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Eric Bloch Column

Government still in denial mode

By Eric Bloch

LAST week’s column addressed the state’s total oblivion to the realities behind Zimbabwe’s record hyperinfl

ation, and the cataclysmic realities of government’s foolhardy and disastrous price controls.

That oblivion was a highlight (nay, a lowlight), of the 2007 mid-term fiscal policy review presented to parliament by Finance minister Samuel Mumbengegwi on September 6.

But government’s mental block to those actualities which reflect negatively upon it was not limited only to hyperinflation and price controls, when the minister sought to review fiscal policy (although it must be exceptionally difficult to review something that is almost non-existent, for government’s only substantive policies appear to be those designed to assure its own survival).

The minister incontrovertibly demonstrated that government continues to delude itself on innumerable other key issues, over and above those of hyperinflation and price controls. Mumbengegwi attempted to review the circumstances of Zimbabwe’s various economic sectors.

He first addressed agriculture, stating that the sector had received $75,4 billion from government in support of the winter wheat crop, tobacco and other summer cropping and livestock development, with a further $32, 1 billion set aside for irrigation development, over and above private sector financial support. He contended that, as a result, agriculture is projected to grow by 7,3% in 2007, primarily driven by growth of the tobacco crop from 55 000 tonnes to 80 000 tonnes.

Only one week after he made this projection, the tobacco sales season ended, with total sales being marginally over 70 000 tonnes, being almost 10 000 tonnes less than the ministerial forecast!

In fairness, it must be acknowledged that the minister admitted to a decline in maize output, from 1,5 million tonnes to 953 000 tonnes. He said this was partially due to erratic rainfall, but also due to inadequate supply of inputs (and especially fertiliser).

Clearly, yet again, governmental support was ineffectual! Notwithstanding, the minister claimed that “much progress has been realised with regard to the early preparations for this year’s winter wheat programme”, and he alleged that “most of the input requirements such as seed, fertilisers and chemicals were supplied on time”, only to be negated by “inadequate water” and “frequent interruptions to power supplies”, affecting irrigation operations.

It’s strange that Zesa claimed the increases in urban power load-shedding were being effected in order to avoid power supply interruptions for wheat farmers!

The minister, along with his cabinet colleagues and the president, need to recognise that the provision of tractors and ploughs, as well as other equipment, at prohibitive costs for government and the Reserve Bank, will not lead to agricultural recovery unless allocated to those who will use them, and know how to do so, unless there is timeous and sufficient availability of all inputs, unless there is a will to farm, driven by assured security of land tenure, and unless an adequacy of funding is available.

Government has spent the greater part of 10 years destroying agriculture, which was the foundation of the economy, but still determinedly ignores the fact that it has been, and continues to be, the primary cause of the agricultural Armageddon.

Thereafter, the minister focused upon the mining sector, stating that “government recognises the importance of the mining sector”, and expressing concern that “mining, however, continues to be plagued by a number of challenges which include limited investment into expansion and exploration programmes”, and stating that “these challenges have limited the capacity of the mining sector to benefit from firming international commodity prices and, hence, undermine its contribution to the efforts to turnaround the economy.”

Unfortunately he, and government as a whole, are incapable of recognising why there is such limited investment.

On the one hand, Zimbabwe is generally regarded as an unfavourable investment destination. Investors desire political and economic stability, respect for human and property rights, rigid observance of law in general, and of international norms of just law in particular, democracy, and that the investment destination country have good and sound, harmonious international relationships. Concurrently, the investor seeks an economy which is market-driven, instead of one where the success or failure of the investment is wholly driven by government.

None of that is the Zimbabwe of today and, therefore, there is an inevitable reticence on the part of investors to invest in Zimbabwe, and that reticence has been intensified over the last few years, as government has more and more vocally pursued indigenous economic empowerment by way of transferral of ownerships, instead of by ensuring economic development and facilitation of indigenous participation in that development.

On the other hand, investors seek a fair and adequate return on their investment, and that is usually unattainable (and particularly so within the mining industry) when government steadfastly constrains exchange rates at unrealistic levels.

In a period of two years the exchange rate has been allowed to adjust by less than 10% of the inflation sustained during that period! Even after the minister, a fortnight ago, and very belatedly, devalued Zimbabwe’s currency to US$1:$30 000, he and government were not prepared to be realistic. In the unofficial (admittedly unlawful) markets, the rate was tenfold that level and, unavoidably, most mining inputs are only available form the unofficial markets.

Neither domestic nor foreign investment will be adequately forthcoming until government is prepared to recognise facts, even where such facts are unpalatable to it, and the minister’s statements, in his fiscal policy review, as to the mining sector, and the insufficiency of investment into the sector, loudly proclaim government’s continuing unpreparedness to do so.

Thereafter, the minister claimed that “manufacturing has great potential in generation employment and foreign exchange, as well as enhancing support services to the other sectors of the economy”. In that, the minister was wholly correct, but the same negatives as impact upon mining pertain to manufacturing.

However, despite the minister’s commendable recognition of the sector’s economic positives his enthused promotion of the catastrophic, devastating price control measures, and failure to recognise the recovery actions required, demonstrate his and government’s continuing denial of facts.

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