Eric Bloch: Much is needed for economic recovery in Zimbabwe

Friday, 26 March 2010

MINISTERS Tendai Biti and Elton Mangoma not only deserve to be commended for their determination to formulate a Medium Term Programme (MTP) for Zimbabwe’s economic recovery, and to do so imminently, but they will also need to be given unequivocal support from government as a whole, and from the private sector. That support must be two-fold; the provision of constructive input to the MTP, and also in the implementation thereafter of the programme.

Although many, having been economically whipped and beaten for more than 12 years, deny it, the reality is that some real progress was achieved in 2009 under the Short Term Economic Recovery Programme (STERP). The economy moved from hyperinflation of many zillions percent to deflation. Commodity scarcities virtually disappeared, real growth (albeit not great) was achieved in many sectors, including manufacturing and mining, and government reduced its expenditure, although not sufficiently so. These are but some of the economic transformations achieved in 2009. Nevertheless, those achievements cannot, and must not, fuel complacency, for the hard and tragic fact is that the economy is still one of the most distressed in the world.

More than four-fifths of the population struggle to survive, at levels tragically below the poverty datum line, unable to meet essential costs, deprived of health care, education, and much else. Over half of the population suffers from malnutrition, having incomes below the food datum line. Most of the Zimbabwean infrastructure is derelict and unable to serve the critical needs of the economy and of the populace.

Government, on its own admission, is bankrupt. These are but a few of the appalling economic circumstances that still prevail.

No matter how diligently Biti and Mangoma apply themselves to bringing into being the MTP, that programme will be doomed to failure in the absence of a substantive enabling environment. Key elements of such environment include:

Political stability. In the absence of a genuinely stable, democratic, political background, there is no prospect of any substantial economic recovery. First and foremost, the so-called government of national unity must become a fully unified entity, with constructive collaboration between the respective political entities of which it is constituted. Therefore, without further delay, posturing, manipulation and self-centred manouvering, they must forthwith implement the totality of the global political agreement (GPA), and work together in a partnership which pursues national interests, instead of interests of politicians. They must ensure the expeditious development of a genuinely democratic constitution for Zimbabwe, followed by indisputably free and fair, and internationally monitored elections. These are prerequisites for any rebuilding of economic and business confidence, motivation of foreign direct investment and domestic investment, access to international lines of credit, and development of continuing trade linkages.

Investor security. Any major economic recovery is contingent upon significant new investment into existing, highly under-capitalised, enterprises, and into new ventures. But in the absence of assured security of investments, investment will not be forthcoming. Elements of such security include belated and grievously overdue compliance with the numerous Bilateral Investment Promotion and Protection Agreements to which Zimbabwe is a signatory, assured access to profits and to return of capital, and creation of a free-market environment, created by major deregulation. One of the foremost issues to be addressed is comprehensive modification of the presently investment-destructive indigenisation and economic empowerment legislation.

Fiscal discipline and frugality. In 2009 Biti laid the groundwork for containment of state expenditure, seeking to limit outflows to available resources, and is deserving of praise for that which he has achieved. However, not only does government continue to “live” beyond its means, but much of its expenditure cannot be credibly justified, whilst other essential expenditures fail to be made. Spending on defence continues to be excessive, for such forces are far greater than needed, whilst expenditure on infrastructural maintenance and development is grossly inadequate, and numerous other fields of unnecessary expenditures are readily identifiable, as are other areas that critically need to be funded.

If the necessary, very extensive economic recovery is to be forthcoming, the MTP will need to include, in addition to much else:

Assured retention of the multi-currency basket until the economy has continuing stability.

Any return to a national currency, or linkage to a single currency, would be potentially disastrous;

Intensive efforts to achieve rapid enhancement of infrastructural service delivery, with especial emphasis upon energy generation, telecommunications, water procurement, purification and delivery, transportation, and health and educational services. Much of these efforts should be pursued by partial or total privatisation of parastatals;

Vigorous endeavours to reverse the “brain drain”, and rebuild the Zimbabwean skills’ resource;

Reform of the land reform programme, ensuring productive operations of the agricultural sector;

Facilitation of investment, inclusive of minimisation of bureaucracy, effective investment incentives, and a “friendly” and regionally comparable taxation system;

Constructive progammes of indigenisation, including support for new enterprises and ready enablement of transition from informal to formal sector;

Ensuring a “level playing field” between local manufacture and imported competitive products;

Rationalisation of Zimbabwe’s partially conflicting membership of Sadc and Comesa.

Pursuit of all these objectives, and the many others needed, with especial emphasis upon the mining, agricultural, tourism and manufacturing sectors, the focus on the latter including strong pursuit of value-addition to Zimbabwean primary products.