Government is very clearly on a roll! Having spent five years continuing endeavours to destroy the economy with an undeniable modicum of success, but without absolute achievement, government is clearly determined to intensify its endeavours. Three weeks ago it presented its 2003 budget which was totally devoid of substance, and would inevitably accelerate that decline. The budget contained no meaningful incentives to motivate foreign currency generation, investment or job creation. The budget showed that government has no intent to contain its expenditure and thereby curb inflation.
And the budget evidenced that government resolutely disregards all need to prioritise its spending in alignment with the needs of the populace. It unhesitatingly continues to spend more on its Defence Vote than it does on Health. It is incomprehensible that a country whose people are faced with a desperate need for an effective health delivery system will perpetuate policies of spending more on the killing of people than upon helping others to stay alive!
The Budget Statement reiterated lip-service adherence to the concept that the private sector is an economy's engine, with the Minister of Finance and Economic Development claiming that the private sector must be the engine for economic recovery and growth, whilst concurrently he enunciated policies which could only cause the engine to "seize-up" and be unable to operate. Most of all, the economic measures envisaged in the Budget Statement were almost entirely resurrections of policies and strategies long proven to be ineffectual and catalysts for disaster upon all sectors of the economy and upon almost all Zimbabweans (save, of course, for those in authority and those related to them).
The most appalling feature of all those catastrophic economic measures, policies and strategies was that they had all, in varying degrees, been resorted to previously, all had failed to achieve their declared objectives, and all had contributed markedly to the dismal state of Zimbabwe's economy and the impoverishment of the majority of the population.
Amongst the extensive array of catastrophic economic policies which have bedevilled Zimbabwe have been government's steadfast refusal to devalue Zimbabwe's grossly overvalued currency. The president has declared devaluation as dead (and its advocates to be saboteurs and enemies of the state), and the Minister of Finance has pronounced devaluation to be a mirage. And yet government has, to all intents and purposes, acknowledged that the value of the Zimbabwe dollar is not what government pretends it is. It has determined not only the official rate, but also a "support price" for gold and another for tobacco. A vast range of imports are valued, for duty purposes, at almost 10 times the official rate.
Similarly, government's foolhardy endeavours to destroy the parallel market in foreign exchange can only be counterproductive in the extreme. Exporters cannot afford to export if proceeds are only realisable at the official exchange rate, which rate fails to recognise inflation officially cited at more than 144% but is in reality at least 175%. The unavoidable results are massive losses if exports are continued, and therefore discontinuance of exports is invariably the case, resulting in yet lesser inflows of foreign exchange, diminished operations for - or closure of - export operations, increased unemployment, lesser consumer spending power impacting adversely upon all sectors of the economy, and reduced revenue inflows to the fiscus. All this has been repeatedly brought to the attention of government, which ignores the facts. Instead, it offers so-called export incentives most of which are of so little, if any, benefit.
Concurrently, government reneges upon its undertakings and assurances given when it permitted the establishment of bureaux de change by terminating their right to operate (and, compounding insult to injury, giving their operators only two weeks' notice of closure, irrespective of legal and moral commitments to employees, lessors and others). Moreover, far from such closures enhancing availability of foreign currency within the formal economy, they can only fuel increased black market operations, undoubtedly of particular benefit to some of the politically influential.
However, amongst the most ill-considered, pernicious policies that government is determined to pursue with increased intensity is the control of prices. In doing so, it pretends a deep-seated concern for the victims of inflation. The unemployed, elderly pensioners, and recipients of low incomes are the greatest sufferers of the hyperinflationary environment which is wholly attributable to govern-ment's mismanagement of the economy.
As government is incapable of admitting error (the omnipotent do not make mistakes!), it attributes the blame for rampant inflation to others. It accuses industrialists, wholesalers and retailers of making excessive profits out of others' needs. That they cannot afford to trade without price increases to compensate for their ever-rising costs of operation is cavalierly dismissed. That in a free economy competition is the greatest curb upon prices is ignored. Instead, government remains determined to show Zimbabweans how much it cares for them (which it actually rarely does!) and equally determined to divert all criticism of its chaotic handling of the economy away from itself and directed against its enemies, actual and perceived.
Therefore, it resorts to price controls. It did so in the last quarter of 2001 and succeeded only in creating an even harsher environment for consumers. Bakers could not afford to sell bread at a wholesale price of $54 a loaf when the then cost of production exceeded $60 a loaf, and retailers could not afford to sell bread for $60 a loaf when it cost them $54 and the remaining $6 did not suffice to cover rent, salaries and wages, electricity, and numerous other unavoidable overheads.
The same held good for milk, beef, cooking oil and other controlled products. The result was immense scarcities as more and more producers discontinued or cutback on production, or diversified into the production of products whose prices were not controlled. What little was produced rapidly found its way into the black market which thrives on scarcity. There are always some that are able and willing to pay extra for that which is not readily available, and others who, although unwilling, will do so for that which they desperately need.
Thus, the injudicious application of price controls in 2001 created increased burdens for the consumers instead of assuaging their ills. Periodically, to reinforce its contentions that the ineffectiveness of the price controls were only because of the diabolical extortion of the private sector and of government's political opponents, it would arrest storekeepers for breaches of the price control and they would be subjected to payment of fines. On very rare occasions this would be extended also to black marketeers. In the main, the storekeepers thereafter ceased selling price controlled products, enabling the black market to thrive even more, and circumstances for the oppressed consumers became even more stressful.
Despite irrefutable evidence of the failure of price controls to address the needs of Zimbabwe's people, and of the massive extent to which those controls have contributed to hyperinflation and to shortages of essential commodities, government has resorted to them yet again. The Minister of Finance recognised that the country's inflationary environment could transform in the event that a social contract was reached between the state, labour, commerce and industry. But government pre-empts any such contract by legislating a further price control order, prescribing a six-month price freeze. In terms of that Order, prices are frozen on all products and services specified in the Order for a period of six months from November 15. The range of effected foods extends over four pages of the Order, including non-alcoholic foods stuffs and beverages, agricultural produce, building materials, petroleum fuels not covered by other Orders, drugs and medicines, most clothing and much else.
All those commodities as are subjected to the Order's provision can only be sold, during the ensuring six months, at the price at which the sellers sold like products on November 15. As those sellers will undoubtedly be confronted with ongoing escalation in operating costs, including salary and wages reviews, rent increases, and so forth, they will soon be unable to comply with the Order, for they will be faced with unsustainable losses. Therefore shortages will become more intense, availability will be limited to the black market at higher prices which will cause yet further inflation.
Many businesses will collapse, the unemployed will be even greater in number, and the economic decline accelerated. Of course, government's parastatal, Zimpost, will not be affected in the way private enterprise will for, within a fortnight of the Price Freeze Order, it announced substantially increased charges!