Cost of policy inconsistencies
“BUT of course we must know that investments can only go where it gets a return so we must make sure we create an environment where investors are happy to put their money because they will have a return.”
This is an except from a candid interview that Vice President Emmerson Mnangagwa granted to the Chinese Central Television during his week-long visit to that country earlier this month.
Mnangagwa added: “So you cannot say there are areas of our economy which we are happy with (in terms of) infrastructure; we feel we are behind by 15-16 years. (In) agricultural development we are behind by 15 to 16 years. Manufacturing, in fact capacity utilisation of our industry in some areas is down to below 20 percent.
So again we need to retool that industry by acquiring new technology, new machinery, new skills so that we are competitive and also in the same vein we have to look at how we can create an investment environment in the country which will attract the flow of capital from friendly countries and, in fact, capital is capital: it will go where it finds comfort so we need to do that, ease of doing business in an environment. Those are the tasks which we face and we have to look at even legislation in the country…”
Someone new to Zimbabwe’s economic crisis would have no reason not to see this brazen admission as the Damascene moment on the part of the powers-that-be.
Before long, Mnangagwa was on another weeklong visit to the post-Soviet state of Belarus where he was taking the same gospel to potential investors.
But how serious is government this time around and what has since happened to the “illegal sanctions” that were being blamed for failures of the past decade and a half?
The most vehement argument peddled by those routing for the continuation of the status-quo has been that the country needs policy continuity.
While this might have worked magic elsewhere in the world, it is sadly something that has eluded Zimbabwe as the country has had a real hodgepodge of economic programmes, hardly any of which have been followed faithfully.
Inconsistencies in the application of policies have left the economy in a shape worse than that of a country that has never had steady and consistent government.
If there is anything that Zimbabwe has been good at it is the production of high-sounding economic blueprints.
It started in 1981 with one called Growth in Equity; then followed by the Three Year Transitional Nation Development Plan (1982-3), after which came the First Five Year National Development Plan (1886-90).
In 1990, the country unveiled a five year Economic Structural Adjustment Programme (ESAP), a World-Bank programme that sought to liberalise the economy from a semi-socialist to a full capitalist one.
Running alongside ESAP was another economic blueprint called Framework for Economic Reform (1991-5), which sought to privatize State-owned enterprises.
In 1998, Zimbabwe unveiled the second leg of its economic structural adjustment programme, the Zimbabwe Programme for Economic and Social Transformation (ZIMPREST), although two years behind schedule.
ZIMPREST (1996-2000) sought to create a stable macro-economic environment to support increased savings and investment in order to achieve higher growth and improved standards of living.
Then came the new millennium in 2000 with its Millennium Economic Recovery Programme, another delayed programme (August 2001-2002) that sought to stop the economy from bleeding right in the throes of a violent and chaotic and land reform exercise.
This was followed by a Ten Point Plan (2002) under the Post-Election Economic Development Strategy and Economic Recovery Programme.
Then in 2003 came the National Economic Revival Programme (NERP), which was followed by a Macroeconomic Policy Framework, which was implemented, between 2005 and 2006.
The year 2007 brought with it the National Economic Development Priority Programme while the Zimbabwe Economic Development Strategy suffered a stillbirth in 2008 thanks to that year’s unforgiving economic meltdown.
The advent of a coalition government brought with it the Short Term Emergency Recovery Programme (STERP) which sought to get “Zimbabwe moving again” between February and December 2009.
This was followed by its successor STERP2, a dual policy document encompassing the Three Year Macro-Economic Policy and the Budget Framework (2010-12).
Then came the current Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset) which runs from 2013 to 2018.
Zim-Asset is a policy document which many government officials struggle to explain away.
It would take more than just the sort of talk Mnangagwa and other government officials have been making to convince people like veteran economist, John Robertson — who have seen it all — that this time around things would be done differently.
“The more severe weaknesses of the Zim-Asset document are that its descriptions of the problems, however, detailed do not amount to a plan. Also, the policy measures that caused the massive shrinkage of the whole economy are not even recognised in the document, let alone addressed,” said Robertson in his brutal assessment of the Zim-Asset economic policy document.
Robertson said while the Zim-Asset policy document seeks “to provide an enabling environment for sustainable economic empowerment and social transformation to the people of Zimbabwe” it, however, is sadly mum on the need to ensure that investor interests are guaranteed protection.
“The knowledge that property rights might be officially disregarded even now and that savings and bank balances might be appropriated without the owners’ consent is still undermining confidence and seriously discouraging the investment inflows that might have transformed Zimbabwe’s prospects.
“To attend to this problem, Zimbabwe will first have to remove the hostile investment regulations and the policies that require every foreign investor to surrender a controlling interest of every business. Government’s intentions to deepen its involvement in business, as proposed in the Zim-Asset policy document, also appear likely to increase the running costs of existing businesses. This will further add to the reluctance of new investors.”
At a time Mnangagwa was reassuring potential Chinese and other global investors that the country’s indegenisation law should not be seen as a threat to investment, foreign investors on the ground have been looking for exit signs.
Global resources giant Rio Tinto plc was clearing its drawers reportedly in protest against the forced inclusion of its subsidiary, Murowa Diamond, in a merger with a motley of loss-making players in the Marange diamond fields.
Essar Holdings was reportedly abandoning its US$750 million Zimbabwe Iron and Steel Company deal after being trapped in red tape for the past four years.
After being harassed, browbeaten and having its operating licence suddenly withdrawn over issues to do with its shareholding structure, among other things, Telecel’s shareholders — both foreign and local — have reportedly offered to surrender the company to the government.
The government pointed out that it was looking for funds to buy the telecommunications firm contrary to the spirit of privatisation that sought to leave business to private players.
So shortly Telecel could be added to the list of 100-plus parastatals most of which are not only in a decrepit state, but are also bleeding the fiscus of hundreds of millions of dollars annually.
Instead of making itself a player and referee in business, government should concentrate on creating such an enabling environment for enterprises to operate viably.
If government had nurtured a couple of businesses in the mould of Econet Wireless, which alone has contributed over US$1 billion to the fiscus since the on-set of the multi-currency regime, maybe more jobs would have been created and it could be getting more revenue in taxes alone.
Economist and social commentator, Vince Musewe, sees this as something that government never sought out to achieve.
Musewe told the Financial Gazette this week: “Clearly the priority of this government is not job creation. They have destroyed more jobs than they have created because of this obsession with political control of business.
That is what happens in predatory states where the state uses its power to control enterprise through patronage and corruption. There is no chance of even the creation of 100 jobs by ZANU-PF (because) they are not in the business of creating things but destroying things since 2000. State capitalism has decimated our productive capacity instead of being developmental.”
Zimbabwe has over the years been ranked poorly on the World Bank doing business survey.
Late last year, the country was ranked as the worst investment protector in Sub-Saharan Africa, ranking number 128 and has dropped to 170 from 168 on the ease of doing business world rankings that the World Bank compiled.
“The prospects of any of these mechanisms being successful can be described as dismal while the authorities maintain and even defend the current investment climate,” Robertson pointed out.
In the meantime, opposition politicians — during whose time in government the economy grew by nearly nine percent annually — continue rubbing their palms gleefully satisfied that their axiom that “you can rig the election, but not the economy” is proving to be a truism.