The Import Ban is a Scam

It looks like Zimbabwe is trying to blackmail South Africa into giving it credit lines.

Never mind that, Zimbabwe has got far much more to loose from a trade war with South Africa.

Zimbabweans have little buying power and as such it is not as important a market for South Africa as the Zimbabwean government would like to imagine.

Yes Musina has grown from Zimbabweans buying there but it is still a very small town by South African standards. Louis Trichardt is actually bigger.

The fact that such a small town can serve as the buying centre for almost the entire country of Zimbabwe is testimony of just how much the Zimbabwean economy has shrunk. An entire country should need a very large city to serve it not a small town.

Zimbabwe should not overestimate its hand. South African business can afford to ignore Zimbabwe and concentrate on the much richer mining markets north of Zimbabwe.

The South African businesses making a lot of noise are only the small shops in Musina, not the real big players.

Anyway given the way the import ban harps on about dairy products like yogurt, powdered milk and cheese, that is a very strong indication that the ban may actually be a ruse to try and make Zimbabwe a captive market for a few politically connected companies.

Most of the politicians will not be affected by the import ban as they either just give themselves the licences, or smuggle in the goods.

It is my considered view that the import ban is intended to eliminate competition for the companies of the political connected.

After all politicians using regulatory power to interfere with markets and line their own pockets is not new to Zimbabwe.

The legendary trillion percent inflation was caused by the government printing cash. Politicians had first access to that cash. At one time a woman, who one politician described is his 'casual intimate girlfriend' was found with her car boot full of crisp new notes that had not yet been officially released.

To benefit from printing cash the politicians running Zimbabwe imposed an artificial official exchange rate which they used for government transactions. Foreign currency was strictly allocated and politicians had first access.

Here is how it worked, if the official rate was say US$1 to ZW$30 and the black-market rate was US$1 to ZW$3000. A politically connected person could be easily allocated foreign currency.

Let's work with an amount of US$100. At the government exchange that would be ZW$30000. On the black market you could be bought for just US$10. Thus someone could get US$100 from the reserve bank, take just US$10 of that go to the black market, buy ZW$30000 go and pay it to the reserve bank as the official equivalent of US$100. They would pocket the US$90.

This practice was called 'burning' money and is primarily what caused hyperinflation in Zimbabwe. Politicians used their regulatory authority to force an exchange that they knew was not practical. They then used the disparity between the official exchange rate and the black market rate to skim money out of government coffers.

I think the same thing is happening with the import ban. Politicians are trying to use regulatory authority to create a captive market for themselves, eliminating competition.

They can give themselves the licences ensuring that only their goods reach the market.

It is for this reason that I think the whole import ban thing is a scam.