Tendai Biti on the State of the Economy
By Tendai Biti
The Zimbabwean economy is grinding to a halt with clear evidence that the economy is fast tracking into deep seated economic recession. It is also evident that Finance Minister Patrick Chinamasa and any of the acolytes in ZANU PF have neither the desire nor the ability of turning around this economy.
In short, they are as carefree and indifferent as they are clueless.
The economy requires structural reforms if the country is to move forward. Furthermore the economy needs to carry out structural reforms in order to convince the international community so that its debt relief efforts and can be supported.
Sadly neither ZANU PF nor Chinamasa has the will or the capacity to carry out such reforms.
Reengagement at this particular time with ZANU PF thugs engaged in factional fights for power is an exercise in futility as there is no appetite for genuine reforms within ZANU PF
There is massive shrinkage of the economy since 2013 with the growth rate being minus 1, 8% in 2015 and that of 2016 being minus 3.5%.
The outlook period of 2016/2018 will be in the red. Zimbabwe thus finds its self in another unwelcome circle of economic recession hard on the heels of the historic economic meltdown witnessed between 1997 and 2008 a period when Zimbabwe lost 60% of its economy.
This time around Zimbabwe has exhausted policy options unlike in 2008 when the option to demonize the Zimbabwean dollar was still available currently it is not there.
The massive collapse of output is reflected by the deindustrialization which the economy has faced. Since 2013, 100 000 jobs have been lost and 60% of companies operating in 2010 have shut down.
With the fall in production there has been reliance on imports with Zimbabwe now becoming a supermarket stocked with foreign products especially from South Africa which is using the weaker Rand as compared to the US dollar being used in Zimbabwe.
Zimbabwe’s trade deficit stands at US$3.3 billion which is 23.5% of the GDP, which is symptomatic of an economy in recession.
With the El Nino effect and the slump in the economy, the outlook period for 2016/2018 will be depressed while rendering the country food insecure for the foreseeable future.
Land invasions are continuing, the Indigenization Act has not been repealed and continues to scare investors and the civil service is still infested with thousands of ghost workers. All these factors work towards weakening prospects for economic transformation which Zimbabwe needs.
In this regard, the government is dithering whilst the country is burning. This is a government that is at war with its people.
There is also a biting liquidity crunch which has been compounded by the government raiding RTGS balances at the Reserve Bank of Zimbabwe, which has resulted in the lack of cash at the banks forcing them to dip into their Nostro accounts to provide cash for their clients instead of reserving it to pay for imports.
The government is raiding these RTGS balances so as to raise cash for supporting their bloated expenditures such as endless foreign trips for the President and hotel bills for Phelekezela Mphoko.
The result of this has been cash shortages, long bank queues and withdrawal limits for clients which has greatly inconvenienced the banking public and further dampened confidence in the banking sector.
This financial situation is a perfect recipe for economic collapse as it makes doing business almost impossible without cash yet clients have their monies locked up in their accounts. We are heading towards a Greece like crisis and soon we will be mired in a crisis worse than the collapse of 2008.
The food security situation in the country is dire and the clueless ZANU PF regime declared a state of disaster which requires US$1.5 billion but has subsequently failed to provide the necessary resources to avert the catastrophe which has now struck most rural areas.
To date over 500 000 cattle have died countrywide due to the drought and vast tracks of cultivated land have become a total write off. Currently, 3.5 million people are in need of urgent food aid yet the government has just coordinated less than US$100 million worth of grain, the bulk of which is being partisanly distributed.
This is against the fact that Mugabe has so far spent almost US$20 million on foreign travels including trips to obscure events such as the one in India.
According to the latest report of the Famine Early Systems Network (Fewsnet), in addition to food shortages accompanied by increased acute malnutrition Zimbabwe is facing various other drought related challenges.
These challenges include availability of water for domestic, power generation and agricultural production, critical shortage of grazing pastures and lower than typical means of livelihood for the bulk of the rural population which is subsisting on less than US$1 a day.
The sum total of this is that poverty will increase and the economy will invariable shrink with disastrous consequences in the short to medium term.
Shrinking revenue base
In 2015 the ZIMRA collected a total of US$3.5 billion against a target of US$3.7 billion representing a short fall of 7%, which is a US$250 million shortfall.
However, in real terms the revenue deficit for 2015 is around US$800 million and includes the sum of US$253 million in the form of the supplementary budget for 2015 announced by Chinamasa in the 2016 budget. The remaining amount comes from cost overruns associated with financing further employment cost including the bonus, government vehicles, the ZANU PF conference and many other dubious transactions.
Further to that the government has started the crime of printing money through the issuance of treasury bills that are now clogging the market.
According to South African based NKC African Economics, central bank holdings of government debt increased from US$843 million in November 2014 to US$1.4 billion by November 2015 representing 1.4% increase.
This government has been criminally issuing toxic treasury bills with total domestic debt now standing at US$6 billion. The continued reliance on toxic treasury bills is a major factor contributing to the current liquidity crisis.
The crisis that Zimbabwe is going through has been further worsened by threats made by Robert Mugabe that he wants to drive out the remaining white farmers from their farms. In March, 12 farms were gazetted in Manicaland province, Mutasa district. This will once again disrupt production which is way below what is expected.
It is therefore important that closure be put on the land reform programme and that land be audited as provided for in the constitution and also give security of tenure to those occupying land so that they can be more productive by enabling them to acquire funding.
Recently cabinet endorsed the decision by Indigenization Minister, Patrick Zhuwao, which came as a slap on the face of the IMF reengagement exercise which recently approved Zimbabwe’s efforts towards normalizing its relations with various international creditors.
The IMF judged that Zimbabwe’s Staff Monitored Programme, which is essentially a reform programme, has been a success yet it is apparent that ZANU PF was indicating right yet turning left.
The PDP in recent months has warned that any effort towards reengaging with Zimbabwe must be based on clear deliverables on the key areas of reform.
We further asserted that one such key area of reform was the repealing of the Indigenization and Empowerment Act in its totality as it was just a haven to promote and sustain ZANU PF’s patronage and corruption while chasing away crucial investments into the economy.
The government payroll is still burdened by over 250 000 ghost workers who were recruited ahead of the contested 2013 general election.
The government is failing to maintain a primary balance of accounts and is spending more than it’s earning using toxic treasury bills to sustain its avid appetite to spend. Recently state resources to the tune of US$500 000 were poured into Robert Mugabe’s US$800 000 birthday bash.
In all this the government is misdirecting its efforts towards removing genuine and hardworking workers in the education and health sectors. ZANU PF must remove ghost workers in the form of so called youth officers, who are in fact militias deployed to harass citizens.
The discovery of diamonds in Chiadzwa and their subsequent exploitation was seen as capable of turning around our national fortunes.
However, the sad reality is that 7 years after the commencement of mining operations, Zimbabwe has only received a paltry US$600 million worth of revenue from diamonds and has lost a whopping US$15 billion, according to the man who must give us answers.
The admission by Mugabe is an indictment for him and as the PDP we are very clear that he is no longer fit to govern. If so much money can be looted by companies whom he gave mining licenses and fails to take action it shows that he was a beneficiary of the looting.
In our political transition document ARREST, we argue that Mugabe and his cronies are running an extractive political institution driven by the twin dynamics of power and primitive accumulation. In undertaking this, they have enlisted the services of international bandits and mercenaries mainly from the Far East and China.
This is the very reason why Mugabe did nothing when we raised the issue of looting of diamonds as way back as 2009. In fact judging by the figures which were being obtained by the Ministry of Finance then, US$15 billion could actually be an underestimate of the loot which occurred in Chiadzwa.
Various mining operations are veiled in secrecy which is a perfect haven for looting. To this day no one knows what other minerals have been looted in areas such as platinum mining in Ngezi and Zvishavane.
If investigations can be done we will certainly get shocked at the level to which our minerals have been looted by private companies with the full blessings of Mugabe himself.
To curb the obvious looting of resources especially diamonds the government must expeditiously enact the Diamond act which must govern the operations in the entire diamond extraction, supply and processing chain.
Human rights and social protection
The ZimVAC report of 2015 shows shocking levels of poverty which continue to afflict our people and in addition they are appalling social indicators with regards to maternity mortality rate and incidences of malnutrition in young children across the country.
It is a crime that 79% of the people are living on 0.35c per day, there must be money reserved for the poor. This can be in form of social welfare grants so that poor families can purchase basic items such as food or be in form of providing free and subsidized social services such as health and water to poor communities.
Furthermore, the human rights situation in the country is still pathetic hence Zimbabwe cannot claim to be on the path of reforms. Itai Dzamara, a pro-democracy activist, is still missing for more than one year now since his abduction. This is an indictment on the ZANU PF regime.
In light of Zimbabwe’s engagement with the IMF, Zimbabwe must walk the talk and prove that it is a worth partner to engage in reforms and in this regard they are 6 areas of reforms, which must be undertaken after the establishment of the National Transitional Authority (NTA) which are as follows:
Peace and stability must be ensured through the diffusion of tension which ZANU PF is fermenting in the country. Zimbabwe is already going through the chaos scenario which will result to disastrous consequences for the nation such as a civil war or coup. This must be stopped by ensuring peace and stability by the NTA.
Restoration of the social contract so as to arrest the social decomposition and decay which ZANU PF induced instability, violence and poverty has fueled in communities.
Stabilizing the economy through the implementation of an emergency economic recovery programme that will inject urgent funds into the economy.
Land audit and security of tenure so as to make the land bankable and dismantle the web of patronage created around by the uncertainty of tenure as currently prevails.
Macro-economic stability i.e. the government must live within its means so that total expenditure on recurrent costs is kept to at least 30% of GDP so as to create working capital for economic growth. There is also need of parastatal reforms as the over 100 parastatals in the country are instruments of patronage and looting which ZANU PF has been using over the last 36 years.
Electoral reforms which must create conditions for free and fair elections (COFFE) as set out in the PDP’s political roadmap ARREST.
These reforms will show that Zimbabwe is willing to reform and thus in need of support and unfortunately ZANU PF is incapable and unwilling to implement even the barest minimum of these.
Therefore, as PDP, we are calling for the establishment of the National Transitional Authority (NTA) which will attend to among other issues, maintaining peace and stability, restoring the social contract and reviving the economy.
Another Zimbabwe is Possible!!!
Tendai Biti is a former finance minister and leader of the opposition PDP