On Zimbabwe and the first post-Mugabe budget

Zimbabwe's Minister of Finance and Economic Development, Patrick Chinamasa, presented the first post-Mugabe era budget on 7 December 2017. The budget has received excellent reviews as has the two speeches by President Emmerson Mnangagwa - the first on being welcomed back in the country by his Party ZANU-PF and the other after taking his oath of office at the packed National Sports Stadium. Many Zimbabweans are on the edge - hopeful of the future and resolute that the worst is past. Even Minister Chinamasa sounded very upbeat in delivering the budget, forecasting real GDP growth of 4.5% in 2018 but unmistakably expectant of a higher rate.


Escaping the past
That Zimbabwe, a nation so-well capitalised in human capital has so trailed the world in nearly all metrics of progress is heart-breaking – and I say this as a Zimbabwean. Listening to Minister Chinamasa cite a Rural Livelihoods Report that found that 'about 50% of children in the districts surveyed were not attending school due to financial constraints' hurts. It has been a horrendous two decades. Zimbabweans and millions of sympathising global citizens are indeed inclined to be upbeat about the country's future. Such a heightened state of optimism is good at this early stage of the 'unfolding democracy' as it may drum-up the determination of those in the driving seats. Our optimism, or euphoria as some choose to call it, could endure if the administration 'walks the talk'.
Clinging on hope

In reviewing the budget, the key question optimists like myself ought to reflect on is whether at this early stage of the New Economic Order, we aren't being naive and underestimating realities that lie ahead. Suppose we allow ourselves to be our own very vicious critics and pause to ask: is the budget as transformative as it should be – does it express a clear and unmistakable break from the past? Answers could be as many as we are and what I've scribbled below could contribute to the debate on this question and its many answers.

The New Economic Order
The New Economic Order as explained in the budget seeks to meet 7 goals which are to

    correct fiscal imbalances and financial sector vulnerabilities,
    reform parastatals and local authorities,
    deal with corruption in the economy,
    improve the investment climate,
    re-engage the international community,
    stimulate production and exports and
    create jobs.

At its most basic, correcting fiscal imbalances is a budget control issue where what is budgeted is what must be spent. If accounting controls are in place and adhered to then this first goal is to a large extent a management accounting and reporting function. And, as the Minister said in his statement, the fundamental challenge in the economy is an unsustainable budget deficit financed by Treasury Bills and an overdraft from the Reserve Bank. Ministries have to stick to their tough tight budgets.

Reforming parastatals and local authorities and dealing with corruption are goals that seek to sanitise the economy. New rules and a revision of policies and procedures in government departments as well as restructuring some of the public entities will need to be undertaken. Given the distinctly firm tone in the President's speeches when he spoke on corruption and the discipline that may accrue to the civil service and the nation at large thanks to the presence of ex-military personnel as senior members of the administration, corruption will most likely be curbed quickly – a year tops.

The real crux of Zimbabwe's fortunes is how well the country improves the investment climate, and how well it re-engages the international community and stimulates production and exports. There is a pressing need for industry-wide recapitalisation to boost production. Improving the investment climate and re-engaging the world is necessary in attracting foreign capital. It must be said though that there is hardly a country that is not working on improving its investment climate to lure Foreign Direct Investment (FDI). Its cut-throat this business of attracting FDI and some countries have top-notch incentives for investors and their physical infrastructure is decades ahead of ours.

This suggests that improving the investment climate could be one of those tasks that we must do and hope that if we do it well, FDI will fly in. But we can do a fantastic job in improving our rankings in the Ease of Doing Business indices and FDI may still not come our way. Zimbabwe is a small low-income country of around 15 million people, tiny market. Zimbabwe is landlocked and this has weighty implications for costs of productions and shipping of output to global markets. Land invasions are recent and very fresh in investors' minds.

So yes, the risk of doing it all right and failing to attract FDI, especially from the West, is real. Improving investment climate will not be panacea to the country's problems but the investment climate must be improved nonetheless. It is great then that two announcements have been made which express the administration's clear break from the past the first being changes in the indigenisation laws to allow 100% foreign ownership in all sectors except in platinum and diamond mining and the other being that of compensating white farmers who had their farms taken away. These fundamental policy shifts have put the country back in some investors' radar screens. And of course, China, that so-called 'all-weather friend', is reported to have already sent a Special Envoy to Harare to sign deals including one to upgrade RG Mugabe International Airport and another to construct a new parliament building.

When 'The New Order' gets to be the new normal
Going forward, it is important to engage the Diaspora. Some investment vehicles for the Diaspora should be set up to, for instance, channel some of the remittances towards the numerous capital raising projects most companies should be undertaking in the very near future. The Securities and Exchanges Commission could play a leading role in this regard.

As the heightened state of excitement subsides, the Ministry of Finance and Economic Development must carefully study the productivity of firms (and civil service) and implement incentives to further boost output per resource invested. There is emphasis on agriculture in the budget. This is understandable. Agriculture is labour intensive which augurs well for job creation. However, farming tools and technologies must be improved to increase production per unit farmed – that's productivity. In line with AU Agenda 2063, farming tools such as the hand hoe must not be in use in 2025 as per AU target!

To conclude, 'Operation Restore Legacy' led by General Constantino Chiwenga which forced the resignation of Robert Mugabe has given ZANU-PF a strange new life. In the short to medium term, opposition parties will stutter for relevance if the new administration walks the talk. The odds are that it will be a landslide victory for ZANU-PF in the next elections – with no rigging. The real coup has been on the opposition. Is it perhaps time for a new type of opposition politics to emerge in Zimbabwe – opposition politics that is policy-centred than protest-driven, that is built on principles than persons. But for now, given what the President and the Finance Minister have said, the future seems way way alluring than it has been in a generation. Fingers crossed and Godspeed.