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Ngoni Nhamoinesu Chivizhe Correspondent
The opinion article by Panganai Kahuni (The Herald of Tuesday July 8, 2014) reminded me of my discovery in my early years as a lecturer of Economics.
People seem to think that anyone under heaven who simply knows how to read can debate economic issues and evince wisdom comparable to that of Socrates — the Greek great thinker.

This degree of unfortunate misconception is fully laden in Panganai Kahuni’s opinion article, and I will attempt to use my specialist expertise in the field to try and make Panganai and his think alike see logic in the use of the US dollar in the contemporary Zimbabwean economic environment.

In his argument in support of the coming back of the Zimbabwe dollar, Kahuni makes a very illogical statement that has no basis in this specialised field of Economics.

He says: “. . . in the 1990s agricultural production was high because 90 percent of it was produced using local currency. The raw materials which were produced using local currency were then accessed by industry at affordable local prices”. In the first place no initiated economist knows of any theory or process where a type of currency has a casual effect on productivity and market prices. I really do not know why a number of people, Kahuni included, feel they can make logical deductions on issues of Economics by simply using visual analysis.

This is very unfortunate and has resulted in many people misleading or being misled. Productivity and market prices are entirely independent of the type of currency under use. Productivity is a function of the quality of its inputs, especially labour and machinery involved. Market prices are determined by the price mechanism. In future, I urge you to make enough research on cause-and effect relationships before you make a bold statement that have no shred of logic.

Kahuni goes on to state further misconceptions, and I quote “The high appetite for the US dollar that most Zimbabweans, including those in the Ministry of Finance, have, is what is destroying our economy”. Firstly, anyone worth his salt would have problems in trying to decipher what Kahuni meant by “appetite of US dollar”. But maybe he wanted to imply that there is high demand for the US dollar — the high demand for money. Again, the high demand for money (that is the demand to hold one’s wealth in cash form” has nothing to do with a type of currency in use. I will recommend that those interested in that knowledge do simple googling on the Internet. However, I felt very pity for the author when I read where he stated that: “Imagine the huge amount of foreign currency that this country is using for non-productive ventures like” shaving, milling and transport services.

Surely, on what logical basis does one say shaving, milling and transport are non-productive activities? So it means the writer does not even know the meaning of production — creation of goods or services that have a monetary value. But may be let me hasten to address the major issue that Kahuni wanted to articulate,- the prudence of using the US dollar in Zimbabwe.

Now, let me first state it axiom-fashion, that it is not prudent to abandon the US dollar and bring back the Zimbabwean dollar, as the whole economy will crumble to hitherto uncharted levels of economic quagmire. Also, let us not regard the US dollar as some very special currency that only the ‘blessed’ Americans, governments, and few privileged rich citizens of the world must use, as the Kahunis of this world would want us to believe. It is very well that the rural folk use the US dollar to sell their home-brewed beer so that they get the true value of their productive activities, and not a currency that will lose value within an hour it gets into one’s hands.

The US dollar is just money and would be like any other currency in the world if sovereign countries were capable of effectively managing their currencies.

However, for any money to be acceptable as a medium of exchange, it is not something that even a gun can force onto people. Any country, Zimbabwe included, does not have to sweat for its currency to be accepted as money if that currency has the following major characteristic: Stability.

A currency can become unstable due to inflation or through the exchange rate when the international community loses confidence in that currency’s strength vis-à-vis foreign trade performance. In a nutshell, domestic economic policy, and foreign trade policy and performance determine the stability, and hence acceptability of a currency, be it the Zimbabwe dollar, US dollar, Chinese Yuan, or Zambian Kwacha etc.

Now, coming to the Zimbabwean case, it is not the currency or the US dollar that is causing economic decline, what people call deflation.

Have you ever asked yourself, why a Zimbabwean is reported to be in the process of investing large amounts (US dollars for that matter) in Mozambique, when Hwange Colliery, Air Zimbabwe, local banks are all in dire need of equity capital investment? For your own information, Zimbabwe would be in a very traumatic economic environment, had it been using the Zimdollar, which no importer would accept when supplying imported food, and other items now that our own industries are operating at very low capacity.

I hope people still remember the empty shelves of supermarkets during the period of the Zimbabwe dollar. Mind, the industries are operating below capacity not because of the US dollar, but because of the economic policies that are not conducive to investment expansion, capitalisation and foreign direct investment inflow.

This very situation we are in is the same environment that caused RBZ to engage in wanton printing of Zimbabwe dollar, hoping it was satisfying the high demand for money, and you know the consequences which I believe no one wants to relive, except those with opportunities to become cash-barons — the corrupt.

One of the views of Kahuni is that, all the foreign currencies currently in the country would still be available when using Zimbabwe dollar and Government would harness and use it prudently as foreign currency reserves. We call this “money illusion” because the amount of US dollars available in circulation is because we are using the US dollar as local trading currency. Have you ever wondered why we do not have large amounts of Chinese Yuan or Rand? The same amount of US dollars would not be here in circulation or in RBZ coffers if we were using Zimbabwe dollars as our currency, except if the economic policy governing our economic environment changes for the better, something that cannot happen in a short spell of time.

Hence, for those not schooled in Economics principles and concepts, it is very tempting to confuse the caused factor with the causal factor.

This is why you never read economists arguing for the banning of the use of injection by the doctors, since by virtue of logical observations, injection cause untold pain to our babies and children. I then wonder why the novices in Economics have this proclivity to apply illogical concepts, and produce what they think is a factual and persuasive article, when they are simply leading others into abysmal ignorance.

The writer is an economist. He writes in his personal capacity.