Finance and Economic Development Minister Patrick Chinamasa and the Reserve Bank of Zimbabwe governor, John Mangudya
PRESIDENT Robert Mugabe’s government yesterday announced plans to crack down on businesses, currency traders, gold miners and social media users, as the economy slipped further into crisis.
In an atmosphere of palpable crisis, four ministers called two late press conferences after yesterday’s Cabinet meeting, which fell woefully short of addressing the unfolding economic catastrophe. Government, whose unrestrained expenditure has been blamed for precipitating the currency meltdown, has ignored the underlying causes of the crisis, blaming “social media” and economic indiscipline.
Finance and Economic Development Minister Patrick Chinamasa, flanked by his Industry and Information counterparts, addressed the media last night, just after Energy Minister Samuel Undenge held his own press conference on fuel shortages. Chinamasa warned of an imminent security crack down on social media “abusers” he blames for a misinformation campaign government believes triggered panic buying and a spike in the prices of some basic commodities last weekend.
“For me, there is a political agenda, a regime change agenda (through the social media). We will take corrective measures in the security arena to safeguard our interests. “The attack is on the economy. There is a realisation that we are succeeding and some people are not happy,” Chinamasa said. Without giving details, Chinamasa said government would soon eradicate the multiple pricing system in the economy. The pricing system, with at least three tiers, has arisen from the various exchange rates for the different payment modes in the economy.
Chinamasa said government would cancel the licences of business flouting the country’s bank use laws and promised a crackdown on currency traders. “Currency vending. We are taking measures to make sure that this practice will stop. Soon, we are empowering the police to seize illegally traded foreign currency on the streets,” the finance minister said. “We are not going to stop on those measures, we are going to follow and understand the trail of money.”
Information minister Chris Mushowe told reporters government would seek the co-operation of mobile phone network operators in the crackdown on social media. Across town, Undenge announced that the country had imported 20 million litres of fuel following supply disruptions over the past few days. “We increased foreign currency allocation to fuel companies to $10 million per week, or $40 million per month. The problem was mainly due to panic buying. The country already has two months’ supply of diesel and one month’s supply of petrol in bonded warehouses at Msasa”.
Energy and Power Development, Minister Samuel Undenge
The economic crisis, long dramatised by a shortage of foreign currency and bank notes in Zimbabwe’s dollarised economy, has escalated in recent weeks. The frenzied buying of basic foodstuffs last weekend, reminiscent of scenes from the 2007/8 economic meltdown, were triggered by panic over worsening conditions.
The foreign currency crisis has forced businesses to source funds needed for vital imports on the informal market, where electronic bank balances were being discounted by as much as 70 percent this week. Bond notes, introduced last November to address the bank note shortage, are being discounted by as much as 20 percent, traders said yesterday. Mugabe, who returned from the United Nations general assembly in New York on Monday, was scheduled to meet his economic ministers after yesterday’s Cabinet meeting to discuss the mounting crisis.
The president’s comments on Monday, describing the price surge as contrived by his political foes, raised fears of a rash policy response, which could possibly include pricing regulations. Price controls ordered by Mugabe in June 2007 drove Zimbabwe into a hyperinflationary vortex and precipitated the country’s worst economic crisis since independence. Industry and Trade Minister Mike Bimha, who met business leaders on Tuesday, sought to allay fears of impending widespread shortages, but made it clear government would not readily allow traders to adjust prices in line with the rapidly devaluing currency.
“I believe that in a day or two we should be able to come out to issue a proper statement in terms of what the situation is on the ground, what measures we’ll take to ensure that the products are made available on the shelves and that there are no price hikes unless it is absolutely warranted,” Bimha told state television after his meeting with business leaders . Although Bimha’s meeting with business leaders was described as convivial by officials who attended, it emerged that the minister, who convened it in preparation for his own audience with Mugabe today, wanted to identify “culprits” behind last week’s price spike. Business leaders this week cautioned government against price controls, warning they could be the proverbial last straw.
“Controls which government put in place in the past worsened the situation. It’s something we can lobby against as business. We have seen very positive indications and believe we are in the right path. Government controls will take us off that path,” Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe told The Financial Gazette yesterday.
CZI president, Sifelani Jabangwe.
“In yesterday’s (Tuesday)’s meeting, we were actually updating the minister when we will start replenishing stock and start pushing products back on the shelves. Yes, people were panicking because of what happened in the past. The situation was also worsened by some rogue retailers who were increasing prices. It was more of rent seeking, people buying from the shops and selling outside the shops. We need to communicate a bit more.” Jabangwe said the $600 million African Export Import Bank facility to support foreign payments would help ease pressure on companies in dire need of foreign currency.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive Chris Mugaga also discouraged government price regulation. “You never know. But I don’t think there is any room for price controls. That will not be good for business. We spoke at length at that meeting which the minister (Bimha) indicated was a preparatory meeting with the President to find out if business was the culprit or not,” Mugaga said. “We would lose the plot if government put in place controls. I think the situation will normalise. So there is no need to panic. If government put in place controls, they will be overtaken by events.”
Themba Ndebele, the chairman of the Retail Association of Zimbabwe, which represents the country’s biggest retailers weighed in: “The problem is that government allowed the informal sector to grow unregulated. This is the price we are paying now.” But Denford Mutashu, leader of the Confederation of Zimbabwe Retailers (CZR) – a grouping of smaller retail outfits – broke ranks and called for government regulation. “This misbehaviour by retailers has been rampant, perpetrated by formal and informal businesses,” Mutashu said. “So, we are working with government to come up with regulation (rather) than continuing with the dialoguing approach. More need to be done. So, this indiscipline is rampant. As a nation, we need to have sanity in the market.”
