Even though he doesn’t admit that the economy is in turmoil, yesterday Finance Minister Mthuli Ncube announced that farmers would start receiving 30% of their dues in USD whenever they made grain deliveries to the GMB. The remaining 70% of the proceeds to farmers would still be paid in the accursed Zimbabwean dollar which no one seems to want. This is sorely needed but it is probably too little too late. Besides don’t get too excited before you read the whole article.
Below is an excerpt from the Finance Minister’s public notice:
A) IMPROVING ACCESS TO AFFORDABLE BASIC COMMODITIES
To futher ensure hat citizens have access to affordable basic commodities, in the face of recent substantial price increases in the shops, the government hereby opens up imports of bsic commodities by citizens, through the lowering of import tariffs and other accompanying measures. This is with immidiate effect. Those with free funds are, with immediate effect, permitted to make use of these funds and other resources to import basic commodities.
B) INCENTIVISING EARLY DELIVERY OF GRAIN TO THE GMB
In the quest to incentivise farmers and encourage early deliveries of maize and other grains to the Grain Marketing Board, government has taken the decision to pay the maize farrmers 30% of the amount due on grain delivered in United States Dollars and 70% in domestic Zimbabwe dollars. The (sic) USDollar payment will be calculated at the prevailing willing buyer willing seller rate published by the Reserve Bank of Zimbawe on the date of delivery. The payments will be backedated to the date of the first deliveries of the seasons maize to GMB.
Hon. Prof. Mthuli Ncube
Minister of Finance and Economic Development
14 May 2022
Will it work?
As already said the above is an excerpt of the important parts of the Minister’s notice. In prior paragraphs, he claims to have achieved macroeconomic stability which is a blatant lie. He wouldn’t be passing these measures if he had achieved macroeconomic stability. Anyway, you are not here to read about the Minister. You probably want to know whether these measures will be enough to bring down the prices of food stuff like maize-meal and cooking oil that have been soaring over the past couple of weeks. We don’t have good news on this front. These measures probably will not be enough.
First, the measures allowing people to use free funds to import basics sound impressive but the problem is that they are mostly nonsense. People are already allowed to import basic commodities using free funds. It is therefore not even clear what the Finance Minister is talking about here. The lack of specifics makes it even more confusing. What does he mean by duty will be reduced? By how much? People have been importing cooking oil from Souh Africa for a long time. Sadly it’s not going to be the solution we seek because even in South Africa, cooking oil is now expensive. Those who import this product have a habit of charging double the price of whatever they import from South Africa.
In South Africa cooking oil is selling at around US$4.5 per 2l bottle. That means it will sell for US$8-$9 the price which is its current price. You will find this to be true for most basic commodities. Unlike past crises where we are the only ones suffering we now have to contend with the fact that everyone is going through some difficult times as well. Probably not as tough as ours but enough to make our already deep crisis worse. Importing is not going to save us. We need to figure a way to internally alleviate our economic troubles.
The second measure sounds exciting you would be tempted to think it would work until you read on and realise that there is nothing to be excited about because there are no USDs involved at all. It sounds like farmers will get paid RTGS at the prevailing willing buyer willing seller rate. Now that is not even the worst part. The GMB has a habit of making late payments and it doesn’t seem like they are about to change this habit. Everything sounds as if they will take your maize and then pay you later at the rate prevailing on the day when you made the delivery and not on the date they make the payment when the rate is probably higher.
Commanding agriculture to ruin
Despite some empty statements claiming that they respect market forces, the Zimbabwean government doesn’t. They think of market forces as an invisible enemy to be thwarted. They continue to exercise tight control on the grain market much to the chagrin of grain farmers who like, their foreign currency earning counterparts, are always looking for ways to circumvent grain sales restrictions. Most small farmers, like their small scale exporting colleagues, earn good money by diverting their grain to the informal market where they get paid 100% USD in real cash and not at some wacky contorted exchange rate that colleague at Techzim recently called “fortunate buyer unwilling seller”.
The reason why many farmers have become discouraged is that the government occasionally likes to set fixed prices for commodities and steal foreign currency from farmers at every turn. Tobacco farmers for example have to surrender portions of their foreign currency to the government instead of getting their full reward in foreign currency. Worse they get paid foreign currency at the “official rate” which is never in line with what the market is willing to pay. The result has been a decline in agricultural production with tobacco sales falling by a whooping 22% thanks to government meddling. To cover up their misdeeds the government often hands out wads of “cash” under the command agriculture scheme further ruining the economy with excess money printing.
Everything done here is not out of love for the country. The elite also enjoy unfettered access to official foreign currency markets and are therefore keen to keep the gravy train rolling. There can be no “gravy” unless someone goes out to raid the hapless masses. Hence each time we have the government desperately working to make sure the “official rate” is always below the black market rate. Allowing a free-floating rate would heal the economy but bring that gravy train to a screeching halt as it did during most parts of the GNU.
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