…as Zimbabwe girds for 2023 harmonised elections

By Noah Marima/Claudette Sunduza

The Zimbabwe Media Commission (ZMC) has launched an Elections Reporting and Peace Journalism manual (EPJM), to promote objective reporting as the country heads towards general elections this year.
The report, first of its kind in Zimbabwe and produced in collaboration with UNESCO is expected to improve the quality of election reportage in Zimbabwe and promote peace.
In a speech read on her behalf by the Deputy Minister Kindness Paradza at the launch, Information Minister Monica Mutsvangwa said the manual will help the media promote peace and report responsibly during this year’s general election.
The Minister said the media should “provide scrutiny on political parties and their policies, while creating a forum for debate,” said Mutsvangwa.
Minister Mutsvangwa added that the manual will also help media promote democracy, knowledge of rights and civic responsibilities.
The launch comes behind the backdrop of media being accused of fanning violence, promoting hate speech and being a political player in the past elections.
ZMC chairperson, Professor Ruby Magosvongwe, said the manual is a critical intervention aimed at equipping journalists with how-to-skills in election reporting.
“The main objective of coming up with the manual is to equip media practitioners and media houses with the necessary knowledge and skills on how to report elections to assist in the creation of a conducive environment for the holding of free and credible elections,” she said.
Speaking at the same event, UNESCO Regional Director for Southern Africa Professor Lidia Arthur Britto said the manual comes as a mitigatory measure for past mistakes.
“As a way of mitigating previous mistakes we have decided to work together with the Zimbabwe Media Commission (ZMC) to change the old reporting system and equip journalists with professional journalism skills,” Prof Britto said.
Academic and media lecturer Dr. Alexander Rusero, who was part of the team that produced the manual said elections mean a lot to a number of people.
“In Zimbabwe, elections are not only just a contest for power. They are also a sight of struggle. So, each time we venture into elections, Zimbabwe is reduced into a war zone. We are already in the war mode,” Rusero said
Dr Rusero also said the atmosphere required journalists to be sensitive and conscious that there is life after elections as much as there is life before elections.
“In the past, efforts to promote responsible behaviour during election centred only on journalists. All actors must be targeted. There is a need to capacitate firstly the politicians because journalist are just conveyers of information.
“The politician must watch his or her mouth and avoid statements that are inflammatory and or induce excitable tendencies that can promote violence, “Dr Rusero said.
Findings by media watchdog, Media Monitors, in its 2018 report titled: “Reporting on Zimbabwe’s 2018 elections”, showed that the media was partisan in covering the general election.
During the period, government-controlled media outlets carried more reports on the election promises and the election environment by the ruling Zanu Pf officials, while watering down those of the opposition.
Even though 53 political parties out of the contesting 55 were covered in the media, two parties, ZANU PF and MDC-Alliance as well as independent candidates received significantly more coverage than the other parties most of which received marginal coverage.
These three entities accounted for 79percent of the time and space dedicated to political actors.
Zanu PF commanded the lion’s share with 52% of the coverage ahead of MDC Alliance which had 20percent while independent candidates comprised 7percent.
The remaining, 51 parties shared the remaining 21percent. While many of these were clearly “briefcase” outfits that sprung up ahead of the election, there were others that represented significant minorities.
“Such coverage disregards the spirit of the Electoral Act’s stipulation of the equitable allocation of time and space to all political contestants,” the report reads.

By Zvikomborero Sibanda

Zimbabwe officially ditched its local currency in 2009 and adopted a multicurrency regime dominated by the United States dollar (US$) -dollarization reform. Dollarization is a generic term used by economists when a country substitutes its currency with foreign currency as a legal tender. In 2019, authorities reintroduced the Zimbabwe dollar (ZWL) as legal tender. However, by end of 2022, the economy had largely re-dollarized (entrenched US$ use) despite government de-dollarization efforts. This piece, the first of a series to come, seek to highlight the causes, the good and the bad of dollarization for Zimbabwe.

Status Quo

The official statistics show that the economy has largely re-dollarized. RBZ revealed that of the total banking sector deposits, 64.2% are foreign currency accounts (FCA) deposits. Also, Zimbabwe National Statistics Agency’s (ZimStat) estimates at the Classification of Individual Consumption by Purpose (COICOP) division show that in 2022 , about 76.56% of transactions were done in US$ with a balance of 23.44% done in ZWL.
The surveys by CZI, a manufacturing industry body, also established that on average domestic foreign currency sales contributed about 66% of private sector businesses’ forex earnings. By taking into account the unbanked informal sector transacting largely in cash, it is clear that Zimbabwe is now back in a multicurrency regime with the US$ at the epicenter.

Drivers of dollarization

Dollarization can be by a de facto market process or through an official government decree. Historically, nations have dollarized as part of economic reforms to infuse macroeconomic stability -the case for Zimbabwe.
During the height of 2008 hyperinflation, it became so difficult to gauge market prices to an extent that the government stopped publishing official inflation statistics with independent estimates showing monthly inflation hovering above a billion percent. Again, re-dollarization being experienced in the market now is a response to ZWL fragility and skyrocketing inflation.
When there is economic instability and high inflation, economic agents (agents hereafter) are forced to diversify and protect their assets from domestic currency devaluation risks. There are two (2) main reasons behind agents’ demand for foreign currency assets: currency substitution and asset substitution.
Currency substitution means that foreign money is essentially used as both a medium of exchange and a unit of account. Since high inflation or hyperinflation increases the cost of using the domestic currency for transacting purposes, agents will be prompted to be on the lookout for cheap alternatives.
Asset substitution entails agents’ risk and return considerations between domestic and foreign currency-denominated assets. Generally, forex-denominated assets provide insurance against macroeconomic risks.

Benefits of dollarization

Zimbabwe is experiencing debt distress. Debt distress is when a country faces challenges in paying its creditors and a debt restructuring is required. With over 80% of public debt in foreign currency, the fragility of ZWL increases debt servicing costs and propensity to default.
Economic literature posits that the immediate benefit from the elimination of devaluation risk by dollarization is the reduction in the country’s risk premium on foreign borrowing. In other words, with dollarization, interest premiums owing to currency devaluation risk will likely disappear. The elimination of the currency risks, however, does not guarantee a substantial reduction in the default risk premium on foreign currency-denominated debt.
Apart from raising borrowing costs, a currency crisis can also wreak havoc on the domestic economy. In theory, the exchange rate affects inflation, that is, a massive ZWL depreciation is likely to cause inflation to increase. Hard data shows that when the ZWL plunged by 12% on average per month in both the official and parallel markets between February 2019 and December 2022, annual headline and monthly inflation averaged 306% and 12% respectively.
While it is conceivable that dollarization won’t eliminate risks of external crises, it indeed holds the promise of steadier market sentiment. This is because the elimination of currency risk tends to limit the incidence and size of contagion episodes. Durable price stability offered by dollarization also helps clamp deepening poverty and widening income inequalities. According to the latest World Bank estimates, the unaffordable prices of basic goods in 2022 plunged about 40% of the population into abject poverty.
More so, although dollarization may make it difficult to insulate the domestic financial sector, it helps establish a sound financial sector while making economic integration of the domestic economy into the global economy much easier. The use of a common currency propels market integration as it lowers transaction costs and trade restrictions -the use of widely accepted currency reduces volatilities.
All else constant, dollarization encourages foreign companies to invest for the long-term taking advantage of stable currency which gives them a stable income stream that is not subject to frequent exchange rate fluctuations.

Risks of Dollarization

The biggest risk posed by dollarization is the loss of autonomy as the country’s monetary policy will now be dictated by a foreign country. A monetary policy is key as it helps the government manage inflation, currency exchange rates, and financial market stability. As such, losing this policy arm will constrain the government in delivering a goldilocks economy which is key in the improvement of living standards.
The relegation of monetary policy also means loss of seigniorage revenues. This is a profit a government can earn by issuing currency, especially the difference between the face value of notes and coins and their production costs. Seigniorage revenue can also relate to the interest rate central bank charges from lending commercial banks money.
Furthermore, although dollarization can eliminate the banking sector’s vulnerability to devaluation risk, it cannot avoid all sources of the banking crisis. In case of such crises, dollarization largely impairs the government’s lender-of-last-resort function thus inhibiting RBZ to respond to financial emergencies.
Typically, a central bank is the ultimate guarantor of the stability of payments and financial systems in case of a systemic bank run. While RBZ may be able to provide short-term liquidity to individual banks in distress, dollarization can make it lose the ability to deal with a sudden run-on deposit throughout the banking system.
A central bank can only undoubtfully guarantee all claims under any circumstance when it can print currency as needed. So, once this ability ceases to hold, the lender of last resort function becomes too limited.
Moreover, dollarization hurts small open developing economies like Zimbabwe by rendering their domestic companies uncompetitive. The use of a strong currency like the US$ increases the domestic cost of production since factors of production are priced in the foreign currency against regional counterparts pricing in their relatively weak currency.
The huge exchange rate differentials also make locally manufactured goods expensive in the eyes of foreigners while making foreign-produced goods cheap in the eyes of locals. This may lead to the importation of non-essential imports leading to unsustainable trade deficits.
For instance, ZimStat shows that between 2009-2018, Zimbabwe experienced a huge deficit averaging US$2.5 billion per year. In addition, dollarization in a developing country set up promotes the dumping of cheap foreign goods and the externalization of forex. Over time, this leads to acute forex shortages in the official channels and loss of employment.

Way Forward

The balance of benefits and costs of dollarization is usually two-handed. However, by reflecting on the status quo and distinguishing between short-run and long-run periods, one may establish that both dollarization and a mono-currency regime (de-dollarization) may be part of the policy package that is needed by Zimbabwe to attain durable stability. Which proposal then best suits the short-run? Which best suits the long run? This becomes the gist of next week’s column.

Zvikomborero Sibanda is an economic analyst and an astute researcher. He writes in his personal capacity. He can be contacted via email:

bravosibanda@gmail.com
Twitter: @bravon96