Zimbabwean and South African officials will meet next week, as preparations for the visit by South Africa's President Cyril Ramaphosa to his northern neighbours gather momentum.
President Ramaphosa will visit Zimbabwe on March 12 for the Third session of the two countries' Bi-National Commission (BNC), and Zimbabwe's Ambassador to South Africa Mr David Hamadziripi said yesterday that preparations for the visit were underway in both Harare and Pretoria.
The two countries held their last BNC in October 2017 and the visit by President Ramaphosa will give a lift to the already existing strong bilateral relations.
"We are going to have meetings with relevant South African officials next week to prepare for the BNC," he said.
"It is important to note that the BNC, which last met in Pretoria in October 2017, will review co-operation across the board.
"We expect issues around trade and investment, energy, transport, health, security and defence among others to be the major talking points."
He said one of the major issues expected to dominate the discussions was the establishment of a One Stop Border Post (OSBP) at Beitbridge. Under the concept travellers will be cleared once for passage into either country as opposed to the present situation where travellers have to queue twice at either side of the border to complete the same processes, which slows down the movement of cargo and human traffic.
Zimbabwe and South Africa enjoy cordial relations dating back to the days of their struggle for liberation. There is also likely to be a strong geopolitical flair as South Africa, the most influential neighbour and Africa's strongest economy, will likely throw weight behind Zimbabwe on the back of external pressures against the country, notably regarding illegal sanctions imposed on the country by the West.
Last week, the 28-member European Union bloc reviewed its restrictive measures on Zimbabwe, which was but a small token amid opposition to the embargo from progressive forces.
South Africa's Minister of International Relations and Cooperation Lindiwe Sisulu this week revealed that South Africa remained ready to help Zimbabwe, underscoring that the regional giant had a strong interest in having Zimbabwe as a peaceful and prosperous neighbour. She said of sanctions against Zimbabwe was central to this and that sanctions would feature in the discussions between Presidents Mnangagwa and Ramaphosa. President Ramaphosa has been a strident anti-Zimbabwe sanctions campaigner himself.
Last month, he took the campaign to the 49th edition of the World Economic Forum (WEF) in Davos, Switzerland, where he publicly called for the lifting of the embargo. Last year, he also called on the European Union (EU) to lift sanctions on Zimbabwe during the 7th South Africa-European Union Summit in Brussels, Belgium, where they discussed a number of issues around trade, climate change, women's rights among other global issues.
The EU and the United States of America maintain sanctions on Zimbabwe, with the EU having progressively loosened the measures. The US remains adamant, tying the punishment of Zimbabwe and Zanu-PF to give an advantage to the opposition MDC-Alliance.
A US$3 billion platinum deal between Zimbabwe and Russia is now mired in controversy after it emerged this week that the funding for the project will come from African Export-Import Bank (Afreximbank) institutions and African Finance Corporation.
Sources in the mining sector told businessdigest this week that the platinum mining venture will not be financed by Russian capital.
According to sources, government entered into a memoranda of understanding between Afreximbank and Great Dyke Investments (Pvt) Ltd concerning the Darwendale Platinum Group Metals Project in Zimbabwe.
Another memorandum of understanding was signed between the African Finance Corporation and Great Dyke Investments (Pvt) Ltd for the Darwendale Platinum Mining Project.
"This deal is going to be funded by African money. All this talk about Russia financing this deal is just propaganda. The question we ought to ask is obviously around whether Zimbabwe needs Russia to get funding on this particular deal," a source said. "Government has basically given away platinum rights to the Russians for no monetary value."
The disclosures have brought into question Russia's contribution to the deal.
Sources say government could have gotten funding from Afreximbank and African Finance Corporation.
Great Dyke Investments chairperson Hesphina Rukato said she expected financial closure on the deal by June.
"Working financial closure is expected to be in June and then we expect construction is going to start in July," Rukato said before requesting questions in writing last week.
At the time of going to print, Rukato had not responded to enquiries sent to her via email last week.
Rukato accompanied President Emmerson Mnangagwa on a trip to Russia last month that saw the signing of the controversial deal.
In a report back on Mnangagwa's state visit to Russia, Belarus, Azerbaijan and Kazakhstan last month, Information minister Monica Mutsvangwa confirmed agreements had been signed with Afreximbank and Africa Finance Corporation but did not elaborate on the actual details.
Mines minister Winston Chitando confirmed agreements with the two financial institutions had been signed, but said he did not have specifics on the deal.
"I don't have actual specifics but I know that Great Dyke entered into an agreement with the financiers and they have two separate agreements. You would need specifics from Dr Rukato," he said.
Asked what the Russians were bringing to the table, he said he did not have actual details of the deals.
"There is no project, especially one of this size, that can be funded only by equity. Such a venture would require a combination of equity and capital. I don't have the actual numbers, but projects that size normally require debt financing," Chitando said.
Additional efforts to seek a comment from Rukato were fruitless yesterday as she claimed to have been travelling since last week.
"I will get the team to look into them today as I have been travelling," she said.
Great Dyke Investments is a joint venture company between the Russians and Zimbabweans in the Darwendale platinum project. Pen East Investments and Russia's JCS Afronet are said to have commissioned the platinum mining project in 2014 but to date the deal has not moved an inch.
The project is expected to haul at least one million ounces of platinum per annum. At least 15 000 jobs are expected to be created when the company starts operating at full capacity.
Large-scale exploration works at the Darwendale deposit commenced in January 2015. GDI had planned to drill over 300 000 running metres, making it one of the biggest exploration ventures in Zimbabwe.
The scope of work was designed to prove the deposit resources in indicated category for longer than a 20-year mining period. The Darwendale deposit resources have been estimated at 40 million ounces of platinum group metals (PGMs).
The initial scope of the project entailed the phased construction of a complex for mining and concentration of 10 million tonnes of ore per annum, and a smelter to enable production of up to 800 000 ounces (25 tonnes) of PGMs in the form of converter matter as final product.
At optimum capacity, the project was expected to require an investment of up to US$4,2 billion. GDI plans to set up a refinery in line with the government's thrust on value addition. Apart from the Russian deal, government also signed an agreement with Great Dyke Investments (Pvt) Limited.
Source - The Independent
Zimbabwe's government continues to explore avenues of attracting lines of credit from neighbouring South Africa after the continent's most prosperous nation rebuffed an earlier request by Harare for a R16 billion (US$1,129 billion) rescue facility, Finance minister Mthuli Ncube has revealed.
South Africa has emerged as the only hope for President Emmerson Mnangagwa's administration for a financial lifeline after several countries, including China, spurned its approaches, citing Harare's tendency to default on debt repayment.
Ncube confirmed in an interview this week that several meetings he held with his South African counterpart Tito Mboweni have so far failed to convince the regional economic giant to commit itself to rescuing Zimbabwe.
"There is no commitment, but we have ongoing discussions," Ncube said, adding government would welcome any form of financial assistance from south of the Limpopo.
"We are in constant talks with South Africa, they are our neighbour, biggest trading partner and we have a bi-national commission. So we have been interacting with them, to see whether they can be of help and support us whenever we need it," he said.
The Treasury boss said government remained hopeful in the face of shrinking sources of credit.
Although there remains a possibility of South Africa extending a US$7 million credit facility to clear part of Zimbabwe's World Bank arrears, the neighbouring country appears reluctant.
Mnangagwa told private media journalists a fortnight ago that: "We started engaging South Africa earlier this year when we had the cooking oil shortage. Then because of the nature of relations between us and South Africa, we said to South Africa can you give us lines of credit. So this is why discussions between the South African minister of finance, our own finance minister and the governor of Reserve Bank of Zimbabwe started."
"Talks are therefore underway for a line of credit from South Africa Botswana has also given us line of credit worth 70 million Pula. What it means is that Zimbabwean businesses can get goods from those two countries worth that amount. We are then given a grace period and then we could be able to repay the credit within an agreed period of time, say to or five years. It is different from a bailout package in that it does not come with certain conditions attached to it," he added.
While critics in South Africa say lending to Zimbabwe would be a waste of money, President Cyril Ramaphosa has over the past week said there is need to support Harare.
However, he has not qualified the kind of support he would prefer.
Zimbabwe is desperate for lines of credit which could go a long way in fixing a tattered economy, which is on the verge of total collapse. Foreign currency shortages continue to haunt industry while the cost of living has soared.
To worsen the situation, Harare's biggest Western cheerleader Britain pulled the plug on Mnangagwa's re-engagement drive when London dissociated itself from the regime last week following the killing of an estimated 17 people during the suppression of violent protests which rocked the country last month while 78 others were injured and more than 1 000 were arrested.
Britain, a key Mnangagwa ally after the toppling of former president Robert Mugabe in the November 2017 coup, had also emerged as the only Western power supporting Zimbabwe's re-engagement with IMF, World Bank and re-joining Commonwealth.
Although Mnangagwa has denied that the country is seeking a bailout package, former finance minister Patrick Chinamasa revealed on a trip to China last year that government was seeking a rescue package of US$2,5 billion to support the productive sectors which include tourism, mining and manufacturing.
Acting Chinese ambassador Zhao Baogang said that they will not give Zimbabwe a bailout package, focussing instead on sponsoring infrastructural development.
Source - The Independent
Zimbabwe’s President Emmerson Mnangagwa invited opposition leaders to a meeting on Wednesday to draw up terms for a national dialogue, they said, following a brutal crackdown on anti-government protests.
More than 20 politicians who contested July’s presidential election were invited, two of whom - Lovemore Madhuku and Noah Manyika - said they would attend. It would be the first meeting between Mnangagwa and opponents since he took power from Robert Mugabe in November 2017.
Manyika however said he believed conditions were not yet right for meaningful dialogue, which could only happen if hundreds of people detained during the crackdown were released and soldiers withdrawn from streets and checkpoints.
“It can only take place if, as the president promised upon his return from his overseas trip, the heads of those who have been responsible for brutalising citizens roll,” Manyika said.
On Tuesday, a nationwide strike by public sector teachers for better pay got off to a patchy start, as some stayed at home while others attended school but did not teach amid fears of further intimidation.
The president hiked fuel costs by 150 percent last month and immediately travelled abroad, triggering unrest that drew a violent response from security forces and eventually persuaded him to cut short his foreign tour.
On his return home, Mnangagwa promised action against brutality by police and troops and called for a national dialogue. There was no immediate comment on Tuesday’s invitation from Mnangagwa or his spokesman.
Nelson Chamisa, who heads the main opposition Movement for Democratic Change party and who counts Manyika among his allies, could not be reached for comment.
The MDC believes Zimbabwe is reverting to the authoritarian rule that characterised the regime of long-time leader Mugabe, and says the election that confirmed Mnangagwa as president in July was rigged, an allegation the judiciary rejected.
‘REPORT ALL INTIMIDATION’
The southern African nation is mired in an economic crisis marked by soaring inflation and shortages of cash, fuel and medicines. Many government workers are demanding wage rises and payments in dollars to compensate.
On Tuesday the striking Zimbabwe Teachers Association (ZIMTA), the biggest teaching union, said most of its members had stayed at home but that security agents had gone to some schools taking details of absent teachers.
The union accused authorities of spreading fake news to discourage teachers from going on strike after state media reported that the stoppage had been called off. “Report all forms of intimidation, we are building a dossier of such,” ZIMTA said in a notice to members. Cabinet ministers declined to answer questions on the strike at a media briefing in Harare.
In schools around the centre of the capital, most teachers appeared to have turned up for work, but some were not taking lessons, witnesses said. In a classroom at a primary school in Harare’s Mbare township, a Reuters photographer saw one teacher eating from her lunch box in class while pupils sat quietly.
Zimbabwe has more than 100,000 public-sector teachers.
The shortage of U.S. dollars in the country has plunged the financial system into disarray and forced businesses to close.
Zimbabwe will introduce a new currency in the next 12 months, the finance minister said, as a shortage of U.S. dollars has plunged the financial system into disarray and forced businesses to close.
In the past two months, the southern African nation has suffered acute shortages of imported goods, including fuel whose price was increased by 150 percent.
Zimbabwe abandoned its own currency in 2009 after it was wrecked by hyperinflation and adopted the greenback and other currencies, such as sterling and the South African rand.
But there is not enough hard currency in the country to back up the $10 billion of electronic funds trapped in local bank accounts, prompting demands from businesses and civil servants for cash which can be deposited and used to make payments.
Finance Minister Mthuli Ncube told a townhall meeting a new local currency would be introduced in less than 12 months.
“On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years,” he said.
Zimbabwe’s foreign reserves now provide less than two weeks cover for imports, central bank data show. The government has previously said it would only consider launching a new currency if it had at least six months of reserves. Locals are haunted by memories of the Zimbabwean dollar, which became worthless as inflation spiralled to reach 500 billion percent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.
A surrogate bond note currency introduced in 2016 to stem dollar shortages has also collapsed in value.
President Emmerson Mnangagwa is under pressure to revive the economy but dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.
Mnangagwa told reporters that the price of petrol had increased to $3.31 per litre from $1.32 but there would be no increase for foreign embassies and tourists paying in cash U.S. dollars.
Locals can pay via local debit cards, mobile phone payments and a surrogate bond note currency.
With less than $400 million in actual cash in Zimbabwe according to central bank figures, fuel shortages have worsened and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium of up to 370 percent.
The Confederation of Zimbabwe Industries has warned some of its members could stop operating at the end of the month due to the dollar crunch. Cooking oil and soap maker Olivine Industries said it had suspended production and put workers on indefinite leave because it owed foreign suppliers $11 million.
A local associate of global brewing giant Anheuser-Busch Inbev said this week it would invest more than $120 million of dividends and fees trapped in Zimbabwe into the central bank’s savings bonds.
When economically challenged rulers try to run nations, especially fragile ones, they can easily make mistakes.
In the past few weeks demonstrators have taken to the streets of Khartoum and Omdurman to protest Sudanese President Omar al-Bashir’s removal of subsidies that have long kept bread and fuel affordable.
Now it’s Zimbabwe’s turn. Just before flying off to Russia last weekend, President Emmerson Mnangagwa doubled the price of petrol. Doing so brought already impoverished urban Zimbabweans out onto the streets of the capital Harare as well as Bulawayo and a dozen other cities and towns. Protesters blocked roads with tyres, trees and rocks, stopped bus transport, attacked the police, threw canisters of tear gas back at security forces and generally ran amok.
Mnangagwa’s excuse for raising prices so abruptly is not clear. Possibly he thinks that more costly petrol will bring more cash into national coffers that are mostly bare. Or perhaps he believes that more petrol will pour into the country via the pipeline from Beira in Mozambique if it is more valuable. Both ideas are barmy.
Before flying off to Russia, Mnangagwa said that the fuel price rise was intended to reduce shortages of fuel that, he indicated, were caused by rises in the use of fuel and what he called “rampant” illegal trading – accusations that make no sense whatsoever. Making petrol purchasing more expensive for poor Zimbabweans – the majority of the nation’s people – simply adds to their hardship and further slows an already crippled economy.
Instead Mnangagwa should do everything his government can to reduce the shortage of real (rather than fake) cash that is crippling the local economy, reducing local production and corporate and consumer cash flows, and driving an already weakened economy further into recession.
He should also be focused on taking a number of other bold steps to try and reverse the collapse of the country’s economy. Among them are bringing state looting to a halt.
The cash crisis
The US dollar is the official currency of commerce. But because Zimbabwe’s economy has essentially ground to a halt, it has few means of bringing new dollars into the country. That, and the steady money laundering of real dollars by high-level officials of the ruling Zanu-PF party, has drained the country of currency.
The government has printed $1 bond notes — known as zollars – for Zimbabweans to use instead of real dollars. They are supposed to be exchangeable at par, but in 2019 they are worth as little as a third of a paper dollar. Many merchants refuse to accept zollars at all.
Bond notes now trade on the black market at 3.2 per dollar, according to the Harare-based ZimBollar Research Institute.
The stress has also spread to financial markets, with locals piling into equities to hedge against price increases.
Mnangagwa may be attempting to obtain loans from Russia and from shady Central Asian countries like Kazakhstan. But what the president should be doing is prosecuting and imprisoning his corrupt cronies. That could limit the flight of dollars from Zimbabwe.
He also needs to trim the bloated civil service of excessive patronage appointments. Most of all, if he dared, he should be cutting military expenditures. Zimbabwe has no imaginable need for its large and well equipped a security establishment.
Such bold measures could return confidence to the country’s corporate and agri-business sectors. If coupled with reduced military and other expenditures, and bolstered by funds no longer being transferred overseas, Zimbabwe’s long repressed economy could take off from a very low base.
Raising petrol prices in a land where but a few months ago supplies of petrol were short and motorists queued for hours and days outside stations is neither politically nor economically wise. The newly aroused protesters will not readily melt away. Putting such a hefty extra charge on an essential commodity, and doing so just when Zimbabwe’s parlous economy was beginning to show signs of stability, shows few leadership skills and little common sense.
Inflation has soared since the national election in July, almost reaching the Sudanese level of 70% a year. Foreign capital and domestically reinvested capital is avoiding the country.
On top of this, exporters are struggling under draconian Reserve Bank regulations. Only Chinese purchases of ferrochrome, other metals and tobacco, keep the economy ticking over, albeit in an increasingly dilatory manner.
A further drain on confidence and economic rational thinking is the Reserve Bank’s allocation of whatever hard currency there is to politically prominent backers of the president. That is how arbitrage during President Robert Mugabe’s benighted era helped to enrich his entourage while sinking the Zimbabwean economy and impoverishing its peoples.
Work that needs to be done
Mnangagwa’s regime has much more work to do to stimulate sustainable economic growth. He will need to restore the rule of law, badly eroded in Mugabe’s time, put some true meaning into his “back to honest business” promise, and widely open up the economy. That would mean eliminating most Reserve Bank restrictions on the free flow of currency and allowing the entire Zimbabwean economy once again to float.
Most of all, Mnangagwa needs to rush home from Russia and Asia and rescind or greatly reduce the price of petrol. After so many years of repression and hardship, Zimbabweans are out of patience.
President Emmerson Mnangagwa says his government was ready to seize and redistribute tracts of idle farmland mostly owned by his top Zanu PF allies.
This follows a land audit which unearthed multiple farm ownership by influential officials in violation of the one-man-one-farm policy by government.
"The land reform program is done and dusted," Mnangagwa said while addressing some traditional leaders in Kadoma on Monday. "As government, we have embarked on a land commission audit. The audit has unearthed that most of the bigwigs have more than one farm."
To address the anomaly, President Mnangagwa said government was going ahead with plans to repossess the farms for redistribution to other Zimbabweans who did not benefit from the country's controversial land reform process in the past 18 years. Mnangagwa also said his government would also move to downsize some of the farms considered too big.
"The preliminary reports have shown us that most senior officials within the party (Zanu PF) have more than one farm.
"As government, we are going to address the anomaly. We are going to repossess those farms and redistribute them. We are going to downsize on some of the farms.
"There are some individuals, very influential, whom we cannot name who have more than one farm and we are going after them," he said.
The Zanu PF led government, then under the now former President Robert Mugabe, in 2000 embarked on a violent land reform process which saw militant war veterans storm white owned farms and grabbing implements, livestock and farm houses.
The chaotic exercise saw some locals allocated pieces of land to both build homes and to fend for their families. Some influential government officials and security bosses used their stamina to grab bigger and more fertile pieces of land with rich infrastructure while some even went for more than a single farm. Although he led the one-man-one-farm mantra, then Mugabe was this year said to be owner of 21 farms, some of which he secretly leased to white farmers.
However, other reports linked the once feared leader to a total 13 farms under his and family ownership.
"I am still receiving evidence of what the (former) first family had. When that process is complete they will select one farm and the rest will be given elsewhere," Mnangagwa told the Independent Foreign Service in a wide-ranging interview August this year.
"It's not a question of voluntary giving up, but about complying with the policy."
Mnangagwa, who is often regarded as a reformist, has refused to return land into the hands of its former white owners saying the land reform process was "irreversible".
Credit: New Zimbabwe
Zimbabwe's President Emmerson Mnangagwa on Friday laid the foundation stone for huge new parliament to be built with Chinese funds outside the capital Harare.
The imposing circular complex will be built over 32 months by the Shanghai Construction group at Mount Hampden, 18 kilometres north-west of Harare, the Zimbabwe Broadcasting Corporation reported. Officials say the current colonial-era parliamentary building in the city centre is too small to accommodate lawmakers.
Mnangagwa said at the ceremony that China had provided a "grant, not a loan, to build a new parliament", without giving a figure.
"Other facilities like banks, hotels will be built around this place," Mnangagwa said adding that a "modern, smart city" was planned.
Mnangagwa took over from long-time ruler Robert Mugabe who was ousted by the military in November 2017.
He has vowed to revive Zimbabwe's economy that has been in ruins for nearly two decades.
China has funded and provided loans for many infrastructure projects across Africa in recent years, ranging from roads and power plants to sports stadiums and government institutions.
Critics say China's increasing sway over the continent undermines democracy and sovereignty.
Econet group founder and executive chairman Strive Masiyiwa has found himself at the centre of a social media storm after appearing to back President Emmerson Mnangagwa and calling for the removal of sanctions against Zimbabwe.
Masiyiwa recently told continental broadcaster CNBC Africa that Western sanctions against Harare, now in place for some 20 years, should be lifted, noting that the country could not move forward with its hands shackled behind its back.
Further, he suggested that, President Mnangagwa was sincere in his much-touted efforts to open up the democratic space Zimbabwe and turn around the country's stricken economy.
Mnangagwa assumed leadership of the country after a military coup last November and strengthened his hold on power in bitterly disputed circumstances in the July 30 elections.
After the vote the military moved into central Harare to beat back opposition protestors and six people lost their lives in the resultant clashes.
Masiyiwa's apparent backing for Mnangagwa was therefore certain to anger the opposition, and it did.
Commenting on Twitter, MDC politician and former education minister David Colart challenged the self-exiled tycoon to return home if he was so confident about Mnangagwa's regime.
Masiyiwa has not returned to Zimbabwe in close to 20 years after being hounded out by the former Robert Mugabe regime.
Former high education minister Jonathan Moyo - also a political exile - was also unimpressed, telling Masiyiwa to "must shut up if he does not want people to disagree with him!"
Masiyiwa took to his preferred Facebook platform to hit back, saying the sanctions had adversely impacted his companies' ability to raise funding through international loans.
He added; "Intimidation and threats have never affected me.
"I stood up to Mugabe when most of those issuing threats by Twitter were either in diapers, or hiding, or even simply minding their own business."
Source: New Zimbabwe
When President Emmerson Mnangagwa campaigned in July for Zimbabwe’s presidency, he promised to be a business friendly leader, and to return his country’s economy to twentieth century times of plenty and prosperity.
But Mnangagwa has already shown himself incapable of jettisoning the state centrist, rent-seeking predilections of his predecessor. A “big-bang” sharp break with Zimbabwe’s recent past is essential to reassure consumers and capitalists. Yet Mnangagwa and his cronies have so far rejected anything forward-looking and sensible.
Mnangagwa’s administration is struggling to overcome the national economic destruction wreaked on Zimbabwe over two decades under Robert Mugabe. This included profligate spending, immense debt pileup, colossal corruption, and ravaging of the country’s once immensely productive agricultural sector.
As a result, Zimbabwe now lacks foreign exchange with which to buy petrol and ordinary goods to stock the shelves of its supermarkets. In the last few weeks many shops – such as Edgars, a long-time clothing store; Teta, an eatery; KFC, a fast food outlet – have simply shut their doors. Queues for petrol stretch for miles.
Banks have no US dollars, or South African rands or Botswana pulas (the notional national currency), and therefore cannot supply stores or customers with the funds to carry on business as usual.
This week the locally created Zimbabwe bond note, officially supposed to trade 1 to 1 with the US dollar, has traded as high as 10 to 1 on the Harare black market. Sometimes it trades for a little less. It is unofficially called the zollar.
The new administration has naturally resorted to printing its own faux money. That inevitably has led, as always, to hyperinflation and monetary collapse.
China may yet help Mnangagwa – but in exchange for multi-years worth of precious minerals and Virginia tobacco at discounted prices. With Zimbabwe’s leadership so thoroughly tainted by decades of peculation and mendacity, and devoid of any real notion of “the public interest,” Mnangagwa’s regime is otherwise unlikely to clean up the prevailing fiscal mess because of its refusal to break sharply with the fiscal derring-do of the Mugabe era. Its principals continue to profit from Zimbabwe’s economic mayhem.
What went wrong
Zimbabwe’s economic weaknesses are unsustainable. Governments in such parlous straits would turn, even now, to the International Monetary Fund, for a bailout – as Pakistan has just done. But Zimbabwe is already in arrears to the international lending institutions and has very few helpful friends left.
Government is running a hefty overdraft. And it’s been unable to collect as much as it needs from the national tax base. Its now attempting to impose a 2% tax on internal electronic financial transactions. This only shows desperation. If implemented, it could yield twice as much revenue as is derived annually from VAT. But that losing manoeuvre has already helped drive commerce underground. It has also undermined what little confidence consumers and financiers have in their current rulers.
The Mnangagwa government has also reimposed import and exchange controls, thus creating additional incentives to avoid regular channels of commerce. Those controls also permit officials to allocate “scarce” resources and licenses to import, export, and so on. These are well-known occasions for corruption and for giving rent-seeking opportunities to cronies.
It wasn’t always this bad. Despite the massive loss of formal employment that occurred under Mugabe, the informal sector flourished and Zimbabwe’s poor probably benefited. This was partly because under the unity government of 2009-2013, when Tendai Biti of the Movement for Democratic Change was finance minister, there were no such controls and there were plenty of US dollars and no questionable bond notes and Treasury bills. Hard currency (the US dollar) permitted Zimbabwe to start growing economically after the long Mugabe slide, and individuals and businesses to prosper. The country ran a budgetary surplus.
But this all came to an end when the government of national unity collapsed in 2012.
What needs to happen
To begin to restore the economy, the government needs to acknowledge corrupt dealings and repatriate the huge amounts of cash that have fled the country as laundered money.
Gestures in that direction would help to begin to restore confidence, a step towards eventual prosperity. So would promises to restore the rule of law. Investors might also return if a sound currency was likely. But that would only follow shedding of ministers, civil service layoffs, military reductions, and many other indications that Mnangagwa and his minister of finance were serious about reducing the debt hangover.
Cutting some sort of deal with the IMF would also be worthwhile, but that could mean giving control over the Treasury to foreign advisors. Zimbabwe is and, since Biti’s day, has been, a basket case. It’s time to acknowledge that fiscal reality and to do something about it.