eBusiness Weekly
There are winners in the foreign currency shortages, just as there are losers. The winners divide into two groups, the legitimate and the illegitimate. The legitimate winners are Zimbabwean manufacturers, big and small, who are slowly reclaiming the territory they once held as well as opening new opportunities to people with good ideas.
Across Bulawayo for example, where many described the city’s economy as “dead”, several going concerns are expanding production and several judicial managers have started doing their job and after completing the re-organisation of a concern, have re-activated production lines.
We do note that it required two factors to bring some businesses back to life: a cut in costs and a management overhaul, plus a rising demand for locally produced goods initiated by the control of selected imports and the shortage of foreign currency to buy more.
The reopened factories might be employing fewer people and carrying a lighter load, but the jobs being created or recreated are real jobs and the output is creating real wealth, by people making things that others want or offering value added services rather than just shuffling paper around. This is essential if Zimbabwe is to grow.
To a large extent Zimbabwean industry knows what to do. From UDI to the hyperinflation collapse almost a decade ago the country survived and grew on the back of those of its people who were able to open and build needed businesses.
The destruction of that industrial base, by very cheap imports and a tendency by too many Zimbabwean consumers to want the import in all circumstances, was made worse because some industrialists had become very complacent and reckoned they could produce dubious quality at monopoly prices. We hope everyone learned some lessons as we see local industry growing again.
This is one reason for hoping that the SI64 regulations are not permanent but that sensible management of foreign currency inflows continues after the need to control imports so drastically does not continue.
That could give Zimbabwe the same advantages of an internal devaluation without destroying the standard of living of the worst paid.
Of course there are some illegitimate winners of the cash and forex shortages, people creating and manipulating largely illegal markets, transferring unearned wealth to themselves, thereby impoverishing the productive workers, and yet producing nothing. In effect this group operate as Robin Hoods in reverse, robbing the poor to pay the rich simply because no extra value is created by the manipulations.
After legal changes there was a tiny blitz; three businessmen were arrested over $55 000 in unbanked bond notes and 19 suspected street money dealers. All that appears to have done is drive money dealers off the street, although it is unlikely to have dented the business much, and forced the big shots to be a bit more careful. We feel that hunting down the minnows will not do much, and even suggest that police and prosecutors could cut deals with this group, greatly reduced penalties in return for some details of the big shots behind them or their major customers.
The Reserve Bank of Zimbabwe is doing something a bit more useful, auditing bank operations and trying to track down tellers and managers who were assigning cash to favourites in return for personal gain, usually by taking bribes or actually personally funding illegal money changing.
No doubt banks will have to tighten up and will be required to initiate disciplinary action against those employees whom they discover are breaking the rules. It does not require a high percentage of bank staff to make a problem a lot worse, and so tighter managerial controls are the simple way forward.
The oddity is not that the economy is in desperate straits. The gap between imports and exports is now down to around $70 million a month thanks to rising exports and diminished imports, largely driven by Zimbabwe once again growing the bulk of its food and by manufacturers getting back to work.
In fact the economy is a lot better off than it was a year ago. It appears that rumour, fear, some managerial errors (such as the delay in permitting soya imports) and a group of very greedy people wanting more than their fair share by producing nothing are causing far more of the problems. Calming everyone down again will be hard, but the only way is to carry on as we are now doing, rebuilding industries and creating real jobs and real wealth.
