By Hopewell Chin’ono
I have often argued and explained here that our crisis is not economic but political manifesting itself through Economics.
The Economic team at the Ministry of Finance has done a lot of things, but they won’t yield much because we need to fix the political side of our crisis first.
Our government has tried to cheat the political process by working on the economic issues, but it doesn’t work and it won’t fix the economic malaise that in essence is political.
We are not getting both substantial local and Foreign Direct Investment (FDI) because we have failed to create a political environment conducive for doing business without political threats to capital.
Capital is a renowned coward and it is afraid of political risks that will fail to guarantee its existence and multiplication of its efforts, which are the central and primary reason for business.
Today the Finance Minister Mthuli Ncube and his counterpart and Permanent Secretary in the Ministry of Finance George Guvamatanga seem like they haven’t done much, and yet they have invested a lot of work in pursuit of economic results but to no avail.
Consequently our lack of economic education which borders on economic illiteracy has seen many blaming them, instead of President Emmerson Mnangagwa’s lack of political resolve to tackle the main ingredient of the crisis, bad politics.
It is important to understand what the economic team have done that hasn’t been acknowledged widely due to the lack of political reform and the lack of communication skills in their own Finance ministry.
Since January of this year, Mthuli Ncube and George Guvamatanga have done the following key things:
1. Generally they have forged ahead with the reform agenda, this is against pressures from other interested stakeholders to control prices and abandon economic reforms altogether.
2. They have signed an agreement with the International Monetary Fund (IMF) to start the Staff Monitored Program (SMP).
The involvement of the IMF, albeit limited to technical advisory functions only, provides credibility to the reform process because of the IMF’s stature.
The key question is whether it will be done to the letter of the agreement, or as an act of political illusion in fulfillment to hoodwink the Western countries that hold the keys to the debt-restructuring program that the SMP seeks to fulfill.
3. They have created a foreign exchange allocation framework, this has been done to target production and supply of basics (focused on the 14 targeted items in 2017 and 2018).
This has substantially helped to keep prices of targeted basics in check and avoiding total price madness that we have started to see with the parallel exchange rate spiraling out of control.
4. They also introduced a formal local currency in February 2019 to enable appropriate accounting for local dollars separately from the US Dollar currency.
This has addressed pricing and other balance sheet related distortions in the economy.
5. They established an interbank market for foreign exchange in February 2019.
The price discovery mechanism still needs to be improved but yesterday’s announcement by the central bank acknowledges that reality and pushes it towards the right direction if not tempered with.
Unfortunately politics got in the way again after the initial introduction when he interbank exchange rate was controlled and nothing worked as opposed to what we were told would happen.
This is because banks were not allowed to trade currencies freely, they got a fixed rate from the central bank each morning before they could trade.
The fixed interbank rate was ridiculously out of touch with the market realities so traders stayed away from buying and selling.
6. They introduced fiscal austerity to reduce budget deficits.
During the first quarter of 2019, government reported a surplus of $443 million against an initial target of +$78million.
But what was it used for and why does it matter when hospitals have no latex gloves and we are having constant load shedding and investors are not coming to work?
7. They have made sure that the money supply M3 has been controlled at around $10 billion since October 2018.
What is money supply M3, M2, M1 and M0?
M0 and M1, for example, are also called narrow money and include coins and notes that are in circulation and other money equivalents that can be converted easily to cash.
M2 includes M1 and in addition, short-term time deposits in banks and certain money market funds. M3 includes M2 in addition to long-term deposits.
The control measurements have allowed the parallel market rate to be less rapacious than it could have been.
The control of money supply and fiscal austerity has had a cursory positive impact on inflation in the outlook so far.
It could have been worse if government was allowed to spend willy-nilly
8. They have also de-regulated interest rates (i.e removal of the 12% cap), to ensure that the market determines the price for money as opposed to command economics where rates were declared.
9. They have come up with a compensation framework for former white farmers, it is still work in progress but a sign of intention to resolve the two decade dispute.
Some of the farmers will be allocated farmland with title deeds.
This they hope will help in investor confidence as the land issue is directly locked to property rights, the bedrock of capitalism.
10. They have doggedly invested in efforts to reduce the domestic debt stock.
At the end of March 2019, the domestic debt stood at $9.2 billion, down from $9.6 billion as of 31 December 2018.
This represents a $326 million decrease
in domestic debt, indicating a focus to pay off maturing debts and limited new issuances of treasury bills.
Treasury bills have been the notorious instruments of choice for the past six years, and they have resulted in government reckless overspending, most of the money can’t be accounted for due to rampant corruption.
11. They have also been negotiating to restructure Zimbabwe’s external debt of US$8.2 billion.
71% of this debt is in arrears and it dates back to the 1990s when Zimbabwe could still borrow to from the Bretton Woods Institutions.
The progress in negotiations has been painfully slow due to the lack of political reforms that are holding back on a deal with the lenders and their principals.
So after all this, why is it that our economy is getting worse and yet President Emmerson Mnangagwa’s Economic team has done so much?
It is very simple, it is because we needed to attend to the political reform agenda first, but the President and his team lack the appetite to do so except in empty rhetoric, promise after unfulfilled promise.
We needed to have immediately attended to the aligning of our laws to the six year old constitution, remove repressive legislation such as POSA and AIPPA and not replace them with equally bad and repressive legislation.
We need to clean up and professionalize parastatals that have been used as feeding troughs by the predatory political elites for decades.
We need to modernize, reform and bring plurality to our media landscape specifically the broadcasting sector, because it creates jobs in the arts industry.
This sector includes film, music, drama, theatre and current affairs.
Zimbabwe and Nigeria were the only countries in Sub Saharan Africa with television in 1960.
Today Nigeria has 113 television stations and their film sector alone dubbed Nollywoood brings over US$7 billion.
Zimbabwe has only one television station that is state owned and is used as an instrument of unadulterated crude propaganda.
We need to liberalize the fuel industry by breaking up the cartels in fuel Imports and also breaking the ethanol cartel, which is run by one company whose owner is very close to the President.
That action would half the fuel bill and make industry more productive as everything depends on fuel.
We need to respect the Rule of Law by not violating court orders and property rights as has happened in Kwekwe at Gaika Mine just next to the President’s farm.
This has been aided and abetted by powerful political elites very close to the President, including his State Security Minister Owen “Mudha” Ncube.
This reduces investor confidence in Zimbabwe as an investment destination because business doesn’t want to be where its processes are threatened with and where the law is constantly violated with reckless abandon.
Today because of bad politics, government is borrowing to cover up for perceived imminent social unrest through subsidies, instead of having used that money in subsidy form but towards the productive sector that creates jobs and enhances wages.
Citizens prefer long term viable solutions that allow them to look after themselves and their families instead of having bus fares paid for by the State, in what we all know will not last for long.
As Marley Dias said, innovation comes from, one, acknowledging yourself; two, studying and understanding the problem; and three, finding a lasting solution.
The country needs to attract more credible local and foreign investors who can set up factories that will produce more for export in order to get more foreign exchange.
This requires a lot more Foreign Direct Investment (FDI) which is currently at bay because of our political crisis.
The country also needs to embark on electoral reforms that will deliver uncontested election outcomes.
Disputed election results have resulted in brutal attacks on civilian citizens by the State and a gross abuse of human rights.
This has locked out any potential for thawing relations with the Western hemisphere led by Britain.
These countries can provide cheap loans for infrastructure development through the World Bank to help kick start the economic turn around.
Zimbabwe’s crisis is political and not economic, and as long as we continue thinking that economics will get us off the hook, we will remain in the deep end of the malaise!
The military and its political elites will continue carting off the country’s national resources with no restraint through thoroughly opaque deals which are not being subjected to the country’s parliament.
Future generations will continue to be laden with odious debt and today’s citizens will continue to be subjected to abject poverty and groaning from unbearable economic pain!
Ultimately this crisis could immediately go away if the political elites were patriotic and had the interests of the country at heart.
My advice to them would be for President Mnangagwa to abandon his current farcical dialogue with inconsequential political wannabes, and get Nelson Chamisa and his team on the table.
They should agree on a program of action that they can take to the international community for endorsement and guarantees by SADC, AU and the Bretton Woods financial institutions together with other relevant international partners.
They should benchmark reforms with time frames, and inevitably the country will get a chance to have a huge economic gasp followed by stabilized breathing and eventually normal breathing.
This will take political leaders who love not only their country, but their people too, and leaders who are able to show compassion and be moved by the suffering and economic misery, which is all over on display for the world to see.
Ultimately the choice is theirs, and theirs alone
Hopewell Chin’ono is an award winning Zimbabwean international Journalist and Documentary Filmmaker.
He is a Harvard University Nieman Fellow, CNN African Journalist of the year and CNN Television Journalism Fellow. He is also a Fellow at the University of Oxford’s Africa Leadership Institute.
Hopewell has a new documentary film looking at mental illness in Zimbabwe called State of Mind, which was launched to critical acclaim.
The late superstar Oliver Mtukudzi wrote the soundtrack for State of Mind.
It was recently nominated for a big award at the Festival International du Film Pan-Africain de Cannes in France, in the UK at the Heart of England International Film Festival and in Texas at The US African Film Festival (TAFF).
You can watch the State of Mind trailer below. You can contact Hopewell at [email protected] or twitter @daddyhope