2019: A Balance of Good, Bad and Ugly

As the most devastating economic year since 2008 comes to a close, we recount the highlights, lowlights and the never-to-be-repeated events that took place in our Zimbabwe. Austerity for Prosperity was the fiscal theme song for the year. A polarising song it was – some adored its necessity, while others chastised its reality. However, what is not in contestation is that in 2019, Zimbabweans and government had to find creative and ingenious ways to dance to Mthuli Ncube’s tune and make a dollar stretch further than ever before. After all, no matter how bad the music may sound, no one wants to be the one on the dance-floor with two left feet.

The Good:

1:1 became a thing of the past. While significant financial losses were made across the board when the bond note and USD parity became no more, significant losses were going to continue to be made had the status quo remained. In February 2019, almost 2 years after its birth, the bond note was finally given its real name: The Zimbabwe Dollar (ZWL). The free-market exchange rate for the bond note that we are observing now is what should’ve been implemented since its inception but hey, delayed logic is better than no logic.

Energy. Fuel and electricity subsidies are no longer present as their prices now move with the exchange rate. This allows the government to free up precious funds for use in other sectors and paves the way to the perennially loss-making ZESA to move towards self-sufficiency. Also, the 18-hour power outages experienced this year have come with silver-lining: Solar. It was inexcusable for a nation that has plenty of idle land and sees sunlight for over 300 days a year to not have significant investments in the solar energy sector. One of the greatest impediments to the development of the SADC region is a consistent supply of electricity with almost all nations in the region plagued by decades-long power issues. It is therefore commendable that the government has taken steps to deregulate the solar industry and remove import duties on solar panels. With good planning and execution, Zimbabweans may find themselves living off free electricity in the coming decades.

The Bad:

Re-dollarisation. After outlawing all USD-denominated transactions, the government almost immediately found itself turning around and issuing a multitude of exemptions to this law. There is no reason for some government departments (i.e. ZIMRA) to still be demanding foreign currency payments for certain transactions. Laws cannot be made to apply to everyone except the lawmakers.

The Interbank Market. Initially touted as the key breakthrough to get the economy back on its feet, the interbank market has been largely underwhelming as it has been subject to manipulation and excessive regulation by the central bank. As a result, volumes traded on the interbank market has been far below expectation and the black market remains the primary source of foreign currency in the economy.

  

Law replacing Economics. This year we saw an abnormally high number of statutory instruments issued by government to combat purely economic issues. A few examples are the banning of the sale of grain to any entity not named the Grain Marketing Board and the requirement for importers to declare their source of foreign currency. The GMB does not pay market-determined prices nor does the official source (the interbank market) of foreign currency supply an adequate amount of it. The government needs to recognize that Zimbabweans are not avoiding official channels out of criminality, but out of economic necessity.

The Ugly:

Drought and Cyclone Idai. In Zimbabwe’s 39 years of existence, this year’s drought is arguably the most devastating one year. Kariba Dam reached some of its lowest water levels while many of the nation’s water bodies dried up. Livestock and wildlife losses were massive and agricultural output was constrained. Relatively, Zimbabwe did not suffer from Cyclone Idai in the same way that Mozambique did, but we almost lost our most beautiful province – Manicaland. People, animals, crops, and infrastructure were washed away under the floods.

Outlook for the New Year:

Exchange Rate Stability: The rate of depreciation of the Zimbabwe dollar is slowing with month-to-month inflation on a downward trend. Daily price changes are less frequent than earlier in the year and it is somewhat easier to plan for the future as a business owner.

Doctors: It is inexcusable for a nation to go for almost a quarter of a year with no doctors in its public hospitals. A silent form of mass-murder is taking place and the government is not taking enough steps to adequately equip hospitals and remunerate doctors.

Treasury Bills: It is worth noting that despite singing the song of austerity, treasury bill auctions almost become permanent fixtures in print media, consequently heightening fears of inflation as the government is still spending far beyond its means.

The End of Austerity: In Mthuli’s 2020 budget, he indicated that “Austerity for Prosperity” has come to an end and that in the new year his fiscal policy will focus on growth. As a result of this, we have seen cuts in corporate tax and value-added tax.

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