Zimbabwe in economic distress as Government remains clueless
By Allen Choruma
THE country once described as a “jewel for Africa” or the “bread basket of Africa” is slowly turning itself into economic mess characterised by mushrooming flea markets, tuck-shops, speed markets, rowdy bus and taxi (commuter-omnibus) ranks (not to mention the menacing “mushikashikas”) and so on as the country’s informal sector erupts, becoming the mainstay of economic activity in Zimbabwe.
The long queues at the banks and cash shortages have made the chaos even more pronounced as people jostle to withdraw the scarce greenback.
Statistics show that Zimbabwe can barely achieve a two percent economic growth rate in 2016.
In fact, Zimbabwe’s economy has been skidding south, having recorded growth of 10,6 percent in 2012; 4,5 percent, 2013; 3,1 percent, 2014; 2,7 percent, 2015, and a projected 1,7 percent in 2016.
With constrained liquidity in the economy, industrial capacity utilisation remains at an all-time low, estimated at between 25 percent and 30 percent, a sign that very little manufacturing of local products is taking place, leaving the country to rely on imports.
It is very surprising that the Minister of Industry, Mike Bimha, has put in place Statutory Instrument (SI) 64/2016 banning the importation of specified food and other items i.e. building materials and SI 18/2016 banning importation of specified medical drugs, when the manufacturing sector in Zimbabwe has virtually collapsed as shown by statistics.
The Industry Minister, like many of his colleagues in government, has simply lost touch with realities on the ground as these import restrictions not only drive prices upwards, but also threaten food security, access to affordable products and medical drugs.
They will also fuel the black market.
Zimbabweans are in a panic mode as the central bank plans to introduce bond notes in October, 2016 under “the guise of easing cash shortages/stimulating exports”, but people are skeptical and have lost confidence in the monetary authorities’ interventions as this reminds them of 2008 when inflation hit a global record of 500 billion percent, bringing the country to a halt!
Fear of the bond notes has fuelled cash shortages and opened up a new informal market for cash trading at a premium of between 10 percent and 15 percent.
The depressed global commodity prices are adding salt to the already wounded economy.
The prices of commodities such as nickel, coal, chrome, cobalt, and so on continue to fall on the global commodity markets.
There is fear that some mines will close, leading to loss of jobs and relegating people to the informal sector.
Fiscal indiscipline continues unabated with the government’s spending appetite breaking economic records. Government has been in a budget deficit since 2012.
For example, in 2015 the government deficit was at US$1,2 billion, with revenues of US$3,6 billion and expenditure of US$4,8 billion.
Statistics show that currently government is spending close to 97,8 percent of Gross Domestic Product!
The gap between income and expenditure continues to widen with revenues estimated at 16 percent below budget.
The Zimbabwe Revenue Authority is well behind in achieving its revenue targets.
Government has become so desperate to a point that it is struggling to pay its own workers with the staggered pay dates for civil servants hardly being adhered to.
With such a constrained fiscal capacity and indiscipline, there is hardly any money left for infrastructure development and social services, leaving people to fend for themselves with little or no government support for the less privileged.
Government has simply lost touch with the realities on the ground and it continues to recklessly spend despite being evidently clueless on how to address the mounting economic challenges in the country.
With an estimated 95 percent unemployment rate, job losses have forced people to retreat into the informal sector.
A mushrooming informal sector is bad news for a fragile economy.
It is difficult to monitor, control and regulate this sector.
The informal sector, while it is a cradle for innovation and entrepreneurship, under the current conditions prevailing in the country, is creating chaos and lawlessness as local authorities battle to bring sanity and order in the urban areas.
Certain urban areas have become impassable as traders have set their merchandise “floor tables” right in front of formal retail businesses.
The downside of the informal sector in Zimbabwe is that it is not properly regulated and there are no systems in place that ensure consumer protection, compliance with by laws and regulations. The informal traders do not contribute much to government revenue in the form of taxes.
Additionally, informal traders do not use the banking system, as they use cash as the medium for exchange.
This consequently makes it difficult for the monetary authorities to manage the currency circulating in this market.
The informal sector also puts pressure on the demand for hard currency from the banks, contributing to the cash shortages we are currently experiencing in the country.
Informalising the economy as we are witnessing also breeds corruption.
Corruption breeds and habitats well where there is chaos.
Experts say that corruption has become so endemic in the country to an extent that it is now viewed as an acceptable way of life at all levels of society.
No country’s development therefore can be driven by the informal sector.
Zimbabwe cannot move forward with the chaos we are currently witnessing, it’s simply not sustainable.
At independence the Zimbabwean economy was the second biggest in the sub-Sahara region after South Africa. Something went terribly wrong in the way we managed the economy after independence.
Independence is not about just gaining political freedom and self-rule.
Independence is about consolidating political gains and solidifying them through economic transformation and development.
It’s about creating a sustainable and inclusive economy that benefits all citizens instead of the political elite.
Independence and sovereignty mean nothing if we have a shrinking economy, massive corruption, huge unemployment, broken infrastructure, and falling living standards of the ordinary people.
It’s been “all bark and no bite”!
The politicians, whose focus is evidently on 2018 elections, are simply clueless on how to resolve our economic challenges.
They are still stuck in sloganeering mode, forgetting that independence should instead translate to creating an inclusive economy that offers opportunities and jobs to all our people.
We need a government that thinks “outside the box”, a government that’s transforms Zimbabwe into a vibrant emerging economy.
We need radical macro-economic policy reforms and innovative ideas to build an economy that is inclusive and broad-based and benefits the majority of the people through employment creation and poverty alleviation.
We now need a new thinking (paradigm shift) and introduction of policies that attract investment if Zimbabwe is to move forward and achieve its goals for economic transformation and development.
Zimbabweans need to have a common vision anchored on self-belief, unity of purpose and the desire to collectively work together in-order to migrate to a new era of economic transformation and growth.
Zimbabweans need to realise that a “get rich quick” attitude and “self-aggrandisement” is not going to move the country forward.
Zimbabwe can only be developed through sacrifice, hard work, dedication and commitment from its people at all levels.
Zimbabweans should not look aside when things are going wrong in the economy.
We need to be agile and demand performance and accountability from government.
Government needs to rise to the occasion and assume its responsibilities in creating an inclusive and broad-based economy that takes everyone on board, rich and poor; an economy that is robust, designed to create employment and opportunities, promote entrepreneurship, develop infrastructure, alleviate poverty and raise the living standards of all our people.
Corrupt, mediocre, lazy, incompetent leaders in government and public sector should simply be fired or prosecuted as they have no place in Zimbabwe.
We need a national leadership that is dedicated, selfless, disciplined, innovative and results oriented.
We need servant leadership that is willing to give effect to the will of the people, serve the people and transform the nation into prosperity.
President of Rwanda, Paul Kagame, once remarked that for African countries to transform themselves into a Singapore of sort, they require leadership with a right vision and a leadership that has the welfare of its people at heart as opposed to a leadership that only focuses on enriching itself.
“Africans should look at Singapore as a successful country in which the quality of daily life of the people is more important than the amount of shillings and pennies in one’s pocket,” (Paul Kigame: African Business, August/September, 2014).
Allen Choruma can be contacted on e mail: firstname.lastname@example.org
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