By Rawlings Magede
President Emmerson
Mnangagwa administration faces a huge dilemma going forwad. Distortions within
the USD-RTGs rate have led to a spike in prices of basic commodities. The cost
of living has seriously deteriorated in the first half of the year which has
seen sharp increases in the price of fuel. Prices of basic goods have soared
and the cost of living is not even comparable to the cost of labour. This rise
has resultantly diminished disposable incomes for workers and the general
populace who have already been dealt a heavy blow of unemployment. This has
seen a serious decline in the standard of living and tremendously high levels
of poverty.
The much touted rhetoric
of a middle class economy that is anchored on National Development Strategy
(NDS) 1 remains a farce.Overal funding for this ambitious strategy requires
over US40 billion which the government does not have. Illicit financial flows,
leakages and corruption have eroded government revenue that usually comes
through tax. Underground economies particularly within the extractive industry
which has gained notoriety for tax evasions and
smuggling of precious minerals such as gold continue to thrive. In 2021,
corruption watchdog, Transparency International noted
that Zimbabwe loses about 1 billion US dollars in revenue every year mostly
because of political elites who engage in corruption. The report also indicated
that the resulting institutionalization and systematization of corruption in
Zimbabwean political and economic spheres has been extensive.
Most analysis of endemic
corruption in Zimbabwe tends to focus on figures of financial resources lost
through corruption but fail to give accurate statistics of the number of people
who have been plunged into poverty through corruption. In understanding the dilemma
facing the President Mnangagwa, we must do a run down from the 2017 coup and
highlight what went wrong.
A
neo-liberal agenda that failed to live to up to its billing
When President Mnangagwa
took oath of office after the infamous 2017 military coup, his message was
punctuated with hope and optimism. His message “Zimbabwe is open for business”
soon became his clarion call to rally investors and international capital. So
charmed were the Breton Woods institutions that in April 2019, a team from the
International Monetary Fund (IMF) announced an agreement with the Zimbabwean
government on macroeconomic policies and structural reforms that underpinned a
Staff Monitored program (SMP).This monitoring programme would see the
government and the IMF agreeing on policies to address the macroeconomic
imbalances and tackle policy inconsistencies within government. This was then
followed by removal of subsidies on fuel and other import subsidies. Even when
citizens took to the citizens in January 2019 to register displeasure at the
increase in the price of fuel, the president never took heed.
The IMF in 2020 also
followed suit in registering displeasure in the administration of its SMP by
government. It announced that the SMP program was “off track”. “Uneven
implementation of reforms, notably delays and mis-steps in implementation and
monetary reforms, have failed to restore confidence in the new currency,” the
IMF said in a statement. The implementation of the SMP was beset by problems
even before it even kicked off. While the government was keen to remove
subsidies, over tax its citizens and partially privatize state institutions, it
failed to demonstrate the willingness to arrest government’s insatiable
appetite to spend. Throughout the SMP, spending especially by the Office of the
President and Cabinet remained secretive. Added to this, in September 2019, the
IMF even warned government that the state payouts to a partner of Trafigura
group LTD undermined the country’s newly introduced currency. Payments to
Sakunda Holdings in July 2019 owned by President Mnangagwa, Kuda Tagwirei under
the command agriculture scheme were again secretive with most economists
arguing that the payment made by the central bank were made after printing of
more money. Such a disbursement led to an 80% surge in the amount of money in
circulation compared with an IMF set target of between 8-10%.
Inconsistent
policies
NDS1 presupposes that the
US$40 billion needed for this ambitious programme will be sourced through traditional
sources of finance, private sector and multilateral and bilateral creditors.
One of the challenges of such an assumption is that no sane institution is
willing to lend the government money because it is a bad debtor that still owes
external creditors. In 2022, IMF resident representative to Zimbabwe, Patrick
Imam remarked that public debt is an issue that has contributed significantly
to the economic crisis facing the country. Three key drivers of Zimbabwe’s debt
crisis are penalties on overdue external debt, budget deficit and the continued
depreciation of the local currency. In June 2019 external debt stood at US$8.1
billion .Out of this chunk ,about US$5 billion is accumulated arrears, interest
arrears and penalties, which constitute about 72.8% of external debt. Given
this analysis, it means that the principal debt is around US$2.2 billion. In
the face of distortions within the exchange rate, it becomes a mammoth task to
service the external debt. Since government is a bad debtor, which institution
(private capital included) is willing to lend money to bankroll NDS1?
One of the greatest
undoing of President Mnangagwa’s administration has been policy inconsistencies.
In May 2022 via a late-night broadcast, President Mnangagwa announced that
banks would not be allowed to lend money to the government and the public sector.
This announcement shook the market as a lot of companies suspended credit sales.
Immediately, Tongaat Hulet, Zimbabwe’s largest sugar manufacturer announced
that it was no longer making advance payments to farmers. In all these knee
jerk reactions, the President is not firefighting alone. Finance Minister
Mthuli Ncube and Reserve Bank Governor, John Mangudya have also been complicit
in the collapse of the economy. Basic economics dictates that you cannot direct
banks to stop lending when the rate between the US dollar and RTGs is growing.
One would expect the
administration to change tact and approach in dealing with the ailing economy.
The high levels of corruption, illicit financial flows, smuggling and leakages
have continued unabated. Those close to the ruling establishment remain
untouchable in their arcane dealings. Those responsible for managing government’s
public relations and image have become a big joke as the signs of failure are glaring.
Social services such as education and health care have become a preserve for a
few in a country with an NDS1 that
highlight that government is supposed to have invested at least US$723 966 864
million into healthcare and wellbeing by 2022!What a big joke!
Against such a mess, the
President recently encouraged young people to “make money” and take charge of
their destinies. Intellectual and professional pursuit of honest work have been
shunned in favour of “hustling” which in practice for many means
self-enrichment through being “runner
boys or fronts” for the ruling elites. The gospel of becoming a real middle
income country or agenda 2030 that is being parroted everyday is the biggest
joke of the century.
In the final analysis, the
Second Republic has failed to inspire confidence in citizens. Those assigned to
do public relations and re-inspire citizens have dismally failed and continue
to embarrass themselves on various platforms. As the country prepares for the
2023 plebiscite, the days ahead will have more eyes.
Homeland or Death! Tinofa
Tichienda!
Rawlings
Magede is a Development Practitioner who writes here in his personal capacity.
Feedback on rawlingsmagede2@gmail.com
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Good read
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