Abandon toxic laws, says RBZ chief

AS Zimbabwe’s economic meltdown characterised by continued company closures and 20 000 job losses in three weeks after a Supreme Court ruling worsens, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has boldly called on government to make prudent policy decisions including abandoning laws that discourage production and industrialisation as a means to sustainably deal with challenges besetting the economy.

Taurai Mangudhla

Zimbabwe in 2007 passed the Indigenisation and Economic Empowerment Act, which compels all foreign owned companies to relinquish controlling squity stikes to Zimbabwean locals and has been the center of a debate and controversy in government in recent years with some quotas calling for the law to be repealed.

RBZ Governor John Mangudya
RBZ Governor John Mangudya

Government has made various statements to the effect that it is willing to negotiate on a case-by-case basis and give some form of flexibility, but it seems foreign investors remain wary of the policy and have adopted a wait and see attitude.

Last month, Economic Planning minister Simon Khaya Moyo said government was working on further amendments to the damaging indigenisation policy which has been a major obstacle to foreign direct investment (FDI) into the country.

Apart from the indigenisation policy, the country embarked on a controversial fast track land reform programme that dispossessed thousands of white commercial farms around 2000 and destroyed billions of investment in farm equipment and land development. The process has put into question the country’s tenure security and has been cited as among the reasons, together with policy inconsistency, deterring investment inflow.

As a result of its uncompetitive policy environment, Zimbabwe only managed to attract a paltry US$545 million in FDI compared to Mozambique’s US$4,9 billion and South Africa’s US$5,7 billion in 2014.

In his mid-term Monetary Policy Statement last week, Mangudya said Zimbabwe needs to do more to increase production and productivity. He said this was achievable by “walking the talk” through implementing the government approved production-friendly package of policies that include further opening up of the economy for investment and tourism consistent with, setting up of joint ventures, implementation of the special economic zones, open tourism policy, removal of obstacles that inhibit production and exports, targeted productive lending, reduction in the cost of doing business and or improving the ease of doing business as well as the promotion of Diaspora investments. He said production and productivity enhances liquidity and reserves, fiscal space, capacity to service loan obligations, employment, and as a result helps the economy to grow beyond stabilisation.

“Key success factors that are needed to go beyond stabilisation include dedication, determination, discipline and sincerity. Disciplined and sincere enough to ensure that policies that are not supportive of production and productivity are minimised and or not tolerated,” said Mangudya.

He added that the country needs to fully exploit its assets in the form of natural resources and people. Mangudya lowered interest rates on borrowings in a bid to entice businesses to take advantage of cheaper funding to recapitalise and stimulate production. He also revised the debt-to-equity threshold for greenfield investments, proposed creation of a bond market and introduction of export incentives to promote exports and boost revenues.

Mangudya also said there was great and urgent need to take stock of the levels of indebtedness of government to public enterprises, public enterprises to government, public enterprises to public enterprises and government to the private sector.

He said it was essential to minimise or remove the current serious gridlock of payments within the national economy whereby several payments each await settlement of the other.

“There is therefore great need to come up with netting payment systems resolutions in order to cleanse the historical obligations of all affected entities including government (and) this needs urgent attention before the payment gridlocks escalate to unsustainable levels,” said Mangudya.

He said the country’s debt stock remained a developmental constraint.

Zimbabwe’s external debt stands at close to US$10 billion and has had the negative repercussions of the suspension of balance of payments and budgetary support by the development financial institutions to the country.

“In this context, the resolution of the country’s debt burden should rank high on the country’s development agenda. This is largely so, as the resolution of the country’s debt remains integral to efforts geared at improving the country’s credit worthiness and the effective unlocking of affordable credit lines,” said Mangudya.

He also said fiscal and internal devaluation measures should be seriously considered in Zimbabwe to improve the cost of doing business and export competitiveness. Mangudya said only serious and productive producers should be assisted or granted resources by financial institutions or government to improve productivity.

As Zimbabwe continuous to witness de-industrialisation and subsequent job losses, citizens have taken up informal employment including vending. However, government recently launched a campaign to end illegal vending. The campaign has faced wide criticism and has been cited by Oxford Economics’ risk assessment firm NKC African Economics (NKC), together with the Supreme Court ruling that resulted in wholesale job losses over a month, as amongst the reasons to potentially spark a conflict.

Following the NKC report, political analyst Pedzisai Ruhanya said there was a huge potential conflict in Zimbabwe stemming largely from a political vacuum and lack of succession plan for President Robert Mugabe.

He said Mugabe was too old to rule the country and address its problems. As a result of Mugabe’s old age, his wife, Grace, is playing defacto President, a role she will not play for an extra second in her husband’s absence, said Ruhanya.

Ruhanya argued there was need for a collective effort in civil society and opposition leaders to push for national interest.

“The problem is right now there is no leader to listen to these disgruntled voices and come up with a way forward,” he said, adding “ we need to put our personal differences aside and people like Mujuru (Joice), (Morgan) Tsvangirai , (Tendai ) Biti and (Welshman) Ncube must come together for national interest no matter who the leader is,” he said.

Ruhanya said what unites Zimbabweans at the moment was the issue of their livelihoods which are increasingly under threat from latest economic and political developments. MDC-T national spokesperson Obert Gutu said Zimbabwe under Mugabe, was an accident waiting to happen, adding any country with unemployment levels in excess of 80% is potentially a conflict zone.

“Just imagine what will happen to the job market when the Zanu PF regime fires no less than 200 000 civil servants in order to cut its salaries and wages bill by 40% as announced by Chinamasa. The fact that the people of Zimbabwe are seemingly quiet doesn’t necessarily mean that they are happy with what is happening around them; particularly with regards to the crumbling economy,” Gutu said.

“Remember, a hungry man is an angry ma. One day very soon, something will have to give. We are in a melting pot. The suffering by the majority of Zimbabweans has now reached the tipping point. You just need to remove the lid on the boiling pot and there will be a massive explosion. This state of affairs is untenable and that’s why the Zanu PF regime is in panic mode. Zimbabwe is now a virtual failed state; a classic example of a banana republic.”