The Devil in the Detail
In all the years that I worked as an economist in what was then Rhodesia and subsequently in the Republic of Zimbabwe, I argued in any circles that would hear me, that exchange control was a national cancer, eating away at the economy and destroying value. I had few disciples.
The decision about three weeks ago to take 80 per cent of the foreign exchange earnings of the platinum mining industry into the Foreign Exchange Accounts of the Reserve Bank and replace them in the accounts of the mines with RTGS dollars, at long last triggered a response. The miners went to see the Governor (in his Holy Temple of the Reserve Bank building - logically one of the largest and most luxurious in the Capital), and asked him to reconsider his position as they could not accept the Directive.
If the Governor does not do so, I suspect this matter will then go to the Courts for a decision, but the Mining Companies are right to deny the Governor the right to steal their output in broad daylight.
When many countries in Africa came to independence they had little or no knowledge of how the banking system worked. At Independence in Zimbabwe, some people walked into banks demanding money over the counter, only to be told that you had to have 'money' in your account. Did the bank really mean that that funny writing in the books was real money? Today it is even more mystifying because it’s just a number on a screen. But the reaction of many leaders in Africa very soon after Independence was to realise what a wonderful thing a Reserve Bank was.
In the 'Gono' era of our Reserve Bank the Bank not only committed the sin of printing money on a vast scale until finally the press could do no more and the whole edifice collapsed, like a Baobab in the bush dying of thirst. His second sin was to take a third of all foreign exchange earnings and convert them into local currency at an exchange rate set by the Bank – which of course bore no relation to the real value of the stuff in local currency. Effectively this was a tax on the country’s foreign earnings and the 'money' that you received in return was only good for 'burning' (an informal sector term) on the local market.