Zimbabwe: Let's Restore Production Levels

Source from:  The Herald (Harare) 1 August 2008 08/04/2008

The headline-grabbing sections of the monetary policy statement by Reserve Bank Governor Dr Gideon Gono - the new currency and the higher daily withdrawal limits - were expected. The only speculation was how many zeroes he was going to knock off and he was bolder than most expected. Everyone now hopes the banks and retailers will be able to quickly adjust their technology to reflect the new currency so that all swipe cards will work and that RTGS payments will once again be swift and certain. But all that grabbed the headlines was bookkeeping and administrative changes that allow the average bank computer to cope with the appalling inflation Zimbabwe suffers. What was more important and far more critical was how Dr Gono hopes to bring down inflation. Once again, as he does every few months, he zeroed in on production, and particularly on agriculture. The only way Zimbabwe is ever going to get out of the economic morass it finds itself is to produce its way out. The lifting of sanctions will help a bit, but will not be a panacea. The economy has to be sound before we go to international finance institutions. We hope that the country has learned from its mistakes of the 1990s and will not mortgage its soul to the International Monetary Fund, or other even more deadly creditors, building up heavy debts that will take years to repay. And if agriculture can be fixed, then we will have a sound economy. We need to rapidly return to the days when Zimbabwe was a net food exporter. We might have had to import some of our wheat and much of our rice, but maize, sorghum, beef, sugar and pork exports paid for those with a bit of loose change left over. At the same time the tobacco, horticulture and cotton crops were mainstays of our export trade, along with some privileged beef exports that might under new trade rules be abolished, and provided farmers with some serious cash. There were shortages of foreign currency, but if we assume that we can return to being a net food exporter, restore production levels of the export cash crops to the levels of the late 1990s and add in the export income from the platinum mines that have started flowing in over the last few years, the books will probably balance. The 1990s agricultural economy was far from perfect. The bulk of export earnings went to a small minority of farmers and Government was forced to spend quite a lot on supporting these large farmers; things like free health care and education for the huge labour forces were one obvious, if hidden, subsidy. People farming on overcrowded communal lands frequently required more food aid than was really affordable but which had to be provided. Land reform, coupled with the same levels or better of productivity, should ensure that this sort of wealth is more evenly spread, allowing emergency food aid to be decreased, and allowing a greater contribution from parents to schooling and from communities for their health care. Just as important, if there is a large rural middle class, then there are huge markets for a lot of the things that Zimbabwean industry produces. With local inputs readily available, and inputs fairly easy to pay for, industry can go back to full use of its production capacity, pushing profits and, so, taxes and can boost employment, meaning fewer people will need Government support The upshot of all that rural and urban economic growth is that Government's share of national wealth, raised through taxes and fees, should be adequate to actually pay for what most people expect a government to do. In such an economy, external loans, whether from the IMF or from banks, will simply be normal commercial bridging finance, to deal with the complication in an agricultural economy that entire harvests tend to arrive in a period of a few weeks, with farmers needing to be paid immediately, but sales of the crops to users and processors is a year-long affair. If Zimbabwe's foreign currency earnings and spending balance over a year, and if taxes cover Government expenditure, then we kiss inflation goodbye. And the whole basis of such a desirable state of affairs is restoring agricultural production to previous levels, but in a society where many will benefit from that surge, thanks to land reform, ensuring long-term viability, huge markets for many basic consumer goods, balanced external trade, and enough taxation income to give balanced or near balanced budgets. Presumably this is why Dr Gono continually harps upon agriculture and is doing more than most to ensure rising production. Enditem