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Elections accelerating economic decline

As campaigning for the forthcoming general elections accelerates, ever-increasing nails are being driven into the coffin of the Zimbabwean economy, reversing the minor recovery achievements of the last four years.

Column by Eric Bloch

Key to a substantive growth of the economy has been, and continues to be, that Zimbabwe attracts substantive foreign investment, which would assure the revitalisation of the long distressed viability of the manufacturing sector, enhancement of the development and growth of the country’s immense potential of mining, recapitalisation and increased funding for the financial sector, massive improvement in agricultural output, greatly heightened tourism upsurge and redevelopment of considerable opportunities of employment for many Zimbabweans desperately anxious to generate livelihood.

The economy having intensively declined from 1997 to 2008, it was good that there was some economic upturn from 2009 (once the so-called Government of National Unity came into being), notwithstanding that the extent of the recovery fell far-short of what was needed.

Because of the upturn that was achieved, which included cessation of the worst-ever hyperinflation sustained anywhere in the world throughout recorded history, hopes and expectations of recovery increased.

The guarded optimism of ongoing improvement steadily increased between 2009 and 2012, notwithstanding a continuing decline in the manufacturing sector, resulting in more unemployment.

Complacency did not exist, for the revival of the economy was not as extensive as needed, but nevertheless expectations of even greater recovery progressively, but guardedly increased.

In recent weeks, on good and sound grounds, those expectations have ceased, and instead the “doom and gloom” perceptions of previous years have been restored.

The change in the formerly moderate anticipations has, within weeks, radically changed.

That transformation from guarded optimism to negative and apprehensive fears has been almost entirely a consequence of the exceptionally foolhardy economic policy projections enunciated by various election candidates as contained in some of their manifestos.

Foremost of those sources of destruction of the moderate expectation of further and economic recovery has been the Zanu-PF election manifesto, and to some extent the divide in the opposition to that party.

Among many ill-conceived and ill-advised economic policies contained in the Zanu-PF manifesto is a declared intent to continue the destructive indigenisation and economic empowerment programmes, instead of modifying constructively and effectively those policies.

That would reverse the immense harm that the existing policies and legislation have caused on the population and economy.
In the Zanu-PF manifesto, and the president’s speech during its launch, it was contended that:

“Only the indigenisation and people’s empowerment reform programme can meet the good of the people. There is no other alternative.”

“Takeovers will realise US$7,3 billion in assets for the government, and will progressively create total value of US$29,2 billion.” (This is tantamount to admitting an intent to expropriate business and their assets without fair compensation).

It cannot be denied that if Zimbabwe would pursue indigenisation and economic empowerment policies in a manner which would not benefit a selected few using state-controlled (oft abused) funds, but instead as has successfully been done by many countries in the Far-East, and several countries in South America and in Africa, it would benefit millions of Zimbabweans, and the economy as a whole.

In contradistinction, pursuit of the present ill-considered, dogmatic policies, will leave more people unemployed and poverty-stricken, as the much needed foreign investment will continue to be withheld.

A second most harmful aspect in the manifesto, reinforced by the presidential statement, is the intention to restore the Zimbabwe dollar as the national currency.

Although that electoral contention did not prescribe a time period within which that should occur, and the president acknowledged that it must be founded and secured by adequate national gold resources, it immediately provoked immense nationwide concerns and fears.

The result has been increased reluctance of the public to avail themselves of banking services, fearing a consequential loss of currency with a value, being replaced by one expected to be devoid of value.

Fortunately, Reserve Bank of Zimbabwe governor, Dr Gideon Gono, said that a return of the national currency would not be immediate, but only when accorded meaningful reserves’ support.

However, the political statement had planted such great fears that the governor’s statement did not suffice to allay them, and the already severely squeezed money market instantaneously contracted yet further.

The manifesto further pursued the frequently stated misrepresentation that Zimbabwe’s economic ills are mainly a consequence of “illegal international sanctions”, contending that they have cost the country US$42 billion in lost donor support and foreign investment, withdrawals by foreign lenders of private sector loans, and high “premiums” on such commercial loans.

These contentions were oblivious of the facts that save for measures on government, its parastatals and some named individuals within the political hierarchy (and enterprises owned by them), no substantive sanctions have been applied.

They also ignore that the absence of loan funds was, to a very considerable extent, due to Zimbabwe’s recurrent failures to effect repayments on previous loans, endlessly defaulting in servicing its debts.

Similarly, despite the marked decline in donor funding to government, there has been considerable donor provision for food, healthcare and education financing by donors.

The consequence of these and other political misrepresentations are not only a further damage to prospects of economic recovery but would accelerate economic decline.


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