Economics 101 says capital is timid. But Zimbabwe’s government does not subscribe to this thinking and has mastered the art of policy inconsistency — indicating right and turning left.
By Hazel Ndebele
Conflicting pronouncements, policy discord and poor governance have come to define the Zanu PF government’s clueless efforts to stem an economic implosion.
The International Monetary Fund (IMF) has already raised a red flag, warning that Zimbabwe could lose the momentum gained in its quest to engage the international community.
“The situation is quite challenging and the conditions have been deteriorating over the past two months. There has been policy inconsistency which might not have been conducive in the terms of traction and momentum that was gained after the Staff-Monitored Programmes,” IMF country representative Christian Beddies told a group of academics recently.
While this is happening, confidence in government is hitting rock bottom. For starters, the introduction of bond notes, which are reportedly backed by a US$200 million facility, is shrouded in secrecy.
To add to the confusion, the reasons for introducing the surrogate currency, which the central bank says will serve as an export incentive, oscillates each passing day.
Just last week Finance minister Patrick Chinamasa and the Reserve Bank of Zimbabwe governor John Mangudya revealed serious incoherencies over the bond notes.
Addressing the 2017 pre-budget seminar in Bulawayo, Chinamasa dropped a bombshell when he announced that counterfeit bond notes were in the market, way before public campaigns on the security features had been rolled out. Chinamasa did not say exactly who is behind the fake notes.
Mangudya immediately sprang to the defence of his pet project, dismissing claims by his boss barely a week after.
Previously, Vice-President Emmerson Mnangagwa has openly expressed support for a currency that the government can control. Mnangagwa recently said the United States dollar is a reserve currency which should not be used for even mundane transaction. This is contrary to government policy which says that the greenback is the anchor currency since the adoption of multi-currency regime in 2009.
“The US dollar is a reserve currency. It is a precious currency to most countries in the world. It’s for international transactions. Haisi yekutengesa matohwe, yekutengesa mavisi, yekutengesa madora kana yekutengesa mazhanje. (It is not meant for buying snot apple, water melon, mopani worms and wild loquat fruit),” said Mnangagwa.
The mixed messages show that government does not bother to speak in the same language and therefore in the process delaying economic revival and progress. Meanwhile, Zimbabwe remains a tail-ender in the World Bank Ease of Doing Business Report.
These contradictions and ongoing discord in government reflect a lack of cohesion on various issues which include indigenisation, foreign direct investment and the re-engagement (of the international community, especially the West) process.
Chinamasa has in recent years become the butt of government failures despite his reform-minded pronouncements. He has been dressed down for doing his job in the best way he knows. After Chinamasa announced that civil servants must forego the 13th cheque this year to create fiscal space, President Robert Mugabe played to the gallery during Independence Day celebrations, throwing the Finance minister under the bus, after asserting that government workers would receive their salaries despite the dire economic situation.
In the face of such fire, Chinamasa beat a hasty retreat by apologising for his “procedural mistake”, but also took the opportunity to paint a gloomy picture of the economic situation. Official figures show that salaries now gobble up 96% of the national budget.
Presenting the Mid-Year Fiscal Policy Review in September, Chinamasa announced government’s intentions to cut its bloated civil service wage bill through retrenchments, but Labour minister Prisca Mupfumira came out guns blazing, saying there would be no layoffs.
Political analyst Maxwell Saungweme said the mixed messages show discord and a lack of cogent ideas in government to take Zimbabwe out of the multi-faceted crisis.
“Contradictory messages also betray the fact that there are no clear economic policies and hence potential investors will sit back waiting for clarity as they can’t throw their money in a policy jungle,” said Saungweme. “Already people have lost confidence in this regime and these contradictions vindicate the fact that we have a clueless lot at the helm. We have an economy on autopilot and we are as good as a people without a government.”
Early this year Chinamasa and Indigenisation minister Patrick Zhuwao publicly clashed over the implementation of the Indiginisation and Economic Empowerment Act with Zhuwao pushing for foreign-owned banks to relinquish at least 51% shareholding to Zimbabwean locals as stipulated by the law and threatening to withdraw their licences if they failed to comply with the law, while the Finance minister argued banks had submitted satisfactory plans.
Mugabe then issued a statement through Information minister Chris Mushohwe seeking to clarify the indigenisation policy after the conflicting positions.
“Conflicting positions in the interpretation of the indigenisation and economic empowerment policy have arisen of late. This has caused confusion among Zimbabweans, the business community, current and potential investors, thereby undermining market confidence,” said Mugabe. “This situation has also led to the increase in the cost of doing business, thus further weakening the country’s economic competitiveness,” Mugabe said, before listing his points of clarification. However, despite the fact that Mugabe and his government are aware of the dire implications of policy dissonance on the economy, they continue contradicting each other.
Economist Vince Musewe said inconsistencies in government policy cost money and create uncertainties for the smooth running of the country and business in particular.
“Policy inconsistencies affect good planning and have an impact on profitability. No investors like moving targets and no project can be successful if the rules change midway. As a result, investors do not invest,” Musewe said.
“Also, it increases perceived country risk and impacts on all sectors of the economy. Any government should be consistent in its policies to allow development and certainty.”