Editor’s Memo

What forex Marah?


By Vincent Kahiya

AT what point in her tenure as Zimbabwe National Chamber of Commerce president did Marah Hativagone realise that the country is “awash” with foreign currency?
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The Marah I know is one who, like most businesspeople, believes that the country is not generating enough foreign currency because of depressed production in agriculture and industry.


This week she jumped to fight in the Air Zimbabwe corner, defending the national airline’s quest to charge fares in foreign currency. She told a parliamentary portfolio committee that Air Zimbabwe should be granted the right to sell tickets in forex because “right now, foreign currency is awash in the country but it is being suppressed…”


What drivel Marah! What foreign currency and suppressed by who or what?


This is the same business leader who only three months ago — and many instances before that — was telling business that there is no foreign currency in the country.


“What will now happen is that manufacturers will simply stop manufacturing and the country will become a net importer, yet there is no foreign currency,” said Hativagone in July in response to government’s price controls.

It is bad enough to have a coy leadership in business but unforgivable for a leader to sing a tune which is at variance with reality on the ground.


The import of Hativagone’s argument that we should buy AirZim tickets in forex because we are paying other airlines in forex is also mind-boggling. For starters, foreign airlines operating from Harare do not charge passengers from their respective countries in foreign currency. They use local currency.


Malawians buy tickets in kwacha and Kenyans in shillings. The reason is simply that their currencies are convertible because they have the forex in the formal economy.


Hativagone on the other hand sees the forex held by sharks on the streets and thinks that everyone has a share of it. Far from it. This is forex coming from formal sources of forex generation, and not the traditional exports or balance of payments support. It is therefore egregious for Hativagone and the bigwigs at Air Zimbabwe to try and prescribe sectoral dollarisation on the basis of foreign currency outside the formal economy. The quest to charge in foreign currency is simply conveying the message that those running the informal economy will now have exclusive access to the national asset.


In any event, dollarisation of the economy is rarely forced on consumers. It happens when residents have taken to the use of the US dollar (or, in a broader sense, any other foreign currency) along with or instead of the domestic currency.


Even then the process has to be carefully managed to ensure the bi-monetary system does not disadvantage sections of society which cannot access the US dollar.


More importantly though, the dual currency system works well when the local currency is tradable to the US dollar. This is only possible when there is adequate capacity to generate foreign currency, which should result in a stable exchange rate.


The facts speak for themselves here. The country has a dismally poor record in the management of its monetary system which has eroded the credibility of its currency. And then again, Zimbabweans have become distinctly sceptical about the significance of the local currency as a component of the country’s basic identity.


There is a form of unofficial dollarisation in place and the government must come up with a clear policy on whether or not to have official dollarisation. At the moment there are piecemeal policies where Zesa is allowed to charge in forex to miners and foreign currency-earning manufacturers.


This, we are told, should help improve the parastatal’s forex reserves to facilitate power imports and procurement of spare parts. This is not happening as manufacturers and miners paying for power in forex are still getting power for just five hours a day.


There is this misguided notion that foreign currency injection without a revolutionary change in work ethic guarantees efficiency.


Air Zimbabwe will have to learn to make correct basic business decisions first, like buying the correct type of planes and removing political fingers from the pie.


Even at a time when this country was “awash” with forex, Air Zimbabwe still made monumental losses. The reasons for those losses have still not been addressed and are now being aggravated by forex problems. Problems at Air Zimbabwe emanate from decisions like flying to China with “crossborder traders” and charging them a pittance all in the name of the Look East policy.


As a business leader, Hativagone’s key role is not only to stand for business but to also advise government on key policy issues. One key piece of advice she can pass on to our rulers is that benefits of dollarisation will accrue only when the country achieves financial integration with the US. For instance, an officially dollarised country must allow American financial institutions to set up branches, accept deposits, issue loans, buy local institutions and transfer funds freely in and out.


This, by itself, does not confer very exciting benefits on our government currently in the grab-and-run mode.

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