The Devil is in the Detail

We have just had our annual pre budget jamboree at the Victoria Falls. This year was very interesting because it was dominated by the elements in Zanu PF who support essential changes to the way in which we are being governed. The background to this meeting was the continued deterioration in revenues to the State and the recent meeting held in Lima where the Zimbabwe delegation met with our international creditors to discuss our arrears and future financing.

The Minister of Finance made his position clear, he outlined how he saw the macroeconomic fundamentals and the essential changes needed to put the country back onto a growth path.

The main difficulty he had was the fact that he continued to argue that the economy was expanding – his figure for 2015 is a modest 1,5 per cent. However he put a graph on the screen behind him showing the decline in revenue from all sources. This showed that the revenues to the State were declining and that the rate of decline was accelerating.

It has long been my own view that the economy is actually contracting – all indicators point towards a decline in economic activity of between 5 and 10 per cent. The other fact that the raw data suggests is that the rate of decline is actually accelerating.

I do not think he could be seriously challenged on the rest of what he had to say because he was brutally honest. We must stop complaining about “sanctions” because that was not our problem; our problem was how to expand the productive base of the economy.

His statement was well received but it was clear to all in the conference that he had little real support in the ruling Party. So long as rogue elements in the Party continue with political suppression in the countryside and make radical statements which violate basic principles of human and political rights and propose destructive economic policies that are totally hostile to the private sector. So long as this discord exists between hostile elements in the ruling Party, no one in their sound mind is going to invest in Zimbabwe.

When Zanu PF won an overwhelming victory in July 2013 they were shocked, first by the subdued reaction of the whole country which simply went into mourning and then as the days went by, by the harsh judgment of the markets. The stock market crashed by 30 per cent in two weeks as investors sold their shares and took their money back. Customers of local commercial banks simply withdrew what money they had in the banks, targeting the new local banks and in the next year 10 banks closed their doors, unable to pay their depositors back their money and another billion dollars was lost.

The recovery in the economy which had seen revenues to the State rise from $280 million in 2008 to $4,3 billion in 2013, simply ran into a brick wall – revenues fell to $3,8 billion in 2014 a decline of 12 per cent and this deterioration in economic activity and in State revenues has continued. The stock market continues to decline steadily – every month and all of us wonder how low can the market go?

The main problem is one of political legitimacy and stability. Despite every effort made by the international community at large and some elements in the Zanu PF Party, the basic position of Zimbabwe as a pariah state has not changed. Indeed there has been no reason why it should change – human and political rights continue to be abused on a daily basis, political freedoms are violated at will, the implementation of the new Constitution has been slow and erratic and the rule of law is not being observed in any consistent and reliable way. Indeed new farm invasions and the State inspired theft of private property continues without respite.

Despite the rhetoric in the state controlled media and the efforts by line ministries, investors remain stubbornly reticent to increase their exposure in Zimbabwe. While FDI inflows to our neighbors run to many billions of dollars a year, new investment in Zimbabwe, despite the abundance of opportunities, remains miniscule. The only major source of inflows are remittances from the Diaspora at the rate of about $3 billion a year as they struggle to maintain their families still trying to survive at “home”.

The devil is in the detail – what we need today is close, specific attention to all aspects of our national life and the way we are doing things. As the Chinese say, “if you are not catching fish, it is not because there are no fish in the water, it is because your bait is wrong”.

Clearly we are at the end of the Mugabe era – this is obvious to all and we need a succession plan – one which will identify a successor who has the support and the capacity to run our affairs. The plan must keep the country peaceful and stable while the plan is implemented and must be acceptable to all Zimbabweans. MDC would like that plan to be democratic in character but that is clearly not in the minds of either the Zanu PF or the Military Junta in the form of the JOC who actually control the country.

Clearly therefore, this issue is in the hands of a few powerful people whose motivation is hardly the wider welfare of the people or the interests of the investing public. If the Mnangagwa faction wins the present struggle for power then one set of circumstances will prevail – probably accelerated reform and attempts to engage with the West. If the Grace Mugabe group comes out on top, I fear for the stability of the State and accelerated economic collapse.

Even if the outcome is reasonable – then we have a long road to walk to get back to where we ought to be. The West will require massive reforms in how we run our affairs – politically and from an economic stand point. They will require that we implement the new Constitution and adhere to its principles. They will demand a road map to free and fair elections just as has been concluded in Burma and probably with the same outcome. Tough.

Then we have to win the beauty contest that is the competition to entice investors to back our efforts to grow the economy – fast, so that we can meet the needs for jobs and a decent standard of living for everyone. They are not going to respond to pretty adverts on CNN – it will take firm commitment to the rule of law, protection for property rights, respect for contracts of all kinds, competitive conditions for new major investors and the recovery of our road, rail and power systems.

Even then we are going to have to have a leadership that shows consistency and does not change its mind every few days or makes arbitrary decisions. They must know up front what conditions will apply to their business ventures and they must be able to make a decent return.

Can we do it? Yes we can but only if we really work together on a new deal – the old one simply is not working.

Eddie Cross
Harare, 11th November 2015