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Zimbabwe Economic Policies – Newton’s Forces at Play

Posted on 04 February, 2019 at 13:09

By Luxon Kalonga

Once upon a time when I was a Physics student, the teacher taught us about Newton’s Laws of motion. Still stuck in my head are the laws “Every object continues in its state of rest of uniform motion unless compelled by other forces to act otherwise” and “To every action there is equal and opposite reaction”. The laws made perfect sense in the sciences arena as they were used to explain movement of objects, gravitational force, inertia, and other fancy science theories. Through my metamorphosis into a Finance person, I have seen that these laws apply economics, finance and accounting too! As a variant to Newton’s Laws, an accountant would say “for every debit there is an equal and opposite credit” whilst an economist will say “the price of a good or service will remain constant unless market forces of supply and demand come into play.”

Sir Isaac Newton, by Godfrey Kneller (1646–1723)

In Zimbabwe, we have become sensitive to macroeconomic policies to the extent that markets, (well, at least parallel ones) react almost immediately to any significant information. The market pandemonium that ensued soon after the announcement of the Monetary Policy and Fiscal Measures on October the 1st is a perfect case study that scholars can build their dissertations on as they analyse the elasticity of Zimbabwean market to policy changes. I would like to believe that given what we went through during the “Casino Economy” days, our policy makers must have anticipated some form of market reaction to the policies. However, events of the past month were beyond anyone’s wildest imagination – the hoarding, the steep movement of parallel market rates, the “closed for renovations” signages, the brimmed over fuel tanks, the steep bulls on the stock exchange… to mention but a few. Going back to Newton’s Laws, these were merely equal and opposite reactions by the markets to the policies that were put in place. It can also be argued that the authorities had to somehow step-in because without the external force of drastic economic policy, the nation was gradually heading for oblivion.


At KFM Consultants, we have been closely following the developments around the adjustments and implementation of the policies that were put in place. The Reserve Bank of Zimbabwe issued Exchange Control Directive RT120/2018 specifying the different types of Nostro FCA Accounts, forex retention ratios for exporters, settlement of capital gains tax for sale of property to non-residents, among other regulations. Almost simultaneously the Finance Minister Prof. Mthuli Ncube made further clarifications on the 2% Intermediated Money Transfer (IMT) Tax, specifying the exempted transactions and the cap amount of $10,000. Whether these were merely further updates to the Monetary Policy and Fiscal Measures or reactions to market uproar will remain a mystery.  The Sunday Mail (4 November 2018), revealed that there would be further review of the IMT tax to deal with illicit parallel market activities. We will have to wait for the presentation of the 2019 National Budget this November to obtain further clarity. As per Newton’s Laws, every clarification or update will be a force to stir the ship (economy) in a different direction at a different speed. Just as other private sector players, the Non-Profit Sector also needs to be equipped on how to deal with these forces as they come.


In our discussions with some of our clients were have noted that most of them have not been able to use their Nostro FCA accounts as some banks were indicating that the platform was not yet in place whilst others gave the option of using the Telegraphic Transfer (TT) system involving offshore Nostro accounts. There has been confusion on whether people could withdraw from these Nostro FCAs to access hard currency. One employee from a Civil Society Organisation that we deal with needed to know if it would be possible to pay for her ACCA/CIMA examinations and subscriptions from her personal Nostro FCA account. Whilst banks have been holding meetings with their clients and other stakeholders on the Nostro FCAs, more still need to be done to before the nation loses confidence in the system leading to lesser financial inclusion and more parallel market dealings.


Most Non-Profit Organisations depend on external donations for their activities. Over the past month, the increases in the prices of commodities has adversely affected their budgets which had been set in a completely different environment. It is important to know funders’ perceptions and the effects of this new force on their support for the local NPO sector – will they allow for upward adjustements of budgets, will they shun Zimbabwean organisations for now, will they compel organisations to work within the available means?


Enlightenment on the issues discussed in this article will enable organisations to effectively manage their finances to ensure sustainable implimentation of their activities. On the 9th of November 2018, KFM Consultants will be hosting a Breakfast Meeting where the impact of the recent policies on the Non-Profit sector. High profile individuals from the Reserve Bank of Zimbabwe, Zimra, University of Zimbabwe as well as seasoned bankers, funders and fund managers will be present to decipher the policies in a way that will equip NPOs towards effective, efficient and economic management of finances.

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