Of course, it is much too soon to give a definitive response to the above question as to whether President Emmerson Mnangagwa can turn around the economy. However, if his inauguration speech is taken seriously, we are certainly about to see the starting steps to economic recovery and the building of a democratic society that we all imagine but this will be without significant challenges on our capacity and also our values.
Whether we agree with it or not, Zimbabwe today is classified as a fragile state by the International Monetary Fund. A fragile state is defined as a country that cannot generate adequate income and is therefore unable to meet its day-to-day needs. It is dependent solely on primary exports, whose prices can fluctuate significantly and often, has high debt levels, pervasive corruption, lack of transparency and non-accountability.
This is the challenge our President will face; how to move from fragile state must be the first and most important task. Then from there, how do we transform to create sustainability while building the necessary pillars for democracy.
Naturally, there are many critics and sceptics out there, but that does not change the fact that Mnangagwa has a once-in-a-life time opportunity of changing the direction of not only our economics and politics but, more importantly of getting Zimbabweans to think differently about him and their country, especially what we can become.
Can Mnangagwa re-invent himself?
For me the answer to that is a definite yes. I have no doubt that we are certainly going to see a different man who recognises that he has an opportunity to leave a legacy as the man who started Zimbabwe’s economic turnaround.
I also think he will reflect seriously on who he can become and begin to behave accordingly. We cannot erase or change the past, but we can learn from our mistakes and correct them.
Can he rebrand Zim?
In September 2015, Finance minister Patrick Chinamasa issued a document titled Zimbabwe’s Strategies for Clearing External Debt Arrears and the Supportive Economic Reform Agenda.
The supportive economic reform agenda stated in that document includes; the strengthening of confidence in the financial services sector, accelerating re-engagement with the international community, revitalising agriculture, advancing beneficiation in or value-addition agriculture and mining, focussing on infrastructure development, unlocking small-to-medium enterprise potential, improving the investment climate, accelerating public enterprise reform, modernising labour laws and aligning of laws with the constitution and dealing seriously with corruption.
This is now the task of the new President and, coincidentally or deliberately, he dealt with all these issues in his inauguration speech.
In this article I want to deal with the critical issues of revitalising agriculture, re-engagement, beneficiation and infrastructure rehabilitation and improving the investment climate.
The President dealt with this key issue as priority number one in his speech. The government of Zimbabwe in principle accepted its responsibility to compensate land owners, subject to an agreement with the farmers on a compensation framework, and then securing the required resources. This will now be dealt with.
Such framework must take into account the compensation for land and improvements, including the consideration of such issues as land valuation methodologies and mechanisms, land price information, the basis of levels of compensation to be paid for land and associated property acquired, interest payable and possible institutional responsibilities. Once these are resolved, compensation can then be agreed upon and paid.
The revival of the agricultural sector can certainly be achieved by mobilising funds for compensation from the international community through a compensation model whose key objectives are;
- To remove the conflict over land rights;
- To monetise lost value inherent in the land and other assets;
- To ensure that the compensation is affordable;
- To give new farmers real bankable security of tenure; and
- To establish a market for land and other rural assets.
There is no doubt that the international community has come to the party, especially the United Kingdom. This was evidenced by the presence of British delegates at the inauguration and the stated willingness to assist as Teresa May mentioned.
I suspect we shall see a thawing of relationships with the West and a more measured productive relationship with countries such as China, which will no doubt remain close to the new regime. What will be key is for Zimbabwe to move away from a cosy relationship with “rogue states” and that may be the condition of the re-engagement with the West.
The issue of targeted sanctions must be dealt with expeditiously to allow the economy to revive without limitations. Sanctions will therefore be a thing of the past and so will be the incessant excuses for economic failure by Zanu PF.
Mnangagwa spoke about unlocking the full potential of our resources and increasing of exports as critical to economic recovery.
Despite the promise to beneficiate our resources under former president Robert Mugabe, this has not borne any visible and tangible benefits. Zimbabwe remains a primary exporter of raw minerals and a net importer of several critical consumables including food.
This has always made the country vulnerable to international commodity price fluctuations and smuggling, resulting in declining export earnings, while the import bill has increased considerably, putting pressure on the balance of payments.
Zimbabwe is estimated to lose about US$50 million a month in smuggled minerals, while annual illicit fund flows are estimated at US$2 billion per annum.
These are, of course, just estimates which are most likely significantly understated due to lack of effective monitoring. Attending to corruption will be a disincentive to smuggle, but it will be important that a few rogue traders are brought to book and made an example of.
Swift justice is critical.
It is estimated that Zimbabwe will require about US$15 billion to rehabilitate its dilapidated infrastructure. In general, infrastructure is defined as electricity, gas, telecoms, transport and water supply, sanitation and sewerage.
The need to improve the quality of infrastructure services is, therefore, the cornerstone for our future growth.
Mnangagwa will have to move very fast to deal with public infrastructure such as roads, water and electricity availability as these are visible and will demonstrate to citizens that things are indeed improving.
What has bogged down this sector is sub-standard project management skills and corruption in issuing tenders and over-invoicing to fund middlemen thus making infrastructure expensive and inefficient.
The President spoke about partnering with international development partners but, also critical, he spoke about the need for us a country to save and invest. We just have to create an environment that encourages domestic savings and attract long-term infrastructure development so that we can finance our own projects as a country. We must not rely too much on conditional foreign funding.
Extractive economic systems, as was the case under Mugabe, are not sustainable because they limit economic freedom and free enterprise. Inclusive economic systems that protect private property rights create fair access to economic opportunity for all encourage investments in new technologies and skills are more likely to create better societies and developing societies.
Mnangagwa seems to clearly understand this, and he did emphasise that Zimbabwe will protect foreign investors, while doing all it can to improve the ease of doing business especially in the public sector. We must reduce perceived country risk and the President committed that government will recognise and abide by the Bilateral Investment Promotion and Protection obligations. This was not the case under Mugabe.
The key issue will be revisiting indigenisation laws, which have made foreign investment unattractive but he stayed clear of this still controversial topic. Zanu PF’s December congress might come up with a stronger position, we wait to see.
Let us wait and see.
Musewe is an independent economist and author. These New Perspectives articles are coordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society (ZES). Email email@example.com and Cell +263 772 382. 852.