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Millions of Zimbabweans are suffering because a little over a month ago, a small group, perhaps a dozen people, perhaps two dozen, decided they wanted to convert their large cash holdings to US dollars and were prepared to pay any amount to buy foreign currency.
The result was a rapid surge in the black market exchange rate as the modest amount of free currency was sucked into the chain of accumulations these few were funding.
That in turn led others to assume that this accelerating rise would continue pushing the rate up fast, so they also wanted to convert their more modest cash holdings, applying more pressure, while others reckoned they had to change their Zimbabwe dollar prices to what “experts”, often described as “independent economists” were predicting the rate would reach in a week, a fortnight or a month.
So the next step was skyrocketing prices round about the beginning of the lockdown, and many of those who panicked have admitted they were acting on speculation over the future exchange rate, not on fact, and while they obviously felt that speculation was, at the time, justified, later careful consideration showed them they were probably in error, making a price freeze on a small range of essential goods possible in a gentlemen’s agreement with the Government last week.
The Reserve Bank of Zimbabwe (RBZ), criticised in the past for doing so little to arrest speculation, is now being a lot more aggressive.
So far, four bureaux de change have been fingered for under-the-counter currency speculation along with three other finance companies that have no legal right to be buying and selling of foreign currency in the first place.
All seven have had their licences, for whatever financial business they were licensed for, suspended and, far more importantly, have had their bank accounts frozen, stopping them from continuing what they were doing.
To show the scale of the operations, the first of the seven to admit their errors and dealings has already paid an administrative penalty, not a court imposed fine, but just a penalty of Z$2,5 million and that cash was swilling around and was paid within a day or two of the sum being set.
But the underlying problem is the gross economic inequality in Zimbabwe.
RBZ has previously reported that half of the billions in bank accounts, both US dollar denominated and Zimdollar denominated, along with all the cash in circulation is held by 200 individuals and companies.
The rest of us share the other half, ranging from people who are very well off indeed, the sort who complain about fuel queues when filling the tank of their spare Benz rather than the price of fuel, down to the vendor with “just $20 in my phone”.
And some of those with huge cash holdings are not as rich as some of those with far less liquid cash, since many of our really wealthy people have the bulk of their wealth in investments, creating new wealth by making things and providing services rather than pressing buttons on a computer as they move cash around.
But those high-end cash holdings do allow a small group to make very big waves if they do decide to press the buttons in such a way as to finance buying of foreign currency with price being no object. And they might well be tempted to increase their paper holdings by manipulation, creating a market for foreign currency say, and then when prices peak selling out at a huge profit.
We do not know if anyone is doing that at the moment, but the temptation is there.
The RBZ has been more active, and is tracking down the dealers.
What we do not know if those dealers are acting on their own behalf, or, more probably acting for others who do not want to get their hands dirty, just giving the orders that will enrich them further.
The RBZ needs to intensify its own investigations and see how money moved in and out of the accounts held by the seven dealers it has identified and then continue its action, including freezing accounts, against any principals it can identify.
There is no reason to hold a country to ransom just to enrich a few, who are acting to increase their wealth, and their share of the national wealth, by doing nothing productive.
This is not to attack people who are rich.
Some of the wealthiest Zimbabweans have built business empires that stagger the imagination, but have built them honestly and productively. A glance at the lists of “10 richest Zimbabweans” that some assemble shows what we mean.
There are exceptionally rich people who built an entire industry from nothing except a good idea.
There are others who bought out inefficient, badly managed and undercapitalised concerns and converted these to efficient, well-managed companies, pumping in money, saving jobs and generally adding value.
Some of these rich people are not all that pleasant as individuals and some may be regarded as lucky. But at least they are rich because they did something, built something, produced something. They create jobs, they pay taxes.
They are not blood-sucking parasites making life a misery for millions like the paper pushers, button punchers and speculators.
And it is these leeches the RBZ and the other authorities need to tame and need to limit.
Online Reporter