Below are the excerpts of the interview.
Q: What is your assessment of the economy?
A: I think (former Finance minister Patrick) Chinamasa took this economy to a level and depth which no other person, which no other regime has ever taken us to. He inherited an economy that was fairly stable and the statistics speak for themselves. This is an economy that had scars and the huge scar that the economy had was the meltdown of the 1997-2008. An 11-year period in respect of which our economy lost 60 percent of its value and Chinamasa ought to have known that our economy is very cyclical; it goes through these cycles of slumps and booms. But particularly, this economy loves elongated periods of slumps. It loves to stay in a ditch. So as a Finance minister, your duty is to implement under cyclical fiscal policies to pursue thorough fiscal consolidation to prevent these slumps and booms. So, during the Government of National Unity (GNU), we maintained a very strong under cyclical fiscal policies anchored on fiscal discipline, we ate what we killed, anchored on macro-economic stability, anchored on financial sector stability.
Q: Where do you think government went wrong on its economic policies?
A: I think that the person of Chinamasa must take a lot of responsibility. As the Finance minister you are left alone and there is very little collective decision making. As a minister of Finance, you have a huge blank cheque and the law anyway says you drive policy. If you read Section 7 of the Public Finance Management Act, it says you the Finance minister, you are the treasurer, then the accountant-general has a role. There are three mentioned, there is the minister as treasurer, the permanent secretary as the pay master general and then the accountant-general, who is like the internal auditor. In fact, the Act says you the minister, you are responsible for formulation of the macro-economic policy of the country, so the buck stops with you. The minister of Finance is one minister whose job description is in an Act of Parliament, other ministers are not. So, you have a big responsibility, so in terms of managing the macro-economic of this country, Chinamasa failed. In fact, he was lucky just to be fired (from his position as Finance minister), in a decent country, he probably would have spent time at Chikurubi. In former Eastern Republican countries, he would have been subjected to a firing squad and his biggest mistake was not to understand the basic rules of economics. You cannot spend that which you do not have and only in Mathematics does one minus two equal to minus one, in economics, one minus two it can't! If you don't have it you can't spend. So, right now we are in a huge mess. Domestic debt right now is $6 billion dollars, the budget deficit is over 10 percent of gross domestic product. This year, his mid-term policy disclosed that he already had a shortfall of
$1,4 billion by June of 2017. My suspicion with this Command Agriculture, with elections, by the end of the year December 31, 2017, the shortfall would be around $3 billion. When your budget is $4 billion and you have a shortfall of $3 billion that means that you are basically 90 percent out. So, it's a dog's breakfast one which not many dogs will not touch anyway. Look at the crisis in the financial market. Reserve Bank of Zimbabwe (RBZ) John Mangudya right now is seating holding a mess, but it's not his mess. The crisis that is manifesting itself as a monetary crisis, as a liquidity crisis, is not a monetary crisis, it's a fiscal mess, it starts and ends with Chinamasa. We have a recession right now. Number one; the key characteristics of a recession are that there is excess capacity. So you know there is excess capacity in the form of labour, 95 percent of the people are unemployed, the people you see selling tomatoes, driving kombis are people who actually want to have a job, like you have, like I have. So it's excess capacity. Number two; you have excess industrial capacity. Companies have closed. If you go to Bulawayo today factories are being converted into churches. The Pentecostal movement is flourishing on this empty space which is supposed to be industrial space. The third characteristic of a recession is low inflation, that's why since 2009; our inflation has roughly been one percent. The fourth characteristic of a recession is weak aggregate demand, so if you go to our shops right now they are full of goods but no one is buying because no one has got money, no one has got disposable income. Recession is lack of activity, recession is a crisis of under accumulation, which is the opposite of the crisis we had in 2008. The crisis we had in 2008 was a crisis of over accumulation. We were all billionaires and trillionaires but it was too much money chasing too few goods. In a recession, people have no money, so in 2008, we had a crisis of over accumulation, 2013 to now, we have a crisis of under accumulation. Now to get to these two crises, it's almost impossible, but has been put by us in less than eight years. It's impossible under ordinary circumstances to get to where we were in 2008, where hyperinflation was 500 billion percent. It's almost near to impossible to get where we are now where growth rate is -1,8 percent. So these two are impossible to reach but Zanu PF is a genius, it has gotten us to this level. But their madness now is that they have put us in a third position which no other country has ever experienced, thanks to Chinamasa. We now have the concept of high inflation in a recessionary period, people have no money, how do goods go up? It's crazy! They have superimposed these two scenarios which are impossible. If you look at our stock exchange right now, the market capitalisation is now $15 billion, so people are just buying shares like they are mad but these shares are not backed by anything, it's just speculation. If you go to supermarkets goods that you bought last month for $100, you are now buying for $180. So Chinamasa has superimposed high inflation in a recessionary period. This is why I have said these guys have redefined failure and we have to find new lexicon, we have to write another dictionary to describe what they have done because what they have done is an insult to failure, what they have done is beyond failure and Chinamasa is responsible for that.
Q: President Robert Mugabe reshuffled his Cabinet and replaced Chinamasa with Ignatius Chombo. Do you think Chombo is equal to the task?
A: No one in Zanu PF can be equal to this task. The management of the economy ultimately at the end of the day is a reflection of confidence, it's a reflection of trust. No one trusts this regime, no one trusts this government, that's why no one is banking. We are only using banks because our salaries go into banks. So Chombo is inheriting a problem which he can't fix and regrettably the entire lack of trust, the entire absence of confidence lies with the entire Zanu PF regime. They can't run this economy well, they have never run this economy well and they will never run it well in future, because people put their money where they trust. If you look at the GNU, we revived the economy and it grew. In 2011 our growth rate was 11 percent. In the seven or so years that this country has been using the US dollar, the highest year that we collected revenue of $3,7 billion was during the GNU in 2013. All of this is a function of trust and no one trusts Chombo, Chinamasa, Mugabe, and Zanu PF, they can't run the economy. An economy needs a lot of hard work, and you have to have proper text book understanding of it, Chinamasa never had it and I think that with the Zanu PF factional wars, the attention of minister Chombo will not be on the economy, because there are bigger things, there are things of survival. Chombo knows that if Ngwena (vice president Emmerson Mnangagwa) takes over, he is gone, so they are fighting for life, it's a last man standing battle, as Western movies would call it.
Q: The tobacco selling season is over and there are claims that this is the reason the country is running short of foreign currency, what is your response to this claim?
A: It's a myth. When tobacco farmers sell their foreign currency, it doesn't go to the government, it goes to them. It's not income, exports receipts do not belong to the government, they belong to traders. So what we are doing now we are killing industries because the export retention levels are too high and no business can function which is why we are heading for a total collapse, because these companies that are still importing our food, our fuel and so forth, they will reach a level where they have to shut down completely because they survive in recapitalising in their working capital for those capital proceeds but those export proceeds are now like a pangolin, a rare animal. They (US dollars) are being hunted by everyone, everyone wants US dollars. The source of the export receipts is like a tiny little animal that is carrying this huge gigantic, greedy, humongous caliphate known as government, but it's too small but one day this small animal that is carrying us is going to crush and it's a question of time.
Q: Government has blamed recent prices increases, panic buying and shortages of fuel and drugs on social media. What's your take on this?
A: That's ridiculous. It's basic economic fundamentals. We are not producing but we are eating. If you go to supermarkets they are full, if you go to Sam Levy, you will find even the Rolls Royce, there are Mercedes Benz there, there are Range Rovers, where is that money coming from? So people are eating, they are not producing. Now you can't eat that which you haven't killed. What happened there is that the cost of the US dollar shot up, that's why the exchange rate of the RTGS to the US dollar became 100 percent. The exchange rate of the bond note to the US dollar was between 55 to 60 percent, the exchange rate to the RTGS to the bond note was again between 35 to 50 percent. So the cost of money shot up, but this is going to be permanent because we are not producing but we are eating.
Q: The RBZ has said bond notes have been a success, do you share this view?
A : If we have a queue of $600 million in forex demands, it means that is not true, that tells you that nothing is working. We need a major paradigm shift in the way we are running the economy. It can't be business as usual and regrettably, problems are never solved by the same mindset that brings them. Zanu PF has brought these problems, they can never solve them.
Q: The RBZ seeks to inject $300 million more in bond notes, do you think this will help deal with the current cash crisis?A: It will change nothing. The money in circulation right now, by money I am referring to broad money supply M3 which is money in the form of RTGS balances, it's about
$8 billion. So to have money that can satisfy demands you need to have about 10 percent of that which is a billion dollars. So $300 million is a drop in the ocean. If it were me I would scrap the bond note today and then I would encourage everyone to have a point-of-sale machine, even people who are selling tomatoes in Fourth Street (Simon Muzenda Street), I would encourage them to have a point-of-sale machine then to transfer totally to a cashless society in the immediate short term. Because we have bastardised the US dollar our solution now lies in joining the Rand Monetary Union (RMU) and using the rand as a currency. That means we will not have any need for the Reserve Bank. That also means that to protect people like you and me now, all balances that are sitting in our banks right now must be closed and be given US dollar balances. They must be closed on a US dollar basis so that when the government has money they will know you have US$36, you had US$100 000 to protect pensioners and workers. Let's ring fence current balances as US dollar balances. So when we use the rand now, it must not be mixed with our old US dollar balances. We start afresh. That's why I said we need a revolution. We need a major paradigm shift and Zanu PF is not capable of thinking the way I am suggesting now.
Q: There is talk of introducing more bureau de changes. Is this a noble idea?
A: What is a bureau de change? A bureau de change is an exchange for foreign currency, so do we have a domestic currency? The bureau de change is a place where currencies change hands, where your currency plus other currencies. So when he (Mangudya) says that, he is implicitly saying we either have the Zim dollar already in the form of the bond note or we are going to bring back the Zim dollar. It's a dangerous statement, but the reality of this is that we don't have the economy that can justify the reintroduction of the Zim dollar. The exchange rate at the end of the day and your own currency at the end of the day is your relationship of your exports and your imports. Not only that, it's also a reflection of your balance of payment cover, your reserves, your current account balance. So when you are in a deficit situation like ours you are not exporting anything, you cannot introduce a currency, it will just collapse the way the Zimbabwe dollar collapsed, the way the bearer cheque collapsed. I have always argued that we should only think of reintroducing the Zimbabwean dollar only if we have US$5 billion sitting in an account with the IMF (International Monetary Fund) or with the European Investment Bank or with a bank in Hong Kong or Shanghai. Without us having physically US$5 billion we shouldn't even talk about reintroducing the Zimbabwean dollar, that's why I suggested that in the immediate short-term period, let's join the Rand Monetary Union. In the long-term let's push for Sadc reintegration, Comesa, PTA reintegration and let's create a regional monetary union because we need bigger markets, then we adopt the currency of that union like in the Euro model.
Q: Do you think the MDC Alliance has the capacity to turn around the economy when in power and what do you have in place?
A: We are in the process of consolidating our policies as you know all the parties in it have got their own documents. So we have HOPE (Holistic Programme for Economic Transformation), the MDC (Tsvangirai) have something they are calling SMART. My own view is that we should write a consolidated document that will focus on reformative, democratic development of the State. That's the document we are writing at the PDP, which is a successor to our HOPE document. I think the key highlights of this document should be number 1: the understanding that economics is not divorced from politics, so we need to stabilise our politics, we need the rule of law, electoral reform and so forth. We need to deal with issues of structural corruption that is arresting our country. Number 2: transformation is very important, the value system in this country has been destroyed and corroded. The biggest legacy of president Mugabe is to change our value system. 3: the economy itself, we need to restore the social contract, Mugabe has broken the social contract… so I would suggest that urgently we need to address the social contract through a programme of national healing, through a programme of transitional justice.
Number 4: We are proposing that in under 15 years we can build a $100 billion economy. This would require a sustained growth rate in real terms of seven percent per annum. In the GNU our average growth rate was 7,5 percent, but you recall that in 2011 our growth rate was actually 11,9 percent, the highest in the world. Ethiopia right now is a $62 billion economy. Less than 20 years ago it was a $3 billion economy. We can do better because we are more endowed with natural resources. So I have no doubt that the team at the MDC Alliance can do this job. We ran this economy, I ran this economy and we achieved. I have spent two weeks in England, I was in the United States of America in June, we have friends and partners and we can create relations that can easily guarantee that within the first eight months of this regime we have mobilised resources of $2 billion in our company which we can use to resuscitate the country. It's a question of trust, it's a question of confidence, these people trust us. These people know that we are genuine, so if you were to send David Coltart (former Education minister) and I on a trip across Europe, we will bring back this money.
Q: You were said to have been fired from PDP as its president, what is happening in the party?
A: Those are (secretary-general Godern Moyo and others who claimed to have fired him) little people with small tribal agendas. It's not possible to fire a president. He (Moyo) must read the constitution. So we will refuse to be seduced by selfish megalomaniac tribal agendas and for someone as young as Moyo to be the poster child of tribalism is very sad. I feel pity for him. We will push ahead with our struggle and our struggle is to confront Mugabe. The enemy is not Morgan Tsvangirai.
Q: What is the state of your party?
A: It's very healthy. In Settlement Chikwinya, we have a fantastic secretary general, in Kucaca Phulu, we have a long-standing human rights lawyer, who is our vice president and in Sony Phiri, we have a fantastic vice national chairperson. What we need to conclude are negotiations with the MDC Alliance and I have said to my negotiators give me something that I can sell to my party then we can sign and move forward.
Q: How do you view the crisis in Zanu PF?
A: I think that we should not let these people lead us to a war, we should not let the people lead us to an implosion in the form of a military coup in this country. We don't want a war in this country but, at the rate in which things are moving I foresee danger. I think the Lacoste faction (Vice President Emmerson Mnangagwa's allies) and its friends in the army will have one last kick. A dying horse always has one last kick and I am afraid that that one is the last kick from a dying horse…could be a military coup. That's the last thing we want.
Q: What's your take on the Zimbabwe Electoral Commission (Zec) implementation of the biometric voter registration (BVR) process?
A: It's shambolic. It's a sham, the 2018 election is being rigged and it's being rigged right in front of our eyes. The process is moving so slowly. The proof of residence that needs to be contained in an affidavit is disenfranchising everyone else. Most importantly, we don't have the time. The data capturing is not live so anyone can temper with those USB flash discs that they are using. So it's a dog's breakfast but one which my own dogs will not touch. They (Zec) can do better, they should take advice from the UN, they should listen to advice from experts, they are refusing to listen to advice.
Q: But they claim to have registered nearly 500 000 voters?
A: I come from Harare East, there is no registration that is taking place there. I was in Murewa over the weekend, there is nothing that is taking place there. So if they are registering people on Mars they should tell us so that we get spacecrafts to go and join them there. But not in Zimbabwe they are not registering anyone, in Mars yes, but they should tell us then we will talk to Richard Branson, to help us with airships to go to Mars.
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