The reason why the economy of Zimbabwe has stagnated in growth for the past few years after a boom in the years 2010-2012 is that the ugly forces of market liquidity crisis are now sprouting into life. The signs of the problems have been seen and ignored because of the much hyped boom which peeked at 11.9% growth in GDP recorded in 2012. Since then the country had an unprecedented fall in GDP beyond expectations of the government forcing the government to adjust their growth estimates not less than 2 times in 2013. The adjustments clearly have shown that we have been caught unaware in the midst of hyped but not worth a hype moment.
The reason why 2010 has been a good year in our economy's history was because we had adopted multi-currency regime in the previous year. The decision was a good one in stabilising the once volatile monetary regime and the gain in GDP over the years was just a manifestation of the stability that has been brought henceforth. As an Analyst and economic instigator those years in which our GDP recorded some highs are the years I believe we have mishandled things to bring about some of the economic misharps we are experiencing in this day. We lost it in our own senses to believe that we had found a solution to the liquidity crisis of which we only had make the situation stable. Therefore, the growth gained as evidenced by the increase in GDP was just a stabilization gesture of which real growth was to be expected from 2013 going forwad if and only if we had strategized and planned for it.
Seriously, we have a very serious problem that is life threatening to the economy and is rearing ugly in our watch. We have a serious liquidity problem in Zimbabwe and if we don't find a solution today trust me we are doomed. In 2012 I made very similar calls in one of my articles( http://www.herald.co.zw/insight-into-zims-multiple-currency-liquidity-crunch/ ) and maybe it fell on deaf ears and in this day I am repeating the same calls due to the continous fall in our GDP levels and the distastefull environment our economy and industry are in.
Some of the manifestations of the Ugly Liquidity Crunch
- Companies are downtooling and closing down
- Corporates are downsizing and retrenching
- Unemployment rates are ever-increasing
- The economy is on a freefall
- Capacity utilization continues to fall
- High interest rates and short term loans
- Emerging of non-perfoming loans
- Short tenor mortgage loans
- Depressed GDP values
- Falling living standards
- Poor service delivery
- Industrial output very depressed
- Non-payment of employees
- Disinvestment
- Property auctioning to repay debts
- Borrowing to repay debts or to pay employees
The bigger question is then, Shall we continously look on as the situation gets out of hand and maybe expect black magic to solve the problem
It seems the government is now waking to try and contain the situation, but let me hasten to say Bond coins are only a drop in the ocean and they will solve the Liquidity crisis maybe by 0.001%.
Here are some of my suggested solutions to the problem
We need to separate economics from politics
I have read some of the economic blueprints penned used by our policy-makers on issues related to the economy and I failed to fall in love with any of them because they sounded more like political blueprints instead. Unless we put a separation in those and chose a progressive way instead of populist ways then we will never get it with the economy. Zimbabwe needs a urgently an economic think tank dedicated to solving economic issues without political influence and affiliation.
Creating a new economy
It is a fact that many of the companies that have not closed doors yet are operating in the negative with just a few being able to make profits in their operations. Trying to restore most of them in this cash strapped environment will take a light of years to accomplish. Take for example the government that is struggling to pay it's workers faced with a challenge to revitalize a company that has made a US$1 million loss in the previous year, had not paid salaries for the past six months, has a gearing of 2:1.7 and the company's management is further being investigated for a clandestine of fraud and that requires hiring some of the most expensive auditing companies. In that situation what would you chose given the other option of supporting entrepreneurs who have some small viable business to enhance their growth so that maybe at some point in time in the future they would buy the struggling company and revitalise it.
Securitization of Resources
Kinda lame a suggestion is to securitize our mineral resources. It's quite lame because we need first to establish our resource base to do that and it requires a lot of time and money. The most immediate action is the long overdue securitization of unpaid dues and to be paid dues to ZESA and also the securitization of non-perfoming loans which has been on the cards for quite a long time now. Prepaid meters for ZINWA are very necessary and provides more avenues for securitization. However, for such to be attained there is need to bring new and vibrant skills in those and all other organisations.
Identity
There is also need to restore our identity as a nation that has a culture and a strong standing for itself. A nation full of love, undivided and with a vision. We have to reclaim our status and be supportive of each other. We should at least buy Zimbabwean made products and support each other on this cause.
Restoration of Law and Order
There is need to make it a punishable crime for private and public office handlers to break codes of conduct or ethical behaviours within companies especially to churn out corruption and other corporate governance issues affecting the industry.
Finally,,,
Liquidity Crisis
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We need to find a solution here.
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