Tuesday 23 April 2019


THERE are growing fears that Zimbabwe's fast-deteriorating economic situation - marked by shocking price hikes and severe shortages of foreign currency, fuel and vital medicines - could trigger social and political unrest as has been witnessed in countries such as Sudan and Algeria, the Daily News can report.

This comes as the prices of basic consumer goods in the country, such as bread and mealie-meal, have hit through the roof over the past month, amid renewed calls by a desperate business community for authorities to consider adopting the South African rand to help stabilise the economy.

It also comes as President Emmerson Mnangagwa has recently accused some businesses of being "unpatriotic and inhumane", following the recent sharp hikes in the prices of basic consumer goods.

Political analysts who spoke to the Daily News yesterday said there was little evidence to suggest that Mnangagwa and his government had the ideas and the capacity to tackle the country's deepening economic crisis - amid expert projections that Zimbabwe will suffer a recession this year.

University of Zimbabwe political science lecturer, Eldred Masunungure, was among those who also warned that there was a real danger now that the country could slip back to the horror era of hyper-inflation of a decade ago, urging Mnangagwa to join hands with the opposition to save the situation - as had happened in 2009 when a government of national unity (GNU) came to Zimbabwe's rescue.

"We are likely to go back to the 2008 situation where instability was the order of the day ... I think the issue of price increases is not good for the ruling regime in as far as the stability of the country is concerned.

"When the economy is fragile, then everything will be fragile including politics ... They (Mnangagwa and his government) now need to work with their political rivals and other stakeholders to mitigate the situation," he said.

Another political analyst, Gladys Hlatywayo, also expressed the fear that the current economic meltdown could breed political instability - unless a solution was found quickly.

"When citizens find the going tough, they channel their anger to the governing elite, and rightfully so because they are the ones who make the disastrous policies that hurt ordinary people. The current economic challenges we are facing are thus a threat to peace and security, not only in Zimbabwe, but the region as a whole.

"The crisis now requires collective action across the political divide as the economic woes are intrinsically inter-twined with the political decay. It, therefore, follows that addressing the crisis requires dealing with the underlying decomposition of politics. Genuine dialogue to solve the political and economic impasse is the only way forward," Hlatywayo said.

Zimbabwe is currently experiencing its worst economic crisis in a decade.

As a measure of the scale of the crisis facing the country, which has heightened calls for political dialogue between Mnangagwa and opposition leader Nelson Chamisa, official inflation has now hit 66,8 percent - the highest recorded in the southern African nation since it abandoned the worthless Zimbabwe dollar in 2009.

So dire is the economic crisis in the country that Mnangagwa used his Independence Day celebrations address last week to warn companies against hiking the prices of basic consumer goods, which he said was unjustified.

"The introduction of a market-based foreign exchange rate system is expected to stabilise the economy in the long run. However, government is alarmed by the recent wanton and indiscriminate increases of prices which have brought untold suffering to the people.

"This conduct by stakeholders in business, industry and commerce is inhumane, unethical, unpatriotic and goes against the grain of economic dialogue which the Second Republic has espoused. Government remains determined to restore the purchasing power of all workers," the miffed State president told the gathered crowds at the rain-swept National Sports Stadium in Harare.

In February, the Reserve Bank of Zimbabwe (RBZ) introduced the RTGS dollar when it unveiled its monetary policy statement which sought to breathe new life into the economy.

However, the country's de facto currency - which opened trading at 2,5 against the US dollar - has since lost its value sharply, with the interbank market battling to attract money.

In particular, forex parallel markets have shot to more than RTGS$5 to the greenback, amid indications that the situation could get worse soon.

As a result, manufacturers and retailers have sharply increased the prices of basic consumer goods, in response to the premium rates obtaining on the thriving parallel market.

Meanwhile, the rising prices have also re-opened debate on why the government should use the South African rand as its main trading currency.

Billionaire businessman Strive Masiyiwa is among those who are urging Mnangagwa and his government to start pricing goods in rand instead of the RTGS dollar.

He said last week that this was different from joining the Common Monetary Area (CMA) - which links South Africa, Namibia, Lesotho and Swaziland in a monetary union - which would entail Zimbabwe having to fulfil many complex processes.

"Let me put the proverbial cat among the pigeons. A loaf of bread in South Africa costs R9,50. It costs R30 in Zimbabwe. 3x!!! 80 percent of imported goods in Zimbabwe come from South Africa.

"It's not uncommon to find those same goods costing anything above three times the cost," he said on Facebook.

"The people who pay for a lot of goods are Zimbabweans living in South Africa, through their remittances. The cost structure - labour and goods - in Zimbabwe is distorted by the arbitrage of the United States dollar as a currency of settlement for rand imports," Masiyiwa said.

He added that if every business in Zimbabwe quoted its goods and services in rand for their customers, "it would go some way to eliminating the dollar arbitrage."

Masiyiwa was echoing what many local businesspeople have also said repeatedly over the past two years, but which authorities continue to resist for unclear reasons.

When Finance minister Mthuli Ncube was appointed to his key post in September last year, he also said then that he would consider using the rand as the country's main currency.

"I am very clear that there have to be currency reforms and the current currency approach is not working. In doing so, there are three choices that I will explore and pursue with urgency: One, adopt the US dollar only and remove the bond notes from circulation through a demonetisation process and also liberate the exchange controls.

"Two, adopt the rand by negotiating to join the Rand Monetary Area, and this will close the gap in loss of competitiveness against our largest trading partner, South Africa.

"Three, adopt a new Zim dollar, and here one needs to be clear that it has to be backed by adequate foreign reserves and macro-economic conditions for its stability. Foreign currency accounts will also be introduced.

"For sure, currency reforms will be implemented. I would like to implement this by year-end," Ncube said then. Daily News


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