Zimbabwe has so far conducted 8 foreign currency auctions since the system was unveiled and each time the rate has gone up. Not only that in all but one of these auctions, the bid amount (i.e. the amount foreign currency buyers were looking for) was less than the amount of foreign currency available. All this means is that despite blaming the black market for everything, there really is a severe foreign currency shortage problem in Zimbabwe. And the government thinks it knows why.
Its low production not saboteurs
Before the introduction of forex auctions the government through the RBZ and the Ministry of Finance loved to blame big bad invisible saboteurs for ruining the economy but the truth is that the Zimbabwean economy is simply not producing enough goods and services to meet local demand. This has seen the country importing everything from needles to combine harvesters putting a severe strain on the little foreign currency we have. This is the real problem and even the RBZ governor acknowledged as much during his recent interview with Sunday Mail.
We are pleased with the performance of the auction. The Reserve Bank has been very clear though: we have bemoaned the lack of productivity in this country; we have no productivity; that is the problem, it is not foreign currency.
We do not produce to self-sustain ourselves. How do we import maize and wheat in this day and age?
The RBZ continues to bemoan lack of productivity to self-sustain ourselves so that the foreign currency we are using to import maize and wheat is used to feed the auction system.
We need 30 000 tonnes of wheat in this country every month. That is about US$12 million, which we are removing from the auction, and maize we need about 100 000 tonnes per month; that is about US$28 million, which we are removing from the auction.
So you can see already that more than half the country’s forex requirements per month go to import basic food commodities in the form of grains and therefore you want to reduce that to put money on the auction.
Agriculture needs a boost
The country has celebrated “bumper harvests” brought about by the controversial command agriculture program but it seems the success of this program has been greatly exaggerated. Despite improvements and billions in inputs the country’s agricultural sector is simply not producing enough to even meet domestic demand never mind export markets.
It’s not a coincidence that Zimbabwe’s economy is suffering as it’s agricultural sector continues to under-produce. The country had agriculture as the backbone of the economy during it’s heydays. With the crumbling of the agriculture sector everything went to the dogs. There is need for extensive reform and accountability in the sector.
Currently we have opaque loans cum grants, the question of tenure,bad government policies, inexperience and an over-reliance on good rainfall patterns all weighing down on production in agriculture.