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Zimbabwe economy on the mend

18 Sep 2018 at 07:32hrs | Views
Dr Masimba Mavaza
Zimbabweans have entered the most anxious week. The new cabinet flew into a cholera crisis and from nowhere prices sky rocketed and rates came to obnoxious stinking levels. Mthuli Ncube's first week in office as Zimbabwe's new Finance Minister was quite a sobering experience and a come down to reality call. The most celebrated minister left a more palatial environment in Geneva, where he was heading the research unit of an investment management firm, Quantum Global Group. Quantum Global, which has a special focus on Africa, has wealthy clients, who collectively have entrusted billions under its management.He was controlling billions of pounds which he gave up for Zimbabwe. He is the man who accepted his job out of love of his country not out of need for money or prestige.  
 
On Thursday, barely a week after his appointment was announced, Ncube was forced to post a crowd-funding plea on Twitter, to support the fight against an embarrassing cholera outbreak that has ravaged the country. The crowd-funding tweet created a storm it exposed the minister as a bowl trotting beggar who desires to beg and shows less creativity. Some were receptive, praising Ncube for his initiative, a first by a government Minister. Others were not amused. They pilloried him for extending the begging bowl to an already suffering public. Either way the begging of money does show innovativeness by a finance ministry of a country.

 The response the minister got from the tweeting society was a mixed bag with some accepting and some criticizing him for waving the begging bowl.  

It was a rude awakening one that the minister may not have anticipated when he tweeted. But if anything, the incident was to show the unpatriotic attitude of our people to the man who is seen by some as the kind of technocrat who could rescue Zimbabwe's economy from the abyss. It gives him a glimpse of the divided, wounded and angry Zimbabwe to which he has returned. It shows him that for any progress one needs to pull the country upwards. Democratic and consultative approach may not work. We are in a desperate situation which calls for desperate measures.   
 
Ncube came to serve his country, and the government he is serving is deeply popular  in Rural areas but not so in the urban part of the population which dominates social media. There is severe frustration over government's perceived  misplaced priorities and insensitivity towards the plight of the common person.  This perceived insensitivity must be explained so that the nation moves on. The opposition has already started to send wrong messages about cars for MPs. The reality is MOs buy their cars. Those cats are never for free.
 
Unlike politics economy does not need popularity. It needs action, reason and progress. Unsurprisingly, much is expected of Mthuli, a highly-decorated technocrat with a multi-carat resume. But the wheel of change rotates slowly.

 Zimbabwe is in one of the most difficult moments for the financial sector and the whirlwind sweeping people and their nascent business away.

 Mthuli has a brilliant mind for economics, one that had taken him through Cambridge, the great centre of knowledge where he left with a doctorate. His ability to instruct others in the discipline took him to greater heights at Wits University, another famous calabash of knowledge. It is in the comfort of his knowlledge that the nation hopes for a miracle.

Minister Ncube has experience which took him to Abidjan, where he was Vice President and Chief Economist for Africa's development bank, the AFDB. Then to Geneva at Quantum Global, with forays into academia at Oxford. That he is of the impeccable intellectual stock is not in doubt.  It is that flowery CV which erects our hope of coming out of the economic abyss.
 
But here he is back home, and created a storm for the crowd-funding suggestion. No doubt, he meant well. People must learn to be responsible. Asking for funding must not reflect on the economical passage.
It must demonstrate prudence and common sense when it comes to use of public funds.
 
Beyond the storm, the incident had revealed something about the state of the national coffers. He may have exposed the parlous state of the national coffers. When the man who holds the keys to the treasury goes to the people to ask for money to fight a public health crisis, it suggests that the situation is dire. It further suggests that Ncube will not be confined to box ticking. He is prepared to think outside the box.  It is that which makes the nation tick.

The one redeeming feature,and encouraging one though, is that he did not take the route to the printers to print more bonds something his predecessors might have done. He could simply have printed some money and handed it over as part of government's rescue effort. In this case he didn't and decided instead to beg from the .masses, it's probably a positive sign that there is willingness to move away from the days of reckless money printing.His actions illustrates an effort to ensure recognition of the popular will while at the same time promoting responsible populace. The President has covered the deficit in skills and competence, by bringing in the unelected into government. The government stands and falls with the performance of these anxiety raisers.  
 
Our constitution recognises this, hence the provision that permits the president to appoint up to five ministers from outside parliament. It could have been more had the proposition not been resisted and watered-down bY MDC. Still, it is important to strike and maintain the balance – to satisfy the popular will, while at the same time, promoting sound government.
 
The unelected technocrats lack political power,In Zimbabwean politics, where one must have a constituency from which they draw power and legitimacy, unelected technocrats must rely on their appointing authority. To be sure, while their specialised knowledge is itself a source of legitimacy, it is not enough to withstand the force of political power that rivals possess. But this reliance also makes them vulnerable and beholden to their appointing authority. The fact that they rely on the appointing force means they have to give better results for the sake of their credibility. In any case the ministers do not refer to their constituents when deciding as ministers.
 
In this regard, the technocrats must negotiate the tricky terrain between Cabinet and ZANU PF's politburo, the party's powerful executive. This endeavor is hazardous to political and professional careers. So to remain relevant the technocrats are forced by circumstances to perform and rise to the occasion. Their failure will be their downfall.

This therefore, is the challenge that the unelected technocrats will have to contend with. They will have to negotiate around the principle of the supremacy of the party where the party's ideas and policies contrasts with their ideas and policies. In this regard, for someone like Ncube, economic prudence will have to do battle with populism from the party headquarters.

There will be points of collision between the politicians and the technocrats and unless the biggest politician of them all backs them, the technocrats will always lose. When they lose, they will become frustrated. This is the fate that befell another technocrat 18 years ago. When Nkosana Moyo was appointed to Cabinet by Mugabe, he too was an acclaimed technocrat whose appointment was well received. But he did not last. He left because he realised the system was not ready for change. Mugabe mocked him for being lily-livered. He had not supported him. If Mnangagwa adopts the Mugabe approach and does not back his technocrat, their fate is unlikely to be any different.  
 
Mthuli Ncube has encountered many significant challenges in his line of work and he has probably succeeded more than he has failed. The Zimbabwean economy will be like nothing that he has ever encountered before.

The country is facing cash problems something that must have stared Ncube in the face in the middle of a cholera outbreak which has already been declared a national disaster. The challenges he must resolve are numerous: they are beyond cholera.

Zimbabwe is short of cash. It has been short of cash for quite a few years now and there is no sign of any respite. ED must support Ncube the money changers littering our streets must be arrested. Those who give them money to sale must not be spared.

Government efforts have so far failed to arrest the deterioration. This was because the trusted ministers survived in corruption. Most money dealers are sent by the powerful to open black markets in our towns. Promoting plastic money in a cash-based economy has limits. In any event, the most widely used electronic payment system, EcoCash is ripping people off. Something has to be done people are buying their own money. Ncube must pull his skills to rise to the occasion.
 
But market watchers say the biggest problem lies beyond bond notes. It is in the electronic balances held at banks commonly referred to as RTGS. It is there that government has been creating bigger amounts of money. Although they are marked in USD, there are in fact no USD to back these balances. It is pretend money. It's like the government has been running a pyramid scheme. This must be sorted now. All eyes are on Ncube. When government wants more money, it simply issues treasury bills or prints more bond notes to mop up whatever US dollars are on the streets. There is a huge market on the streets of Harare – some refer to it "the World Bank". This is unsustainable. Ncube must approach it head on.

This is an urgent problem that people expect Ncube to solve. Patience thins out very quickly among the weary masses. And if he takes too long, his political masters will simply throw him under the bus to save their skins. The minister has also talked about an eventual return to a local currency but that's in the long term. Whatever route he chooses, people want an immediate solution to their immediate problem.
 
A long-standing problem which Ncube must resolve is Zimbabwe's arrears. The country is heavily indebted and its failure to service debts has affected its credit rating. This makes it hard to access lines of credit and when it does, the punitive rates reflect its risk profile. The country owes roughly $1.8 billion in arrears to multilateral institutions. Its domestic debt has been growing too. According to the Zim Bollar Index, domestic debt rose by 72% between June 2017 and June 2018 – from $4.5 billion to $7.8 billion. This is mostly borrowing to fund the budget deficit – in other words, to fund the government's spending habits. The new man will have to be tight. Really tight and tough.
 
Ncube says he has a plan for debt resolution. This is one area where he might use his networking and negotiating skills in the international finance community to find a solution. He knows the institutions, the people and the politics of international finance. His predecessor tried and came close with the proposed LIMA deal. The arrears to the IMF were paid but the World Bank, AfDB and the Paris Club of creditors are still owed.

Another challenge is low productivity and in some cases, the lack of productivity. The key areas include mining, agriculture and manufacturing. The country has become one big supermarket for South African businesses partly because the country is not producing enough goods and where it is, sometimes the quality is poor or the cost is higher because of high costs of production. There was a time when the country had a vibrant manufacturing sector. The poor levels of production mean the country has to import even the most basic products. This raises the import bill, which gobbles up the country's meagre foreign currency.
 
Zimbabwe simply has to start producing more for the local and export market. The capacity is there.The resources are there in abundance. Mining, agriculture and manufacaturing. Zimbabwe has many advantages that its competitors in the region don't have. Much of its skills are currently propping up other economies, like South Africa. Ncube has to design a package that incentivises investors and producers, a package that incentivises its diaspora to return home. It could be tax breaks for investors setting up production plants in Zimbabwe. It might also be scrapping or reducing duties for those importing machinery for local production. It could be tax incentives for the diaspora skills to return home. The long term benefits of these investments will eventually outweigh the losses in tax revenues.

Solving the investment problem will also help tackle the unemployment challenge, which at more than 90% threatens social stability. The country can look to foreigners but there are many Zimbabweans in the diaspora who could play a key role. Mthuli himself is a key example of a diaspora citizen who has returned home to play a role. He should use his vantage position to persuade the traditionalists in ZANU PF who have long viewed the diaspora with disdain. He won't solve the challenges on his own. He needs the skills and competence out there. Many Zimbabwean engineers are busy solving water problems in other countries. They can be lured home to do the same, using the experience they have gained. They too are sons and daughters of the soil that can be brought back to uplift their country.

It is the political problem that meant the US was unmoved regarding the targeted sanctions regime even before the elections had been held. The US Congress passed an amendment to the Zimbabwe Dmocracy and Economic Rcovery Act (ZIDERA) just a few days before the election. The US President signed the bill into law after the elections. The new Finance Minister will have a hard time trying to convince the Americans that things have changed. The opposition worked hard to economically destroy Zimbabwe.  

Corruption can not be removed by one person it needs everyone's cooperation.
Mnangagwa is trying to fix that problem with his drive against corruption. He cannot achieve his goal alone.

The PR mission has been trying to present a reformist perspective, with flowery articles in the British media. Ncube will want to help in re-building those broken bridges, again exploiting his networks gained through his work across the globe. It's not going to be easy. He may want to start at home, by courting the multitudes of the disgruntled on the other side of the political aisle. He commands some respect across the political divide and if he uses his vantage position well, he might just help to unlock some of the doors.

 The minister needs to re educate people.  Ordinary people cannot understand why a government which has money to buy vehicles for chiefs, ministers and MPs can only afford a miserly amount for a national emergency affecting poor people and comes to the same people with a begging bowl.
 
Mthuli Ncube arrived with impeccable credentials which gives a fresh air of relief. His appointment brought some hope in the market. But the market has refused to respond positively. His appointment has not impacted positively on the market. Instead, the situation has declined. The cholera outbreak in the capital is embarrassing. But it's not a natural disaster. This is a man-made calamity which reflects poor governance at both local and national levels of government. Ncube had expected to hit the ground running. But the outbreak is part of the unexpected that he has to deal with together with his colleagues in government.it is true that the minister has received a warm and expectant welcome.

But he is experienced enough to know that this could all be wiped away very quickly. He has to engage the people.He is not a not political animal, but he is there for the people on account of his skills and competence. While there was anger at the crowdfunding plea, he should not take it as a personal attack. The anger is towards the system. He should not be disheartened. He should understand why it's there and take it as a challenge to work on it. Hard decisions will have to be made. They must be made.  
 
Vazet2000@yahoo.co.uk

Source - Dr Masimba Mavaza
All articles and letters published on Bulawayo24 have been independently written by members of Bulawayo24's community. The views of users published on Bulawayo24 are therefore their own and do not necessarily represent the views of Bulawayo24. Bulawayo24 editors also reserve the right to edit or delete any and all comments received.

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