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🧵Rhetoric vs Reality

I will borrow the conceptual framework of @sivioinstitute in analyzing RBZ about turn.

ZiG is a gold backed structured currency launched on the 5/04/24 at a rate of 13.54 to the USD.

The MPS of 28/09/24 has now devalued ZiG by 44% to 25. 2/
ZiG was introduced in April of 2024 because its predecessor ZWL introduced in February of 2019 had lost 99% of its value. In 5 years $1 was now 1cent. In 2024 alone ZWL moved from a rate of 12k to 40k to the USD on the parallel market.

1/24 🧵

Currency Board

Solution to Zim currency problems?

In the wake of Professor Mthuli coming out and signaling the intention of GOZ to introduce a currency board it’s worth revisiting the essentials/fundamentals as we await full details from the authorities. 2/24

A currency board (CB) is a good thing and we have said as much in the last three years.

The sanctity of the currency board mechanism, depends on a number of factors, which I will list and elaborate on.

🧵

1/12

Zimbabwe in a Debt trap

The Zimbabwe Public debt both internal and external is now US$18bn. With current debt at extremely punitive interest rates and onerous terms, secured against the country’s major exports.

A debt trap is when the interest rate on sovereign debt… twitter.com/i/web/status/1… 2/12

Treasury puts the national debt at US$18bn at 99.6% of GDP.

Admitting that Zim GDP is actually US$18bn.

Zimbabwe in 2013 had a GDP of US$19bn. According to the Ministry of Finance and Economic development Zimbabwe has NOT grown over the last ten years.

There is a lot of ignorance on how international trade occurs.

That US$11.6bn transferred into Zim without hassle means there is no sanction against Zim.

The RBZ is correct to respond to allegations of money laundering. Zim is a signatory of Vienna, Palermo & Merida conventions A lot of the arguments made on sanctions are political. And have to do with grandstanding & moral authority. Meaning, those who imposed targeted sanctions against certain persons do so not as a matter of law but as their prerogative. Based on moral principle.

RTGS under Dollarization. 🧵
1/20

Formal dollarization worked under 2009-2013 until settlement was moved from the banks to RBZ.

Once clearing (RTGS) was with RBZ & banks lodged cash with RBZ, casino economics started. RBZ started creating RTGS fictitious dollars. 2/20
Fractional banking by banks creates money but the risk remains with the bank. Meaning you can have two banks. One aggressive & the other conservative in its lending & both creating credit deposits.

ZESA pricing paradox

Only 40% of Zimbabwe has access to electricity. 60% are in the dark. The 60% are the poorest.

63% of Zimbabweans use firewood to cook. These are the poor.

Invariably electricity in Zim is NOT a necessity. It is a luxury for the majority Unfortunately the pricing of electricity subsidizes the elite. Often Zimbabweans confuse themselves with South Africans where 94% of citizens have access to electricity.

Not so much in Zim.

Sunday thought.

A lot of African governments believe in the wealth of our natural resources. Which they deem finite & must be controlled by the state.

A lot of innovation is taking place to replace the natural resources.

Cacao free chocolate, artificial diamonds, aquaculture And a whole lot more that will render finite resources useless. We saw Tesla replacing Cobalt with LFP.

Aluminum ingots in the 19th century were priced at $550/pound before plummeting to 25c/pound in just 40 years.

Innovation discovered more aluminum & substitutes.

Zimbabwe Economic Outlook 2023

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Part 1
1/24

From Dual currency to Plural currency

There was a marked slump in demand in the last half of 2022 brought about by a movement towards a cash economy.

2023 will see three currencies becoming dominate. USD cash, Nostro & ZWL 2/24

Within days of the new year ZWL depreciated by more than 10%. Brought about by liquidity of ZWL that entered the market.

We make the distinction between liquidity & money supply. This money was always there, just not liquid.

Imagine a great farmer who manages to get capital and a ready market offshore for millions of tonnes of tomatoes.

The market requires a peculiar type of tomato grown with exact particulars. So the farmer decides to go intensive farming with acres upon acres of green houses. In total the farmer manages to get US$500m in equity investment and off taker contracts.

He goes to GOZ to get all the necessary paperwork and here the problem starts.

IMF SDR are tokens. You must convert them into USD. This requires explicit American consent.

musanyeperwe.

For the last two years we warned IMF on its Zim stance post staff monitoring. They gave Zim a long rope. Zim in turn increased money supply by 20,000%.

https://twitter.com/baba_nyenyedzi/status/1603772143975944193

You can’t blame IMF report based on the facts on the ground.

The imperialists SDR & benign IMF stance on Zim had the authorities relaxed. They were not expecting the article IV review. Moreso, outright rebuke & advice to “winding down the use of gold coins”.

Unfortunately, instead of analyzing what happened, Zim twitter became more fixated on our feelings about sanctions.

Our feelings don’t matter.

This Bloomberg piece should guide our analysis. There was a clear intention from the US government
(i) especially before the much anticipated US/Africa summit.
(ii) Defrosting of relations between EU & Zimbabwe
(iii) Lafarge Zim finalising it’s purchase by Fossil
(iv) Elections in 2023 & the US attitude.

Budget notes *

Austerity for prosperity.

In Nov 2018, at his maiden budget presentation Prof Mthuli argued the nation was entering a phase of austerity. He introduced more taxes to buttress his budgetary thrust. “I have learned to seek my happiness by limiting my desires, rather than in attempting to satisfy them” Prof Mthuli quoted JS. Mill in a Thatcherite budget betraying his leanings.

The RBZ doesn’t have reserves nor can it act as the lender of last resort in the event banks need liquidity to fund Nostro position.

Previously, Afreximbank by guaranteeing the issuance of bond notes acted as a guarantor. But that didn’t stop money supply increasing. Today, without reserves, without Afreximbank, the USD nostro balances are increasing at an increasing rate. These balances are not backed by real USD.

Legacy debt TB’s is basically money printing. Real USD is taken out of the system & replaced with a long dated promissory note.

Part 2

The changing seasons, the changing economy 🧵

1/24

Coup political economy

A coup government is certainly different from other forms of governance. It follows too, so is the economics. 2/24
In Part 1, I sought to show how Zimbabwe’s political economy themes change.

On the fifth anniversary of the 2017 coup it is important to define coup economics & see if it’s consistent with the literature & empiricals.

Part 1

1/24 🧵

The changing seasons,the changing economy

In history, Zim economy shifts in decades or there about. A shift happened in Zim in Nov 2017.

However, many are still in denial. It is the purpose of this thread to make clear the shift.

Part 1 will look at the past. 2/24
The War Economy

The 70’s were particularly devastating for Rhodesia then. A war is an expensive excursion.

Everything stopped in Rhodesia & industry moved to sanctions busting. The Rhodie buccaneer introduced swashbuckling.

Industry captains were dismayed.

The dinosaurs had you believe that Agriculture was the highest gdp sector.

This had been going on for years to justify the Makandiwa doctrine eg. Command Agriculture

I received the most hate mail & trolling for calling out this lie by simply stating a fact. Next was infrastructure, again to justify Makandiwa doctrine we were lied to that white elephant infrastructure grows an economy. This resulted in hyperinflation.

The dinosaurs now argue it’s Mining & mining beneficiation. We are told the largest steel plant in Africa will win

🧵
1/10
Money supply is increasing at an increasing rate. A perfect setting for a crush ahead.

In less than 2 months the PMR has eased from 850 to 750. ZWL has strengthened by 12%.

The Fx auction rate has declined from 391 to 604. A 35% depreciation. 2/10
While the CPI to a considerable extend factors the PMR. Our monetary assets are purely recognized at the official exchange rate.

Dead cat bounce 🧵

1/20

There is this idea that even a dead cat dropped from high enough will bounce.

It doesn’t mean the dead cat has resurrected.

This captures very well a slight recovery in markets on their downward trend. 2/20
One could say the same about the ZWL recovery from 850 to 750.

This has been greeted with some relief & some overshooting of enthusiasm to now hold ZWL.

Fortunately the majority of people understand the underlying trend will not change & are planning accordingly.

🧵
Part 2
1/20

Economic implications of the Zimbabwean census 2022

Throughout history population has been integral in economic growth. Firstly as a source of labour & 2ndly aggregate demand.

Part 2 will seek to warn GOZ, Business & Society. 2/20
Zim population has been counted as 15.2m, growing at 1.5% p.a, one of the slowest in Africa.

It was also noted that we have 3.8m households and 61% of the population live in Rural Zim.

Because GOZ & black farmers don’t understand finance 101. Let me make it clear. Without land ownership & capital appreciation/equity they’re essentially bankrupt. Occupying the land burdens one with incurable liabilities & only depreciating assets.

https://twitter.com/baba_nyenyedzi/status/1556659267502886912

Owning the land & enjoying capital appreciation means a farmer can withstand bad prices & bad weather for years. Their balance sheet will be growing.

Because black farmers are in perpetual bankruptcy they rely on the tax payer to subsidize them. Society is worse off.

🧵

Economic implications of the Zimbabwean census 2022

Part 1

1/20

We must thank Zimstats for conducting & producing the population & housing census.

The census has serious economic implications, most poignantly two decades of Africa’s slowest population growth rate. 2/20
I suppose we must first ask the question why the census has serious economic implications and how?

The economic history of the world provides an apt answer. We consider the last two thousand years whereupon economic data can be digested with some precision & accuracy