No Change – that’s the problem

I have been surprised by the harsh reaction of local and international markets to the return of Zanu PF to almost total power in 2013. Domestic reaction was immediate and drastic and since then the economy has begun a familiar slide into the abyss. Officially they still talk about growth and stubbornly repeat the 3 per cent figures for 2014 and projected for 2015. Last week the IMF cautiously came out of the bush and said that the contraction in the economy (first time they have admitted that it’s contracting) will continue in 2014. That’s a gross understatement.

All the real market indicators point to a rapid decline in economic activity across the board. This in turn is being reflected in the fiscal numbers and after a $1 billion fiscal deficit in 2014 (a sustainable level would be about $200 million in a growing economy) it will be close to $1,5 billion in 2015 – completely unsustainable.

It’s not that the Minister of Finance has not been trying – three visits to China last year produced a State visit by the President to Beijing, but nothing else, a call on Putin to help yielded a totally one sided deal in mining but no cash and a hurriedly arranged State visit to South Africa produced a few laughs and racial slurs, but no cash. Then the Minister announces that he is cancelling the Christmas bonus for the Civil Service in 2015 and 2016; that would save about $500 million and help to stop the fiscal bleeding.

But it was not to be, on Independence Day Mr. Mugabe needed something to say which might inject a little celebration into the event and announced that the Minister had not consulted him (I doubt that) and that he was wrong – the Civil Servants would get their bonus. I expected the Minister to tender his resignation over a matter as important as this but all we got was a statement issued in Washington where the hapless man was meeting with the multilateral institutions, appologising for his “mistake”.

What is wrong here is not “sanctions” (now legal), it’s not climate, it is the simple fact that there is no change in the way this country has been managed since 1980.

In 2013 after 4 years of the GNU during which the “bounce back” from the collapse in 2008 was dramatic; in 2009 the economy was 3,2 times the level of 2008, in 2010 it was 1,7 times the level of 2009 followed by 1,6 times in 2011 and 1,3 times in 2012. Revenue to the State is the best indicator and this rose from $280 million in 2008 to just over $4 billion in 2013.

During this period, tough management of the fiscus by the then Minister, an MDC legislator, ran a balanced budget by managing the civil service salary bill. Once this discipline was stripped away by the resumption of total control of the State by Zanu PF, this collapsed and the fragile confidence that was gradually creeping back into the system, disappeared. Capital inflows were reversed, cash fled the banks and foreign investment dried up. Zimbabwe was again looking down the barrel of a national economic, social and political crisis.

The only hope in this situation emerged when it became clear that Emmerson Mnangagwa, the Minister of Justice, was making a bid to become the successor to Mr. Mugabe. This began in mid 2014 and by the end of the year he was ensconced as the first Vice President and for the first time in 35 years, when the Mugabe’s went off for their annual holiday in the Far East in December Mnangagwa was referred to as the “Acting President”.

Zimbabwe has a culture of rumors that is typical of any country that has an inadequate media system with a major propaganda machine dominating. In this case the stories were that the VP would assume de facto control of the State once the President took up his responsibilities as Chairman of both the SADC and the AU in February 2015. This made sense – he is 91, not in good health and his new responsibilities would be significant.

At the same time, the rumor machine was saying that once the VP assumed control of domestic affairs, he would clean house of the corrupt and incompetent and radically alter course with regard to policies that are clearly not working. Changes to the indigenisation laws and regulations were hinted at, security of property rights would be restored and compensation paid to the farmers and foreign direct investment would be welcomed and facilitated.

We heard of significant interaction with the international community and there were signs that the diplomatic iceberg of relations with Zimbabwe was melting.

When Mr. and Mrs. Mugabe came home from their holiday, we watched the situation very carefully. It became clear that the putsch against Mrs. Mujuru was not going to be reversed, indeed the exercise was intensified. However it was clear that Mr. Mnangagwa was not getting the old man’s agreement to the changes that the Vice President thought were essential to get the economy moving. It was also clear that the targets of the 2014 putsch were not going to be widened for the time being. Several key retirements were put on hold.

Then at a major meeting at the Victoria Falls, Mr. Mugabe hinted that neither of the new Vice Presidents were his choice of successor. Since then there have been a number of incidents that have shown that he is up to his old tricks of playing one faction against the other, not giving anyone a hint of where he stands on succession and it now looks as if it is his intention to stay on as President with all his powers intact, until he fades from the scene. It would seem that he will even have a go at another term in office in 2018 at the age of 94.

Our problem is will we get there? We face a massive food deficit in the context of a region where suddenly the food supply chain has lengthened and become much more expensive. Zimbabwe is absolutely broke and does not know how it will meet its payroll at the end of every month. International relations are back on hold and the freeze now extends to China who wants to see the succession issue dealt with and policy reform to get economic recovery and growth under way.

The expulsion of key players from Zanu PF has cemented the rift in the Party and created conditions for a serious fight back and on top of all this, the regional States who masterminded the 2009 Government of National Unity are not even thinking about how to get Zimbabwe back on track into the future. They do not want to have anything to do with another crisis situation here and are doing nothing.

The Xenophobic attacks in South Africa have suddenly brought the situation regarding economic refugees into the spotlight. South Africa well knows that the Ghukurahundi exercise from 1983 to 19787 led to an influx of perhaps a million refugees from Zimbabwe. This has been followed by another, perhaps 4 million during the 2000 to 2008 collapse in the economy. Another 2 million refugees from Zimbabwe – driven out by the food crisis and economic collapse would be a disaster. Yet it seems as if the South African leadership did nothing to discuss these problems during the recent State visit by Mr. Mugabe.

That is the problem, nothing has changed and unless it does, and soon, we are in for a rough ride and it could affect all our neighbors.

Eddie Cross
Bulawayo, 24th April 2015