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Where is Zimbabwe getting it wrong

24 Apr 2019 at 19:14hrs | Views
Since the fall of Mugabe in November 2017 the Zimbabwean economy has been struggling. While much of the blame for the economic problems that the country is facing is directed at the Mnangagwa government that took office in November 2017 the decline started years earlier. Indeed, in many respects economic performance under the Mugabe regime that ruled the country from April 1980 through 2017 was equally dismal. Essentially, the past two years have been wasted and compare quite unfavorably on most indicators with economic developments during the last few years of the Mugabe regime. There are chances which were missed by the government to change Zimbabwean fortunes completely.

In the Mugabe years, growth fell to 72 percent a year, inflation averaged over 90 percent, and the official unemployment rate rose from 9 percent to 90 percent. Government macroeconomic policies were relatively unchanged between the Mugabe and Munangagwa governments. The fiscal deficit as a share of GDP remained in double digits and was financed primarily by government borrowing from the banking system and heavy taxing.
One area where the Mnangagwa regime bears considerable responsibility for ill-advised policies is maintaining the bond despite growing external imbalances. The result was sky rocketing prices.
Initial reactions to the change in government.

The military-installed transitional government has been greeted with enthusiasm in the belief that it will stop the slide and turn the Zimbabwean economy around soon. The appointment of prominent and well-respected economists, such as Mthuli Ncube Minister of Finance has given hope to Zimbabweans of a new economic dawn. The media received these appointments very positively taking the view that these "liberal" economists have the requisite expertise and experience to reverse Zimbabwe's fortunes.

There was no question about the ability of the new economic team and their appointment was a welcome development. This group is on par with the economic team assembled by Mugabe led by Aristo Chambati . But even though the members of the new team have been characterized as liberal economists, presumably because they are pro-market and private-sector oriented, they believe strongly in inclusive growth and social justice, and therefore see an important role for government in driving the economy. Thus, it is expected that their policies will be somewhat different from the ones favored and implemented by Mugabe's economic team.

The appointment of the substantive government  led to some positive economic developments, although more associated with politics rather than the result of any specific economic measures. The almost immediate promise receipt of funds in external assistance from China, UK and other countries motivated largely by political considerations, has greatly eased the pressure on the country's external position. But the money is yet to come. The announcement by EU after Davos that they and other investors will be "investing in Zimbabwe like never before" is also reflective of the change in political regimes rather than any observed improvement in economic fundamentals. But nothing came out of the promises. Instead inflation rose sharply. This should give us a lesson that we must never try to change our economic fortunes by relying on others pockets. We must be self sufficient. We can achieve more without being embarrassed by fake promises.

Reforms or populism?

After the fall of Mugabe and the discrediting of the economic policies his government had implemented, there was a question of what type of economic model Zimbabwe would adopt.  Would the country continue with market-oriented reforms or would it adopt populist economic policies to cater to the immediate demands of the population that were a major factor in the November 2017 restore legacy. Unfortunately, the government was willing nor able to articulate, let alone implement, the type of economic model relevant for Zimbabwe.

For Zimbabwe to become a dynamic and vibrant economy that can compete in a globalized world and create sufficient jobs for its young and growing labor force, it needs to follow through on the economic reforms initiated by the Finance minister. These reforms are necessary for the long-run prosperity and development of Zimbabwe. A cursory look at how other developing countries have adopted market-oriented reforms—in Asia or in Latin America—should be convincing evidence of their value. The adverse consequences of these reforms, and in the short-run there are many, can be dealt with through appropriate supporting economic measures.

More specifically, for Zimbabwe to become a truly market-oriented economy the government needs to undertake a number of structural reforms, including:
Reducing the extensive government expenditure system that annually eats up 70 percent of GDP and three quarters of the government budget.

    •    Widening the tax base without inhibiting investment and job creation.
    •    Reducing public sector employment which today accounts for a half of total employment in the country.
    •    Streamlining business and investment regulations to encourage both domestic and foreign investments.
    •    Improving labor market flexibility by changing labor laws and regulations that constrain employments.
    •    Advancing the privatization process to reduce the burden on the budget and bring efficiency into the operation of state-owned enterprises and banks.
    •    Dealing with corruption once and for all. Arresting ministers and legislators who intimidate investors or those who charge investors for seeing the president.Undertaking the appropriate economic policies and reforms thus proved to be an overwhelming challenge. In fact, economic issues are taking a backseat as the government is totally preoccupied with political issues. An economic plan, that is to form the basis of an economic turnaround must be developed now. The failure by the National prosecution to successfully prosecute one high profile corruption case has made the investors fear for their investments. The total harassment of investors by ministers and legislators has raised red flags on those who might want to invest in the nation. The president's name is being abused in each and every corner of the economic road. The president is supposed to be listening but he is yet to.  The stupid calls of engaging the opposition are not serious. The economic problems we are facing has nothing to do with the absence of the opposition in the government. The opposition has not tabled an alternative economic recovery plan. All they sing is that they have the keys to success. Its a pity some senior members of the government are now believing that the opposition has an answer.
    
The answer is not in the opposition. The answer is in having a new approach to the economy.

Zimbabwe will not be better off without a GNU. Calling for one shows shallowness of mind. You can not always deal with failures by hiding behind a finger. Chamisa is as clueless as a confused drunkard. He is just riding on the problems we are having and some people are believing him.

The starting point  is to deal with corruption. This kinsman syndrome is seriously destroying our country. There are some people who are serving in government positions and they do not deserve them. They just know how to protect their positions no production at all. This syndrome has destroyed our country.
Zimbabwe is going through dark moments but it will be out of it soon.

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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