FOR too long government has been ignoring realities and, consequently, is the cause of over a decade of economic distress with attendant massive unemployment, poverty, infrastructural decline and unsustainable national debt among other consequences.
The Eric Bloch Column
It is indisputable that the Zimbabwean economy cannot recover substantially, despite its massive potential, without attracting substantial foreign investment.
The economy is currently so emaciated that domestic investment funds are minimal, hence the need for recourse to foreign funding, concurrently with accessing state-of-the-art technology not presently available in Zimbabwe. However, almost all investors turn their backs on Zimbabwean investment opportunities because they are deeply concerned that their investment will not be secure. That fear was initially fuelled by perspectives on political instability and unrest prior to the 2008 elections, and still exists albeit at much lesser levels.
Thereafter fears over investments insecurity intensified when Zimbabwe started implementing indigenisation legislation, enacted in March 2008, and vigorously pursued in the post-election period. Almost all investors are willing to have indigenous co-investors, but do not wish such investors to be imposed upon them, especially so when the co-investors are governmental entities such as the National Youth Development Fund. They wish to associate with co-investors who can fund their investment participation timeously, and who are able to contribute constructively to the beneficial operations of the investment entity.
The potential investor is also usually unwilling to have a minority status in the investment entity, which in terms of prevailing policies is the case, for government emphatically persists in its demands that non-indigenous investment participation not exceed 49%, with indigenous investment at 51% minimum.
That fear of investment insecurity is compounded by statements such as that recently made by President Robert Mugabe that all Zimbabwean economic entities should be 100% held by Zimbabweans, notwithstanding the president shortly thereafter stated publicly that foreign investors must comply with Zimbabwe’s investment laws and policies.
If 100% of investments are to be held by Zimbabweans (most of whom are devoid of investment funding) there can be no foreign investors, and hence no obligation to comply with Zimbabwe’s laws and policies. However, Mugabe’s subsequent statement does imply 100% of all Zimbabwean entities need not be held by Zimbabweans, and that foreign investment is acceptable. Nevertheless, such conflicting statements result in further investor concerns over potential investment insecurity.
Another factor receiving little government attention is the intensifying decline of most governmental infrastructure. Since inception, Zesa was understood to be the “Zimbabwe Electricity Supply Authority”. Now, derisively, Zesa is said to denote “Zero Electricity and Substantial Accounts”.
The aged electricity-generation and distribution infrastructure not only is incapable of generating sufficient electricity to meet all Zimbabwean needs, but is constantly breaking down. Hence consumers are not only subjected to extended load-shedding periods, but suffer many other outages due to the breakdowns.
The inadequate and irregular electricity supplies are not Zesa’s fault as it valiantly tries to minimise power non-availability. The reality is Zesa lacks the resources required to replace and upgrade its aged and decrepit infrastructure. Zesa is grossly undercapitalised, and as it is wholly state-owned, the required capitalisation should be provided by government.
However it does not have the resources, or will, to enhance the capital funding of its parastatals. Because of the electricity supply shortage industries have many periods of non-production, resulting in losses. Effective operations of the commercial and distributive sectors are also prejudiced, as is the agricultural sector which is often unable to irrigate crops timeously. The power cuts have also jeopardised the motivation of tourists to visit Zimbabwe.
Also undercapitalised are many other parastatals including National Railways of Zimbabwe, Air Zimbabwe, TelOne, and various others. All lack the capital necessary for full maintenance, upgrading of infrastructure, and access to the latest state-of the-art technologies. Government should now accept that because of its bankruptcy, it is wholly unable to fund the capitalisation necessary (in excess of a billion dollars) for the restoration of real life to the parastatals, thereby advancing economic recovery.
This must then lead to the end of the long resistance to parastatal privatisation, and external investment being sourced. Such privatisation could be total or partial disinvestment by the state and, if realistically pursued, can be readily achieved. Over recent years, significant investment interest has been demonstrated by major companies and investment entities in Germany, France, Belgium, the United Kingdom, Israel, Australia, Switzerland and many other countries.
Government is also unwilling to meaningfully reduce the national debt and achieve a fully-balanced budget, instead of deficits and consequential increase of its debt. It is incomprehensible that to render state services to a population of approximately 12 million, the state employs approximately 230 000 public servants. Progressive reduction of the civil service, primarily by non-replacement of retirees, would result in lowering of the numbers employed by the state, and therefore its massive salary bill.
Equally incomprehensible is the magnitude of the state’s travel expenses. International travel is essential for any government, but the extent of travel undertaken by ministers, permanent secretaries and other government personnel cannot be justified.