Govt rhetoric vs economic reality

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Despite claims by President Emmerson Mnangagwa that his government has secured investments worth US$16 billion, there is no evidence on the ground showing that the economy has received such massive flows of foreign direct investment.

Zimind Comment

If anything, the objective indications point to a deterioration in economic fundamentals. The trade deficit hit US$1 billion in the first four months of this year. This shows that the economy is losing large amounts of foreign currency to its trading partners. There is every reason to believe that, given huge elections spending and companies’ retooling, the deficit could increase to US$2 billion by year-end.

Zimbabwe’s import cover, which stands at a mere 15 days, reflects the precarious state of our balance-of-payments situation. Comparatively, our neighbour Botswana has 15 months’ cover.

There is no doubt, of course, that Zimbabwe has generally seen a huge improvement in investor sentiment in the past six months. However, it is important to emphasise the point that there is a vast difference between “commitments” by foreigners to invest and the actual movement of capital inflows and equipment into the country.

While politicians have the luxury of preoccupying themselves with woolgathering rhetoric, the stark reality is that the ordinary citizen is bearing the brunt of a comatose economy. The economy is simply not productive enough to generate the capacity to make a difference in the quality of life. We are still deep in the woods.

In fact, prices are shooting up, making life very difficult for consumers. Prices of fuel, basic foodstuffs and other goods are going up—yet disposable incomes (in a country where the rate of formal unemployment has reached crisis proportions) either remain stagnant or have been eroded significantly. Signs of decay are everywhere. In these pages today, we report that companies are struggling to pay retrenchment packages, citing viability challenges as the main reason.

The deepening economic crisis — characterised by a crippling liquidity crisis, a severe cash shortage, low capacity utilisation of less than 50% and obsolete equipment — has forced companies to downsize their workforce or retrench, fuelling unemployment.

The Retrenchment Board says the struggling firms, when faced with the tough task of paying severance packages, is requesting to stagger a US$2 000 package over two to three years.

Some companies are seeking exemption from paying the retrenchment packages. This is in violation of the law which clearly stipulates that retrenched workers be paid two weeks’ salary for every year served. The government’s failure to solve the cash shortage is a major source of suffering. Desperate Zimbabweans are still sleeping in bank queues for just a handful of bond coins.

Although there is a renewed sense of investor confidence, we cannot ignore the marked deterioration in the general quality of life as shown by the escalating prices of basic commodities, a sharp increase in poverty levels, the continued collapse of private companies, a rise in formal unemployment and the sense of hopelessness among the urban poor and the youth. What Zimbabwe needs is a comprehensive strategy for socio-economic rejuvenation, not electioneering rhetoric about imaginery billions and false recovery.

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