The foreign currency auctions of the Reserve Bank of Zimbabwe (RBZ) have not only achieved a stable exchange rate, but are also managing to supply the foreign currency needed by the productive sector to buy raw materials, machinery, spares, chemicals and the like.
This week valid bids and allotments both went over US$35 million, with all valid bidders managing their bids into the tight range that is now the norm and the RBZ having adequate funds to meet all bids.
Part of the reason for a record total bid was obviously the three-week gap in auctions, to match the annual maintenance shutdown of much of the manufacturing sector over Christmas and New Year, but it also shows that the productive sector continues to grow.
Factories had obviously stocked up with both raw materials and with the finished products they needed to deliver to customers, so there were no breaks in supply, so the continuous trend of rising foreign currency allotments is an indication of real and significant growth.
The national development strategy stresses the importance of the productive sector in moving Zimbabweans out of poverty, that we have to create real wealth by growing, mining or making things rather than trying to move bits of paper across a desk, or spend our way to riches.
It also shows that the factories, mines and farms are managing to operate properly during the Level Four national lockdown triggered last week by the spike in Covid-19 infections and deaths.
The Level Four lockdown has been carefully tailored so that large crowds are avoided, but the productive part of the economy operates normally, even at full blast.
For factory and mine managers there is not much difference in levels.
Regardless of whether a lockdown is at Level Two or Level Four, the factory can stay open, but the management has to ensure the basic safeguards of masking, social distancing, temperature scanning, hygiene and, where necessary, testing.
This is important, as the Government recognises and more people need to recognise.
It is all very well saying supermarkets and food shops can stay open for at least some hours a day during all levels of a lockdown, but that is not much use if nothing is on the shelves.
These days well over half the products on our shelves, and an even higher proportion in our shopping baskets are local as producers now reach the volumes and quality where they can undercut many imports.
And the overwhelming bulk of our industry is making the essentials, near-essentials and mass market items, which makes sense.
If industry closes, we either go short or return to killing our local manufacturers and import everything, at a higher price and see our hard earned foreign currency buying things we can make ourselves.
That, incidentally, does put an onus on the productive sector to follow the rules and regulations on health they have hammered out with public health experts, so we can have these safe, controlled productive environments and still have low risk of infection.
There has been speculation among some economists, who always like to model the worst cases, over the sustainability of the auctions and the steady exchange ranges that the markets have developed in the price-discovery and maintenance processes.
RBZ and Government have made it clear that with the positive balance of payments, that is we export more than we import, a position we moved into soon after the advent of the Second Republic along with our fiscal discipline, there is no structural impediment to maintaining the system.
But the Reserve Bank has taken steps to ensure an adequate percentage of export earnings is assigned to imports; that is one of its critical jobs.
With Government reforms having fixed fundamentals to get that excess of exports over imports, the RBZ policy is to ensure productive sectors can buy their share.
Some producers are also net exporters, much of the non-coal mining sector for example, and so can from their retained earnings import what they need.
Others, such as manufacturing, can earn some of their own foreign exchange, and in fact have to spend their own before they buy more at an auction, but are net importers.
At the start of the auction system it was assumed the big net exporters would be selling foreign currency they earned and retained, but did not use, on the auctions and, in theory, they had 60 days after the money arrived from their foreign customer to use that cash or sell it.
The Monetary Policy Committee of the Reserve Bank has, in its tracking, found that net exporters prefer to stock up with their imports rather than sell.
So a new tack is now being taken. Exporters were selling to the Reserve Bank, at the auction rate, an average of 30 percent of their foreign currency earnings when that money arrived in Zimbabwe.
As a result of policy changes they will now be expected to sell an average of 40 percent to ensure that rising demand at the auctions can be met.
In any case with mining output continuing to grow, a record tobacco crop now expected, with the good rains we are having, far lower food imports and greater local supply of all sorts of raw materials from oil seeds onwards, the RBZ must be quietly confident of rising export receipts and falling critical import payments. So the auction system can continue to grow steadily without strain.
But the RBZ has also agreed that the net exporters can keep the remaining 60 percent as long as they like.
They no longer have a deadline to use it or sell it. That change has its own plus side.
For a start, a net exporter will be more careful about what they buy, since they can now store foreign currency in the bank, and that in turn will increase the national foreign currency reserves, already high, and decrease imports.
And it has managed that without any minus side since the former expectation was not happening in the first place.
All this, making market-related and market-driven systems work smoothly, is the proper role of every central bank, and the RBZ appears to be doing it well and doing it properly.
It has moved away from what, in retrospect, was a weird role of managing trade by edict for more than half a century, to the present one of exploiting the fixing of the fiscal and monetary fundamentals and simply ensuring that the free markets set up work as they are supposed to.