Withstanding storms on all fronts

Just as the country’s man-made political and economic storms were abating, nature unleashed its own fury in the form of Cyclone Idai. Zimbabwe’s long-suffering citizens have to now deal with yet another crisis. Analysis by Baffour Ankomah in Harare.

Just when everything seemed to be calm in Zimbabwe after six turbulent months of political, economic and social unrest, there comes a mighty cyclone called Idai from the Indian Ocean, making landfall in the Mozambican port city of Beira on Sunday 18 March, flattening the city and killing an estimated 1,000 people, before veering southeast and hitting hard at Zimbabwe’s Manicaland district of Chimanimani, killing 98 people (and another 200 missing at the time of writing).

The United Nations said it could be the worst weather-related disaster in history to hit the Southern Hemisphere. The devastation in both Mozambique and Zimbabwe was unbelievable. Neighbouring Malawi fared better but not without casualties and broken homes.

Idai was not kind as the storms in Zimbabwe’s life – the political, economic, social and labour storms of the past six months – were abating and the country was slipping into a deserved calm in the aftermath. Irony of all ironies, until Idai arrived, the political front was calm, the economic front was calm, the social front was calm, the labour front was calm.

The government was even running a budget surplus after it stopped issuing treasury bills to finance the fiscal deficit. Finance ministry figures show that the budget deficit came down from $651.2m last August to $242.1m in November. And it continues to come down.

“In fact in the month of October we had a primary surplus of $29m,” said Finance Minister Prof. Mthuli Ncube. “This is the first time this has happened in the longest while, so we are walking the talk when it comes to fiscal discipline and fiscal consolidation and balancing the budget.”

Until Idai visited without invitation, the only bad news was very poor rains affecting this year’s farming season. Zimbabwe being a country whose economy is largely dependent on agriculture, the implications for the already beleaguered economy are immense.

Compared to other African countries, Zimbabwe has an advanced agricultural sector, but already the spectre of hunger and agricultural collapse loom large over the country, forcing the government to appeal for outside help to cover the shortfall even before the harvest was brought home.

Otherwise the frenetic days since last October when the introduction of a 2% tax by the finance minister on electronic money transfers over $10 sparked weeks of sheer madness in the shops, and the ensuing high prices boomed right across the economy, have given way to a more settled national life, though life itself is harder to live now, with prices so high and salaries so low and not increased.

Though the acute fuel shortage of recent months is not quite resolved, there has been a vast improvement in the fuel supply and this has brought a welcome respite to harassed motorists. 

But the trouble that will not go away is the high cost of living, now exacerbated by sharp rises in the month-on-month inflation rate, which has risen from 5.6% in September 2018 to 56% in February 2019 and counting.

Decline in purchasing power

Meanwhile salaries have remained static; in fact that is not entirely true, there has been a movement in salaries but downwards instead of upwards because of: (a) the high jumps in inflation, (b) the introduction three months ago of nostro foreign currency accounts that have made nonsense of people’s savings, and (c) the abandonment last month of the 1:1 parity rate of the US dollar with the local currency, formerly called the ‘bond note’ but now called the ‘RTGS dollar’.

Before November 2016 when the bond note was introduced by the government, all salaries and wages, prices of goods and services, and bank deposits were denominated in US dollars.

Even better, the government’s insistence of a 1:1 bond note-USD parity rate, though not supported by any economic logic, provided a welcome cushioning until mid-2017, when black market currency dealers suddenly popped up like mushrooms in Harare’s central business district, exchanging the bond note initially at 1.20 to $1, then 1.50 a few months later, then 2.00 for much of 2018.

Then suddenly all hell broke loose in early October when the then-incoming finance minister, Prof. Mthuli Ncube, even before he was sworn in, gave a media interview and hinted that he would kill the bond note after taking office – and in fact appeared to be fulfilling the promise when he announced his new but unpopular 2% tax on electronic money transfers.

Though it was a progressive tax that sought to widen the national tax base, Mthuli’s inability to factor in the political and social costs, and his lack of broader consultation before announcing the tax, greatly upset the government’s applecart and played into the hands of the black market dealers who devalued the bond note further by pegging it at 3.5 to $1, from where it ballooned to 7:1 in a matter of a days.

That gave birth to the panic buying of October 2018 and the resultant sharp rises in prices and inflation. Typically, when calm was restored by late November, the high prices refused to come down, thus eroding the purchasing power of most people.

Now with the 1:1 parity rate removed, it means a worker who used to earn $300 a month before and after the bond note was introduced, is effectively earning $85.70 a month as his old $300 salary is now denominated in ‘RTGS dollars’ (whose exchange rate floats between 3.3 and 3.7 to $1).

Worse, bank savings, which used to be denominated in US dollars, have unwittingly been turned into RTGS dollars after the central bank introduced nostro foreign currency accounts (FCAs) three months ago. Which means all bank deposits, apart from the nostro FCAs, have automatically lost their value by the prevailing RTGS exchange rate. Therefore on the economic front, the people of this long-suffering country have lost out big time.

Political dialogue

On the political front, however, the government has been encouraging national dialogue among the leaders of the country’s 23 political parties. But Nelson Chamisa, the leader of the largest opposition MDC-Alliance party, who still cannot come to terms with defeat at last year’s elections, has rejected the government’s overtures, claiming there is a “legitimacy issue” that President Emmerson Mnangagwa should resolve first.

Chamisa’s intransigence has shocked many people. After taking the election defeat to the highest court in the land and losing there too, right-thinking people expected him to accept the court decision and move on. But he has allowed himself to get stuck in a hole, and strangely he keeps digging and continues to spurn the government’s reconciliation efforts – until, as he puts it, the “legitimacy issue” is resolved.

But the “legitimacy issue” was resolved by the Constitutional Court, the country’s highest court, whose proceedings were broadcast live for the first time in the annals of the court. But who can explain this to the 40-year-old opposition leader? NA