Eric Bloch: Economic Recovery Demands Good Governance

ADDRESSING last week’s International Business Conference at the 2009 Zimbabwe International Trade Fair, the deputy Minister of Finance said that government has begun crafting a medium to long-term economic blueprint to replace the current Short Term Economic Recovery Programme (Sterp), which expires at the end of this year.


In doing so, the deputy minister stated that the blueprint would be “stakeholder-driven”.

This is very positive, for it is those that are actively engaged in an economy who know best what is needed to drive an economy into recovery, and thereafter to maintain that recovery. Even the most competent of governments inevitably have detached perceptions of the details of economic activity and needs.

Constructive appreciation of the positives and the negatives of an economy is best available to those actively engaged in it, or impacted by it. In contrast, with very rare exception, governments have a very detached overview of an economic environment, driven primarily by statistics and political preconceptions, instead of “hands-on” experience on the economic “battlefield”.

This does not mean government must not lead an economic recovery, and do all that is necessary to assure its continuance and wellbeing. It is therefore somewhat heartening that the African department director of the International Monetary Fund (IMF), in a recent statement on the IMF’s website providing an update on the IMF’s sub-Saharan African regional economic outlook, Antoinette Sayeh, said: “In Zimbabwe specifically, there are some encouraging developments… coming out of the agreement earlier this year to put in a coalition government… It’s the context in which we think there is a window of opportunity in Zimbabwe that is worthy of support by the international community.”

She added that “the actions taken recently… by the government in Zimbabwe are encouraging. We think hyperinflation has been stopped by the decision to use the rand and the US dollar, to recognise the use of those currencies because those currencies have become quite widespread in Zimbabwe. The formal recognition, and the formal decision, to ‘dollarise’, as we call it, to use external currency as domestic currency, has helped to put a stop to the quasi-fiscal deficit… So, in the very recent past developments in Zimbabwe have been broadly positive.”

She also said that the IMF hopes to assist Zimbabwe with policy advice, and by the provision of technical assistance in key areas of IMF’s mandate, and could work with Zimbabwe’s authorities to assist continued   progress.

All this is very pleasing, but does not suffice. Hopefully government’s declared intent of substantive interaction with Zimbabwe’s economic stakeholders will be a reality.

This would yield governmental recognition   that much more is needed of government itself than has been or is presently forthcoming from it, if the critical restoration of economic wellbeing is to be achieved, and if the economy is to grow to the extent necessary to support, in reasonable wellbeing, Zimbabwe’s population.

In particular, government has to become conscious of, and constructively responsive to, the prerequisite for any sound economy — and that is unrestricted, absolute, good governance. And that good governance is founded upon unequivocal adherence to the principles of democracy, respect for human property rights, adherence to and implementation of, law and order (just and equitable), respect, co-operation and interaction, with other nations, and total fulfilment of all agreements and obligations.

Regrettably, that is not yet the case despite recurrent governmental protestations to the contrary. Last week the Minister of Finance, Tendai Biti, intensified Zimbabwean efforts to convince the US government and international financial institutions that enough change has taken place for the international community to extend beyond only the provision of humanitarian aid, and in addition to fund Zimbabwean reconstruction. Unfortunately he failed in this endeavour.

This was evidenced by a statement by a spokesman for the US State Department, Robert Wood, that the Zimbabwean presence at the Spring meetings of IMF and World Bank a fortnight ago did “not signal any kind of change” and that “there are a number of things we have to see yet in Harare” before the US will consider providing developmental funding. There is a clear indication that the US is not yet ready to repeal the Zimbabwe Democracy Act and, until it does, it must veto any IMF funding for Zimbabwe.

Consequently, the IMF cannot even reschedule Zimbabwe’s existing, long overdue debts, which is essential if the IMF is no longer to have Zimbabwe as a payment defaulter, which precludes further advances.
Despite the many commendable achievements of the inclusive government, it cannot claim to have achieved necessary standards of good governance. A few prime examples are:

 

  • Notwithstanding the Global Political Agreement (GPA), President Mugabe continues to resist swearing in Roy Bennett as Deputy Minister of Agriculture, saying that he will only do so once Roy Bennett has been acquitted. This is clearly contemptuous disregard for the fundamental principle of Zimbabwean law that a person is innocent until proven guilty, and instead adopts a stance of “guilty until proven innocent”! The inevitable international perception is that the GPA is shallow, and cannot endure, and that the president and Zanu PF are determined to retain considerable power, irrespective of agreements concluded by it.
  • With almost a decade having elapsed since Zimbabwe embarked upon its land reform programme in a horrendously destructive and unproductive manner, it has still failed to honour its obligation under Bilateral Investment Promotion and Protection Agreements (Bippas), which cannot instil any confidence within the international community, and amongst potential investors, that Zimbabwe will honour future agreements. Moreover, Zimbabwe’s limited external assets are now at grievous risk for, on April 15 this year, the International Centre for Settlement of Investment Disputes (ICSID), sitting in Paris, France, awarded 8 220 000 euros to 13 Dutch farmers unceremoniously ousted from their farms with contemptuous disregard for the Netherlands and Zimbabwe Bippa. Moreover, in ruling in favour of the farmers, ICSID prescribed interest of 10%, compounded half-yearly, which has increased the award to 16 million euros (approximately US$21m).

This judgement could well provoke attachment of Zimbabwean government assets abroad, albeit that this should not include assets of any parastatals that are structured as independent legal entities for their assets are not, in reality, government’s assets — notwithstanding that government is possessed of the shares in such entities. The judgement of ICSID will inevitably provoke innumerable further legal actions by many other displaced farmers, intensifying Zimbabwe’s already grossly poor international creditworthiness.

=Continuing vehement castigation and recrimination of the Reserve Bank of Zimbabwe and its governor, of various previous ministers, and of the minority white population in general, and those from the agricultural sector in particular, projects an appalling international image of intense division prevailing in Zimbabwe. This is not conducive to necessary political harmony, which is essential for economic recovery, national reconciliation and creation of a conducive investment environment.

The bottom line is that government in general, and those in the inclusive government who constituted the preceding government, need to prioritise Zimbabwe, its people, and its economy and international standing ahead of themselves, effecting utmost good governance instead of self-preservation and enhancement.  Until then, inevitably economic recovery will be slow and incomplete. Utmost good governance is the key to the future that Zimbabweans need, and deserve!

BY ERIC BLOCH

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