16 Jun Down the slippery slope … again
The need to issue bond notes is ZANU(PF)’s latest desperate attempt to prop up an economy that it has systematically wrecked. In its dazed Zim-Asset-in-Wonderland world, the revolutionary party is incapable of thinking outside its patronage box. It perpetuates a vicious cycle of maintaining power through violence and rigged elections to take over our national assets: from farms and factories to mines and businesses. It then buys votes by dishing these out to its supporters, along with jobs and benefits, in order to maintain its dictatorial power.
These party beneficiaries, who have not invested a cent in the farms and enterprises they mismanage, seek only to reap where they have not sown. They care nothing about producing anything. With a clear focus on self-enrichment, these loyalists fleece companies with obscene salaries and benefits, even as they beat workers demanding their unpaid wages. While living the high life and driving top-of-the-range SUVs, they build up debts with impunity – safe in the knowledge that government will ‘assume’ their debt. Finally, the government hands us – the taxpayer– a bill to repay their cronies’ debts.
The bottom line is this. Bond notes have been introduced because our predatory and spend-thrift government has once again run out of money. The reason is two sides of the same bond coin. On the one hand, asset-stripping by cronies has resulted in such high national production costs and impoverished so many, that legitimate businesses cannot survive. As a result, thousands of workers have been laid off and tax revenues have continued to dwindle. On the other hand, the government refuses to trim its bloated bureaucracy. It has not only increased the number of civil servants it has to pay, but we have a President who insists on paying them bonuses too. In the same breath, the Finance Minister disingenuously promises the IMF that government will reduce its wage bill.
When the cash crunch came, the government began to delay its payments of salaries and bonuses. But when civil servants threatened to strike, the government squeezed the banks for extra cash. It first reduced the banks’cash reserves, and then insisted that the banks bring home their money held in overseas (nostra) accounts (used to pay foreign creditors). When the government was unable to repay the banks for the cash it had borrowed, it simply issued them with IOUs in the form of treasury bills (TBs). But when there was no more cash to mop up with TBs, the government surreptitiously siphoned money from electronic bank transactions (RTGS) to pay civil servants. At first, a few days delay in RTGS payments began to lengthen to a week, then two weeks. Eventually delays became so chronic that our hard-pressed businesses, struggling to survive in Zimbabwe’s harsh economic climate, let out an anguished cry.
But, despite everything, the government has steadfastly rebuffed calls to change course and undertake the necessary political and economic reforms. And since patronage takes precedence over prudence, the government has refused to cut its coat (its wage bill) according to its cloth (its dwindling revenues). Reverting to its recidivist ways, the government has predictably decided to start printing money again.
Our understanding is that the government can now issue $200m worth of bond notes, underwritten by Afrexim bank. This is the same bank that is also expected to fork out $200 million for maize imports, $150 million for small-scale gold mining, plus a further $819 million for clearing the government’s $1.8 billion debt arrears with the IMF and the World Bank Group. This adds up to double Afrexim bank’s equity, and a third of its total assets. Is it conceivable that such a small bank can risk so much with such a delinquent state?
Still, the bigger question is how a government can repay $1.8 billion in debt arrears when it is so broke that it has to print bond notes to pay its wage bill. The answer is by fiddling its finances and borrowing from Peter to pay Paul. Can the IMF really take seriously a government that behaves like a drunk, begging for money on the promise of mending his ways? The IMF may choose to turn a blind eye to our rogue regime, but we the people know full-well that its single-minded determination to maintain political power is based on oiling its patronage machine. Once the government has its grasping hands on borrowed money it will be pilfered and wasted, piling up still more debt, then pleading poverty and begging for more – all on the back of unfulfilled promises.
Actions speak louder than words
Instead of printing and borrowing money, some simple political and economic reforms present themselves to restore liquidity and growth to the economy. First, foreign investment can help narrow the gap between import and export earnings. But which investor in their right mind would be willing to invest in a country that respects neither human rights nor property rights, and where the rule of law is flouted in favour of Presidential edicts. Our indigenisation law purports to require foreign investors to forfeit a controlling share of their companies to ZANU(PF) cronies. But instead of scrapping this law, the President ‘clarifies’ it by saying that he is happy to negotiate with investors. But what kind of investor, we ask, would trust a President who continues to allow senior party officials to seize productive farms and companies under the pretext of empowerment while his government still owes billions of dollars to world financial institutions?
A second approach to closing the trade gap is to increase export earnings by producing goods and services that are competitive on international markets. But as we have seen, it is ZANU(PF)’s very patronage system that is the underlying cause of high costs, low productivity, and lack of competitiveness. So, to deflect blame and cover their tracks, they