Right Again! Complete Official Dollarisation Announced In Budget


Well, the budget story is not a story to you regular readers, I broke this story on January 20 this year in an article entitled As Talks Collapse, Dollarisation Now Official. I did tell you that there would be a few shocks in the budget didn't I? And on 12 January, I broke the story that the Zimbabwe Stock Exchange was to be dollarised! This has also been confirmed by the "Acting Finance Minister" in the budget. 

A lot of people insisted I was "speculating", did not know what I was talking about and so on. But I happen to have been right with every single story on this blog so far. I will let you, the readers, be the judge!

For you, my readers, I suppose it is pointless for me to repeat "news" that you read about 10 days ago on this blog.

What you should take careful note of however, is something that the general public who do not read this blog are not aware of yet, this being the story I also broke here on New Year's Day, I January, entitled: Zimbabwe Approaches South Africa To Officially Use The Rand.

Pay special attention to Chinamasa's budget speech and you will see that he says no expenditure outside of the budget is going to be entertained. In other words, all ministries will have to live within whatever allocations they have been given.

This is important because, as I told you in "Zimbabwe Approaches South Africa To Officially Use The Rand", the South Africans demanded this. They made it clear that one of the conditions for Zimbabwe's official adoption of the Rand would be that they come up with measures to ensure that the Mugabe government never aproached the South African Reserve Bank to "borrow" money for its operations.

Mboweni, in his meeting with Gono late last year, is said to have made it clear that South Africa did not have the capacity nor inclination to support ad hoc expenditure like the Zimbabwe Reserve Bank did, simply dishing out money whenever government overspent.

The fact that Chinamasa has explicitly made this committment is an effort to show the South Africans that Zimbabwe is ready to meet the conditions set for use of the South African Rand. 

So, we are definitely on course for the official adoption of the South African currency. We will be joining the Rand Customs Union, which currently comprises of Lesotho, Namibia and Swaziland. How long the South Africans will wait to see if, in practical terms, Zimbabwe's ministries will stick to the principle of living within their means, is not yet known.

But we can be sure that they will want evidence that the Zim government is capable of actually doing this before official announcement is made. Randisation is definitely coming. It is just a matter of time, to wait and see how serious Mugabe's government is.

Let me also state unequivocally that, as a result of this dollarised budget, MORGAN TSVANGIRAI AND THE MDC MUST DUMP THIS UNITY GOVERNMENT THING FORTHWITH!! 

Let me explain. This budget is a classic ZANU PF budget. Take this, for instance: The budget is worth US$1.9billion  in total.  Yet, of this, fully US$1.7billion of it is recurring expenditure. In other words, out of the total National Budget of US$1.9billion, US$1.7billion is for purely consumptive purposes! They intend to "eat" this money. There is no provision for development or resuscitation of the economy and country's infrastructure here. This is what is called a wasteful budget. It is not looking to the long-term.

As a result, should Morgan and his buddies join this monster, they will be tied to a failure. The budget is one that ignores the massive need for redevelopment in Zimbabwe. It will not end the suffering of the people of Zimbabwe at all. Instead, the suffering will be made worse.

By concentrating on "eating the money" (this is a very Zimbabwean expression by the way - "kudya mari"), the Mugabe government appears to have abandoned all hope of developing this country.

This budget will not create any jobs, that is for sure. Of course, as I told you a week or so ago, Mugabe and his party have abandoned the productive sector, whom they accuse of "sabotage". They were not going to do anything to revive production with this budget as a result.

But this is where jobs would have come from. Still, Mugabe, who was fulminating during a cabinet meeting in December that, "If we have to become a nation of shopkeepers like the British, so be it, I am sick and tired of our productive industry!", was not going to make provision for local industry to recover.

To reinforce this and for you to really understand the truth of this stance, you only have to look at the fact that the suspension of duty for the importation of basic goods has been suspended again until June this year. 

Mugabe wants people and supermarkets to be able to import maize-meal, cooking oil, sugar, salt et al, from South Africa, Mozambique and Botswana at a minimal cost.

Zimbabweans are already spending billions of rands shopping in South Africa every year. And, if the South Africans are really clever, they could, at a stroke, shrug off the looming global recession as they crank up their production to cater for the demand from Zimbabwe. This demand will now be increased exponetially because of the officiallisation of the use of the US dollar and Rand and the suspension of import duties on basic goods.

What Mboweni had demanded was for Zimbabwe to put in place the same import and export regime that exists in the Rand Customs Union BEFORE they join it. This budget goes some way towards achieving this.

Below, then, are what can be considered the highlights of the Zimbabwe National Budget. You will notice that quite a few of the things in it are things that I broke in stories on this blog long before the budget presentation

  • Use of multiple Foreign Currencies Now Official
  • Customs duty suspension on basic commodities extended to June (bugger Zimbabwean manufacturers, says Mugabe, and he says he is never going back on this, "they will have to compete on the open market with South African and Mozambican goods," he told cabinet in December)
  • Voucher system for civil servants' foreign currency allowances (these are essentially salaries paid in foreign currency and the "vouchers" will be denominated in US dollars. Special shops will be set up from where civil servants can buy goods and services using these vouchers. The shops and outles will then redeem the vouchers for real US dollars at the Reserve Bank)
  • Zimbabwe Stock Exchange To Trade In Foreign Currency (this story I broke on 12 January 2009, abou two weeks ago)
  • Water management goes back into the hands of the local councils (MDC controls most local councils and here Mugabe is trying to set up the opposition for failure, by giving them a posioned chalice and NO MONEY to rescuscitate the infrastructure killed by ZINWA, the Zimbabwe National Water Authority).
  • GMB monopoly on buying maize and other grains has been abandoned (a commendable move, especially in tandem with the abolition of import duties in basic goods - the millers can buy their maize directly, turn it into maize mill and sell it for exhorbitant amounts of money like they are used to, but now Zimbabweans will simply refuse to buy local, which is traditionally more expensive and instead go for cheaper (and better quality) South African mealie-meal etc.
  • ALL TAXES TO BE PAID IN FOREIGN CURRENCY (That means ALL TAXES, including traffic fines - the corrupt ZRP Traffic department must be rejoicing. A lot of motorists will be parting with US dollars on the roads of our country!)
  • Anyone can now charge in foreign currency, not only those who were licenced by the Reserve Bank to do so (This, more than anything else, reveals the fact that the country is now officially dollarised. No shop is going to accept Zimbabwe dollars again after this.)
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  1. Hi Denford,

    If the MDC is in charge of the finance ministry can they not reverse this?

    If not, do you think that foreign aid could see them through the first year. Although given the current economic climate I am not sure how much of the aid previously promised will ever materialise. I once read that the UN was willing to pay the health workers in foreign currency. Surely this would make some of them return.

    In the worst case scenario they may tough it out over the first year if they cannot reverse it and maybe foreign aid will see them through.

    If Zanu PF is in charge of agriculture and mining, then they have the key ministries that could grow the GDP. I would expect services to improve under the ministries under the MDC.

    In a nutshell, I would think its still the right move for the MDC to join. Of course its not going to be easy. I prefer to see the glass half full.

    p/s Not a MDC supporter

  2. I have never seen a photo of this blogger Denford, but don't you all think that he is Mugabe. He always predicts what the Zany part is doing next.

    So are we going to be using UScents too because these shops are reaping us by charging everything to the nearest dollar.

  3. @Taps,

    Hehehe, that is a good one.

    Seriously, though, Denford has some sort of aversion to photography. He keeps saying we will never ever find a photo of him online, ever.

    He says it distracts from the message. We have tried, but no success!!!

    So, yes, you will never, ever see a photo of Denford online. Ever.

    Does Denford exist?

  4. Anon, I suppose you mean reversing the budget to be in their favour rather than dollarisation.

  5. Thoko Says:-
    Whoever thinks Denford Magora does not exist is somehow a fantasist. Do they think this Blog is run by a spook. Regarding displaying photos, I am one such person who doesn't like such displays. My colleagues have even pressured me to sign up to FaceBook, but no, never I will not.
    Anonymous above wrote that, he thinks services will improve under ministries under MDC. I think this is wrong, that is not the way governance operate. Once they are in government, they will not be MDC ministers but gvt ministers, they will not persue their own policies. Gvt will set policies and ministries implement them. The difference now is policy formulation will come from both parties' contributions.
    I think one good thing about the two protagonists joining up to work together, is that there isn't much wasted energy and effort in demonising, the country and wishing all evil to befall the country. Effort and energy may now be used for production and constructive purposes.Not trying to out do each other in spewing insults and hate and grab headlines in International hostile media.
    I disagree with Mr Magora that MDC should quit this inclusive gvt. If they quit, then do what, Go on a diplomatic offensive, seeking further isolation of Zim and the broadening and tightening of sanctions.They have said that already as their Plan B. We are tired Mr Magora, we are suffering, we do not want that any more.I personally believe Zimbabwe will not have been what it is today if MDC was not formed at all.Zim will have been much better off. The Westerners would have found better ways and means to solve their problems with Zim gvt policies, and not regime change. If regime change had found no takers, I doubt if the former colonial powers would have felt a sense of legitimacy in its destructive approach. Now they hide behind MDC and say they are doing it for the sake of the people of ZIM, and the people of Zim they refer to are MDC supporters only, most of whom are either ill-informed or misinformed or both about the role their party has played in destroying what Zanu PF gvt built. For instance they still argue foolishly that Zim is not under economic sanctions, the only sanctions are targeted towards Zanu PF elite, "What bull shit".

  6. Thoko, yes they are gvt ministers but I would still expect a difference in the work ethic.

    For example Elias Mudzuri was mayor of Harare and I think its fair to say Harare started improving when he was in office. The Zanu PF guys have been shuffled around in cabinet for years without delivering.
    Hopefully being in a coalition will force them to improve. Come next elections we will be able to compare how they have performed. Its one thing to have an agreed gvt policy but quite another to carry it through with diligence.
    I do agree with you that MDC should be in it. Indeed they have just endorsed it. Things will start improving no doubt.


    Son of the Soil


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