Latest News Editor's Choice


Opinion / Columnist

Mthuli Ncube, COVID-19: Zimbabwe economy's biggest threats

09 Apr 2020 at 08:31hrs | Views
At the core of a functional democracy is the commitment by citizens to constantly demand to be governed well through active participation in public affairs and holding those in public offices to fully account for their commissions and omissions during their tenure of office.

It is in light of this spirit and principle that as a patriotic Zimbabwean, who takes his civic duties to own country very seriously, I have decided to share my perspectives on the performance of the Honourable Minister of Finance and Economic Development, Professor Mthuli Ncube.

This is particularly critical given the fact that the performance of the Finance Minister in every country has far reaching implications for the welfare of ordinary citizens and the entire economy.

It has been over two long and indeed painful years for ordinary Zimbabweans since his appointment amid a lot of hype as Minister Ncube was considered the messiah to our economic challenges.

Typical of the naivety that now gives collective character to most of us as Zimbabweans, the messianic expectations regarding the performance of the derivatives professor was more based on his academic profile and partly the assumed credibility of some of the organisations he has worked for in the past.

I christen our national expectations regarding Ncube as having been naĆÆve on account of the fact that, while the professor is undoubtedly a good academic, he has no known experience of any success in private business or even just advising a specific developing economy.

Being at some point appointed chief economist of the African Development Bank on a South African ticket on its own was never supposed to raise our hopes to dizzy heights as the strong systems in such organisations allow even for the not-so-gifted to remain unexposed.

Anyway, let that be subject for my next article on how we should choose competent government ministers.

Back to the subject of the day, following the country's blind and somewhat random dance with the International Monetary Fund (IMF) structural adjustment measures under the Transitional Stabilisation Programme (TSP), it is becoming clear by each day that Ncube's appointment has been a complete disaster as evidenced by growing calls for his removal in national interest from across the political divide.

The economy is now evidently in a worse off situation as living standards have plummeted due to erosion of purchasing power following the Minister's reckless implementation of "cut-and-paste" IMF-backed reforms without considering the domestic context.

It would not take an economist to know that Ncube's first point of assessment before implementing his hard though largely ineffective austerity measures was the results of Zimbabwe's 1991 implementation of the Economic Structural Adjustment Programme (ESAP).

It is common knowledge that ESAP decimated the country's industrial base leading to unemployment and increase in prices among other unintended outcomes.

Professor Ncube, in his wisdom or probably lack of it, went on to implement exactly the same shock therapy while miraculously expecting different results.

The basic tenets of the TSP mirror the IMFs structural adjustment programme hence from the onset, we were never unlikely to get different results.

Even when Zimbabwe had the 1:1 exchange rate parity to the United States dollar, the country still experienced low inflation levels despite its shortcomings.

Its unmanaged collapse was largely due to irresponsible statements by the current Minister of Finance, which caused the market to panic as well as government's appetite to spend, which went into overdrive post November 2017.

Further, the big bang approach being implemented by Minister Ncube on an already fragile economy is not doing our sickly economy any favour.

It's undeniable that he got into office when the economy had its own challenges, but annual inflation was 3% in November 2017.

Annual inflation was negative for the whole of 2015, 2016 and January 2017 only becoming positive in February 2017.

Fast forward to the period under Ncube annual inflation is now 540% as at February 2020.

This is despite attempts to try and hide his failure through a one-year ban on the publication of annual inflation.

The economy which was registering positive growth performances prior to his appointment is now recording negative growth rates, notwithstanding the continued harping by the Minister about non-existent fiscal and current account surpluses.

Real gross domestic product (GDP) growth for 2019 was -6.5% and is projected to register negative growth again in 2020.

The actual situation is worse than the official positions being recorded. Even the situation on the ground points to contracting economic activity and worsening poverty levels.

He now has to provide buses for civil servants to report for duty as the salaries are no longer adequate to meet household needs including education costs hence the fire-fighting measures to subsidise examination fees.

According to the recently released 2019 Zimbabwe National Statistical Agency (Zimstat)'s Labour Survey report, 210,333 jobs were made redundant in 2019 as companies closed downsized and closed against a background Annual inflation: Jan 2017-Feb 2020 Source: Zimstat GDP Growth Source: Budget Statements of high inflation, energy and foreign currency shortages.

Demand for products and services weakened as the Minister pushed ahead with austerity measures that have pushed the economy into recession.

As the situation continues to worsen, more job losses are expected in 2020.

Pensioners have also been severely hit hard by the deteriorating economic environment, where the foreign exchange parallel market surpassed 1USD:ZW$42 before the lockdown, thus pushing up prices in the economy.

The small pension pay-outs are further reduced by increasing bank charges as well as the Minister's 2% tax on transactions.

Questions have been raised about the morality of the 2% tax on the elderly.

It's undeniable, Zimbabweans are poorer in 2020 than they were two years ago and just like Covid-19, the Minister of Finance has become the biggest threat to the existence of our people.

His faith with IMF policies is shocking to say the least given their track record across the globe characterised by huge losses in GDP, deindustrialisation, job losses, depreciated exchange rates and rising poverty levels.

It is an empirical fact that the developed countries achieved their successes outside of demand management measures prescribed by the IMF to poor countries.

This is not meant to downplay the need for sound economic policies and the need for a stable macroeconomic environment, which policies cannot be attributed to the IMF.

The growth being witnessed in Ethiopia, Mauritius and Rwanda is on the back of home-grown contextualised policies and political cohesion in the respective economies.

The Asian tigers: South Korea, Singapore, Malaysia and Taiwan did not follow the IMF formula.

The same applies to China, the world's largest industrial base, which has been able to take over a billion people out of poverty. Your Excellency, President Emmerson Mnangagwa, the current economic trajectory under the stewardship of the Minister Ncube is a cause of concern for the majority of the citizens.

His policies seem not well planned. How will he manage the exchange rate in the absence of adequate reserves?

The exchange rate is unlikely to really settle anywhere given the thin foreign exchange market existing in Zimbabwe.

This is not sheer incompetency but looks like it's a deliberate strategy, which will unfold with the passage of time.

Jameson Dapi is an economist and development finance expert. He writes here in his personal capacity. For views and comments, e-mail to dapijameson@gmail.com.

Source - Business Times
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.

Subscribe

Email: