Experts strongly condemn Mnangagwa’s ‘paranoid’ measures and predict economic bloodbath

By Alois Vinga and Sharleen Mohammed

VARIOUS speakers and experts strongly condemned the economic stabilization measures introduced by President Emmerson Mnangagwa to “prevent economic hitmen” from sabotaging his administration under fire.

They said the measures, primarily a ban on lending by banks, were unconstitutional, inadequate and misguided.

Experts also said the measures would result in a serious economic bloodbath.

Officials from the main financial services provider, BancABC, said the lending ban would force banks to resort to transactions to make up for any resulting losses.

Last year, Ethiopia applied almost similar measures when it banned banks from granting loans secured by collateral, such as land and buildings, after it was discovered that the money was being used on the black market.

But an analysis submitted by chief bank executives accused the government of using a heavy-handed approach to try to solve a long-standing monetary conundrum, warning there could be dire consequences.

The bank was, however, forced to state that the views expressed by its executives did not reflect its official position.

“The ban on lending activities will threaten the survival of banks as it will wipe out 20% to 50% of their income. Therefore, it could push banks to engage in risky and/or unauthorized activities to compensate for the loss revenue,” the executives said.

“It could also drive up bank charges as banks devise survival strategies. On the other hand, businesses cannot survive without working capital. This will lead to reduced operations, commodity shortages, further price increases, viability issues and possible business closures and job losses,” they said.

“The ZSE also reflects the behavior of investors seeking to hedge in difficult economic times, as well as a lack of confidence in the direction the local currency is heading. A plethora of regulations impose operational bottlenecks, make the ZSE inefficient and unattractive to foreign and domestic investors. This has the potential to undermine retirees and new registrations.

“On the other hand, businesses cannot survive without working facilities. This will lead to reduced operations, commodity shortages, further price increases, viability issues and possible business closures and job losses. No economy can survive without access to working capital,” they added.

The Zimbabwe Banks and Allied Workers Union (ZIBAWU) said Mnangagwa’s measures would weigh heavily on ordinary Zimbabweans.

ZIBAWU General Secretary Peter Mutasa described the measures as anti-people.

“Our experience with applying for loans indicates that some clients apply for loans for medical care. Prohibiting lending condemns many to death. Some want to pay tuition and exam fees,” Mutasa said.

“The directive excludes many children from school and some will fail exams. We see them as negative consequences of politics that may have been unintended and overlooked,” he said.

He warned that banks are going to be forced to raise bank charges, restructure and in doing so face viability problems associated with increased bank charges, which will increase inflation and hit the poor hard.

“The cessation of loans will seriously affect the productive sector. Many businesses will close their doors if they don’t get loans and overdraft facilities.

“We expect policies that will help economic recovery and we don’t think this is such a policy,” he said.

He said the measures are the surest way to discourage the public from engaging in banking with an impact that could erode confidence in the country’s banking sector in the future.

“We believe this policy should be reviewed and rescinded immediately. This does not benefit the nation as the negative results far outweigh the expected benefits. We therefore call for a broad and inclusive dialogue on monetary policy involving all stakeholders, including trade unions in the sector, as a long-term solution,” Mutasa said.

Former Finance Minister Tendai Biti said: “This decision is unconstitutional. It is an illegal act. »

“The truth is that the measures are thoughtless and reflect an incompetent paranoid regime. The fall in the exchange rate stems from the introduction of the Zimbabwean dollar when the necessary preconditions were absent. This stems from a huge mismatch between supply and demand and the failure of the auction system,” Biti said.

“It comes from corruption. It is downright illegal to prohibit banks from lending when it is their core business. It is a lie that cooperatives obtain loans from banks and inject them into the black market. The new taxes and proposed civil penalties are illegal,” he said.

Already a major meat processing company, Surrey, has announced that it is shutting down operations due to the ban.

“We will not be able to pay producers/sellers of cattle and hogs until further notice. We will not accept cattle and hogs for slaughter or live weight. Please be guided accordingly,” the company said in a notice to customers in a warning from development experts that could herald massive economic bloodshed.