Other side of cash and forex crisis. . . Is there any good?

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Albert Norumedzo The other side
Although it is a hard sell, especially considering the daily pain of dealing with cash and foreign currency shortages, the current crisis has its own silver lining.

Before the current cash crisis many investors were focused on fears of change in policy, on suppressed industry growth, rising government debt, election related anxiety and a deteriorating disposable income base, among other issues.

Capital immobility though a possible risk factor, was not top of the list of things to worry about.

It is true the banking public had more faith in the banking system than they do today. Before the cash crisis people could afford to withdraw all their hard earned money and spend it as they saw fit without using cards or phones. Before the cash crisis the speculation of a currency crisis and the return of the Zimbabwean dollar was a fading threat which seemed more and more unlikely as the years went by. The long queues at banks had become a part of history which everyone hoped would never befall the citizenry again.

Before the cash crisis, the only hindrance to imports were perhaps protective measures put in place by Government to protect a recovering ailing local industry. The use of international payment platforms like Amazon and Ebay were becoming popular and many working class citizens got their hands on imported second hand vehicles from Japan.

In retrospect it is easy to look back and conclude that life was better in the days of no cash crisis, the advent of the cash crisis has given birth to a shadow economy where the consumer base is penalised for a situation which is not of their making. Massive inflationary pressure has been exerted from the ongoing cash crisis, consumers are falling victim to opportunistic unscrupulous and unethical business tendencies with some consumers paying up to 100% premium on goods and services if they are using plastic money.

Smaller businesses especially those in remote areas with limited ability to embrace electronic transacting platforms like point of sale machines have found refuge in mobile money transfer platforms like Ecocash.

The list of economic and social atrocities ushered in by the cash crisis is endless to say the least.

The common saying that “necessity is the mother of all inventions” reminds me of the wise man who said “human beings cannot change without pressure”.

Yes, the cash crisis is bad and we would all prefer to go back to the days where one’s earning capacity determined their spending — at home or abroad — or the amount of cash they could withdraw from a bank.

However, we find ourselves in a unique situation of having to craft home grown solutions and reduce dependency on the US$, which the authorities is a temporary measure.

Despite the negatives that are all there for everyone to see, there is the other side of the cash crisis.

Before the RBZ prioritized foreign payments in order of economic significance, Zimbabwe had turned into a supermarket for foreign goods despite the availability of most of the same goods locally.

Illicit transfers

Externalization of foreign currency and illicit financial flows were rampant with cash-rich retailers evading the banking system and exporting huge sums of cash out of the economy. Both local and foreign companies were opting to produce outside the country and only to sell in Zimbabwe to mop up precious US dollars.

The liquidity crisis and foreign currency shortage, though with other ills that it comes with, has slowed down illicit financial flows. The use of plastic money has revolutionized the banking sector to catch up with international financial systems the world over.

The ranking of payments for services and goods available in Zimbabwe as “No priority payments” has seen the dying local industry showing signs of response to the economic resuscitation efforts like SI 64 among others.

With almost a university in every province across the country, it defies the logic of growing the local educational systems if students are enrolling in foreign secondary and tertiary institutions at the expense of equally good local institutions, that is another form of externalisation of much needed foreign currency.

Unless and until Zimbabweans warm up to home-grown solutions to address attending economic challenges as opposed to seeking for the easy way out in the form of foreign alternatives, our economy will not grow.

For many years particularly since the adoption of the multi-currency system, Zimbabwe has supported industries in South Africa to buoyant levels of growth at the expense of its own industries.

The more foreign capital shies away from the economic landscape on the fear of capital mobility and profits expatriation, the more opportunities are created for home-grown solutions and industries which are not concerned about capital mobility and the ease of expatriation because they are born and bred local solutions which in their growth, the nation will grow with them.

The common economic notion that economic development particularly in Africa, is largely premised on foreign capital needs to be challenged. Economies like China, the United Arab Emirates and other Asian economies have grown largely from home grown solutions and investments.

Our prerogative as a nation should be to grow local capacity by maximum use of available resources so that we can offset the export and import relationship based on comparative advantage.

Those with land should cultivate every square inch while those in industry should invest in their operations to match international product specifications to venture into exports and benefit from the fiscal and monetary incentives like the export incentive scheme by the Reserve Bank of Zimbabwe.

Yes, times are hard, anxiety is rising and the environment in many ways seems unforgiving but perhaps we were made for such a time as this. Every cloud has a silver lining.

Unless we self-introspect and craft home grown solutions to turn our hurdles into opportunities, we will not move forward.

  • Albert Norumedzo is an Equity and Alternative Investments Analyst who writes in his own capacity.

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