Oliver Kazunga, Senior Business Reporter
THE newly introduced Zimbabwe dollar should be backed by production to maintain value against major currencies and sustain strong economic activity in the country, economist, Dr Gift Mugano, has said.
Speaking in Bulawayo last week at the annual Buy Zimbabwe Summit, Dr Mugano said following the recent introduction of local currency, concerns have been raised in the market on whether the currency will be able to maintain its unit of account status and anchor the economy.
“I heard quite a number of observations. People were talking about it and said, ‘so what is going to happen?’ And my observation is that nothing is going to happen, nothing has changed from a currency perspective.
“But my point and submission has been that the challenge in Zimbabwe is not currency. And I’m very stubborn about it; the challenge in Zimbabwe is production,” he said.
Currency reforms are at the heart of the Transitional Stabilisation Programme (TSP). Through Statutory Instrument (SI) 142 of 2019, Government has abolished the multi-currency system adopted in 2009 in favour of the Zimbabwean dollar as legal tender.
Said Dr Mugano: “We can change currencies, we can give them various names or we can bring back the rand, we will still go back to the same problems.
“We need to address production and anchor the currency with production so that we substitute the imports.
“If we don’t produce . . . we will not achieve anything, the currency will remain the same”.
He said the manufacturing sector should rise to the occasion for the economy to substitute imports and achieve a trade balance.
For the last 10 years or so, Zimbabwe has recorded a cumulative trade deficit of more than US$30 billion.
“We are importing because we don’t have enough items that we are producing and we have US$2,1 billion worth of products which we are importing; we need to be producing locally,” said Dr Mugano.
He said the country’s export gains were being eroded by the penchant for imports.
“Look at how much money we got last year. We earned US$6,3 billion and that’s a lot of money isn’t it. US$6,3 billion went down the drain because we are importing rubbish, so our challenge is not currency.
“We are not short of money coming into this country but we don’t have it because we are wasting it,” said Dr Mugano.
He said last year Zimbabwe spent US$519 million importing cereals (soya bean and wheat) and highlighted the need for the nation to curb such imports through venturing into domestic production.
Despite business opportunities in the pharmaceutical industry, Dr Mugano said Zimbabwe was spending millions of dollars importing medicines, which can be manufactured locally.
“Pharmaceutical products — we are importing them and last year US$202 million was spent. To me, the opportunity is already created but I think it is on the Local Content Policy where Government has to make a deliberate position that certain critical drugs or medicinal products have to be supplied locally,” he said.
Industry and Commerce Minister, Mangaliso Ndlovu, has said Government is putting in place a policy framework that will increase industrial linkages anchored on value addition and beneficiation to turnaround the economy.
It is hoped that value chain development and beneficiation will ensure the country derives value from its primary resources while creating jobs and reducing reliance on imports. — @okazunga