1/7 ED Mnangagwa’s vision is to be a middle income country by 2030.
What does that actually mean? How does that vision translate to strategic intent and objectives.
GOZ has an empty promise therefore the empty rhetoric & consequentially violation of economic principles.
2/7 Peter Drucker notes leaders are not in control of the universe. Hesiod the Greek poet in 7BC discovered scarcity.
If a leader can’t control & he has very little, in Economics all his decisions have a trade off. An opportunity lost/cost. By hunting you forgo farming harvest.
3/7
More guns less bread. So the price of a gun is the many loaves of bread that could have fed the nation.
You can’t have it both ways. When you consume you don’t invest. When you invest, you forgo consumption.
4/7 Coming back to leadership.
The FX auction is a trade off. Subsidize consumption vs allowing production through capital investment.
The cost of FX in Zim is the lost investment in capital goods. The endeavor to prop up consumption comes at a cost of loss of capital goods.
5/7 Do the authorities know this?
Part yes & part ignorance.
It goes back to that vacuous political ED vision of 2030. Middle income status is about consumption.
Contrast the SE tigers’ vision which was to industrialise. They too faced scarcity of FX
6/7 To industrialize they forgo consumption. They saved more. They invited savings from abroad. Multinationals from abroad. Invested in capital goods & exported more. Exporters were given preference to importers. EZ with tax incentives for exports into 1st world.
7/7 This resulted in rapid industrialization.
Think about it for a moment. If GOZ wanted to develop the nation would our laws & governance not speak to this? A small country’s salvation is exports. Not imports. Especially not importing cheese🤷🏻♀️ nor cheese ingredients😢
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1/10
It is absolutely necessary as citizens we never tire of highlighting the policy flaws. We made the emphatic point many times, that ZWL is being created to buy US at the fixed auction.
Belatedly, RBZ seems to have taken notice of this. The apparent speculation & arbitrage.
2/10
Money supply of ZWL has been increasing at 315% by Nov 2020. Most of this ZWL finds its way to the fixed Auction rate. Giving importers a 40% discount.
ZWL “productive loans” are less than 40% p.a when inflation is at 322%.
This creates the perfect arbitrage.
3/10
The arbitrage is not only with importers. The speculation goes further in the market. Eg a firm/individual can buy steel/gas/ non perishables priced at 83 & simply hold the stock. When shortages arise, or when the inevitable devaluation occurs they’ll offload at a profit.
There is a fundamental difference between a stimulus package & government guarantee.
Perhaps let’s start with Biden’s $1.9trillion package. Perhaps far from Zim, cooler heads can prevail. Whence it becomes obvious what GOZ has done.
The $1.9tn Biden stimulus works this way; (1) Treasury spends more than its revenue through issuance of a bond. This over expenditure is why it must go through both houses of the legislature.
This means treasury is running a deficit.
(2)Treasury issues the bonds in the marketplace, but investors are weary of future high inflation & thus hesitant to subscribe. Besides there is not enough money in the world to allocate to new issuances.
So the FED literally prints money to buy the Bonds. Treasury owes the FED
The President Mnangagwa, has announced GOZ new policy to repossess unused land, big farms, multiple owned farms & state land. This land will be redistributed to the youth.
The new policy is Political & NOT economics. See the attached thread.
2/ With a restive, unemployed, unskilled youth, albeit the largest voting block, Zanu PF has decided to placate the youth with Land.
As a political party, this is well within its rights. But this is dangerous for the Economy & will destroy what little activity is in Agriculture
3/ Agriculture in Zim requires security of tenure. It requires title deeds & private property status.
Private property is not necessarily needed for banking finance. But for innovation to take place. Land is just a factor of production no one has the right to dictate its usage
On the 12th of Feb 2021, compelled by a court order, the MOF gazetted loans taken by RBZ it guaranteed.
It is very clear why RBZ & GOZ were secretive about these loans to the point of making its apologists deny the very existence of them.
2/ For example, over the last 3yrs it has been pointed out that;
(a) RBZ is involved in quasi fiscal activities
(b) GOZ treasury has no surplus
These two points are linked. RBZ comes directly under the Minister’s armpit. RBZ took over treasury responsibilities & its deficits.
3/
RBZ losses, are directly treasury’s losses & by law must be included in the consolidated revenues & expenditures. This never happened, so the right hand claimed it was clean, when all the time the stolen goods were in the left hand.
1/
Not many countries in the world have a budget surplus. Not even fake surpluses. Well run countries found themselves in manageable deficits - without need to print. Borrowing directly from the market place.
Luxembourg is such an example- in normal years it runs a surplus.
2/ Mthuli made a mistake touting a surplus when it really wasn’t necessary to propagandize. The economy was already in a depression with the 2nd highest inflation in the world. GOZ domestic debt was being inflated away. Offering pensioners 8% interest when inflation was over 500%
3/ Perhaps his colleagues didn’t understand. They were happy to be told GOZ domestic debt was falling fast. Remember this was at a time the official ZWL inflation was banned.
The false euphoria resulted in 2 mistakes;
(I) Pension industry crushed to only $1bn.