Mnangagwa admits government failure to fix Zimbabwe's economy

Vice–President Emmerson Mnangagwa on Wednesday admitted that the cash-strapped government is now finding it difficult to fix the frail economy, the Financial Gazette can report.

He made the remarks at the ongoing Zimbabwe National Chamber of Commerce (ZNCC) congress in the resort town of Victoria Falls where he was guest of honour.

"There is a stalemate in the economy," said Mnangagwa. "We are gathered here to map a way forward. Where there is a stalemate in the economy like in our case it's not easy, it's not easy to move away from it. We don't want our economy to be in a stalemate like now. This means, it's now difficult to attain our 2016 budget."

Mnangagwa's statement comes as government is struggling to pay salaries for some 350 000 civil servants on its payroll.

The public sector wage bill currently accounts for over 80 percent of government expenditure, meaning that a paltry amount remains for crucial infrastructure development projects, critical in turning around the economy.

Mnangagwa added: "Our economy has not been performing optimally for several reasons, chief among them being the effect of illegal economic sanctions imposed by some countries in the west and their allies.

"Because of this, key parastatals, state–owned banks and certain key individuals were targeted  by these  illegal sanctions, resulting  in our inability to access  balance of  payment support, international funding. The net effect of this was that the country missed out on certain global opportunities and could not grow as fast as she should have.

"The country is branded as dangerous for visitors and risky for foreign direct investment. (This means) our 2016 National Budget target will be difficult to attain."

Zimbabwe is now highly informalised with statistics showing that at least 94,5 percent of Zimbabweans are informally employed, resulting in government's revenue base dwindling.

An estimated US$7 billion is said to be circulating in the informal sector, which is nearly two-thirds of Zimbabwe's gross domestic product.

Finance Minister Patrick Chinamasa recently admitted that the formal sector was now dead, resulting in revenue challenges for Treasury in the face of investor fatigue, lack of balance of payments support and poor inflows from aid agencies.

Indications are that further job losses are inevitable as employers are likely to react in the coming months by either slashing salaries or offloading workers onto the streets.

Hundreds of workers are being thrown out of their jobs as more and more companies collapse or downsize.

The situation has forced many unemployed people to resort to vending to eke out an honest living.

Most banks are now restricting depositors to a single withdrawal per week, allowing a maximum withdrawal of US$500.

Faced with growing pressure to rescue the ailing economy, government plans to introduce bond notes in October, whose value will be at par with the greenback, ostensibly to incentivise exporters.

The bond notes will be equivalent to US$200 million. The facility will be backed by the African Export-Import Bank.

The move has since been backed by President Robert Mugabe, although many believe government wants to bring back the Zimbabwe dollar through the back door.