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A number of pressures are building up within the private sector that threaten to damage the economic stability that Zimbabwe has achieved under the firm discipline of the Second Republic and its decision to open doors rapidly for that same private sector and increasingly allow markets to operate freely within the normal regulatory environment that most countries need.

A central problem identified by Reserve Bank Governor Dr John Mangudya and Secretary for Finance and Economic Development George Guvamatanga when they jointly hosted a monetary policy review webinar this week is the determined attempts by some in the private sector to abuse the auction system to buy foreign currency for what can be described as hoarding or unapproved payments, often abetted by banks.

Others, perhaps many, are using what appears to be black market rates, or even higher rates, to price goods and services in local currency when the foreign currency inputs into those goods and services are derived from the auctions.

This was pinpointed by Mr Guvamatanga as the principle driver of recent price rises for many goods.

The two diplomatically described all these manoeuvres as “market indiscipline”.

Many would be blunt and use the word “cheating” or the word “profiteering”, depending on just what the particular manoeuvre amounts to.

When someone creates a shell company that produces nothing, and finds a bunch of invoices for stuff they have no intention of buying to make an auction bid, abetted by a bank that is supposed to know its customer is very dodgy, it is difficult to be diplomatic.

And retailers quite happy to take a US dollar from customers at $83 or $84 to buy something, but raising their prices to match a $110 rate, appear to be cheating both the customer and the system as they profiteer, in fact engaging in double profiteering.

Already some cheating has been stopped. The money creation by mobile networks, of all people, was stopped, or almost stopped. The Reserve Bank has caught most of the dubious bids as it checks them out. And now the Ministry of Industry and Commerce, largely using its oversight of competition rules, is probing the price fixing and cheating.

Huge efforts, and major sacrifices, have been made over the last 30 or so months to fix the fundamentals and create a “normal” economy for Zimbabwe.

This kicked off with Government itself biting the bullet and for the first time in four decades not just budgeting to live within its means, but then enforcing the required fiscal discipline to make sure the budget was followed and emergencies or changes were funded through virementing, that is cutting back spending on some items to use the money elsewhere, a process overseen and tightly controlled by the Finance Ministry; the end result is still a balanced budget.

This fiscal discipline then allowed monetary discipline, more the preserve of the Reserve Bank although enforcement required eager Government assistance.

No longer required to fund Government fiscal indiscipline through creating money from thin air, with bank bureaucrats allocating foreign currency almost by whim to keep the wheels of the economy turning, the Reserve Bank was able to enter a real world where market forces of supply and demand could set the pace.

The Reserve Bank then took on the normal central bank role of regulator and intervening to set, or at least manage, interest rates, credit creation and like, with careful adjustment to make it easier to borrow money to build a factory than buy luxury goods.

The auctions for foreign currency were the last step, allowing market forces to set the exchange rate for US dollars needed to buy almost everything required by the productive sectors, and even a range of needed consumer goods not produced locally.

Government, by simplifying, drastically simplifying, business regulation is opening every door it can find to make it easier, in some cases possible, for someone to fill those production gaps. And the auction system itself allows the local producer of even the most inessential luxury goods to buy currency for inputs, as they suddenly become raw materials and machinery.

The system and the policies do work. Last year, Zimbabwean exporters sold about US$4,9 billion worth of goods and services and this year expect to sell more.

Importers paid about $4,7 billion for what they needed.

Covid-19 cut import demand, although we had to buy more medical supplies, but with more than 10 percent of those imports being food that our farmers are now busy growing thanks to the Government’s input finance programmes, which have come under far stricter discipline to exclude cheats and chancers, the authorities are confident we can maintain a positive balance of payments.

As the economy grows we expert more, and import more; it is the gap that is important and for the first time in decades it makes sense.

It’s difficult to understand why some in the private sector want to cheat. Suggestions for improvements are always welcome, and as Zimbabwe continues its journey into the real world we will need to adjust, modify and expand our systems. But this requires an atmosphere of mutual trust and that suggestions should make sense.

Here the latest intervention of the Confederation of Zimbabwe Industries, the body that is supposed to represent the largest importers and the manufacturers who dominate the auctions, does not make much sense.

The CZI sees the auctions as a mere interim step towards a free-for-all currency market, the sort of market that severely damaged many its potential members and destroyed more than a few, although allowed some of the biggest to expand by acquisition and cut out bothersome competition.

Reading between the lines though, those big private established industrialists who dominate CZI appear to want to use free-for-all rates to set their prices, while having a fixed rate to pay for inputs, perhaps a return to the RBZ handing out a few cheap US dollars while they charge the “market rate” and make large profits off reduced production, legalising the sort of market indiscipline complained about by Dr Mangudya and Mr Guvamatanga.

This smells of the influence of large established monopolists and cartels panic stricken about new investors breaking the cosy world built at UDI and buttressed by the First Republic, a cosy relationship that guaranteed profits without having the bother of creating markets.

This adds new urgency to the investigation launched by the Ministry of Industry and Commerce. We wonder just how far most of our new industrialists who actually built new factories agree with this stance. CZI does not go out of its way to recruit newcomers.

As we keep stressing, Government’s switch to being pro-business, and seeing the private sector as the driver of economic growth, is not a policy of holding the hands and establishing cosy relationship with particular businesses.

It is a policy of wanting lots and lots of more producers and investors and allowing expanding markets and thoughtful consumers to build winners, not manipulators and influence peddlers.

At all levels, the referee suits and whistles have to be broken out of store and the manipulators given their yellow cards, and some who do nothing but fill in forms their red cars.

Fiscal and monetary discipline needs market discipline. You cannot have one without the other.