Govt clueless, stuck on the economy – Tendai Biti

via Govt clueless, stuck on the economy – The Zimbabwe Independent February 14, 2014 by Tendai Biti

SEVEN months into the new Zanu PF administration, the country is slowly but surely grinding to a debilitating halt while the economy sinks into a comatose position in the midst of clueless hand-wringing by authorities, indicating a clear lack of leadership and direction.

After the elections, the economy was always going to be the centre-piece of delivery or its lack thereof. It was always going to be the point of reference and the yardstick of measuring Zanu PF’s capacity to govern.

That President Robert Mugabe and his new government are not fit to government is becoming clear by the day. The past seven months of his administration have provided proof beyond a shadow of doubt about the dearth of capacity and understanding of how to the steer the country forward.

Within a short period of time, a dramatic collapse in confidence has seen a massive contraction of the economy. Any realistic projection of 2013 Gross Domestic Product (GDP) cannot exceed 2,4% while the most optimist figure of GDP growth rate for 2014 is the World Bank’s 4,2%.

According to the World Bank, since 2009 and before the elections, Zimbabwe’s economy had started to recover from the 1999-2008 meltdown that saw economic output cumulatively declining by more than 45%.

Supported by a strong recovery of domestic demand and government consumption, real GDP grew by 20,1% in 2009-2011. GDP growth was led by strong growth in mining (107%), agriculture (35%) and services (51%) while recovery in manufacturing sector (22%) has been less vigorous. Despite the strong 2009-2011 economic rebound, GDP growth in 2012 has moderated to an estimated 5%, largely supported by mining.

“The agricultural sector went down by 3,5% as the production of maize declined due to adverse weather conditions, lower hectarage and subdued yields. Uncertainty about the implementation of the indigenisation programme negatively affected overall growth in the mining sector, beyond the growth in diamonds and gold. Growth in manufacturing (5%) performed below expectations, dampened by credit constraints and declining competitiveness. The manufacturing sector contributed 16% to GDP while the services sector remained the biggest contributor to GDP, at 39%,” the World Bank noted.

Annual average inflation remained moderated at 3,7% in 2012 despite rising international prices of grain and oil. The external position remained under pressure as merchandise exports slumped by 10,5% to reach US$4 billion in 2012, while imports reached US$6,7 billion in 2012, driven by fuel (20%), food (11%), and machinery (13%) and manufactured goods (15%) (Reserve Bank of Zimbabwe statistics).

The current account deficit in 2012 remained elevated at 22% of GDP, largely financed by short-term capital inflows and accumulation of arrears.

Foreign exchange reserves remained low at 0,6 months of import cover in 2012, while errors and omissions remain high at US$938 million, reflecting persistent unregistered remittances, unreported exports and unidentified financing.

The strong fiscal recovery which characterised the 2009-2011 period is moderating. Government revenues reached US$4,5 billion (36% of GDP), while expenditure totalled US$3,61 billion in 2012.

However, expenditure remained heavily skewed towards employment costs, which absorbed US$2,17 billion (68% of current expenditure), blighting critical social and capital expenditures. The government ran a primary deficit estimated at 1,2% of GDP in 2012, largely composed of domestic arrears (US$208 million as at October 2012), and accessed non-concessional external loans.

The September 2012 debt sustainability analysis confirmed that Zimbabwe was in debt distress, with total external debt at the end of 2011 estimated at US$10,7 billion (113,5% of GDP). Most of the overdue obligations are owed to the World Bank (US$911 million), AfDB (US$587 million), EIB (US$244 million) and IMF (US$138 million).

While signs of decline in the economy started showing in 2013 before the elections it became clear that going forward, sustaining high growth would require determined efforts at economic reform.

In this regard, envisaged important reforms in public financial management, financial sector regulation, and other areas needed to be sustained.

Zimbabwe’s external debt is high and largely in arrears, cutting off the country from access to most external financing sources, and this also needs to be dealt with. In particular, Zimbabwe remains unable to access IMF resources because of its continued arrears to the fund.

Strong track record of maintaining macro-economic stability and implementing reforms, together with a comprehensive arrears clearance strategy supported by development partners, will be essential for resolving Zimbabwe’s large debt overhang.

However, what we are seeing now after the economy rebound during the inclusive government days it is a fresh phase of “depression economics” and sharp down ward spikes that have characterised this economy since the 1960s.

More than anything else, the greatest threat to the economy remains the strong signs of deflation which are there for everyone to see. The rate of inflation, more appropriately collapsing companies, retrenchments, the collapse in aggregate demand all point to this accelerated level of deflation.

There is simply no sustainable economic activity going on and the figures prove this.

Revenues have contracted sharply. Monthly revenues can no longer meet the bloated monthly wage bill.

At the same time there is no coherent strategy for expenditure management. The net result is that government is in de facto shut down while at the same time arrears are accumulating exponentially.
The biggest mistake of the new administration has been to transit from cash- budgeting to deficit financing under circumstances where the deficit cannot be monetised through printing of money.

The elementary rule of economics is that you cannot eat that which you have not killed. It will always catch up with you.

Nowhere is the disaster more aptly captured than in the country’s parlous balance-of-payments position. The trade deficit, even in the face of a depreciating rand, continues to spiral out of control.

At the same time thanks to muddled positions on the murky indigenisation, the capital account remains a big yawn.

Beyond this, with minimum disposable incomes, banking sector vulnerabilities and grinding liquidity crunch, prospects of domestic resource mobilisation through savings are next to nothing.

Thus in a very short seven months, the country is gliding into the abyss courtesy of tin-pot leadership and incompetence. Government officials, always shouting the ill-defined economic blueprint Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) as if that is all what is actually needed to fix the economy, are short on delivery long on slogans.

ZimAsset has become the end in itself and not the means to an end, something which is revealing about government officials’ capacity fix the economy.

Poverty and depravation have become the order of the day at a time when the gap between the rich and poor is growing at a rate only bettered by Nigeria and South Africa on the African continent.
At the same time public sector corruption, at least now firmly in the public domain, has become the principal haemorrhage of scarce public resources. But as with everything else from the current regime, no decisive action will ever be taken to deal with the corrupt officials and their networks to clear the rot.

It is clear that an independent and full commission of inquiry chaired by a retired judge is required. At the same time forensic audits must be carried in many of these state enterprises and quasi-government bodies.

Further the Public Finance Management Act must be amended to allow Treasury to approve and oversee even the recurrent budgets of parastatals. Constitutional requirement of two-term limits on parastatal heads must be made law through an Act of Parliament, while corporate governance must be enforced.

The sad reality is that this government has no capacity or clues on how to fix the economy beyond empty slogans and ill-informed and impractical references to ZimAsset.

Thus resolving the root cause of the problem — which is political — must be a necessary precondition. In the meantime it is self-evident that some form of an emergency rescue package on the economy is needed. The country urgently requires a stimulus. However, this government seems to be lacking the credibility and a bankable programme to get funding.

Stemming the chronic deindustrialisation must surely be top priority so too addressing the deficit in gross capital formation. None of these issues will ever be addressed by a government run by officials always absorbed in power struggles and succession battles.

The current lot running government are like catfish which cannot survive in clean running waters of a modern inclusive democratic state. Like catfish, which even if found in freshwater environments, though most inhabit shallow, running water, they can only hunt in muddy waters.

Yet the truth of the matter is, as Albert Einstein once said, problems are never solved at the same mindset and level of thinking that created them in the first place.

Biti is former finance minister, MDC-T MP and lawyer.

 

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19 comments on “Govt clueless, stuck on the economy – Tendai Biti
  1. Maverickzw says:

    No one in Government is listening or cares for that matter!

  2. Ndebvu Mukomichi says:

    A Pun for Puny Politicians:
    muBiti mune bete rakorwa nezviyo. Makaitwa madyira pazhe neZPF shasha- zvino modongorera napamahwindo kuti muvone vari mumuzinda muchitarisira kutongavo. Prepare for 2018 Mr $217- else mucharamba muchigara panzvimbo yokugedageda kwemeno.

    • nesbert majoni says:

      Saka I we chinokufadza pane zvauri kutaura chi. Vana Bit I varikungotaura kuti zvinhu ngazvinakira munhu wese. Its not a matter of a need to govern. Seyi uchipembedza zvinhu zvakaipa. Muchinyara vo mhani.

    • Chess player says:

      Ndebvu Muwhatever…you are no doubt part of this rot. The world is moving on sir…and Zimbabwe is falling way behind because of people like you. Open your eyes and smell the coffee..we are in 2014 a good 32 years since 18th April 1980. people like you make my blood boil and because of you and this government of theives we are where we are today….a laughing stock of the world. Honerable Tendai Biti is 100% right, this govt has’t got the faintest idea how to tackle the problems we are faced with…problems which they have created themselves.

  3. John Thomas says:

    To give credit where it is due Biti was much better than any of his ZANU predecessors. Nonetheless the shallowness of his understanding is well displayed above. Classic deflation cannot happen here. We do not print our own money. Any downward trend in prices is long overdue and should be seen as a sign that competition is working at last and that believe it or not labour productivity is improving. These are good things and auger well for the prospects of real development once these ZANU clowns are out of the picture

    • Zombi says:

      Is a fool who knows that he is a fool still regarded a fool? You sir, don’t realise that you are a fool.

      The question of deflation in Zimbabwe is not about competition. What evidence do you have for that? Look at the figures… Example: Last year, lager sales went down 25% to the fourth quarter and people generally switched to opaque beer. That is the same story for most things. Where deflation is due to competition, it is characterised by manufacturers cutting costs whilst boosting production and a growth in demand. Just touch on demand there… Company closures, retrenchments and the like tell of reduced demand. Civil service wants more money, which isn’t coming because of a lack of money. This is a fight for increased disposable income. With belts tightening, there is no spending. So in essence, no my friend, the deflation is not driven by healthy competition. It is driven by a sick desperation to at least make a sale so that things don’t rot in warehouses. The economy is failing. Let’s not fall into the fallacy of misdiagnosing things. Let the numbers lead you, not emotions or wishes.

  4. Lindy Lou says:

    For God’s sake get up off your arses and DO something.Stop whinging,and crying.More of you than them.Sick and tired of your moaning and groaning,wailing etc.Stand up and be heard.Bunch of bloody cowards the whole lot of you,sit back and wallow in poverty moan and do nothing. Zimbabwe is your country,but you voted for ,ha ha for what you have.Do something.

  5. E Makhate says:

    Yebo. Zims are a whole load of cowards. Like their Malawi cousins during the Kamuzu Banda rule or misrule, they are resigned to destiny or fate.

  6. Sekuru Mapenga says:

    Its true – economy is in a state of collapse…. companies closing, no demand for goods, hapana basa, hatina mari. bye bye.

  7. Rich says:

    Simba Makoni at the top whose right hand is Tendai Biti.
    This country will allow Zimbabweans to now live in a pearl.
    Zanu veterans….must go.

  8. I am not the one! says:

    U tell ‘em Lindy Lou… 100% agree. As for JT, the name really says it all!

  9. true Biti,but what are you doing about it,zimbabwe needs people who not only see things but those who have the arsenal to stand up and fight for what is right,seriously i think its time youMDC guys do something for the betterment of our lovely country

    • Zombi says:

      Biti is doing something. He is trying to inform the public and encouraging the masses to look candidly at our situation.

      Question is actually not what Biti is doing about it. What are YOU doing about it? Besides standing by and saying… They just talk but don’t do anything about it.

  10. Saddened says:

    Well said “I am not the one” Short & to the point!

  11. BaMuno says:

    Simply put ,a country needs goodwill for its existence and Zimbabwe is next to zero on Goodwill.We need to wear another attire to suit investors and the current crop of leaders are past their saleable dates

  12. Phys says:

    Sit back and watch this unfold. The pigs are at the trough and the trough is rapidly drying up. Soon the pigs will start turning and eating each other.
    Tendai Biti – you should be the new leader of the MDC and take this once beautiful country, back to it’s rightful place.

  13. Tjingababili says:

    Never did never will!

  14. Abbu says:

    I don’t agree w ppl who say Zimbos are cowards. What we lack is leadership. The current opposition leaders are weak. I year for e leadership and courage of e yester year Tsvangirai at zctu, nca and formative days of mdc. U can’t just go into e street by yoself obviously unorohwa kuita kafira mberi bt if leaders ar on front zvinofamba cos vane protection yeinternational community. Let’s ask ourselves what prompted formal talks bwtn mdc n zpf? It was cos e defiance on MT under e Save Zim campaign which defied e police ban of e Highfield prayer meeting

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