ZIMBABWE CONTINUES TO ACT AS A CAUTIONARY TALE

Last week it was announced that Zimbabwe’s finance ministry was mulling the possibility of a gold standard to shore up its hopeless currency.

Zimbabwe dollar battered by hyperinflation and falling export receipts has become so worthless that Zimbabweans have forsaken it for the South African Rand, US dollar among other hard currencies to transact in their daily lives.

A gold standard would hold the government to a discipline of only issuing as much currency as they have gold reserves (As was suggested in this column in 2008).

"This would have the immediate effect of putting the brakes on inflation and strengthening the currency, but would in the short term be very painful for the man of the street as cash would be in short supply and hard to come by...

How did it come to this? Zimbabwe used to be the breadbasket of Southern Africa, an emerging economy with industries and a growing middle class, better than adequate infrastructure – physical and social and generally an African country on the move.

What happened? In a nutshell, bad politics.

Former president Robert Mugabe and his ZANU-PF under pressure politically, resorted to populism, redistributing land arbitrarily to their cronies and gutting the southern Africa nation’s productive sector with one fell sweep.

It bought them an election but in the process setting the promising economy back decades. According to some reports the country’s per capita GDP has regressed to its 1980 levels, meaning they have fallen out of the middle income status as a nation.

That’s just a number, but for the everyday Zimbabwean it means shortages of essential commodities – Zimbabweans returning home stock up on sugar, bread and cooking oil; it means fuel lines at the stations or walking long distances to work, out of necessity because they cannot afford fuel or transport; it means a real fear of hunger and starvation.

"Zimbabwe is an important case study for us, in the developing world where politicians think they can tamper with the economy to sustain themselves in power, without regard to the long term repercussions to the general population...

Because the truth is, even in Zimbabwe the ruling class are not suffering the hardship and shortages of the everyday man. They still ride to work in fuel guzzling four-wheel drives, take their children to study abroad and have their families treated overseas—Mugabe died thousands of kilometers away in a Singapore hospital.

In Uganda we are no strangers to this downward economic spiral. While it did not start with the expulsion of the Asians in 1972, this clearly speeded it along by decimating our commercial class, a blow we have barely recovered from now 50 years later.

To get the economy back on an even keel, we have had to do some unpopular things like liberalise the economy, which while growing the country’s wealth has concentrated it in a few hands. This last part thanks largely to government inefficiencies and corruption.

While the Uganda macroeconomic stability and growth must continue in Uganda, probably more importantly the economy has to be rejigged to give every Ugandan a fair shake.

This does not mean government standing at every corner dishing out shillings. As popular as that may be in the short term it only serves to create dependency on government instead of self-reliance of the population.

The distribution would take the form of improving social service as a way to improve our human capacity, widespread infrastructure to allow access to market for our producers and improved safety of person of property, through improved security and application of the law.

That it is why it is important to pay attention to corruption whether in government or the opposition, because the perpetrators will seek to protect the status quo even if and especially if, it does not advance the living standards of the everyday man.

This is why given all that we have seen in recent weeks, with opposition politicians just as, if not more, rapacious than the usual suspects, calls for government to own businesses should be avoided like the plague. In fact we should look closely at the champions of these calls because more likely than not they would be the main beneficiaries of the increased surface area for corruption.

The point is this, just as in Zimbabwe, we need to recognize the productive sectors of our economies and rather than disrupt them, because we have no real control over them or because we want some quick political fix, enable them to be more productive through macroeconomic stability and an improved business environment.

Given our economic history, one would think I am preaching to the converted, but the political drama since the beginning of the year suggest that we are leaving the door open for some dangerous political maneuvering that may very well send us back into an economic abyss most of us have no knowledge of. Eight in ten Ugandans were born after 1990.

If Zimbabwe which had already attained middle income status in the 1980s, can be spiraling out of control, let us not think we are immune to the same, whatever the fat cats in government want us to believe.