When Ian Smith announced the Unilateral declaration of Independence (UDI) in November 1965, he fundamentally changed the course of Rhodesia. Beyond politics, it veered off from good economics to dangerous territory that could only entropy into a disaster fifty six years later.
Sadly, in 2021, the Economic thinking, structures and processes have not changed. It has naturally degenerated to a worse form.
Ian Smith Economics was defined by four fundamental issues. Which four remain true today, albeit in a more vicious degenerative form;
(i) Net outward migration
(ii) State Monopolies dominating industry structure
(iii) Hawkish foreign policy & more tyrannical…
The curious case of smuggling gold out of Harare.
As usual. Zimbabweans miss the obvious. Even when stated loudly, the obvious is not as obvious. But let’s try.
Why on earth would anyone smuggle gold out of Zimbabwe? Gold prices are at an all time high. The price of gold has gone up 30% over the last year. Coupled with a strong dollar, even Warren Buffett is buying gold ( he has never bought gold in his entire life- the Oracle believes in “safe” investment)The price is good enough to make Rio Tinto’s low grade ore profitable.
In Zimbabwe, small…
In April 2013, narrow money, that is notes and coins( including near money like travellers cheques) was USD$2.1bn. This was money in the formal banking system. The informal sector also held its own notes. Credit creation was USD$3.6bn almost exclusively to private sector. It is this credit that spurred growth averaging 7% per annum in five years. What is known as the miracle of dollarisation.
I write this note to show that Zimbabwe is not dollarising in the classic “Ecuador” sense, as happened in 2009, but is moving into a Dollar cash (USD cash) society like Somalia. While it is…
It’s a little wonder how everyone has become an Economist. Almost everyone is definitive of the consequences of economic policy and direction in Zimbabwe. Like any piece of cake, there is the good and bad.
It’s good, because people are roundly concerned about their economic well being above everything else. It’s bad, because most have neither the tools nor common sense judgement to embrace the logic of economics.
Many are shocked that Economics is premised on laws and indubitable truths, since all they are accustomed to are trained Economists head butting each other and never agreeing. …
Which government in the world would purposefully forfeiture USD$3.5bn in tax revenue for USD$2bn and fast declining? Apparently Zimbabwe.
What is the size of the Zimbabwean economy? We can extrapolate in many ways but what is realistic and useful is the tax to GDP ratio. If we plot this overtime we get an understanding of the size of the Zimbabwean economy. A good baseline is 2013.
In 2013, Zimbabwe collected USD$3.4bn in net taxes. And the GDP was USD$17bn. A tax to GDP ratio of 20%. For every dollar of domestic production, 20 cents went to government as tax revenue…
(This is the first of a two series essay on the post covid-19 impact on Zimbabwe. This essay will focus on past global economic crisis in the last 20 years or so and the effects thereon.)
My first major work assignment was post Asian currency Crisis of July 1997. Mine, five years later was to study the after effects of the crush. The impact on economies and what the world looked like on the other side of the crisis. More specifically study the Malaysian and Singaporean response.
Thus I was based in Kuala Lumpur and spent hours with central bankers…
A dual economy is in no way a dollarised economy. If the central bank (RBZ) were brave and particularly courageous then they should have completely erased the local currency. And started all over again in the dollar.
They did not do this because they want to have their cake and eat it too. In some ways they are shocked at the precipitous fall in production and national output in the first quarter of 2020. Before Covid-19. Demand is simply not there and production has stopped. The slump in gold production must have worried the authorities.
It’s important to read the…
“There are a lot of political things that are about to happen. Do not believe what is going to be said because it is all politics.” Solomon Mujuru
Our working definition of moral hazard shall use Mathew McCaffrey exemplar as “ It deals with the implications of choice when actors don’t bear the costs of their actions. This occurs, for example, when actors can shift the costs of their decisions to others without these others’ immediate consent”
Moral hazard as a concept was initiated by Insurance industry. Before this, it developed its rudiments in canonical laws and understanding. …
By and by, Zimbabweans are good natured with an acute sense of right and wrong. Take political affiliations aside, in toto strive generally to become better. It is this strive to be better, that education — western education for that matter, found fertile ground on this land. Unlike any other land in Africa.
This education has made us reach the ends of the world earning a living. I got a job once in a western capital, on part, because of my Zimbabwean heritage and predecessor’s reputation. It is without question our good nature that lands itself in us punching above…
There is a geopolitical threat that occurs when a country is rich in natural resources. In these countries, resources foster instability. Precisely because of the instability, economic benefits accrue to politically powerful interest groups. Stability would lead to greater governance and scrutiny to the detriment of the political special groups. Hence why, instability and chaos become the sine qua non/ the bedrock of resource rich countries.
Singapore or Switzerland is unlikely to suffer a coup or major instability. Nor is Mauritius. The very use of force to gain Mauritius state power yields very little in reward. It is also true…
Baba Nyenyedzi
Entrepreneur with a deep interest in Economics and an even deeper interest in Zimbabwe.
