Zimbabwe sliding towards depression: Tendai Biti

Zimbabwe is mired in a whirlwind of elite rapture playing out in the liberation movement known as Zanu PF. Without a doubt, this elite disjuncture has brought paralysis in government and held captive the country’s political economy.

The bottomline is that this country, thanks to the despotism of President Robert Mugabe, has become what George Ayittey describes as a “vampire state”. That is to say a government hijacked by a phalanx of political gangsters and cronies who use the state for patronage and neo-patrimonialism.

The most worrying thing about all vampire states is that inevitably, they degenerate into failed states. The term is used to describe a status quo where the centre is not holding due to the absence of an effective cohesive government and the state being incapable of fulfilling all the modern imperators of a modern state.

For the past 34 years, Zanu PF has overseen the transformation, in this case the transformigaration, of this country into one captured by under-development, inequality, corruption and structural failure.

The challenge of the day is a simple one: how does one alter the current downward developmentary trajectory? How does one reverse the structural regression arresting this economy?

In order to do so, it is critical to unpack and fully understand the nature of the Zimbabwean crisis. This unfortunately is the bane of the day.

There is a complete misdiagnosis of the crisis and as a result, symptoms are addressed while the essence of the crisis remains untouched.

The truth of the matter is that we face a complex multifaceted local, regional and international crisis that requires proper unpacking in order to come up with a hypothesis, synthesis and antithesis.

What cannot be disputed, however, is that at the epicentre of this complex crisis is a crisis of leadership, in this case its absence thereof. And on this goal Mugabe must plead guilty to this charge without any mitigation.

However, despite the existence of odious and toxic politics in the veins of the nation state, it is urgent and imperative that solutions be found to immediately address the massive economic regression that the country is facing.

Developments since the collapse of the Government of National Unity (GNU) point to one thing and one thing alone: Zimbabwe is in the middle of an economic recession that is U-shaped, and that trough will last for at least 15 years unless there are major interventions.

The evidence of this recession, which will no doubt deteriorate into a depression, is seen in the persistent deflation, the huge current account, falling government revenues, dwindling capacity utilisation, absence of capital and massive unemployment.

Annual inflation is currently -0,001%.

We are back to what, Paul Krugman would term the return of depression economics.

The challenge we face is that in the history of economics such situations turn to be very cyclical and are prone to long periods of recession interrupted by temporal periods of growth.

The last time around, we witnessed an economic depression from 1997 all the way to the crisis years of 2008. A period of 11 years which saw the economy losing 60% of its value.

This time around, all indices point to a much longer trough.
However, what is indeed shocking is that the current regime does not understand the nature of the crisis it faces and for that reason has absolutely no solution to it.

In normal recessionary conditions, it is now standard that pro-fiscal economic policies are implemented that are geared and targeted at capital expenditure with the aim of generating aggregate demand.

Thus cuts in interest rates are automatic. Protectionist gross capital formation projects are critical so too loosening up controls is important.

In a situation where the country needs a huge capital account in the form of overseas inflow such as foreign direct investment (FDI) and overseas development assistance, this government continues to pursue anti-integration policies. The epicentre of this is a rapid cataclysmic, anti-West rhetoric which has no form, logic or substance.

The Indigenisation and Economic Empowerment Act is doing a great deal to keep investors at bay and is saving absolutely no purpose other than to obliterate the remnants of a tired economy. So bad is the situation that in the first half of the year, the country only managed to attract US$67 million in FDI. Not even the Chinese or Russians are making any significant investments in the economy other than shady invitations to treat.

At the same time, there is a massive crisis in the financial sector where banks are rocked by under-capitalisation, corporate governance issues and the absence of a lender-of-last-resort. Systemic bank risk is prevalent, with the majority of the locally-owned banks struggling.

The government’s economic blueprint, ZimAsset, is easily the most technically weak and most dishonest policy document since independence.

Through ZimAsset, Zanu PF is quickly learning that countries are not run through populist slogans, acronyms and radio adverts.

The government needs to deal with the following structural issues:
The revival of production and emphasis on supply-side economics;
Macro-economics stability;
Financial sector stability;
Addressing the sovereign debt question;
Dealing with re-integration in the community of nations;
Repeal of the Indigenisation Act;
Attending to the infrastructure deficit;
Attending to an overvalued exchange rate;
Tackling the question of security of tenure and secure property rights;
Reform of state enterprises; and
Service delivery on water, electricity, health and education.
On the contrary, the government is doing exactly the opposite. It has increased taxes, duties and protectionist policies.

The sad diagnosis is that some national consensus must be fashioned out, which must at least liberate the economy from the hands of the class of 2013 who are as impotent as they are incompetent. No wonder why the likes of shadowy Herald columnist Nathaniel Manheru, who reflects his boss’ thinking, are beginning to think about the prospects or possibility of yet another GNU.

With great respect, a GNU in such circumstances will only make matters worse. What is required now is a decisive and bold leadership to address the national crisis. Regrettably, a coalition government, with all the temerity of compromise, cannot offer that. A national consensus is needed first.

The truth is that Zimbabwe has gone to the dogs. It is not acceptable that less than 7% of the population is in formal employment and that 85% of our people are living below the poverty datum line with 57% having incomes below the food datum line.

Given the rate of our population growth, it means that to achieve middle-income status by 2040, this economy needs real GDP growth rate above 10% per annum for the next 30 years.

The reality is that with the class of 2013 going it alone, this will never be achieved.

It is time to rethink the nation’s state. It is time to rethink Zimbabwe.

Clearly, a new narrative is required. A total brick to start with and a complete overhaul and renewal of the national ethos. This new narrative must be based on consensus vision and the capacity to take this country forward.

On the evidence of what we have seen in the goings-on in Zanu PF and big-tent opposition politics, the country has certainly a long way to refocus on the goals of equity, justice and national transformation.

Zimbabweans will differ on this contention, but they will never disagree that Mugabe has been a grandmaster of failure and has transformed this country into a wasteland and monument to failure.

Tendai Biti is the former Finance Minister in the 2009-2013 Zimbabwe coalition government