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, Part 2
"In
the Hotseat" speaks to Zimbabwean Economist Eric Bloch (Part
1)
Violet
Gonda, SW Radio Africa
September 19, 2006
This programme was broadcast on
Tuesday 19 September 2006
Violet: Zimbabwe is
a country in crisis. Inflation is at an all time high of more than
1200%, unemployment 80% and an unstable political environment. On
the programme today I have invited Economist Eric Bloch – who advises
Gideon Gono the Governor of the Reserve Bank of Zimbabwe - to give
us his views on the crisis in the country.
Welcome on the discussion Mr Bloch.
Eric : Thank you Violet
Violet: Now, my first
question is related to the issue of mass action that the labour
body embarked on just recently and was crushed by authorities before
it even started. In your view, and, as an economist, do you see
mass action changing things in Zimbabwe ?
Eric: Not mass action
by way of disrupting commerce and industry. I don’t see that that
achieves change, that only provokes a very heavy handed stance from
the authorities and it’s counterproductive because it forces the
economy into even greater depths to the prejudice of the very people
who are protesting who are resorting to the mass action. So it is
very, very counter productive on their part. I do believe that the
masses should be more forthright in making government aware of dissatisfactions
in order to achieve change, because any government has to be sensitive
to the views of the populace. But, that must be done by way of protests
or actions which are not of a negative nature and which actually
are more harmful to the protesters than to anyone else.
Violet: But, isn’t
that why the tripartite negotiations failed because to a large extent
the government was not sympathetic to the workers?
Eric: No, that was
the case at one time but the reality is that at different times
over the last two years or so each of the parties at the Tripartite
Negotiating Forum has frustrated things. Initially, Government refused
to enter into agreements because it did not want to be constrained
on the management of the fiscus; on its spending. Subsequently,
it was the private sector; private enterprise, who resisted because
they felt that the demands being made were incapable of being met
or fulfilled by private enterprise without enterprise dying. Thereafter,
labour resisted and said they were not prepared into any agreement
unless there would be a minimum wage at least equal to the Poverty
Datum Line. Eventually the private sector said they were prepared
to agree to a minimum wage of the Poverty Datum Line subject to
a qualification, and that qualification being the ability of businesses
to pay it, because they saw no point in agreeing to a wage which,
in practice, would not be paid because the businesses would collapse.
That qualification was unacceptable to labour. So, the reality is
that at different times, each one of the negotiating parties has
frustrated an agreement coming about. I do believe that eventually
reality will prevail, and we will see a reasonable agreement coming
out of the TNF but, it does need a will on the part of all three
to compromise instead of each sticking to their rigid stances which
has been the characteristic of much of the negotiations.
Violet: Right, so
if the economy of Zimbabwe is one that cannot be addressed through
the current strategies being employed by the ZCTU, such as going
on strike as you say, now, in your view, what should the different
segments of Zimbabwean society be doing right now to resolve this?
Eric: Essentially
first and foremost, I believe that the people must be prepared to
speak out and make their views known, but that can be done by way
of written petitions rather than undermining the economic activity.
It can be made by way of attendances at rallies and at report-back
meetings in constituencies, thereby making the views of the populace
known to the Members of Parliament. It can be made through the media,
particularly the independent media where people can express their
views far more readily than in the state controlled media where
much of those views would be censored and simply would not be published,
and, of course, representative bodies such as the ZCTU could, very
forthrightly, make the views of their membership known to government
without having to resort to strikes and protest marches. The intention
last week was that they were going to deliver a written protest
to representational government in each of the sixteen centres in
Zimbabwe where they had intended to have marches. They could have
delivered those same things without having had the march, so, they
were obviously looking for publicity side to it over and above actually
making their views known.
Violet: But Mr Bloch,
knowing full well the repression in the country, you know all the
things that you have described about what the ZCTU should have done,
you know that in Zimbabwe right now, it’s very difficult to do any
of those things. For example, written petitions; they tried to do
this but we know very well that the Government ignores this and
even in fact, as you said, the ZCTU tried to present a written petition,
and, they were blocked before they even started. The media is another
problem; it’s extremely partisan and it does not even give a voice
to the other stakeholders. And then, you talked about rallies; opposition
forces or pro-democracy groups, to a very large extent are not allowed
to hold rallies in Zimbabwe . So, clearly it looks like a lose-lose
situation for the worker?
Eric: Agreed, agreed,
but therefore to resort to something which A) doesn’t have the support
of the masses, and B) will have the same repression is an exercise
in the pointless and the fruitless, because the reality is that
the majority of workers did not turn out for the protest marches
last week. The ones that were dispersed were mainly the leadership
of ZCTU; the heads of the various Unions, not, the workers, the
mass workers turned up for work because they couldn’t afford not
to receive a day’s wages. And, those who did turn up were subjected
to the same repression that you are talking about. So, all you’re
saying is that instead of following tactics that have been repressed
in the past, let’s do other tactics which will be repressed and
which will be equally unproductive. That, I don’t believe, makes
sense. What makes far more sense is that when government, for example,
when it has it’s Independence Day rally, when it has it’s Africa
Day rally, when it has it’s Defence Forces Rally and it’s Defence
Forces Rally and it’s Hero’s Day rally, let hundreds of thousands
turn up to those rallies and let them shout out those views collectively
at those rallies. Those are Governmental rallies which aren’t going
to being prevented by the state, but if hundreds of thousands are
prepared to voice their views, peacefully – not resorting to violence,
there is no choice but for Government to hear it, and, any Government
in the world becomes concerned when they find that there is a unified
opposition stance from a majority of the population because then
they fear that it may move away from a peaceful situation. So, there
has to be greater constructively. Resorting to a tactic which isn’t
going to work to replace other tactics that didn’t work, is meaningless.
Violet: But again,
I know this is the last point on this issue because it seems there
is no solution to this problem. All the other pro-democracy groups
have taken to the streets, whether if it’s the WOZA women, if it’s
the NCA, if it’s the ZCTU. So far as we have seen as the media,
covering these protest marches, they have been largely peaceful.
So, to some extent, even if the majority of the people f Zimbabwe
were to take to the streets, the government will still clamp down
on this?
Eric: Yes exactly
and that’s why I say it’s pointless for them to take to the streets
in a protest march. It achieves absolutely nothing. But, if, collectively,
the masses voice their views at official rallies of the State and
through the media, and by bombarding the Members of Parliament and
their Government with their submissions, and, if the representative
organisations keep making those submissions, eventually, it’s got
to ware down the authorities, as we have seen in other parts of
the world. However, to resort to strikes will only result in the
collapse of the very businesses with the result that instead of
having 80% unemployed, we finish off with 100% unemployed. And,
whilst the people are not being paid an adequate wage, it is still
better to have an inadequate wage then a zero wage. So to me, the
ZCTU was actually proposing actions which were going to be harmful
to it’s members without any compensatory benefit flowing from it.
They need to be more dynamic and positive in the message that they
resort to.
Violet: Now let’s
move on to the issue of recovery. You have been advising the Government,
namely the Governor of the Reserve Bank, Gideon Gono, and, as I
mentioned earlier, inflation is nearing 1200%, there is a critical
shortage of foreign currency, unemployment is at 80%. So, my first
question on this issue would be, what exactly are you advising Mr
Gono?
Eric: Well I, I’m
not at liberty to disclose confidential advices. Obviously, some
of the advices I give are in line with things that I have also written
about and spoken about, so, I can only give you a partial answer.
But, before I even do so, I think I need to make two points. The
first is that Dr Gono has a large number of advisors, not just myself,
and he will receive diverse advices and then he will have to evaluate
and consider which one he is going to take. But, secondly, in many
instances, his hands are tied in that even when he wants to take
those certain actions he has been precluded from doing so because
many other things require the authority of Government rather than
being in the ambit of the Reserve Bank. So, whilst he tries, as
much as he can, to right the state of the economy, often things
are beyond his hands. For example, the gross mismanagement of agriculture
by the Ministry of Agriculture over the last six years could not
be remedied by him because he has no authority over the Minister
of Agriculture and that’s just one example. Having said that, I
believe that key features towards our economic recovery are first
and foremost, that there has to be a significant cut back in Government
spending, so that we do not continue with massive deficit budgeting
which is funded through the printing of money, which is one of the
major causes of the rampant inflation that we have.
Secondly, in line with that, we have
to stop talking about containing corruption and actually have to
start containing corruption, because as one of the most corrupt
countries in the world, we are, in fact, fuelling our inflation
through the very high costs of that corruption. The Third thing
is that we have to ensure that we do have a significantly increased
flow of foreign currency so that all sectors of the economy have
their inputs consistently and therefore that we maximise productivity
because that is key to bringing inflation down. Now, in order to
obtain that foreign currency, number one, we have to be realistic
in our exchange rates.
We must either allow our currency to
float or we must regularly devalue in line with inflation, so that
we do create and keep export market competitiveness. Secondly, we
have to reconcile with the international community and in order
to do that we need to demonstrate that we are going to have a full
respect for human rights, for democracy, for the preservation of
law and order, for the implementation of justice; completely free
and independent judiciary.
All of those are pre-requisites to
reconciliation with the international community plus we must also
stop calling the international community names. If we do all these
things and achieve the right reconciliation then, we will, on the
one hand get the resumption of financial support from the international
bodies such as the IMF and the World Bank, the European Investment
Bank and the like; we will receive far more substantial developmental
aid from many of the countries in the world, and, we will once again
become an investment target for many which brings both the foreign
currency, and new employment, as well as other economic benefits.
So, collectively, we’ve got to be prepared
to deregulate the economy, devalue the currency regularly, restore
our relationships with the international community by changing the
very mode of the operations of our country; of the Government of
our country.
Violet: So now you
say there’s corruption, overspending by the Government as some of
the reasons for the high inflation. So, is there hope then or any
chance at all that the economy could be improved by the Mugabe government?
Eric: Oh yes, and
in fact, I do believe that we will start to see economic improvement,
economic recovery, but, I don’t believe that we will be achieving
it as rapidly as we should because of the reluctance of Government
to take many of the steps that I’ve just mentioned. Some of the
steps will be taken, for example we did see a devaluation of the
Zimbabwean Dollar on the 1 st August, and that has already helped,
to some degree, in bringing in new export orders. We are seeing
more determined efforts now to recognise bilateral investments,
protection agreements and bring some sanity back into the agriculture
sector. So some of the measures are being taken and will begin to
yield results in 2007 but it’s going to take years and years because
we cannot achieve a total recovery until there is a radical change
in governmental thinking and actions.
Violet: What is the
Government doing in terms of corruption or stemming corruption?
Eric: Absolutely nothing
other than talking about it. It keeps saying that it’s going to
contain corruption and, already two years ago, a Ministry of Anti
Corruption was established, but, in reality, there has been very,
very few prosecutions and only of people that Government wished
to eliminate, but there’s been no focus on the others. If we think
that it’s now already some nine or ten years since the Chidyausiku
Commission identified hundreds of persons who corruptly obtained
war veteran compensation and yet there hasn’t been a single prosecution
out of that. It’s at least five years since the exposures of major
corruptions in certain parastatals, and with the exception of two
uncompleted prosecutions relating to the Grain Marketing Board,
we haven’t seen any prosecutions there. So, basically what Government
is doing is talking; nothing else.
Violet: So then, how
can we expect things to change under the present regime if they
are actually doing nothing as you say?
Eric: Exactly as I
said just now; we can only expect partial change; being those things
that they do, eventually, out of desperation, do. I’ve given the
example that they are now trying to change the situation within
agriculture. That is one positive. There has finally been some recognition
that there has to be some exchange rate movement. That is a partial
positive because while there has been some movement, it hasn’t been
sufficient. There is some attempts on the part of the State now
to ensure that there is greater compliance with the budget votes
by the various Ministries. So, I wouldn’t go so far to say that
Government isn’t doing anything, what I do say is that government
is not doing enough and it’s only doing those changes which it reluctantly
feels that it has no alternative to change, rather than that it’s
dynamic and proactive in addressing the comprehensive changes that
are needed.
Violet: What about
Gono’s recent currency reforms? How effective are these and how
does reducing the Zeros actually help, given the fact that inflation
is at 1200 %?
Eric: This has been
one of the biggest misunderstandings in Zimbabwe and world-wide.
The change in the currency was never intended to have any bearing
on inflation; other measures were to be taken. The change in the
currency was merely an attempt to prevent the economy collapsing
even further through an inability to manage and administer money.
Because of the extent of inflation that we’ve had over so many years,
we were faced with so many zero’s in all transactions, there were
hardly any computer programmes in Zimbabwe that were able to function
any longer. The cash registers in the supermarkets could not even
tally up an ordinary trolley load of groceries; the petrol pump
metres could not record the price of petrol on the rare occasion
that there was any petrol to sell, desk calculators couldn’t handle
transactions any longer. It was totally impossible administratively,
so three zero’s had to be knocked off just to be able to restore
ordinary administration.
Similarly, because of the number of
zeros the extend that people had to carry money just to do ordinary
transactions, was creating tremendous security hazards, first of
all for businesses where major supermarkets were now being faced
with having to have dozens of large tin trunks to hold all the money
and transport them to the banks instead of very much lesser volumes,
and, people were having to carry large suitcases and bags full of
money making them vulnerable to bag snatching, to hi-jacking and
to robbery than a far greater extent than before. So, by knocking
of the three zeros, management of currency was being restored. It
wasn’t intended one way or the other to have any effect on inflation.
It wasn’t intended to have any effect on the economy, other than
to restore the working environment, and, that it has achieved.
So, whilst many people have been highly
critical of the action, I believe that in principle I think they
were completely right. Where I have my reservations is that I think
that it was implemented in too short a period of time creating a
major difficulty for some in achieving the exchange of their money
timeously. So, some hardships were created through the implementation
side of it, not through the principle.
Violet: But how sustainable
is this? I mean, are we not going to find ourselves in a situation
where we have those zeros back by December as was said by the Finance
Minister, Herbert Murerwa, recently?
Eric: Well, not by
December. I do believe that probably in another year’s time we are
going to have to go through the same exercise because until we do
get inflation down very substantially we will find progressively
the amounts of money needed for each transaction rise, the number
of zeros will increase again. Probably mid year or so next year,
the whole exercise will have to be done again, but as we bring down
inflation it won’t have to be a recurrent thing every few months
or every year, it’s once or twice that it’s got to be done and it’s
still better to do that than not do it and have yet a further nail
in the economic coffin.
Violet: And did you
have anything to do with the slashing of the zeros?
Eric: Certainly I
had recommended it; I believed it was right and I had heard the
representations from the Computer Vendor’s Association and the Computer
Society of Zimbabwe, from the Zimbabwe National Chamber of Commerce
because all it’s members were being unable to cope, from the Institute
of Bankers and numerous others. And, having heard and seen their
representation and being aware that they were right in those representations,
I certainly supported them. To me, it wasn’t just a good idea, it
was something we had to do, there was no alternative. I would have
liked to have seen the actual implementation slightly better handled,
but, we had to do it, otherwise things were going to be only worse,
there was no alternative to it.
Violet: Join us for
our final segment of this discussion with Eric Bloch where we ask
the economist, among other issue; H ow much of Zimbabwe 's economic
downturn is a result of mismanagement and poor governance? W hat
is a man with his expertise and reputation doing working with a
regime that has been marred by corruption and seems to be going
down hill? Should the RBZ governor be determining fiscal policy
over and above the head of the Finance Minister Herbert Murerwa?
These issue will be discussed next Tuesday.
*Comments and feedback can be emailed
to:violet@swradioafrica.com
Part
2
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