Current account surpluses have been cited as an achievement in the macro-economy stability area.In his Monday presentation, Ncube revealed that a current account surplus of 1,2 billion dollars, driven by a 33% rise in ‘capital flows’ from the diaspora. The IMF, in its Staff-Monitored Programme report cited compression in imports due to shortages of forex curtailing demand for imports. This was before Covid-19. The Treasury TSP report does not attempt to explain the contribution of Covid-19 in depressing demand for imports.
The Brett Chulu Column
Treasury, instead, argues that the re-introduction of Zimdollar has curtailed demands for imports due to the local currency promoting import substitution. A current surplus occurs in two economic situations — either in a healthy economy that exports heavily or an economy in recession. Zimbabwe’s economy has been in recession for two years. There is a current account surplus — it is a fact. The question is; has the Treasury given a balanced assessment of the drivers of this current account surplus? Are we allowing investors to repatriate their dividends? To what extent has foreign aid and bilateral aid shored up our current account? What about our failure to pay interest on sovereign loans?
To what extent has Covid-19 tamed imports? The issue here is for the Treasury to account for the extent to which the current account surplus has been a result of factors of its direct policy interventions.
To a large extent, the macro-economic stabilisation objective is on course. However, this statistical stability is yet to translate to affordability as the vast majority of Zimbabweans cannot afford basic services such as medical as these are priced beyondtheir salaries. Stability without affordability is big poser. Has the economy been transformed to deliver private sector-led growth? The second TSP objective was on transforming the economy to deliver private sector-led growth.
The drivers of a private sector led economic growth was premised on opening up the economy to international investment and unlocking of external financial flows through striking a debt treatment deal with international financial institutions and bilateral lenders (Paris and London Clubs). The Staff-Monitored Programme (SMP), an informal agreement with the International Monetary Fund(IMF) to help Zimbabwe attain the targets in the TSP did not turn out as expected — Zimbabwe failed to meet the targets it set for itself.
Country risk has thus remained elevated. Companies that are getting external finance are getting it priced in with the country risk. The 99-year commercial farm land leases are yet to be made bankable.
Policy inconsistencies have not been eliminated as has been envisaged by the TSP. Some international firms have had their brands soiled through allegations of manipulating exchange rates. They were judged before investigations were done; they were absolved of any wrong doing after investigations were conducted. All these key issues have militated against private sector led growth.
The TSP review cites improvement in Ease of Doing Business Ranking. It needs to be stated that the compilers of the Ease of Doing index state clearly that Ease of Doing does not form a basis for making investment decisions. The Ease of Doing Business index has strategic value when it’s used in league with the corruption index. The two indices are highly correlated.
Our corruption index has barely improved during the TSP period. An improvement in Ease of Doing Ranking does not relay meaningful information if there is a little improvement in the specific Ease of Doing Business sub-indices.
Have the infrastructure gaps been closed?
The original TSP document did not explicitly state the infrastructure gaps. It is difficult to assess if the gaps have been closed. We will go by inference. Government indicated a grand plan to bring 200 000 ha of land under irrigation every year until 2030. The TSP review document did not report the performance against this target. In terms of power generation, the TSP review cites upgrades at the Hwange Power Station and Kariba.
The big one, Batoka power project was not mentioned in the TSP review document despite government hailing the US’s General Electric as poised to fund the project. Road projects were also cited as an achievement of the TSP. The matter of the second pipeline for oil from Beira to Mutare was not cited in the TSP despite its strategic importance.
Has growth been stimulated by quick wins? The fourth objective was on economic growth stimulated by quick wins.
The TSP review document did not explicitly address progress on this objective. What is clear is that the TSP missed the 2018 and 2019 economic growth targets, with 2019 experiencing a negative growth of 8,3%. The year 2020 is projected to record a negative growth of 10,4%. The TSP review attributes the negative growth to
external causes, specifically droughts, cyclone Idai and Covid-19. It gives an impression that there are no internal policy dislocations contributing to that negative growth. The TSP set targets for gross capital formation (investment in productive assets) as a proportion of Gross Domestic Product (GDP). The targets, as a fraction of GDP were 16,8% (2018), 18,5% (2019) and 19,2% (2020).
These numbers made serious economic sense as numbers approaching 20% and beyond would be be necessary to sustain economic growth targets needed to attain upper middle-income status as these reflected increasing investment in new productive assets as opposed to replacing worn out productive assets.
The quick wins envisaged in the TSP were very essential in supporting a huge lift in investment in productive assets. Our immediate pre-TSP gross capital formation levels were an average of 9% of GDP. Surprisingly, in the TSP review, the quick wins-led growth objective is inexplicably omitted. The TSP review does not attempt at all to show how we have fared in terms of our gross capital formation targets. It is a grand omission.
The TSP review document surreptitiously introduced three additional objectives. The achievements claimed in terms of social protection and public service delivery are incidental, not a product of strategic forethought. The objective of normalising international relations have suffered significant setbacks. Basic freedoms have been flagrantly violated.
Undiplomatic responses to concerns raised by local and external groupings have taken out the credibility from the re-engagement thrust. Farm seizures continue.
Debt treatment process has stalled due to failure to meet economic reforms. The 3,5 billion USD Global Compensation Agreement, as it stands is just an acknowledgement of debt that was off the books since government does not have a solid plan to fund the compensation. This new debt will simply complicate the process of negotiating external debt treatment.
As has been established in formal performance management, self-assessors tend to over-rate
themselves. The TSP review paints a picture of a good performance. This critique has pointed the areas unattended by the TSP review. The writing of the forthcoming National Development Strategy I need to align itself as closely as possible to benchmark strategic plans with clear objectives, strategic indicators and targets to enable evaluation based on strategic commitments, not incidentals. Future reviews should clearly provide verifiable evidence that strategic objectives have been met or not met.
Chulu is a management consultant. — firstname.lastname@example.org.