By Shame Makoshori
An unrelenting economic crisis that has gripped the nation forced ZANU-PF to call for an emergency Politburo meeting last week, and assess among other pressing matters, progress on the much touted Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset).
This sense of urgency has invoked fears that the country’s fractious, but usually defiant politicians were beginning to be unsettled by an imminent economic implosion.
The meeting came after the Reserve Bank of Zimbabwe and the World Bank (WB) had recently warned of a gloomy economic outlook and urged authorities to act on low levels of domestic savings, the high cost of doing business, high cost of capital and lack of structural transformation in the manufacturing sector. These have reversed modest growth rates registered between 2009 and 2011.
“The 2009-2011 recovery was powered by favourable winds in the global economy, it was also imbalanced,” said WB’s resident economist, Nadia Piffaretti.
“Any imbalance sooner or later will readjust. In 2012 imbalances started to bite, while headwinds from the global economy started to blow. At the same time, the country has entered a crisis in domestic confidence,” she said.
Some weeks ago, MMC Capital downgraded growth targets to 1,5 percent this year from the 6,1 percent predicted by the Ministry of Finance, citing a painful liquidity crisis, faltering industrial output, precarious State revenues and ruthless carnage on jobs.
A widening trade deficit, which deteriorated to US$3,6 billion in October last year, from US$3 billion in August of the same year and a slide in foreign direct investment have also become an albatross around government’s neck that has defused the impact of the ambitious blueprint, Zim-Asset, which was hastily put together in September.
With the local economy only generating US$3,6 billion in annual revenues, Zim-Asset was anchored on the mobilisation of US$27 billion, hoped to come mostly from the fastest growing economies of Brazil, Russia, China, India and South Africa (BRICS). Evidently, the economic blueprint was adopted without taking due consideration of the realities of running an economy in a US dollar regime.
With the BRICS having no history of lending, the best that government can salvage from the group would be buyer’s credit. But under these arrangements, the cash remains in the country offering the credit, making it difficult to immediately channel it to address the prevailing liquidity crisis.
A recent politburo meeting exposed how ZANU-PF, which returned to power last year, with the zeal to turnaround the economy, has run out of ideas to tackle a fast deteriorating crisis.
Although the ruling party has downplayed the crisis and insist that all is well, they are at pains to justify progress under the blueprint.
The ruling party has dusted old projects, such as cement plants earmarked for Mashonaland Central and Harare, which commenced well before its economic blueprint, and announced and claimed that these projects had come to fruition because of Zim-Asset. They roped in the South View housing project, which is being undertaken by Fidelity Life, and placed a Zim-Asset tag on it.
“We had comrade Patrick Chinamasa updating us on the Zim-Asset implementation,” said ZANU-PF spokesman, Rugare Gumbo.
“His views are that things seem to be moving well. New ZimSteel has come back and they are now in the process of resuscitating the company…there is a cement factory which is being done here in Harare as well as in Rushinga…it demonstrates that Zim-Asset is working and there is progress taking place,” he claimed.
Gumbo’s utterances exposed how ZANU-PF is trying to gloss over prevailing hardships, and how it is mistaking private investments for the success of their ambitious blueprint.
At the core of the ongoing crisis remains a lack of funding to resuscitate infrastructure, fund industries, provide drugs in hospitals and purchase food for those facing starvation. A solid blueprint should have the capacity to do all these, and with more than six months under its belt, the programme should at least have breathed some convincing life into the ailing economy.
“It is just happy talk,” said Takunda Mugaga, head of research at Econometer Global Capital. “They are diverting attention from the collapsing economy.
“ZIMASCO, Bata and Zimglass need far less money than New ZimSteel. To resuscitate New ZimSteel we need the entire US$4 billion National Budget. We already have Larfage Cement, if we raise its capacity to just 80 percent, it will meet all our cement requirements. They should focus on closed companies,” he said.
Working against ZANU-PF is the lack of consistency in policy implementation, as well as harsh empowerment policies that have repelled investment. The WB has advised that Zimbabwe works with the international community to deal with the crisis.
“(Zimbabwe should) complete successfully the economic programme monitored by the International Monetary Fund staff (SMP-Staff Monitored Programme), which includes a prudent fiscal stance, strengthening financial supervision, and progress on capturing of revenues from diamonds (and) adopt a short-term economic stability and job creation programme, including predictable policies to increase domestic levels of confidence,” said Piffaretti.
Against all that background, economic deliverables promised by ZANU-PF at election time, have all but failed. Unveiled to thousands of flag waving supporters before the July 31, 2013 elections, the ZANU-PF election manifesto promised drastic measures to arrest suffering and kick-start economic recovery.
Within the next five years, at least US$7,3 billion was expected to be unlocked through the indigenisation of 1 138 foreign-owned firms, the manifesto promised. ZANU-PF had promised to create US$1,8 billion through reviving ailing State firms and local authorities, as well as exploitation of minerals.
Agribank and the Infrastructure Development Bank of Zimbabwe were expected to be recapitalised through a US$5 billion injection.
These measures were projected to create over 2,2 million jobs in five years, turning around the fortunes of a country whose industries are off loading 300 jobs per week. The Zimbabwe Congress of Trade Unions says 9 617 workers lost jobs in the first quarter of 2014.
About 75 companies collapsed under the weight of the crisis during the same period. The ZANU-PF manifesto forecasted economic growth to average 7,7 percent per annum, but after a difficult start to 2014, economists are warning that this was too ambitious.
Revenue collection has declined sharply and deflation continues to affect consumer spending. Over one million children previously under the Basic Education Assistance Module face an uncertain future after government indicated it would be discontinuing the programme.
The “new economy” promised by Finance Minister, Chinamasa through renewed focus on small scale enterprises is yet to take off. There is no capital to fund small businesses. Government’s penchant to impose heavy taxes on struggling firms has also resulted in businesses preferring to go underground. It has been a tragic start to the year.
“We are in for a bottoming out,” said Mugaga.
“There is no room for economic recovery. We need a buy in from investors; ZANU-PF’s targets are quite ambitious. It is difficult to talk of monetising idle assets because there is no funding. ZANU-PF has no capacity at the moment regardless of how brilliant the blueprint may be.”
The turbulence has made it imperative for government to review its policies, especially the indigenisation policy, the tax regime, high royalties for mines and general inconsistencies.
“Unless there is a change of template, then the projections will remain an unrealistic dream,” says Godfrey Kanyenze, director of the Labour and Economic Development Research Institute of Zimbabwe. “They are still fighting the European Union and everyone else instead of engaging.” Financial Gazette