Interview with Eric Bloch

Broadcast 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?

Erich: 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.

 ENDS