled prices and then selling the same cars at market prices.
Their alleged crimes are no different from the construction of the externalisation charges for which Gono is now proposing a policy reversal without taking any responsibility for championing such misguided policies. President Mugabe believes in controls, be it of political or economic behavior. Under his world view, the prices of commodities must be determined by the government in as much as the exchange rate.
The Willowgate scandal of the late eighties where Ministers lost their jobs for recognising that a market system offers a rational basis of allocating scarce resources demonstrated the attitude of President Mugabe to a market system and its consequences. In 2007, we find that the government of Zimbabwe has not changed its outlook on the market system. Mugabe now has a Governor who shares the same outlook and zeal to blame third parties for policies that have universally failed to deliver efficiency to any known economic system. It is amazing that President Mugabe and his colleagues continue to live in the fantasy world that believes that resources can be efficiently allocated by an administrative system.
Gono now wants Zimbabweans to accept a situation where selected individuals can benefit from buying foreign exchange at Z$15,000 to US$1 and then sell the same US$1 at Zim$25,000 or more. Gono has made his point that devaluation is out of the question but has introduced an Economic Stabilization Fund under which all foreign currency holders can sell to the RBZ their foreign currency at Z$15,000 to US$1. If there was any amnesty to be granted then Gono would be an ideal candidate for living in a fantasy world. Why would Gono attempt to deny an obvious devaluation? Whose interests is he protecting? Who benefits from the current distortions? Would President Mugabe, to the extent he knows that the RBZ is trading foreign currency at black market rate, want to continue to remain as President of Zimbabwe beyond 2008?
Anyone who does not subscribe to the misguided policies of Gono and his principals has been labeled a saboteur worthy of punishment by the law enforcement officers. While Gono was preaching the reconciliation, message he was also putting in place a whistle blower scheme targeting diamond traders.
Even illegal diamond traders are more intelligent than what Gono would expect the average Zimbabwean citizen to be. In Gono’s world, a person with, for example, US$1 would be expected to exchange his money for Z$15,000 while pretending that the official rate is Z$250 when the market can accommodate Z$25,000. Assuming Gono is a rational person and has not lived in a make believe world like the ‘State House’ for the past 27 years, why would he expect exporters to exchange their export proceeds at Z$15,000 while acknowledging that the country is a victim of hyperinflation?
For many who have wondered why diplomats including those representing Mugabe’s worst enemies have not been critical of Gono, it may not be far fetched to speculate that these diplomats may be themselves beneficiaries of the market exchange rate from none other than Your Governor. Can you imagine a foreign diplomat who, for example, receives a salary of US$20,000 per month? He faced the prospect of converting his salary at Z$250 until last week, translating into Z$5 million, compared to Z$500 million that he stood to realise from the parallel market. I am not sure that many diplomats would not find the RBZ to be an economically useful ally in the circumstances.
In an opaque system administered by Gono, there is no doubt that many beneficiaries of the illegal trades would prefer to keep quiet while selected targets are daily castigated for conduct that the RBZ should also be guilty of. What would be interesting is for Gono to make public the affairs of Fiscorp, the special purpose vehicle, set up to warehouse the quasi-fiscal operations before preaching about amnesty.
As Zimbabwe approaches the D-Day to choose a new government, it is important that key issues are openly debated and people are informed about the conduct of their agents who are in the public sector. The impression created so far is that anyone who works in government is an angel and citizens are guilty as charged. What if the policies of the government are misguided and criminal, who should give amnesty to whom? What are the choices for citizens when the world view of its first citizen is inconsistent with the values that promote progress and development? Are the poor protected by policies that are immoral and based on deception?
In criminal law, amnesty is a sovereign act of oblivion or forgetfulness (from Greek amnestia, "forgetfulness") granted by a government, especially to a group of persons who are guilty of (usually political) crimes in the past. It is often conditional upon the group's return to obedience and duty within a prescribed period. It is the action of a government by which all persons or certain groups of persons who have committed a criminal offence—usually of a political nature that threatens the sovereignty of the government (such as sedition or treason) are granted immunity from prosecution.
Amnesty allows the government of a nation or state to "forget" criminal acts, usually before prosecution has occurred. Amnesty has traditionally been used as a political tool of compromise and reunion following a war. An act of amnesty is generally granted to a group of people who have committed crimes against the state. Gono would like Zimbabweans to believe that selling foreign currency at a market rate should be treated no differently from any treasonable offence. If the truth were to be told, how many Zimbabweans would not be guilty of the same offence to make a mockery of Gono’s games?
Before the end of the week, another article was published on May 4, 2007, in the Herald entitled: “Forex remittance defaulters warned”. It was reported that the RBZ will come down hard on exporters that continue to deprive the economy of precious foreign currency through under-invoicing and non-remittance of foreign currency receipts. Without giving figures, the central bank said this week Zimbabwe was losing millions of dollars in hard cash to "fraudsters" within the export sector.
RBZ said while export figures for the first quarter were on the rise — up 23 percent to US$420 million — the number of outstanding receipts was too big to ignore. The RBZ went on to state as follows:
"Currently, the country is owed millions of dollars by these delinquent exporters, some of whom have literally gone into hiding. The central bank is fully aware of these delinquents, and has forwarded a comprehensive list to law enforcement agencies to track down those commodity brokers who have gone into hiding to avoid the completion of export formalities.
"Reserve Bank also notes with concern that some exporters continue to under-invoice their exports resulting in the country not realising the true and fair value of its exports.
"Exporters are further warned against such retrogressive behaviour and measures have been put in place to detect such malpractices."
While in many countries, the market is allowed to determine the exchange rate, in Gono’s world exports belong to the nation and the export is merely an agent of the state. Under this construction, the exports are effectively a nationalised commodity and while the government is not exposed to production costs it nevertheless has a say in terms of the output regardless of whether viability of such producers is an issue.
What is unfortunate is that there appears to be no informed discussions on policy matters particularly in respect to what direction Zimbabwe should take to lift itself from the current quagmire. I sincerely believe that good policies induce good behaviour and progress only comes from progressive policies.
What is tragic is the chameleon type behaviour of people like Gono who exhibit many colours and the confusion they inflict on unsuspecting citizens who deserve a better deal. On the one hand he preaches amnesty while on the other fails to acknowledge the bankruptcy of his policies and programs. He plays the Pope while at the same time plays the Cop without any respect of the objective conditions on the ground and his construct actions in undermining the rule of law in Zimbabwe as well as the violation of human and property rights.
My week started on Sunday, April 29 when I read an article published by the Sunday Mail with the title: “Gono pushes for amnesty” and during the week, another article was published by the Herald on 4 May 2007 entitled: “Forex remittance defaulters warned.”
How can the RBZ be pushing for amnesty while at the same time threatening others of punishment for the same offences? It is important that we unpack the amnesty call and attempt to focus on the role of the RBZ in creating confusion and undermining the rule of law in Zimbabwe.
It is evident that the RBZ has now become a critical player in furthering the exploits of the political actors who see no evil in their policies and, therefore, wish to remain in power indefinitely. Why call for amnesty when the criminalisation of the intended beneficiaries of such amnesty was meant to ameliorate the problems of the country? Does it mean that Gono’s policies were misguided? Who should be culpable for the senseless policies?
The Sunday Mail reported that Gono was pushing for an amnesty for some economic fugitives who fled the country in the past few years arguing that this would see the country dedicating its resources to worthwhile economic endeavors. He was reported to have said that the amnesty would earn the Government a lot of goodwill and encourage the "economic fugitives" to deal with their own conscience.
With respect to the justification for the change of policy, he had this to say: "In South Africa, they had amnesty that related to externalisation of foreign exchange which brought in significant sums back into the country. This related to exchange control violations but did not relate to criminal activities. It’s along the same lines that have motivated me to call on us to formally examine that approach because of the knowledge that many Zimbabweans are living in fear because they have skeletons in their cupboards and are just waiting for the law to catch up with them. The call must not be read as a sign of weakness on the part of the central bank but is one in the same spirit of healing, in the spirit of the Social Contract and it’s in the spirit of trying to rebuild our country.
He made the allegations that there are companies and individuals that are under-invoicing exports and over-invoicing imports and violating Exchange Control Regulations. On this issue, he made special mention of the tourism industry as follows:
"In the area of tourism as well as hunting, we are aware of organisations which for one reason or another have kept this country’s proceeds outside and the proposed amnesty is meant to encourage them to deal with their conscience, clean their decks and exorcise the demons that are in their bottom drawers in a manner that will benefit the country.
"The proposal of an amnesty of that kind would obviously need to be predicated on a time frame and conditionalities including the fact that those who had actually been tried and found guilty, but are running away from justice would obviously not be covered by such amnesty."
He then proposed a reconciliation framework involving a number of stakeholders as social partners as a way forward in resolving the Zimbabwean crisis. He said as follows:
"This is also in the spirit of healing and forging a genuine smart partnership which has win-win features and an advancement of the principle of reconciliation as was founded by none other than His Excellency, President Mugabe.
"Such an approach would allow the country to dedicate current scarce resources to present and future transgressions than to be wasting those resources on past and often elusive misdemeanors and playing the cat and mouse game.
"Kune vanhu vakawanda vane hama dzavo whether in business or in their private capacity vasiri kurara mudzimba for fear that one day the law will catch up with them? So such a move will earn the Government tremendous goodwill from a wide spectrum of economic players. In the spirit of the ongoing negotiations for a Social Contract, the idea of an amnesty should be seriously considered."
Gono’s sentiments were given legitimacy by Zimbabwe’s CEO, President Mugabe, when he said: "We are all witness to the futility of trying to turn around our economy in an environment of pointless conflict."
It is evident that President Mugabe genuinely believes that the Zimbabwean crisis is externally driven and there is nothing he would have done differently over the past 27 years to make Zimbabwe a winning country. He is of the view that were it not for the machinations of imperialists and their agents with the support of unpatriotic businessmen, Zimbabwe would be a functional democracy.
There is very little that can be done to change President Mugabe’s world view. This view is not only held by President Mugabe but is evidently held by Gono as well. When he was appointed as Governor of the RBZ, he was quick to target what he termed as “unscrupulous businessmen” as the root cause of the crisis. He then proceeded to cause the amendment of the exchange control regulations and transforming any alleged violations into serious economic crimes. The victims are many and identifiable.
It must be acknowledged, however, that the approach of criminalising rational economic behavior did not start with Gono. The early victims were Enos Nkala, Shadreck Shava, Dzingai Mutumbuka, Maurice Nyagumbo and company who were accused of buying cars at controlled prices and then selling the same cars at market prices.
Their alleged crimes are no different from the construction of the externalisation charges for which Gono is now proposing a policy reversal without taking any responsibility for championing such misguided policies. President Mugabe believes in controls, be it of political or economic behavior. Under his world view, the prices of commodities must be determined by the government in as much as the exchange rate.
The Willowgate scandal of the late eighties where Ministers lost their jobs for recognising that a market system offers a rational basis of allocating scarce resources demonstrated the attitude of President Mugabe to a market system and its consequences. In 2007, we find that the government of Zimbabwe has not changed its outlook on the market system. Mugabe now has a Governor who shares the same outlook and zeal to blame third parties for policies that have universally failed to deliver efficiency to any known economic system. It is amazing that President Mugabe and his colleagues continue to live in the fantasy world that believes that resources can be efficiently allocated by an administrative system.
Gono now wants Zimbabweans to accept a situation where selected individuals can benefit from buying foreign exchange at Z$15,000 to US$1 and then sell the same US$1 at Zim$25,000 or more. Gono has made his point that devaluation is out of the question but has introduced an Economic Stabilization Fund under which all foreign currency holders can sell to the RBZ their foreign currency at Z$15,000 to US$1. If there was any amnesty to be granted then Gono would be an ideal candidate for living in a fantasy world. Why would Gono attempt to deny an obvious devaluation? Whose interests is he protecting? Who benefits from the current distortions? Would President Mugabe, to the extent he knows that the RBZ is trading foreign currency at black market rate, want to continue to remain as President of Zimbabwe beyond 2008?
Anyone who does not subscribe to the misguided policies of Gono and his principals has been labeled a saboteur worthy of punishment by the law enforcement officers. While Gono was preaching the reconciliation, message he was also putting in place a whistle blower scheme targeting diamond traders.
Even illegal diamond traders are more intelligent than what Gono would expect the average Zimbabwean citizen to be. In Gono’s world, a person with, for example, US$1 would be expected to exchange his money for Z$15,000 while pretending that the official rate is Z$250 when the market can accommodate Z$25,000. Assuming Gono is a rational person and has not lived in a make believe world like the ‘State House’ for the past 27 years, why would he expect exporters to exchange their export proceeds at Z$15,000 while acknowledging that the country is a victim of hyperinflation?
For many who have wondered why diplomats including those representing Mugabe’s worst enemies have not been critical of Gono, it may not be far fetched to speculate that these diplomats may be themselves beneficiaries of the market exchange rate from none other than Your Governor. Can you imagine a foreign diplomat who, for example, receives a salary of US$20,000 per month? He faced the prospect of converting his salary at Z$250 until last week, translating into Z$5 million, compared to Z$500 million that he stood to realise from the parallel market. I am not sure that many diplomats would not find the RBZ to be an economically useful ally in the circumstances.
In an opaque system administered by Gono, there is no doubt that many beneficiaries of the illegal trades would prefer to keep quiet while selected targets are daily castigated for conduct that the RBZ should also be guilty of. What would be interesting is for Gono to make public the affairs of Fiscorp, the special purpose vehicle, set up to warehouse the quasi-fiscal operations before preaching about amnesty.
As Zimbabwe approaches the D-Day to choose a new government, it is important that key issues are openly debated and people are informed about the conduct of their agents who are in the public sector. The impression created so far is that anyone who works in government is an angel and citizens are guilty as charged. What if the policies of the government are misguided and criminal, who should give amnesty to whom? What are the choices for citizens when the world view of its first citizen is inconsistent with the values that promote progress and development? Are the poor protected by policies that are immoral and based on deception?
In criminal law, amnesty is a sovereign act of oblivion or forgetfulness (from Greek amnestia, "forgetfulness") granted by a government, especially to a group of persons who are guilty of (usually political) crimes in the past. It is often conditional upon the group's return to obedience and duty within a prescribed period. It is the action of a government by which all persons or certain groups of persons who have committed a criminal offence—usually of a political nature that threatens the sovereignty of the government (such as sedition or treason) are granted immunity from prosecution.
Amnesty allows the government of a nation or state to "forget" criminal acts, usually before prosecution has occurred. Amnesty has traditionally been used as a political tool of compromise and reunion following a war. An act of amnesty is generally granted to a group of people who have committed crimes against the state. Gono would like Zimbabweans to believe that selling foreign currency at a market rate should be treated no differently from any treasonable offence. If the truth were to be told, how many Zimbabweans would not be guilty of the same offence to make a mockery of Gono’s games?
Before the end of the week, another article was published on May 4, 2007, in the Herald entitled: “Forex remittance defaulters warned”. It was reported that the RBZ will come down hard on exporters that continue to deprive the economy of precious foreign currency through under-invoicing and non-remittance of foreign currency receipts. Without giving figures, the central bank said this week Zimbabwe was losing millions of dollars in hard cash to "fraudsters" within the export sector.
RBZ said while export figures for the first quarter were on the rise — up 23 percent to US$420 million — the number of outstanding receipts was too big to ignore. The RBZ went on to state as follows:
"Currently, the country is owed millions of dollars by these delinquent exporters, some of whom have literally gone into hiding. The central bank is fully aware of these delinquents, and has forwarded a comprehensive list to law enforcement agencies to track down those commodity brokers who have gone into hiding to avoid the completion of export formalities.
"Reserve Bank also notes with concern that some exporters continue to under-invoice their exports resulting in the country not realising the true and fair value of its exports.
"Exporters are further warned against such retrogressive behaviour and measures have been put in place to detect such malpractices."
While in many countries, the market is allowed to determine the exchange rate, in Gono’s world exports belong to the nation and the export is merely an agent of the state. Under this construction, the exports are effectively a nationalised commodity and while the government is not exposed to production costs it nevertheless has a say in terms of the output regardless of whether viability of such producers is an issue.
What is unfortunate is that there appears to be no informed discussions on policy matters particularly in respect to what direction Zimbabwe should take to lift itself from the current quagmire. I sincerely believe that good policies induce good behaviour and progress only comes from progressive policies.
What is tragic is the chameleon type behaviour of people like Gono who exhibit many colours and the confusion they inflict on unsuspecting citizens who deserve a better deal. On the one hand he preaches amnesty while on the other fails to acknowledge the bankruptcy of his policies and programs. He plays the Pope while at the same time plays the Cop without any respect of the objective conditions on the ground and his construct actions in undermining the rule of law in Zimbabwe as well as the violation of human and property rights.
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