HomeOpinionWill new govt fix the economy?

Will new govt fix the economy?

THE general elections have come and gone. They were held with undue haste, precluding the registration of many potential voters as well as the late release to the political contestants of the voters’ roll hindering verification of the contents thereof.

Column by Eric Bloch

Be that as it may be, and notwithstanding doubts and reservations as to whether the elections were genuinely free, fair and transparent, the controversial results give Zanu PF a new five-year mandate to govern, replacing the government of national unity.

The new government’s primary obligation should be to constructively and seriously ensure economic recovery and growth.

There are many, extremely diverse, effective policies that must be rapidly and intensively pursued, driven solely by economic fundamentals and realities, as distinct from political ideologies and long-standing, but ill-considered, policies and actions which have prevailed to date.

In view of the immense under-capitalisation of almost all Zimbabwean enterprises, the pronounced, ongoing illiquidity on the money-market, the extensive opportunities for development and growth in Zimbabwe’s mining, industrial and tourism sectors (amongst others), and the need for the latest state-of-the-art technologies and skills, Zimbabwe must rapidly, intensively and effectively, create an investment-conducive environment.

Much is required to achieve a conducive investment environment, and especially so after many years of counterproductive, negative and destructive policies and actions which preclude realisation of billions of dollars of available investment funding.

That, in turn, not only becomes an immense barrier to employment creation, but also an endless trigger to fuelling of unemployment, and hence intensification of national poverty.

It also intensifies the country’s negative balance of trade, with imports vastly exceeding exports. It also precluded the generation of private sector profitability, thereby markedly reducing essential inflows to the fiscus, and radically increasing the national debt.
Key to a turnaround greatly needed are:

Major revisions to the Indigenisation and Economic Empowerment legislation and other policies, and to the mode of implementation thereof.

This columnist has often expressed the view that Zimbabwe has an over-riding need for Indigenisation and Economic Empowerment, not only because it is just, equitable and a humanitarian need, but because it is democratic, morally necessary and a potential catalyst for national economic growth.

However, it must be pursued and achieved in a manner which does not only enhance the wealth of governmentally operated (or abused) funds and the select few politically connected, but which beneficiates the majority of the population.

This should be effected and achieved without alienating the desperately-needed investment. It is foolhardy in the extreme and pronouncedly naïve to expect companies to provide total required investment funding, only to be reduced to possession of a maximum of 49% of the enterprise in which investment is effected, and to be given no compensation for the 51% or more of participated investment, and the investors’ control and authority of the enterprise being wholly emasculated.

Moreover, the investors should be enabled to identify for themselves their indigenous co-investors.

Concurrently, government needs to imbue in potential investors a deep-seated sense of investment security by convincingly declared policies of absolute adherance and compliance with the numerous Bilateral Investment Promotion and Protection Agreements to which it is a party.

Despite issues of national pride, realities necessitate that government be convincingly and authoritatively determined to the retention, for an extended period of time, of the currently prevailing multicurrency system, for reversion to a national currency would be an economic disaster if pursued prior to such currency being wholly, fully and absolutely secured by mined and nationally-held gold reserves.

Zimbabwe’s taxation policies must be comprehensively revised.

Currently, they are excessively oppressive, with rates incompatibly high as compared to most other countries in the region, and with the unjust exclusion of many legitimate deductions in the determination of taxable income (for example, the Zimra stance of disallowance of genuine, justified, provisions for bad debts and other forward commitments).

Moreover, the policies and their supportive legislation contain virtually no incentives for investment-creation, for generation of export revenues and the like, over and above intensifying poverty by taxation of incomes below the Poverty Datum Line.

Indirect taxation policies fail to boostand facilitate exports, and inflate costs for manufacturers in the procurement of essential, imported, manufacturing inputs.

Another area that is long-overdue for effective governmental actions is the containment and the progressive reduction of the national debt in general and that of the state in particular. Addressing this critical issue, two key positive actions needed of government are:

A marked reduction in governmental expenditures. This can readily be achieved by a considerable reduction in the number of ministries, with not only a significant saving on salaries and associated benefits, but also a pronounced and vigorous containment of corruption, and elimination of thousands of “ghosts” workers in the public service. Concurrently, there should be greater ministerial devolution to areas other than the capital city.

Pursuit, constructively and collaboratively, of Heavily Indebted Poor Countries debt rescheduling and relief.

Yet another economic measure that requires to be pursued urgently is the recapitalisation of the Reserve Bank of Zimbabwe (RBZ), with government assuming liability for its accumulated debts and expeditiously settling those debts.

The RBZ must be enabled to fulfil only two roles, and to do so effectively, being the determinant and controller of monetary policies and being a lender of last resort to and supervisor of the financial sector.

Ancillary to these, and other key actions needed of government, is once and for all to restore relationships with the international community.

Zimbabwe should cease its endless attribution of economic ills to the “illegal” international sanctions, must discontinue belittling that community, should adopt a comprehensive “Look North, South, East and West” policy, instead of concentrating on an exclusively “Look East” policy, must discontinue being confrontational and aggressive and instead must, without sacrificing principles, be collaborative.

Should government do all this, as well as related other measures and actions, it can ensure economic recovery and growth, but if it fails to do so, disastrous economic decline is inevitable.

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