What does 2015 Promise

via What does 2015 Promise 31 December  by Eddie Cross

When you think about past history it is extraordinary how the world keeps on catching us by surprise – in 2014 there is no doubt in my mind that the great surprise that the world sprang upon us was the 50 per cent reduction in crude oil prices from $115 in June to $57 in December. No one saw this coming, everyone was taken by surprise. Oil and its derivatives is the most heavily traded commodity in the world because it is produced in some places and consumed everywhere.

When oil prices are high then there is a vast transfer of wealth from the main consuming countries to the producers. China is most vulnerable as it is one of the largest consumers and has very limited resources. Europe comes next and all consumers contribute to making a small coterie of primary producers extremely wealthy and cash rich.

The oil market has seen two great shocks in the past two decades – first was the unleashing by George Bush of the oil resources in the North American continent found in shales and other geological formations that previously had been ignored for cost and technical reasons. The effect over a decade was to make the USA almost independent from oil in Africa and the Middle East. It also resulted in energy prices in the USA declining and then holding at about 10 per cent below Europe and 30 to 40 per cent below China.

The effect of this shift in global energy balances and economics meant that the US, after 30 years of decline, began to see a resurgence of manufacturing and faster growth. Rising labour costs in the Far East, driven by maturing economic systems assisted in the realignment.

I always advise observers of the global scene to never under estimate the Americans. They are a remarkable people, hard working and innovative with some of the brightest and the best managers in the world. I suspect that Mr. Putin has, like his predecessors, underestimated the American system as an enemy. It is no coincidence that energy prices have collapsed just as Putin (one of the great beneficiaries of oil wealth transfers) had begun to flex his muscles in Eastern Europe.

The low oil price cannot hold for very long as the long term trend is towards reduced supplies and more expensive sources of supply. But do not bet on that in 2015. I am sure the world will have other surprises up its sleeve for us in the coming year.

In Zimbabwe the coming year holds fascinating promise. I estimate that up to $20 billion in various projects ranging from steel manufacture, to base metal and precious metal production on a large scale as well as major investment in agriculture and infrastructure and tourism ($3,5 billion in the Victoria Falls alone) are simply waiting for the right signals from Harare. Those signals are not complex or many but will determine what sort of year we will have and how the overall trajectory of the economy will be established.

In a sense we have made a start, the Mnangagwa team has effectively taken over as the main center of power, been welcomed officially by the Chinese Government and is being watched very closely by all Western States. But the transfer of power is not complete; they have to deal with the remaining elements of the Mujuru faction in Zanu PF as well as recalcitrant elements such as the “Gang of Four” who have ambitions beyond their station. The other critical issue is how the “Old Man” of Zimbabwe politics will behave when he comes home in January. Success is critically dependent on both men working closely together and in sync to secure progress on other fronts.

I remember in the late 80’s of the last century, visiting Malawi to see its ageing leader, Dr. Banda. He was frail and lost concentration easily, could not remember who he was talking to or what about, yet if he so wished, even at that stage he could order your arrest or elimination. People were terrified of him and his close cohorts who really ran the show. Only his death cleared the way to a more sane dispensation.

To put Zimbabwe back on the path to recovery and growth we have to meet three broad objectives in early 2015:

1. Complete the transfer of operational control of the Zimbabwe State and economy to a new team that will take us into the future. This does not mean that the “Old Man” steps down but it does mean that he starts to allow the new team to make decisions and implement change.

2. Change our economic policies so that investors feel that they can invest with confidence and control and manage their investments in the long term secure in the sense that their interests will not be prejudiced by unlawful and unpredictable actions by rogue elements in the State.

3. Change our political and social policies so that we comply with the norms and standards that the international community regards as being the norm for States functioning in this new interactive and cooperative global community of States.

This is a big call and I agree with many who have contacted me that this remains the central issue of our day. Should Mr. Mugabe revert to business as usual, playing one group off against another and using his immense personal power and influence to crush the ambitions of those who work with him and simply refuse to allow his successors to implement the changes that are necessary, then we are in for a rough time.

The outcome of such an event is totally predictable – continued economic collapse, the collapse of social institutions critical to national welfare, continued international isolation – perhaps even greater isolation than is the case today.

This situation will be exacerbated by the chaos in Zanu PF where the mainstream elements in the Party have been swept aside and demoted. They are not taking this lying down and if the Mugabe/Mnangagwa alliance weakens in any way, or Mr. Mugabe pulls the rug from under his new team, then you can add political instability and even violence to your equation.

For Mr. Mugabe, 2015 represent the pinnacle of his long and successful career as a political leader. In the coming year he will add the Chairmanship of the African Union to his Chairmanship of the SADC and Presidency in Zimbabwe. What he does not need is instability and failure at home. If he does the right thing, then he will end his long political journey in 2015/16 with a year during which he will have been the most powerful and influential political leader in Africa. If he was to retire at that point and allow his successor to take over and get ready for the next elections in 2018, he might yet redeem something from the disgraceful shambles of the past 20 years.