Eddie Cross, MDC MP Bulawayo South
When we got our Independence from those pesky settlers in 1980, I can recall incidents where people walked into Banks and demanded that they give them cash. When the Tellers politely declined and said that you had to have an account first and then you had to put money into the account before you could draw any out, they were not amused. For years they had seen white Rhodesians drawing money from the banks, what could this thing called Independence be worth if not for the release of these seemingly unlimited funds from machines and banks?
20 years later when Gideon Gono was the Reserve Bank Governor he discovered that you could print money. Marvelous, you put paper in at one end and real money that people on the street would accept, would come out at the other end – what a business, 10 per cent costs, 90 per cent profit. The only problem was that once he started, he could not stop, somehow the machine needed to be fed ever larger amounts of paper, then he discovered that you could simply put a couple of zero’s on each figure, when that became too difficult to fit on the notes he started dropping the zero’s. Eventually, I am personally convinced; he also became totally confused by the whole thing.
We eventually ended up with the second highest inflation in history. Prices doubled every three hours. Somehow people managed and various means were developed to establish what all this paper was really worth. For the bigger players, it was the Old Mutual Rate, for others it was the street value of a boiled egg, for the majority it was whatever you could get for the wretched stuff. The Money Changers on the streets became an industry and exchange rates changed by the minute. Most people just abandoned the local currency and even though it was illegal to even carry a US dollar or a Rand in your pocket, everyone was trading in hard currency, for everything.
It is difficult to imagine now, that a sophisticated institution like the Reserve Bank, with a long history of sound management of our Nations currency and staffed by men and women with excellent degrees from many Nations, could get things so wrong and for so long. Every few months the Governor would hold a very fancy meeting for stakeholders at the magnificent Headquarters in Harare and it would be crowded with bankers, economists, Ministers and Diplomats. Gono would sweep into the room and present a lengthy “Monetary Statement”. He would then answer questions and give everyone a splendid tea. No one ever had the courage or the temerity to ask him just what he thought he was doing. The press faithfully followed every word and repeated his wisdom and advice in the papers.
For the poor guy in 1980, who thought that you simply drew what money you needed from a bank or an ATM, this was a different problem. He listened to the media, thought he understood what was being said, but the reality was that every time he was paid by anyone, he put his hard earned money in his pocket, only to find that when he came to draw it out, it had shrunk – sometimes by an alarming amount.
Faced with the problem of trying to explain inflation and the reasons thereto to audiences in the MDC, most often at meetings attended by the very poorest of the poor, I used as an illustration, that it was like having a mouse, called Gideon Gono, in your pocket. When you put your money into your pocket, this mouse ate it so that when you came to draw your money out of your pocket, it would no longer buy what it would have when it went in. Gono was eating our money, he was eating our savings, the money in our bank accounts and he was eating the accumulated surpluses of 100 years of enterprise and hard work.
When finally he was finished, the total value of all the cash in circulation, calculated at the Old Mutual Rate, was $19 million dollars. That is equal to $1.58 for each man woman and child in the country. Not enough to buy a burger. Every bank was broke, every insurance company was broke, the liquidity of all companies was down to zero. The average Civil Servant earned $5 a month, our fuel stations were empty, supermarket shelves were bare and you had to travel to our neighboring States to find salt. But the Mouse had become a giant fat Rat with an insatiable appetite.
In the end it took 20 minutes for the Minister of Finance to announce that we were abandoning our own currency and adopting the US dollar and six other currencies for trade purposes. We abandoned exchange control after a hundred years of controls, freed the market for Gold and lifted all price controls after the Price Controls Board had demanded that all firms halve their prices in local currency as a means to curb inflation, caused basically by the reckless unchecked printing of money.
Within hours the markets took over, restored sanity to the money market and in a few days shortages were eliminated and prices actually fell 7 per cent.
Gideon Gono is no longer Governor; instead we have one of his colleagues in the position. Nice guy, decent human being and Church member. Have they learned anything from this turbulent period of our recent history? I think we must now say no; not at all, because they have just done the same thing again – although using different means.
This time, its plastic money; not notes printed on plastic, although that might be on its way, this time it is the marvelous swipe card. The conversion of paper into money is involved again but this time it started when they began to take real money out of the system and to issue Treasury Bills. You do not even need special paper for these – you can print a Treasury Bill on ordinary bond paper, all that is needed is the signature of God in the form of the Minister of Finance or the Reserve Bank Governor. Instantly a sheet of paper worth perhaps 2 cents becomes $5 million dollars and attracts interest at 5 per cent per annum.
But this process takes real money out of people’s pockets and replaces it with paper. When this became more and more difficult (because people were not putting real money into their pockets anymore) they started to actually take money out of private accounts. When this became noticeable and started to embarrass the bankers (if that is possible) they then started a new phase and hijacked 70 per cent of all export earnings. So as to ensure that this would not be noticed for a while, they replaced this real money ($200 million a month) with virtual money expressed in US dollars transferred via electronic means to the banks. Mighty Mouse was back at work.
The owners of these accounts asked “how do we spend this stuff!” Ah! Said the Mouse, you use your swipe card and thereby transfer the problem money to someone else. In fact they said you can also use the RTGS system to pay others in the domestic economy because they will not know the difference. So firms and Government now simply pay their staff through the RTGS system. Miraculously your salary appears in your account on time and in full, but when it comes to drawing it out, there lies the problem, because at that juncture your bank cannot print money, they must give you real money. And so the amount you can draw from your bank has shrunk from unlimited last year, to $10 000, then $5 000 then $2 000, then $1 000 and now perhaps $50 or $20 a day.
In the meantime this new “currency” is building up in the banks – they now hold over $6,5 billion worth of the stuff. What the Banks will do when finally their customers wake up and demand their money – at full value, in real currency, is anyone’s guess – my guess is that they will retreat into themselves and close their doors. We are back in 2008 and Mikey Mouse has stolen our money – again.