New Zimbabwe.com

It’s flawed macro-economic governance systems, Stupid!

By Jameson Dapi

PUBLIC Accounts Committee (PAC) chairperson, Honourable Tendai Biti is not only an accomplished lawyer but has also authored a book with Greg Mills and former Nigerian president Olusegun Obasanjo.

Their book shows that a functional democracy is an outcome of the interaction of systems and institutions of government as they deliver value to the governed.

They note that democratic system of government with strong institutions have proven historically to be the most effective, highlighting the important role played by institutions in democracy and development.

By inference, this means the social economic and other outcomes in any country should be viewed within the wider system that generates them as opposed to individuals serving in any single institution.

That said during the day, when darkness falls, the same Biti surprisingly decides to run at tangent with his own literal works and starts playing the shallow politics of individuals solely for expediency.

As a high-ranking opposition politician, lawyer and former Minister of Finance, Biti knows it fully well that key State institutions such as Parliament, parastatals, the Reserve Bank of Zimbabwe (RBZ) and even Treasury are not independent enough.

For instance, in 2009 Biti called former RBZ Governor Gideon Gono an Al Qaeda terrorist and accused him of destroying the economy through quasi-fiscal activities.

But as soon as he became Minister of Finance he is on record as having authorised the use of Special Drawing Rights (SDRs) to finance similar government programmes such as the presidential inputs scheme even though a budget provision had not been made and debated in Parliament.

As if to suggest that the forces that made the garrulous MDC vice president release SDRs, a reserve asset, to procure inputs for a government programme outside the announced budget ended with the Government of National Unity, Biti now makes it a daily deliverable to harass mere government and RBZ officials without confronting the edifice that he knows is responsible for the actual decisions.

Such levels of dishonesty and expedient duplicity from an honourable Member of Parliament (MP) and an officer of the High Court is indeed nauseating.

In its latest report quoted by a local weekly in a series of articles, the PAC noted that the RBZ “aided and abated an expansionary fiscal policy”. The same article, at the end, recommends that the RBZ Act should be amended.

What is particularly interesting in this conclusion by PAC is that its chair, Honourable Biti, is the sole author and purveyor of the current RBZ Act.

As they say, what goes around comes around, the PAC chair resorted to his characteristic politics of individualism and resultantly created a rickety RBZ Act in 2010 which made the Central Bank a mere department of the Ministry of Finance just to target former RBZ Governor, Gono.

As is bound to happen with national institutions, the occupants and drivers change all the time while the institutions and legislations governing them remain.

Today Gono and Biti are out of the mainstream governance system but the poorly authored RBZ Act is still there with its key weakness being zero independence of the Central Bank.

The irony to the whole issue comes to the fore when Biti, in 2019, emerges as the biggest mourner over the poor legal work he perpetrated to target an individual when his mandate as minister was supposed to be national and objective.

Biti allowed his hatred for Gono to get the better of him and crafted legislation that did not consider the bigger picture but served his egoistic purpose as Minister of Finance as he could give directions to the RBZ Governor. It’s only that now instructions are coming from another Minister and that he does not agree with them.

Going by the same token, as described above, the so-called money lent to Government in the PAC report was based on instructions from the principals to their agent or banker.

The RBZ Act provides for the Minister of Finance to instruct the Central Bank on anything as stipulated in Section 64. Further, these resources were meant to pay for electricity imports, grain imports and local grain purchases from farmers.

Due to sub-optimal tariffs, power utility Zesa Holdings could not raise the required domestic currency to buy foreign currency and import power hence the Ministry of Finance would borrow from the RBZ through its overdraft facility. This arrangement was, in part, an acknowledgement by government of the adverse impact of its policy on tariffs as well as failure to budget for the subsidy.

Similarly, because the Grain Marketing Board (GMB) sells maize at below purchase price, government would also borrow from its banker to finance the purchase of maize delivered to the State granary. Borrowings would also be done to facilitate the purchase of foreign exchange for importation of both maize and wheat.

These are policy issues, whose implications legislators are expected to appreciate and debate in the august House.

Parliament has a role to influence policy through its oversight on the Executive and stop unnecessarily harassing executives of public institutions.

If the truth be told, these executives are actually looking up to Parliament to set them free so that they have operational independence and are only blamed for things they have control over.

Can the chief executive officer (CEO) of the Zimbabwe United Passenger Company (Zupco) refuse to provide buses for a rally? Or rather, can the CEOs of GMB or Zupco question the rationale behind the subsidies being shelled out like confetti at a wedding on their parastatals?

The same MPs have been there in the face of these unsustainable subsidy policies. If anything, they were happy to buy fuel at 30 cents and bread at one dollar, regardless of the macro-economic implications.

The truth of the matter is, however, that since the fuel was sold in RTGS money, funds had to be found somewhere to settle the foreign currency obligations and even import the fuel in the first place, hence the facilities offered by the RBZ. Facilities were also arranged for cooking oil and wheat.

It has taken the current Minister of Finance, Professor Mthuli Ncube to tackle these issues head-on and ease the burden on the Central Bank.

Regarding the issuance of Treasury Bills (TBs), Biti knows that TBs are issued by Treasury based on an analysis of its cash-flow position. Central Banks only issue TBs on behalf of their principals.

So, instead of barking up the wrong tree, the PAC must engage Treasury and map a way forward on this issue.
But then again, this is one of the issues that the Central Bank and Treasury have discussed and agreed, including limiting access to the overdraft facility. What is taking place now is an unwinding process that should see normalisation in the near future.

It is important to restate that RBZ Governors come and go and it’s the responsibility of Parliament to ensure that our institutions are strong and are able to support the democratic process in the country. The legislature should take the lead in identifying and addressing governance weakness as the Executive branch may not address such weaknesses.

This also applies to the governance framework around parastatals as this is the source of some of the problems.

For example, faced with a power crisis resulting from low water levels in the Kariba Dam, the current Minister of Energy and Power Development fired the entire Zesa board as if he wanted them to pour water into Lake Kariba or the Zambezi River. What followed makes for sad reading! He then hired a 73-year-old as executive chair for the power utility despite his not so impressive previous track record at Zesa.

Similarly, problems at the National Social Security Authority reflect weaknesses of the governance framework.

When all is said and done, the most important point is to acknowledge a national reality that Zimbabwe has an unsustainable debt overhang, which makes it impossible to access offshore credit without securitising it with stable income flows.

Married to that fact is the reality that failure to access credit literary means shutting down the country with disastrous humanitarian and security consequences. This, in essence, makes it imperative that government – through all agencies at its disposal – prioritises collective survival ahead of narrow purviews being pursued by PAC and other armchair critics.

In other words, the structural deficiencies affecting Zimbabwe’s macro economy, which among other things has resulted in depressed domestic production and over reliance on external borrowing certainly needs to be addressed but that’s a process and not a days’ event.

It, therefore, stands to reason that production has to rise to cover the gap before some of these external financing facilities are cut off, if Zimbabwe doesn’t want to turn into another Somalia.

Jameson Dapi is an economist and development finance expert. He writes here in his personal capacity. For views and comments, e-mail to dapijameson@gmail.com