Bond Notes: A Misguided Policy?
By: Peter Richard Nyanyiwa
Founder and Leader of the Zimbabwe’s Labour Party (2016)
It comes as no surprise that Bond notes have dominated the social media and most Zimbabweans are in limbo as they battle to figure out the implications of this recent measure and anxiety grips the nation as speculative suggestions from some economists and opposition parties point to a devious plan by the ruling ZANU (PF) government. Secrets have a way of coming out in the future no matter how much one tries to hide them.
Prior to the introduction of the Bond note, the Governor of the Reserve Bank of Zimbabwe Dr J Mangudya, made clear suggestions that Zimbabwe needed to create macro-economic environments conducive for businesses to thrive before the government can re-introduce the Zimbabwe dollar. Was he wrong or right? He was correct and many economists will back him.
However, the same Governor announced the introduction of Bond notes as an export incentive for businesses. It is not clear what the Governor meant by “export incentives” and it is not the purpose of this article to embark on speculation.
So by imposing the Bond note, does the Governor now believe the required conditions have been met for business to start investment resulting in employment opportunities?
Taking the imposition of the new local currency upon the nation one can conclude that the Governor has satisfied himself that enough conditions have been met where it is safe to re-introduce the Zimbabwe dollar (disguised as a Bond note). Zimbabweans need to wake up to the fact that a new currency is now in use, and they need to be aware that the conditions the Governor of the Reserve Bank of Zimbabwe previously said are required clearly have not been met. There is a clear distance between the non-existence of advantageous environment that is strong enough to boost investment and what is current. It is true that favourable environments are a necessity for businesses to invest resulting in employment creation, if done appropriately and targeted correctly.
As many economists are fully aware that it is not wrong for a government to print its own currency to fuel its domestic economy. Economists are also aware that it is how a government structures this common practice and implementation strategies that are pivotal for success. Such measures need to have a direct and positive impact on the domestic economy.
Economies great and small, like fires, require fuel in order to achieve stability and maintain growth. The first world economies thrive on the practice of printing local currencies which they periodically inject into their domestic economies via various means in order to generate supply and demand; the pillars of every economy. For instance, the UK uses a benefit system where the government gives money to working age people in the form of tax credits when in work or welfare payments for the unemployed and those that are not able to work due to a variety of reasons. So how does giving people money benefit the economy such as Zimbabwe’s?
The government could and should be creating demand on the domestic market in order to force suppliers to meet the demand. Instead of wasting scarce foreign currency on printing the Bond note the government should have resorted to an already known currency, the Zimbabwe Dollar, and used the foreign currency to import grain and other raw materials for producers to start manufacturing goods for supermarkets. The government should set up a similar welfare system such as described previously to give people the means to accommodation, to buy food, goods and services, and that is precisely the economic stimuli needed for Zimbabwe’s domestic market. And it is this market that employs the majority. It is logical that if people are given money they will spend it and that is the fuel that ignites viable economic activities required for businesses to expand and employment opportunities to be created.
Is it safe to re-introduce local currency without a properly thought out economic recovery plan when the country is faced with low productivity, 90% unemployment (this percentage figure quoted by the main opposition MDC-T should be never be considered as absolute because it is not clear whether the rural populace is included), no food in shops, low pay for those lucky to have a job, and zero confidence in businesses that can invest; the list is endless?
Zimbabwe could benefit greatly if the rural population is properly organised. Order is required to create favourable conditions for businesses to seek investment opportunities in rural settings. Let us assume a place like Buhera and surrounding districts all come together in organised and ordered communities with the government paying weekly social benefits to those eligible. If we take the working age population from the combined communities to be half a million receiving 100 dollars per week this means that Buhera will have an economy worth around 5 billion dollars per year from social payments alone; a clear attractant for businesses. Businesses are attracted to where money is and where there is organised labour, roads, and other infrastructure businesses require to conduct their operations efficiently.
It is common practice, and not “last resort” as some economists suggests, for governments throughout the world to use this practice of fuelling domestic economies to enable businesses to grow, employ people and to generate revenue for the exchequer and this enables governments to provide essential services such as hospitals and medicines, schools and implement infrastructure projects such as roads and rail. Organisation of rural areas into ordered communities will generate more funds for the government through commercial land sales, business rates, and taxes from businesses. Broadening our industrial base can be achieved by opening new business centres throughout the country, thus rural urbanisation, and this would benefit the nation immensely. It is vital for any credible economic recovery plan to include the rural populace into the main-stream economy of our nation if we want success.
So where does this leave the ordinary Zimbabwean?
There is no hope because the government, including the opposition MDC-T, have no credible economic recovery plan in place or to embark on and this was revealed in recent negotiations for a failed loan request with the IMF which rejected extending further loans to Zimbabwe until a credible recovery plan was in place.
Clearly the aim of the Zimbabwe government is to take the USD and other currencies that ordinary people possess as well as the pool of currency held by businesses in order to compensate for the failed loan. The re-introduction of a local currency is real and Zimbabweans need to brace themselves as the inevitable will surface, that of losing savings and investments. How will they manage to take your USD, Pound, and Rand? Through banking, purchases, and salaries are now paid in the Bond note including all cash transactions. It is clearly a misguided policy that the Zimbabwe government has adopted.
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Note: Zimbabwe needs a new political class of politicians to bring the Land Question to the forefront of Zimbabwe politics. Politicians who have vision and can deliver equality to all Zimbabweans regardless. To include rural folk into the mainstream economy and our policies are directed at improving the living standards of all Zimbabweans, provide employment opportunities for everyone, remove segregation in our school system, empower the African Zimbabwean by giving rural people protected Title Deeds. These policies and more are described in greater detail and will be available when our manifesto will be published in February 2017.