Our News Editor sits down for a wide-ranging interview with President Emmerson Mnangagwa’s spokesperson George Charamba about the stuttering economy and what government is doing to address the worsening crisis.
Find below excerpts of the interview.
Q: President Mnangagwa is set to leave for Belarus, Azerbaijan, Kazakhstan and Russia this week, before making a second appearance at the prestigious annual gathering of world leaders, economists and captains of industry at the World Economic Forum (Wef), in the resort town of Davos in Switzerland. What is the objective of these trips?
A: They are outstanding invitations which we couldn’t fulfil last year because of the sheer congestion of his programme.
Q: The opposition is saying he is taking his begging bowl to eastern Europe, that he is going on a “dictatorship refresher course” because most of these are countries under autocratic leadership.
A: We look for investors, we don’t ferry begging bowls.
Q: One of these countries is an energy giant, is he looking for fuel?
A: We always have a drought period of foreign currency between (the) second half of the year up until when we start having tobacco sales. I’m surprised you guys have not come to grips with the cyclical shortages of foreign currency.
Q: In years gone by it wasn’t this bad.
A: Because the economy has been static in the sense that demand for foreign currency was not as big as it is now. There is more activity in the economy which means the demand for foreign currency is larger.
Q: What is stimulating this demand?
A: Because there is more activity in industry. You were the first person I gave that story remember, and you were sceptical at the time. You said it was “spin.” You didn’t realise I was actually equipping you for things to come.
There is increased activity in the economy much of it which requires raw materials whereas in the past it was as if we had good foreign currency position. It was simply because there was inactivity in the economy.
The simple way of understanding this is to look at the quantity of consumption of fuel. It will tell you (the full) story; (we are consuming) 4,3million litres daily. Suddenly a false surplus position or near let me say a limited shortage which we had in the past was a false one to the extent that it was founded on inactivity, economic inactivity.
Q: What do you mean?
A: It was due to a depressed economy. There was no (economic) activity.
Q: Isn’t a pricing issue because foreign truckers refuelling here at knock-down prices because of distortions in the currency?
A: Zimbabweans are notorious for single-cause reasoning. From currency, we go to pricing. Gift, if your raise the price, you restrain demand, you follow? It doesn’t mean you have met the demand, you have only restrained it.
There is a basic difference and sometimes I fail to understand why our economists mislead people. In terms of regional pricing, we are slightly cheaper but it has its own positive side in the sense that, then you keep inflation under check.
When you raise the cost of fuel per litre, what it means is to tell Gift that if you have fuel covering 200km per week, don’t embark on the trip because I am making it more expensive for you to do so. It causes demand restraint; that is a way of coping with a scarcity situation. It doesn’t solve the scarcity issue. It simply allows you to cope better because you are also restraining activity.
Q: Last time we spoke about the fuel crisis, which is worsening, you blamed it on transport economics. Now, why is this fuel crisis not going away?
A: There is fuel in the country, (it is just that) we can’t afford it. Fuel suppliers in the country, such as Trafigura and Glencore have fuel stocks running into millions but those millions have to be paid for in terms of foreign currency.
Q: Is government broke?
A: Why is it broke? I am saying it is our priorities. Allocations of fuel are expending on the basis of increased economic activity. This is a simple point. I don’t like this propensity for negativity which I find rather difficult to explain.
Q: There is no negativity here; we are trying to understand the crisis.
A: Then why rush to say the government is broke? Well government is not the sole trader of fuel in the market, you follow? Why are you attributing it to government? By the way RBZ is not a shareholder. You need to do an enlightened coverage of this story.
Your discourse has never gone beyond the retail side of fuel.
Q: Retail side?
A: Yes. The retail side is what is visible; it is not the full supply chain. There are bulk suppliers, the international oil companies like Trafigura, Glencore and Engen. If you got to their storage facilities right now, they are actually holding huge quantities of fuel, but that fuel has to be paid for.
Q: By who?
A: It has to be paid for by the retail companies, such as Sakunda and Zuva who do not have foreign currency.
Q: They don’t have foreign currency?
A: No, they don’t.
A: Because they are not exporters, they are in fact importers. Because they are importers, they are not earning foreign currency.
They then troop to the RBZ for the 30 percent of foreign currency the RBZ gets from exporters for allocating to importers.
So everyone, whether you are in industry or you are in (the) fuel sector or in the service sector or pharmaceutical sector or wherever, we are all going to converge on the 30 percent that goes to the RBZ because generally the assumption their businesses have a larger societal goal even though they are not earning foreign currency.
Otherwise the bulk of the foreign currency is in the private sector, the 70 percent of it, that’s where it is. And the biggest challenge we have been having is how to get that foreign currency made available to the rest of the economy.
Q: What currency do the fuel retailers have?
A: They have bond notes and RTGS (balances). They are not exporters Gift. It’s like you, when you want newsprint you may not have foreign currency but probably lots of money in local currency.
Q: So, isn’t that a currency problem?
A: Yes, it has always been a currency problem. It’s not a shortage of fuel, in the strictest sense because there is no fuel in the country. There is actually a glut from the point of view of oil companies that supply bulk supplies.
Q: Why are we not retailing fuel in foreign currency?
A: Because it’s not everyone who can afford it. There are some outlets selling fuel in foreign currency. Why are people queueing at outlets that do not insist in foreign currency if they had it? This is where we always say sometimes we go for easy solutions.
We actually have dedicated outlets that sell fuel in foreign currency; those have been recording diminishing sales because people don’t have the currency. But big companies that are exporting, if you notice, you don’t find their vehicles in queues because they can afford the foreign currency.
Q: There are untested allegations that Zuva is owned by the president, it’s selling fuel in foreign currency. Is this true?
A: It’s untrue and if you talk to (Gloria) Magombo, (the) secretary for Energy, there was a decision taken by government in the context of fuel truckers that were refuelling here; foreign truckers from South Africa, from DRC especially, Zambia and Malawi. They were coming (here) on empty to come and fuel in the country because our fuel was cheaper because it was being sold in bond notes.
Q: Government has started selling to the foreign truckers in foreign currency, isn’t it?
A: Just be patient Gift, so that I can explain. Then we decided that this is what is dwindling the small supplies we have as a nation, why don’t we establish dedicated outlets which will sell fuel in foreign currency to both the outsiders as well as the Zimbabweans with free funds.
Now, those dedicated outlets come from across a whole menu of retailers, it’s not any one specific. You know who owns Zuva. It’s not a secret, go to the Deeds Office and find out who the owner of Zuva is.
Q: I have been to the Deeds Office, the file is not there. We know it is owned by Wobble Investments.
A: Interesting, but you can get it from the chair. So, anything you don’t find a file for, it belongs to the president? If I don’t get the ANZ file then I should assume that the Daily News belongs to the president? (laughs uproariously).
Q: We know Zuva is owned by Wobble Investments but we are trying to see the shareholders. The file has been removed from the Deeds Office. That’s strange? You are being sarcastic, isn’t it?
A: No, I’m just trying to show you the absurdity of the reasoning. In the first place, I hope you get my point that the outlets selling fuel are not restricted to Zuva alone, it’s across the whole chain of retailers.
Q: Ok that’s fine.
A: So, it’s a falsehood. I hope you also remember that a few months ago we actually closed some outlets belonging to Zuva.
A: For going against the trading rules. One myth being peddled in the media is to equate dry pumps to a dry a country, they are different.
Q: You are saying they are well stocked, I got that.
A: We have millions and millions of litres in the country. Those are your equivalent of a warehouse if you want in everyday parlance. To access those millions in the warehouse, you have to buy them.
Q: How much are these major companies holding?
A: Major companies are holding an average of 2,211 million of diesel, and 1,33 million of petrol.
Q: That’s a lot.
A: Yes of course. That’s why I was telling you that we are not dry as a country.
Q: So where is this fuel, in the bonded warehouse?
A: Well, in tanks. This is fluid my friend.
Q: So, you’re saying this is in Msasa?
A: Aaaah, do I have to tell you where it is. (LAUGHS). It’s now a security issue which you want me to discuss.
Q: Ok but that’s a lot of product.
A: Yes, this is the trouble.
Q: How are the stocks for ethanol?
A: Ethanol 2,8m litres.
Q: And I see regularly the blending ratios are always shifting, why is that?
A: Yes, because of the shortage of ethanol, which is why we are trying to improve on the supply side.
Q: Why is the Tongaat Hullet Zimbabwe unit, Triangle (Private) Limited, not coming to the party in light of the shortages. Why don’t you want Triangle to supply ethanol to government?
A: It has been licensed now, why are you so behind Gift?
Q: It has been licensed?
A: Yes of course it has been.
Q: When did this happen?
A: Ahhh, check with Magombo, it has been licensed.
A: Yes, yes. And just to show you something very interesting, daily consumption rate for diesel is 4,3m litres per day. And for petrol is 3,3m litres per day. Yesterday (Wednesday) Trafigura sold 6m litres of diesel.
Q: So why are the shortages persisting?
A: Aaah, because you guys are trading the product
Q: You mean on the black market?
A: Yes of course. Over and above increased usage, there is quite an abuse. Of course whenever you have erratic supplies, panic buying sets in.
Q: Everyone is filling up their tank.
A: There is also a component of a secondary market for fuel products.
Q: And the prices on the black market are ridiculous.
A: If we are on 4,3m litres and we release 6m litres and you still see persistent queues, cant you see that there is something very anomalous there?
Q: But the default mode is to fill up your fuel tank.
A: Well, this is a human instinct, isn’t it?
Q: Of course.
A: If you are in an environment where you have experienced scarcities, you want to guarantee yourself against stock-outs.
Q: Of course.
A: It’s understandable for human behaviour, but ultimately it boils down to a consistency of supply. Those are the facts and figures on the ground.
Q: So are you saying this fuel crisis is here to stay until mid-February when the tobacco auction floors open?
A: Let me put it this way: When the foreign currency inflows into the country improve.
Q: When is that?
A: Generally, we have out cycle Gift. Let’s be very basic. The key earners of foreign currency in this country are mining, agriculture which is your tobacco, and tourism.
Q: But tourism and mining are doing extremely well. Gold for instance scaled 33m kg last year?
A: Don’t be generous with your terminology. They are doing extremely well in relation to historical records, but not in relation to the need of this economy.
Q: Are you saying the need dwarfs the performance?
A: Yes. That has seen relative improvement in the performance of these individual sectors. That doesn’t mean that improvement meets the requirement of foreign currency for this economy. So, we are only talking of relative improvement in relation to historical data.
Q: Ok fine, I hear you. So, what’s the solution?
A: The solution is to stimulate an export-led economy.
Q: But that won’t happen in the short-term?
A: Of, course it will not, which is why for me anyone who thinks dollarisation will solve our problems is joking.
Q: What’s wrong with dollarising? This fallacy that the US dollar is trading at 1:1 with bond notes is simply unsustainable, isn’t it?
A: That is not the issue. What is at issue is the availability of the dollar.
Q: But people recall the dollarisation era with nostalgia?
A: But nostalgia doesn’t run the economy.
Q: But in 2009 it worked.
A: No, can I give you an example. In 2009 — then that’s another myth that you guys need to debunk — what made us afford salaries in US dollars was because every civil servant was on $100; do you understand? Yes, yes.
Now, if you look at the wage levels as of now, where do you get that foreign currency? And if you can get it enough to make a wage bill which is 70 percent of GDP, I mean why would you be unable to have enough foreign currency to run your industry?
I just don’t understand the thinking of some of our economists. It’s rather convoluted; it doesn’t make sense to me. In 2009, we were all pegged at $100 basic wage, that’s why we were able to give someone a modicum of what we call money illusion.
That illusion must not be allowed into a new era where we find the lid on the wages has been removed.
That argument is a false argument and the sooner we move away from it, the better it is for us. And by the way the trouble is that it stands in the way of proffering real solutions because we are giving ourselves false solutions.
The solution lies in stepping up your tobacco; industry, stepping up your mining industry, tourism and, more critically, in transforming your economy towards greater beneficiation, then your earnings improve.
Q: Yah, but as it is, there is no beneficiation policy.
A: Now, you and me are talking. If you looked at the three instalments that we have done under Economic Dialogue (President Mnangagwa’s column in a local State-owned weekly), that was the subject matter.
We need a beneficiation summit for all the sectors in the economy so that instead of exporting chrome and platinum as matte, how can we enhance our own earnings by making sure that we actually work with finished and semi-finished goods. That is the gist of the matter.
Q: But it looks like this issue is on the back burner.
A: No, it’s not on the backburner, that’s where we are going. In today’s story, for instance, we are talking about black granite. We have been sending stones boulders in the raw form.
Q: Some people think the president must rope in opposition leader Nelson Chamisa to fix the economy.
A: Chamisa and Mnangagwa will not improve your savings levels if you are living from hand to mount.
They will not improve your agriculture if you are busy admiring vast tracts of land which are lying idle.
They will not improve your mines if you are pushing out produce instead of value adding minerals.
This is a matter which requires hard-headed economics not this political myth that we are creating around ourselves. Chamisa’a parents are struggling wherever they are. Go to the Mnangagwa family it’s also struggling wherever they are, you know. Why do we take a family that is as just badly circumstanced as you and me and then transform them into a magic wand that will solve the national problem?
Q: Are you aware that people are recalling ousted Mugabe’s rule with nostalgia?
A: The human tendency is to hunger over days gone by.
Q: The problems are piling up. It looks like the whole civil service wants to go on strike.
A: No, no, no, that’s what you guys were wishing for. (LAUGHS). What you guys were wishing for hasn’t happened.
Q: No, no, no we have no such wish for labour unrest. We have no dog in this fight.
A: You guys were running out of headlines. (LAUGHS.) I feel pity for your sub editors. They were literally running out of words. It will not happen.
Q: But the Apex Council has issued a 14-day strike notice?
A: No, no, no, you are confusing Apex with Artuz (the Amalgamated Rural Teachers Union of Zimbabwe), don’t confuse the two.
Q: I know the Apex Council, it represents everyone in the civil service.
A: No, no, no, that’s not where you got the voices. The voices you are referring to were those of sub unions, Sir. Just go back to your text and see whether Ms Alexander said that. You won’t find her name.
Q: You mean Cecilia Alexander?
A: Yes, she is the president of Apex Council.
Q: But she has a secretariat, isn’t it?
A: You know what, a secretariat is exactly that, it does exactly that, secretarial work.
Q: So you’re saying until Alexander pronounces herself on this….
A: Yes, yes yes, she is the leader of the Apex Council.
Q: But she is being accused by her colleagues of being captured by your regime?
A: No, no, no. She is their leader. There is a certain desire for things to go in a certain way, which will not happen Gift.
Get it from me. It does not help to come up with a story which creates excitement but then gets confounded by tomorrow’s events.
The beauty about Charamba is he subverts your storyline but gives you the facts. What you are going to see is a convergence.
Q: A convergence?
A: Yes, which in fact happened on Monday.
Q: Are you going to yield to the US dollar salaries?
A: I have already explained this. There is going to be convergence and convergence can’t be around false solutions.
Q: Why are you resolutely predicting this convergence?
A: I am an insider Gift. Are you aware that I am the acting chief secretary?
Q: No, I didn’t know?
A: All reports are coming to my desk. Just now the deputy minister of Health was on the phone with me to give an update on progress.
Q: I hear the doctors’ strike is dissipating?
A: It’s not just dissipating; we are finding each other around long-lasting solutions, realistic solutions not falsehoods because you can negotiate outside the parameter of the budget. It’s like collective bargaining outside what the ANZ can afford. It does happen that way.
Q: I hear you, but the protesters were saying if they don’t get US dollar salaries, that’s a deal breaker, there will be no convergence?
A: No, no, no, you guys are completely lost. Look, if we couldn’t succumb to health practitioners, you expect us to do so in respect of any other branch of the civil service? It doesn’t make sense.
The health workers wanted US dollars and we told them that we can’t afford that. If you want US dollars you have to work for foreign currency earners. It was hard talk.
Q: But in government it seems you don’t usually give each other straight talk, you use diplomacy and that’s problematic, isn’t it?
A: Well, it applies to some not Charamba, to say it like it is.
Q: Telling it like it is like the Daily News?
A: Hahahaha, borrowing from you.
Q: The teachers marched from Mutare to Harare demanding these US dollar salaries. They seem determined.
A: We don’t need to create emotional triggers by walking all the way from Mutare to Harare. I mean, many people do that.
Q: But their grievances are different, these area rural teachers. They want an education equalisation fund. That’s a legitimate concern.
A: Did you read the statement from (Public Service Commission head) Vincent Hungwe yesterday?
Q: Yes, I did.
A: One of the key challenges the Apex Council was tasked with is to find how they could distribute the $4,8 billion between rural-based and urban workers.