IT’s almost a year after President Robert Mugabe won elections but all the lofty electoral promises, including creating more than two million jobs, are far from being fulfilled.
The Zimbabwe Independent Editorial
It is clear that Mugabe and his government do not have a practicable plan to deal with the problems besetting the economy, never mind the frequent reference to the country’s latest economic blueprint, ZimAsset.
All that could go wrong with an economy has gone wrong and the worst appears yet to come.
Liquidity problems, an unstable banking sector and low capacity utilisation are apparent for all to see. The liquidity crunch needs to be dealt with urgently, yet President Mugabe’s government appears to be in no hurry, or is clueless on what to do for “you cannot rig an economy”, as the opposition has warned.
For instance, civil servants salary payments have been delayed for several months with no solution in sight, retail turnover is dwindling; non-performing loans on banks’ books are rising while companies are failing to remit pension and medical aid contributions.
The tax base is shrinking due to company closures and retrenchments.
All indications point to an economy in deep trouble. As a result, government is now further delaying payments to private sector suppliers.
Although the illiquidity has many causes, it is symptomatic of the larger problem of an unattractive investment climate created by poor macro-policies. Some of government’s economic policy choices have forced production volumes down and increased dependence on imports.
Too much of the scarce foreign currency is being funnelled out of the country to pay for imports, with government the chief culprit.
Economists believe the cancellation of the market and collateral value of farmland that used to support the bulk of bank-lending has also contributed to the problem.
While the constitution provides for property rights, the knowledge that such rights might be officially disregarded even now, and that savings and bank balances might be appropriated without owners’ consent, is still undermining confidence and seriously discouraging investment inflows that might have transformed Zimbabwe’s prospects.
To address the liquidity situation in the country, Zimbabwe needs to first ensure that hostile investment regulations and policies compelling foreign investors to surrender controlling stakes in every business to indigenous Zimbabweans are repealed.
Traditional sources of liquidity such as exports and foreign direct investment have all but dried up owing to various factors including the indigenisation programme, low capacity utilisation and lack of competitiveness.
Industry is operating with obsolete equipment, is not competitive and cannot export meaningfully, while government’s industrial policy has not helped manufacturers retool.
Many fear government does not have the political will to deal with these problems even when its future depends on how successfully it solves them.
As a party that romped to victory on the back of promises to indigenise the economy, Mugabe might not be willing to go back on the disastrous indigenisation policy despite rhetoric in public.