Surviving Zim's law of expediency

After two years of declaring that anyone with “unofficial” foreign currency was an economic saboteur and an enemy of the state, the Zimbabwe government last month said it would “turn a blind eye” to people buying fuel in hard currency.

In a desperate bid to find new sources of foreign exchange, the government announced that it would be a case of “no questions asked” for people taking advantage of a new arrangement between it and selected garages around the country where fuel, imported by the government, could be bought for $1 a litre, as long as it was paid for in hard currency.

However, instead of the long queues the government had expected, the response was lukewarm. “I’m not going anywhere near this situation,” said one local.
“They are probably taking down registration numbers so they know who to arrest when they change the policy.”

Sure enough, it emerged that Reserve Bank representatives would be present at the garages, ostensibly to ensure that the precious US dollars did not go missing. Yet, many believed their real job was to provide the government with a list of targets for when it reversed the policy and such people were once more enemies of the state.

In present-day Zimbabwe it is often difficult to know which side of the government’s “law of expediency” you are on, or what to expect the government to do next. As the crises mount, officialdom has been forced to find creative solutions to problems, a situation that has resulted in breathtaking official U-turns and overnight policy shifts.

“The government introduces something one day and a few weeks or months later decides it no longer likes the idea and either makes it illegal or drops it,” said one businessman. Here are some recent examples:

• For several years, manufacturers of certain basic goods have been forced to adhere to strict price controls. While this resulted in major shortages of such goods, those flouting the rules were punished. Yet, the finance minister has now declared that price controls do not work and should be abolished;

• Earlier this year, the government announced a 1 000% increase in school fees, insisting it be backdated to January. Just weeks later, it reversed the backdating order;

• For years, the president has called anyone suggesting a devaluation of the currency a traitor. But he then introduced a range of “special” rates for exporters, tobacco producers, cotton producers, gold producers and even diaspora remittances, while maintaining the official rate. In mid-2005, the government changed its mind and devalued the currency by 70% over just a few weeks;

• In August, the government introduced a 10% capital gains tax on the stock exchange, despite the fact that it abolished the very same tax in 2000, saying it was unworkable.

The government’s latest money-making ruse—the introduction of new number plates—has been subject to a similar reversal. After Zimbabweans paid Z$30-billion to buy the new mandatory plates, the government decided it wanted to add the letters ZW to the plates. Motorists now have to go through the tortuous exercise again.

Another tactic is to allow you to get on the right side of the law—for a price. In the aftermath of Operation Murambatsvina, the campaign that reduced large “illegal” residential areas to rubble, the municipal fee for those in wealthier areas, who needed to “regularise” their house plans with the council to prevent demolition, rose from Z$5 000 to Z$23-million overnight.

It does not help to be close to the ruling party, as many bankers, targeted for foreign-exchange violations by their former colleague, Reserve Bank governor Gideon Gono, found out the hard way. Being close to power means those who implement these policy shifts are the very ones who are likely to have the most dirt on you if they need to make an example of people.

Dianna Games is the director of Africa @ Work

How Bob paid the IMF

Naturally, Zimbabweans were concerned when the government announced recently that it had managed to “find” $170-million to pay the International Monetary Fund (IMF) in the midst of Zimbabwe’s worst foreign-currency crisis in decades. The exact source of the money is a well-kept secret, although the rumour mill is in full swing.

Gideon Gono’s line is that the money came from “our savings”, despite the fact that the country is technically bankrupt, with no savings to speak of, and inflation was 272% in August, year on year.

There is speculation that the government is “dipping into” the foreign exchange pool used to fund the twice-weekly auction. The funds are drawn from exporters’ profits, 50% of which must be converted into local currency at the official rate, which is significantly less than the black-market rate. Businesses complain that it can take weeks to get currency on the auction, if at all.

The central bank has instituted more visible measures to raise currency. One of these is the estab-lishment of its own bureaus de change, despite the fact that two years ago the government closed down all such bureaus, accusing them of fuelling the black market.

Another measure is deliberately delaying the processing of exporters’ requests to repatriate foreign currency from their hard-currency profits. If the bank does not approve applications within 21 days of their being submitted, the applicant is forced to convert the currency into Zimbabwe dollars.

Officials hinted at “generosity” from businesses in the raising of the IMF dues, and there are suggestions that companies have liquidated some of their precious foreign-currency holdings in the national interest.

Given the shortages, this would seem to be a crazy notion. But word in Harare is that the government offered takers a rate of Z$50 000 to $1 to make the exchange, against the official rate of Z$24 520.

Another rumour has it that the hard currency has been borrowed from big platinum, cotton and tobacco exporters on the basis that it will be repaid to them when Zimbabwe’s ship comes in.

If Zimbabwe does not take up the South African loan, conditions notwithstanding, the harbour might be empty for a while. Gono has admitted that the promised resources from China will be a long time coming while Iran, which negotiated a $67-million credit facility with Zimbabwe’s government recently, has started demanding guarantees.

Keeping business going in Zimbab-we is a question of second-guessing the government. “Once you understand the political machinations, you can generally get it right,” said a Harare banker.

But getting it right seems to depend on just how desperate the government is. It might have managed to stave off the IMF expulsion, but it is now payback time. Sucking $170-million out the current Zim-babwe economy was no mean feat—there are a lot of holes that now need to be plugged. Zimbabweans are bracing them-selves for the next policy roller-coaster ride.—Dianna Games

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