The audacity of faith, actions of reviving the Zimbabwean economy – first things first, rectifying the currency anomaly through contextual innovation.
By Tichaona Mushambadope.
President Emmerson Mnangagwa’s fresh looking cabinet has brought unprecedented excitement and genuine hope that the country’s fortunes are about to change for the better. With an urgency to navigate the country out of the murky economic waters, the new team is mandated to hit the ground running. Inspired by the President’s mantra that “Zimbabwe is open for business” and the comprehension that political emancipation is hollow without corresponding economic emancipation, the cabinet has a humongous task at hand. Professor Mtuli Ncube, a highly astute and venerated economist with vast industrial and academic experience has been tasked to lead the efforts to sanitize and revive the country’s finance ministry and economic fortunes.
As a knowledgeable patriot with the understanding of the urgency, criticality and importance of the task at hand, he promptly proffered a number of options that can be explored in reforming the country’s currency. Irrefutably, currency reform is the first port of call to literally and metaphorically stop the bleeding of our economy throw the vanquishing of parallel market trading. The three options furnished by the good professor include the total removal of bond notes thus reverting to using the USD only, adoption of the Rand or joining of the Rand Monetary Authority and the introduction of new Zimbabwean dollar backed by forex reserves.
There is no shadow of doubt that Professor Ncube is a towering intellectual giant on whose firm shoulders I can proudly stand on as I humbly express my thoughts on the way forward. Delving into the first proposal of removal of bond notes to remain with US dollars, my assertion is that this is a bit complex and difficult to implement given the current relationship between our electronic balances and cash availability. The bond being a surrogate currency which is pegged at par with the US dollar, its sudden removal without any further changes means that all RTGS and other electronic balances have to be cashed in US dollars and given the current situation pertaining to cash scarcity, the scenario will only be aggravated.
The second proposed option pertains to the adoption of the Rand or joining the Rand Monetary Authority. Proponents of the concept have suggested it would be the ideal solution as South Africa is our biggest trading partner hence adopting the Rand would lower operational costs and facilitate business transactions for most importers. However, as rightfully alluded, this option is no longer the most viable and has been overtaken by events. South Africa faces two mammoth issues that it has to deal with, sooner rather than later, namely the land reform program and the contention surrounding the very ownership of the Reserve Bank of South Africa.
The hard knuckled truism is there is no way of predicting the impact of the land reform on the South African economy but having gone through a relatively similar process, it would be prudent to avoid, where possible, economic overdependence on South Africa. With proponents of the land reform advocating for inclusion of mines in their reform process, South Africa is most likely to face severe economic warfare from its detractors who are opposed to the correction of historical injustices and equitable distribution of resources. Pertaining to the clamours around the ownership of the Reserve Bank of South Africa, there will be no quietude until resolution is brought to matter, most likely through the nationalization of the bank. Given that there are powerful persons and entities with vested interests in the RBSA, there is bound to be resistance which may take many forms include economic sabotage.
In essence, given that there is lack of clarity pertaining to the impact of the pending reforms in South Africa, it is imperative that our economic destiny is not over dependent on theirs. Given that South Africa is our biggest trading partner, anything negatively affecting their economy will affect us as well, hence we might as well minimize the impact on us by not tying our monetary policy to theirs. With President Mnangagwa’s well-articulated vision of having the country as an upper middle class economy by 2030, and depending on the effect of the reforms in South Africa, Zimbabwe may be called upon to share the status of regional economic hub with its southern counterpart. Basically, separation of monetary concerns will be strategic in a long term perspective as it can ensure that Zimbabwe can be in a position to support and buffer South Africa and the region in the event that their reforms have a negative impact.
The third option presented by the Professor is that of introduction of a new Zimbabwean dollar backed by forex reserves. This is the option I am inclined to support, with a bit of innovative twist to it. I am proposing a robust and innovative hybrid solution that will meticulously harness on emerging technologies in the blockchain space and also capitalize on entities that already have faith in the trajectory that Zimbabwe is taking. The initial proposal is that we need the new Zimbabwean dollar that is backed by forex reserves, but at the same time we a need a stable economy to build our reserves, so it becomes a classical catch 22 scenario hence the proposal to rope in the blockchain in the mix to expedite the process.
In essence, the proposed solution entails Zimbabwe utilizing the blockchain in a multi-faceted manner. Firstly, the government must launch its own crypto-currency which will be backed by investors and potential investors in the country. With the comprehension that there are an array of conversations currently taking place to the effect of investing into Zimbabwe in the various sectors of our economy and that these investments will only come through and benefit Zimbabweans in the mid to long term. The idea is instead of having these monies sitting in some bank elsewhere, part of it can be used to support and back the Zimbabwean cryptocurrency.
Our local currency, the new Zimbabwean dollar that will then be launched will be backed by this cryptocurrency which is in turn backed the finances from potential investors. This way we will be in a position to launch a local currency that has a relatively solid backing without necessarily having taken much time to build our forex reserves. Through this approach, it becomes feasible to have our own currency with sufficient backing by the year end.
It is critical to highlight that investment in the cryptocurrency is not only limited to those seeking to make FDI investments but also locals seeking to do make LDI in the new economy order. Once the cryptocurrency is launched, because of the dynamic nature of the underlying technology that enables relative rapid clearance in terms of transfers, the new Zimbabwean cryptocurrency can be utilized by people in the Diaspora for remittances. Since the cryptocurrency will be backing the Zimbabwean dollar, the funds from Diaspora remittances will also play a part in indirectly backing the new dollar.
The transparency and security furnished by blockchain technologies and the new government’s business-like approach is envisaged to encourage potential investors to have much more confidence in the proposed cryptocurrency. The cryptocurrency methodology is likely to more saleable to potential investors than asking them to back our Zimbabwean dollar directly because they would have no control of their monies as it would be directly under our central bank, unlike a cryptocurrency which they can be able to dispose in an open market and recover their investments or more depending on the going price at that moment. Essentially, by the time some of the investors commence seeking liquidity and releasing some of their crypto coins, the country would have already started building sufficient forex reserves to either back directly our currency or back the Zim crypto that would in turn back our dollar.
There is obviously a healthy scepticism regarding cryptocurrencies as some persons have been swindled through pyramid schemes masquerading as crypto-related investments that promised astronomic returns. This has led to having most central banks in Africa issuing warning or imposing some form of restrictions on crypto trading. I agree it is important to put in the necessary regulations to protect the general populous but I also opine it is more than critical for monetary authorities to invest in acquiring the right knowledge and expertise to ensure that workarounds are formulated that will enable our country to benefit the most from emerging blockchain technologies.
Ceteris paribus, with the sufficient political, regulatory and technocratic backing, I humbly assert that the route of launching our own cryptocurrency, promoting it to investors and all interested parties to back this crypto and subsequently launching the new Zimbabwean dollar which will be backed by the aforementioned cryptocurrency is the best foot forward as we take assertive actions for reviving our economy.
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