ZIMBABWE is facing a myriad of challenges, including a huge debt overhang which is a stumbling block to new financing, hyperinflation that has eroded people’s disposable incomes, and general economic decay which has plunged the country into its worst crisis in a decade.
While the country is making efforts towards economic reforms, analysts and civil society organisations have argued that the changes should be implented in tandem with political reforms. Against the backdrop of the high debt levels bedevilling the economy, composed of 75% arrears, which government has failed to resolve over the past two decades, civil society organisations, the African Forum and Network on Debt and Development (Afrodad) together with Zimbabwe Coalition on Debt and Development (Zimcodd) last week held a stakeholders’ public debt conference to discuss these issues and map the way forward for the country. Business reporter Melody Chikono (MC) this week spoke to Zimbabwe Economics Society (ZES) immediate past president Lovemore Kadenge (LK, pictured) on these and other economic issues. Find the excerpts of the interview below:
MC: Start by sharing with us your thoughts on Zimbabwe’s current debt situation and its impact on the economy.
LK: Well, the impact of debt, as you could tell from the (conference) discussions, is that Zimbabwe is unable to get any finance from the international financial institutions until it pays back its debt. The impact is the debt is 25% and about 75% are arrears, so now it is really a challenge for us to be able to pay back our debt. You must be able to generate enough revenue and also other countries depend on (foreign direct investments) FDIs from other institutions.
Zimbabwe is in a dilemma in that it is unable to get resources from other countries because it cannot pay its debt.The other issue is, if you are in a situation where you are known for not paying debt and if you go and try to look for loans, you pay a premium because you are a risky country.
I remember I was talking to various embassies of Western countries and others where they were saying in their culture, even in our culture, Zimbabwe must simply pay back its debt for it to be able to receive support from the international community.
Zimbabwe is really in a dilemma. On the other side is this programme of staff monitoring with the IMF which I understand we seem to be doing fine but, as you could tell from the IMF representative, there are two sides of the coin. There is the economic side which IMF says we are doing fine although, of course, looking at the economy we are not doing fine. We also have another issue on the political side on the reforms themselves.
I think, as a country, we are scoring an own goal because if you look at the issue of the demonstration which took place last week on Friday on sanctions, the basic reasons why sanctions were brought in 2001 were three. The issue of violations of human rights. People were being killed and beaten up for believing in a different political party and secondly the issue of land reform, from the way it was done and lastly the issue of governance.
You see that in as much as we say the issue of land reform is a done deal, it is not reversible but unfortunately on the other two issues we are not doing fine. If anything, we are actually doing exactly the opposite of what we should be doing.
Zimbabwe is not scoring well on the issue of governance and we really have a challenge. Other countries in the region are receiving FDI (foreign direct investment) from other countries. It appears that maybe China, our all-weather and other friends are the ones who have come to the party.
However, as you know, China is number two in the world in terms of the economy and its aim is also to be competing with Eastern countries. That is the reason why they are giving us resources without any conditions at all. I think as a country we need to re-engage with the West and unfortunately we are not doing fine. Worse, on Friday (October 25) the Minister of State Security got placed on the sanctions list.
MC: Considering the diplomatic fallout you are describing, it seems the re-engagement process is now futile given that government and the US were exchanging tough words. How do you see the re-engagement project panning out?
LK: We really have a challenge and I think there were a lot of challenges in government. Zanu PF thought they would fill the stadium and it would send a message but you could see from the messages coming from the Western side that we are not doing well at all. We really have challenges.
When you look at the issues of human rights, people who are being beaten, people who have been beaten, raped and everything, you will realise it is not a simple issue. I have involved myself in terms of assisting those who were beaten last year and, recently, women who were raped by the military and everything else. So we are not scoring well and I think what government must do is to make sure that we put our efforts in addressing the issues of good governance. Mnangagwa has no choice but to engage with Chamisa — that is the bottom line.
MC: On the economic front, how soon do you think Zimbabwe will be able to generate its own foreign currency given the current turmoil?
LK: Well, the challenges we have are basic issues, for example power itself. Currently people are only having power at 10pm and it goes at 5am and a number of companies are operating within that time.
You also have to note that it is very expensive to produce using a generator. So in the absence of power, how do you generate income? You need to have constant power and that is why government’s relationship even with its all-weather friends, the Chinese, is now badly wounded. You see, when they raided their account and stole their US$10 million, it is not good for them.
The Chinese need to complete the power stations where they have been funded. The issue of power is very critical.Secondly, electricity is now very expensive but it is not available. It is also very expensive to be using generators for production.
MC: You spoke about bad governance and lack of accountability. What are your real concerns on accountability?
LK: Well, by profession I am an accountant. The issues of accountability are of critical importance. I read (Auditor-General) Mildred Chiri’s reports year-in-year out.
We have a situation where ZW$3 billion is put aside to assist in command agriculture. Then somewhere along the line no one knows where the money has gone, no receipts and no accountability whatsoever.
If people steal money or if you cannot account for the money, then how do you make people have confidence in you that if they give you money you will account for it properly? So my take is we in our institutions need to employ proper governance.
We can’t just have ZW$3 billion disappear.That is what we should have done last week on Friday (October 25). It should have been Zimbabwean people marching against corruption, bad governance and non-accountability. That is what we should be doing. The biggest sanction Zimbabwe has is the issue of corruption. We must get our officials, both public and private, accountable. That is really my worry.
MC: We have heard about the government considering aligning the Zimdollar with the rand. What is your comment?
LK: The biggest challenge we face as Zimbabwe is inconsistency. Policy inconsistency. Even when (finance minister) Mthuli (Ncube) came, we were told that we will only have a new currency at the end of December.
But we already have it. We have been told that the US$ is equal to the bond note but you know it is no longer that. So the issue is: Do you trust what they say?
The biggest challenge we have is that people have lost faith in what government officials say.
MC: What then are your recommendations to government in terms of the economy, debt and policy?
LK: Well, as you have seen from the workshop itself, there are a number of provisions according to the constitution, the RBZ (Reserve Bank of Zimbabwe) has its own recommendations. We have laws which tell us the thresholds that we should not exceed when borrowing. So I think what we need as Zimbabwe is to abide by the law and make sure that our public officials are accountable.
There is also need to make sure that those who steal the money or break the rules must be imprisoned. They must pay back as (South African opposition leader Julius) Malema said. If we have no penalties for people who steal people’s money, then they will steal again tomorrow.
So my recommendations would be: Let the police doA its work, let Zacc (Zimbabwe Anti-Corruption Commission) do its work and let parliament do its work and let anyone who breaks the law irrespective of his position in the party (Zanu PF) or government face the consequences and pay back.