White farmers compensation inadvertently exposes Ncube

 White farmers compensation inadvertently exposes Ncube 

The Brett Chulu Column 

Zimbabwe Independent 17 April 2019 

WHILE I am delighted that the gov­ernment seems to be taking on board most of the advice this column and many other platforms have been ar­ticulating on the matter of compen­sation for the forcibly acquired farms, the joint statement by Finance min­ister Mthuli Ncube (pictured) and his Agriculture counterpart Perrence Shiri revealed some apparent fiscal deci­sions that government has not offi­cially communicated to the nation, seemingly done without parliament’s say-so. 

Three separate but recent statements by Ncube will be quoted verbatim to reveal a seemingly surreptitious move by government to make unilateral fiscal decisions. 

Ncube presented a budget for 2019 of US$8.2 billion. On page 36 of the budget statement, point 76, Ncube states: “Premised on a nominal GDP of US$31,6 billion (3,1% growth), a budget of US$8,2 billion (including retentions of US$400 million) is be­ing proposed for the 2019 fiscal year, against expenditure bid proposals by line Ministries well in excess of US$15 billion, which is beyond the revenues that can be generated even our current GDP.” (paratheses are not mine). Ncu­be cannot be quoted out of context: he presented a budget in US dollar terms even though taxes are largely collected in RTGS means. 

On the compensation for farms forcibly acquired by the government, Ncube revealed in the same budget statement (page 85, point 305) that “Given the limited fiscal space, the 2019 Budget (sic) makes provi­sion of US$53 million for payment of compensation to former farmers, to show commitment to this obligation.” Again, there is no room for Ncube be­ing misquoted: the provision towards the farmers’ compensation is in US dollars.   

There is a dramatic shift as revealed in the press statement jointly present­ed this week by the Minister of Lands, Agriculture, Water, Climate and Ru­ral Settlement and the Minister of Fi­nance and Economic Development The press statement titled Implementa­tion of Compensation of Former Farm Own­ers by the Government of the Republic of Zimbabwe, on point 4, states: “Reflecting government’s (sic) commitment to compensate former farm owners for farm improvements and recognising that a large number of farmers are still to be compensated; government (sic) allocated RTGS$53 million in the 2019 National Budget for interim advance payments.” 

There you have it in black and white, with zero room for misquoting: The US$53 million stated in the National Budget has all of a sudden become RTGSS53 million. This is a huge prob­lem. The Monetary Policy /Statement (MPS) presented by the Reserve Bank of Zimbabwe (RBZ) government John Mangudya discarded the 1:1 parity between the US dollar and the quasi-currencies (bond note and electronic monetary balances) in favour of a managed forex exchange floating sys­tem which saw the inter-bank forex market debuting at RTGS$:US$=2,5. 

There are several implications. 

Given this, first, we cannot escape the logic that the 2019 national budget has been re-denominated to RTGS$, meaning that the budget has been shrunk almost three times in US dol­lar terms because when Ncube and Shirt made their joint statement on farm compensation, the RTGS$ on the inter-bank forex market had fallen to about three to the US dollar from a debutant rate of 2,5. On the parallel market it has shrunk more than four times. Parliament has not been con­sulted on the move to scale down the national budget from USS8,2 billion to about US$2,7 billion. Who made the decision to change the budget and who approved it? Parliament cannot be outwitted again by the executive when it comes to major fiscal decisions that are implemented without its sanction as required by our law. 

Second, does it mean that the do­mestic debt government has ac­cumulated, US$9,624 billion at the time Ncube presented the National Budget, has also magically become RTGSS9.624 billion? Following the logic of the farm compensation com­mitment figure mystically becoming RTGS$ by simply changing the sign from US$ to RTGS$, it follows that the domestic debt is now in RTGS$. What a fiscal innovation! It would be a travesty of justice, if all of a sudden, domestic lenders’ assets (government debt) shrinks three or four times at the stroke of a pen. 

Ncube needs to clear the air so that we do not regress to the harrowing era of hocus-pocus economics. Ncube needs no schooling on the importance of re-building confidence in the fi­nancial sector. He has no Option, but to set the record straight by admitting that he made a mistake in announc­ing the farmer compensation com­mitment figure by not stating it in US dollars as originally stated in the 2019 National Budget. If he does not correct this “typo error”, it will raise uncom­fortable questions that can undo a lot of the good work he has done. Government must not be seen to be trying to be too clever by halt deceptively re­ducing its debt obligations by unilater­ally re-stating its domestic obligation in RTGS$ terms on a 1:1 basis. 

Third, the apparent move by gov­ernment to re-state the budget on a 1:1 basis will buttress the suspicion that the government’s promise to ring-fence the value of pensions originally valued in US dollar terms is mere po­litical rhetoric. The market, if Ncube does not move swiftly to “correct” his compensation commitment token fig­ure, in terms of the currency denomi­nation, will interpret that government is signalling that the value of pensions will not be protected. It is granted that this will cause confusion to rein in all our markets, be it retail, money and stock. 

Already, the retail markets are mov­ing to increase prices by multiplying the old pre-MPS prices by a factor of 2,5 to three, the logic being mat if the quasi-currencies and the US dol­lar were once at par, then the new prices must reflect the devaluation of the quasi-currencies (now bundled together as RTGS$). If government is hoping to benefit by creatively re­ducing its obligations, the market will take a cue. What is good for the goose is good, for the gander would be the argument. 

Understandably, Ncube seems to understand very well that the matter of property rights as typified by com­pensation for forcibly acquired prop­erty is a critical reform requirement to pave the way for his external debt relief proposals to the international fi­nancial institutions. The Spring Meet­ings of the World Bank and Interna­tional. Monetary Fund are underway and Ncube apparently wants to have a good story to tell on property rights, an issue that matters dearly to the in­ternational financial institutions (IFIs), the financial custodians of the post-World War II neo-liberal capitalistic order institutionalised at the famous Bretton Woods post-war reconstruc­tion deliberations. 

I am afraid, in a rush to earn brown­ie points with the IFIs, a howler could have been committed that seems to show that unilateral fiscal decisions have been made under the radar of parliament-Ncube must prepare to answer convincingly when these mat­ters are raised during his interactions with the IFIs, starting with the ongoing IMF meetings in Washington DC. 

We await with bated breath for Ncu­be to unequivocally tell us his RTGS$ figure for farm compensation was a howler. If it was not a boo-boo, the Public Accounts Committee should summon him without delay. 

Chulu is a management consultant and a classic grounded theory researcher who has published research in an academic peer-reviewed international journal. –[email protected].