As Zimbabwe’s economy continues to lurch from one crisis to the other, business leaders and economists say the government is running out of both time and “rope” to turn the situation around.

This comes as rising inflation – put at more than 100 percent by many independent economists – as well as a rampant foreign exchange parallel market, shocking price hikes of goods, and shortages of fuel and basic commodities continue to ravage the local economy.

And as if to stoke the fires further, Finance minister Mthuli Ncube recently indicated that the country’s $9,5 billion real time gross settlement (RTGS) deposits would soon be separated into “hard” and “non-hard” currency balances – without providing clarity as to how this would be achieved.

“This will be undertaken through designating bank deposit balances, with outstanding deposit balances prior to a specified date deemed hard currency deposits. Non-hard currency deposits made after the specified date will be recorded as ordinary RTGS deposit balances,” he said in his transitional stabilisation programme recently.

But worried business leaders and economists told The Financial Gazette this week that the planned move by government could prove to be “the final nail in the coffin” for the country’s ailing economy.

Chris Mugaga, the Zimbabwe National Chamber of Commerce chief executive, said there were high chances – if this policy proposal were to be carried through – that depositors’ balance sheets would be greatly eroded.

“It’s quite clear that the government is running out of ideas and time … the Finance minister’s only problem will be on choice of a specified date where the RTGS balances are concerned,” he said.

“The government sold the nation a dummy for too long. They were milking a buffalo thinking it’s a cow, now it’s kicking them from its udder and they are beginning to wonder why,” Mugaga said.

Mugaga also warned that the market had already started rejecting Treasury’s rhetoric that RTGS balances would be recalibrated to be at par with United States (US) dollars.

This was despite Ncube’s assertion last week that the Africa Export and Import Bank (Afreximbank) would guarantee the conversion of the country’s RTGS balances to dollars.

On its part, Afreximbank – whose balance sheet is slightly over $11 billion – neither denied nor confirmed that it will provide a warranty to Zimbabwe when it was contacted for a comment.

With the regional lender, one of whose directors is Reserve Bank of Zimbabwe governor John Mangudya, promising to give The Financial Gazette a more detailed response later, a statement on its website said it had met with a Zimbabwean delegation on the sidelines of International Monetary Fund meetings in Bali, Indonesia where they discussed a $500-million nostro stabilisation facility to be concluded by end October.

“The ultimate goal of the facility is to secure payments for essential imports and to promote exports, diaspora remittances and deposit of foreign currency. It is envisaged that this will restore foreign currency liquidity and stability in the market,” it said.

But Mugaga had misgivings about Ncube’s assertions that Afreximbank would guarantee the conversion of RTGS balances to US dollars.

“I think Afreximbank (story) has … reached its sale-by-date. Why believe it now when it couldn’t support a mere $250 million bond notes?

“Mthuli’s office does not possess the stamina and obligation to decide on the RTGS vs US dollar exchange rate, it can only flip-flop since it is reacting to a storm whose vortex or eye is not yet clear,” Mugaga – a trained economist – said further.

“In fact, he (Ncube) must stop being romantic with both the market and business.

“After all, he is dealing with a market which has already lost trust in this relationship … It’s important to appreciate that we don’t have quick fixes to our economic problems. In fact, they won’t even be solved by a tax hike,” he added.

John Robertson, another renowned economist, said the authorities appeared not to appreciate the fact that markets were “more powerful than government statements”.

“The government is facing pressure from people who are worried about the future, worried about the value of the money they have saved and whether they will get their income in the coming months,” he said.

“There is lots of uncertainty and anxiety about not knowing what will happen next because there is no sequence in the events really,” Robertson said.

“But all this could be changed by policies. Government has to act fast because its biggest challenge is to regain trust because most of the time they say something and rarely does anybody believe that they are telling the truth or that they can keep their promises,” he added.

Robertson said further that people no longer trusted the government as it had failed to honour its obligations in the past.

“And the promises keep multiplying but nothing actually changes, nothing happens. If government doesn’t regain the public’s trust, things will get worse. Government should be thinking carefully about what can be done to restore confidence in the country,” he said.

Also highlighting the fact that Afreximbank’s guarantee may not be solid, the veteran economist said the bank’s surety “ignored the powers of the market”.

“We have to see the feasibility as time passes because it’s more feasible to talk about the guarantee, but bringing it in as a practical issue that puts money in the bank and makes people happier is the part that government has not explained … they haven’t said how they will do that,” Robertson said.

Steve Hanke, an American eonomist and global hyperinflation expert from Johns Hopkins University, also questioned the Afreximbank guarantee – pointing out that the continental lender was attempting to bite more than it could chew. This comes as Afreximbank’s regional chief operating officer, Humphrey Neugo, recently told a ZimTrade exporters’ conference that the bank was strictly into private sector lending.

“Budgetary support is not really our area as we mainly want to provide trade finance,” Nwugo said.

Previously, Afreximbank had promised to issue non-funded risk instruments to help Zimbabwe out of its predicament.

“Instruments to de-risk would obviously have to be issued. Here you are talking about things like political risk guarantees and credit risk guarantees.

“It is not a long journey, but the processes just need to be followed,” the bank said.

In the meantime, and as Zimbabwe’s economic distress continues, President Emmerson Mnangagwa has described parallel market currency dealers as a national security threat – warning further that his administration would take stern measures against them.

At the same time, pressed authorities have moved to ban the use of fuel containers to discourage product hoarding which the government claims has led to “artificial” fuel shortages.



Tyra Chikocho is a Zimbabwean gospel musician and comedian who is popularly known as Madam Boss. As a gospel musician she has staged shows alongside Shingisai Suluma, Kudzi Nyakudya and many others.

Chikocho was born on April 10, 1985, at Harare Hospital. She is a beauty therapist by profession. She was married to….more here


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