As Zimbabwe awaits the outcome of the general elections, whoever is elected president faces an onerous task of getting the economy going after years of economic malaise partly due to lack of investor confidence and wanton disregard of property rights, economic experts have said.
Report by Chris Muronzi
Under President Robert Mugabe’s reign, the economy, once one of the strongest in Africa, was almost brought to its knees in the last decade when inflation raged to record highs.
The International Monetary Fund estimated Zimbabwe’s gross domestic product shrunk by as much as 60% in the decade to 2008.
Economist Eric Bloch says whoever wins the presidential election will have the unenviable task of restoring a sense of investment security in the minds of potential investors and financiers, a tough if not herculean feat, given the heightened threats to take over companies by Mugabe at his election rallies.
Chief among the changes needed to get the economy going, economists say, is the need to repeal the Indigenisation and Economic Empowerment Act or sanitise it, which many see as an albatross around the economy’s neck.
Other critics say the indigenisation law is racist and narrow in its objective especially in light of its implementation which has seen several empowerment schemes being castigated by Mugabe himself. Some say it is part of an agenda by the ruling elite to parcel out companies to themselves and the well-connected.
“The key to a substantive economic upturn is not who wins the election, but what will be the composition of the next government and will that government initiate the right actions to achieve and maintain that economic upturn.
“Essentially, whoever comprises that government and whoever is going to be president, will have to: restore a sense of investment security in the minds of potential investors and financiers by substantively modifying the indigenisation and empowerment policies and laws so they are constructive and do not alienate investor security; observe compliance with Bilateral Investment Promotion and Protection Agreements; re-align taxation legislation in accordance with what is prevailing elsewhere in the region; and reconcile with the presently alienated entities within the international community,” Bloch said.
He also said the leader of the new government would have to rein in runaway government expenditure.
Currently, civil servants’ salaries gobble up nearly US$2,6 billion, which translates to 70% of the government’s total revenue collections.
Government spends around 35% of GDP compared to 27% on average for Africa and 25% for Asia. Over half the total expenditure goes to 230 000 civil servants in salaries, the highest ratio of public service wages to GDP in sub-Saharan Africa except in Lesotho.
Apart from the high civil servants salaries bill, Bloch said there was need to address the burdensome national and international debt.
Bloch added there was need to, among other things, effectively restructure parastatals to ensure substantive service delivery and incentivise exports and eliminate inequitable import competition.
Mugabe’s government failed to restructure several parastatals and ran them into the ground in the last 33 years they have ruled the country since Independence from Britain in 1980.
Other critics say the government has been slow to privatise the parastatals even when several billions of Zimbabwean dollars had been dolled out as subsidies since Independence.
The country’s rankings on the doing business survey have continued to plummet with each passing year, an indication which analysts say points to worsening government economic policies.
Zimbabwe was recently ranked 172 out of 185 countries in the doing business rankings, down from 170 last year out of 183 countries.
While the enterprise survey for Zimbabwe captures the experiences of businesses currently in the country, experts say the elected president needs to make Zimbabwe’s investment laws and policies friendlier to investors
Analysts say there is need to deepen international trade amid indications the country’s exports were more resource-intensive than labour-intensive.
Also worrying are Mugabe’s intentions to re-introduce the Zimbabwe dollar once re-elected albeit in the medium to long-term.
Experts say the economic environment is not yet conducive for the Zimbabwe dollar’s return.
In an interview over the Zimbabwe dollar earlier this month, Reserve Bank of Zimbabwe governor Gideon Gono said while discussions had been held between the central bank and the President’s Office on the return of the local unit — whose name will not necessarily be the Zimbabwe dollar — it would only come back after an enabling macro-economic environment has been created.
Gono said among the pre-conditions needed were sustainable macro-economic stability, accumulation of adequate foreign exchange reserve buffers to the Sadc regional target of three months and rehabilitation of infrastructure.
“The above pre-conditions can be feasibly attained in the medium to long-term, and only then has the president directed that we can, as monetary and fiscal authorities, timely devise ways of re-introducing the local currency,” Gono said. “Additionally, the local currency, according to the wishes of His Excellency, would be required to circulate alongside the basket of currencies which are currently legal tender in Zimbabwe and the public will be free to pick and use a currency of their choice for transactions purposes.”