Chinamasa walking a tight rope

Q: Are we likely to see the economy remaining on the path that you had taken during your tenure as minister of Finance and do you share the view of being equated to the late Bernard Chidzero?

A: I am different from Bernard Chidzero and anyone else because I inherited an economy that was in tatters, an economy that had gone through 14 years of sustained economic decline, an economy that was bleeding with inflation of 500 billion percent.

Bernard Chidzero and those who were there in 1980-1981 inherited an economy which was so strong that the Zimbabwean dollar was 1 on 1 with the British pound.

The Zimbabwean dollar was stronger than the US dollar and there was a lot of goodwill.

The Zimbabwean government, between 1980 and 1985, got US$4 billion in development aid. We operated in a different environment.

Chidzero and others operated on the basis of a vibrant economy which had been slowed down by sanctions. I operated in an environment where there was no economy.

So my key task was to, number one; restore macro-economic stability, stop the hemorrhage that had been taking place, the current deficit and so forth.

Number two, it was to lead, to provide a vision, which I did in the Short Term Emergency Recovery Programme (STERP) which we basically wrote in two weeks.

What did we achieve? We achieved macro-economic stability, we achieved growth.

In 2010 and 2011, Zimbabwe was the fastest -growing economy in the world, growing in real terms; at 9,4 to 9, 7 percent per annum.

My legacy is that of actually re-establishing a functional economy where there were goods in shops, an economy where children are going to school and universities, an economy where there is commerce, there are cars and offices, where people are working, which was not the case in the crises years, particularly 2008.

Q: There is a new regime including a new Finance minister. Do you see a continuation of that recovery path in the economy?

A: I think that to come up with a way forward; you have to understand where you are.

My problem with the current people (Zanu PF government) is that they do not know where we are.

They do not know that they are lost. And a person who does not know is lost cannot ask for directions. So they will continue moving around in circles like headless chickens.

The position of our economy is so precarious. Number one; we do not have capital in Zimbabwe. We need capital.

I would estimate that we need at least $4 billion immediately for recurrent expenditure, for short-term needs and current account deficit.

We require $14,2 billion for infrastructure in the next five years. There has not been meaningful gross capital formation in this country since 1968.

That is why if you wake up someone who died in 1968, he will not get lost in Harare! So we have no capital.

But whoever is now minister of finance (Patrick Chinamasa) is operating under a very restrictive environment. He does not have (a) monetary policy because we dollarised.

The Reserve Bank of Zimbabwe cannot print money. His fiscal options are extremely limited.

Normal economy functions on the basis of what is called a fiscal diamond. He does not have a fiscal diamond.

A fiscal diamond is the existence of number one; your capacity to borrow cheap money on the international financial markets. We do not have that.

We have got a sovereign debt of $11 billion.

So we cannot get money from the World Bank and African Development Bank. And because our risk profile is so high we cannot get any money from the international financial markets.

That is why countries who are different from us, who do not have those problems, (can get money).

Zambia for instance went into the market asking for $400 million, the bond was overpriced to the tune of $11 billion.

Rwanda very recently went into the market and wanted $400 million and got $ 4 billion.

I wanted $30 million in October of 2012 and I got $ 7 million because no one trusts a predatory government.

Then number two, he (Chinamasa) cannot get overseas development assistance which again is a fiscal tool because of political reasons.

Then number three; part of the fiscal diamond depends on what you yourselves can do in terms of reform effort.

There, he is going to have a problem because he would want transparency over the diamonds but he will find soldiers waiting for him there and the sophisticated infrastructure of looting that has been set up.

Then the things that I could get away with because I was MDC, he will not be able to get away with.

The secret of being a good finance minister is that you must know what has to be done and this is a technical thing.

I am not even sure that I am  a lawyer anymore. I think I am an economist now!

So you must read and understand from a very technical point of view.

Once, you have the knowledge and you know where you want to go, you must be a thug, you must have the capacity of pushing. You must be very thick-skinned.

But you must also be a diplomat. In fact you are a core minister of Foreign Affairs because when you go to Washington, Brussels, it is diplomacy.

When you talk to local donors, it is diplomacy.

The way you communicate with fellow ministers as well, it is also diplomacy.

So you must know when to shout like a mad man, you must know when to listen, you must know when to deny information by omission.

You must be versatile and you must have dexterity and quickness of mind but most importantly you must be honest and consistent because the greatest thing you want is trust.

The bankers must trust you that if he says he is going to do this he is going to do it. Commerce must trust you that if he says he is going to do it, he is going to do it.

When I became Finance minister the question that used to be asked was yes, you have written STERP, are you going to implement it?

Anthony Mandiwanza asked me that question on March 30, 2009 and I said we are going to do it, remove surrender requirements, and he was shocked.

The next question that came to me was are you going to return the Zimbabwe dollar.

And I said guys if there is one thing that I would commit suicide for and refuse, is the return of the Zimbabwe dollar.  So in the end people knew that, once he steps his foot, he steps his foot, haatangike.

And you need that because you must be consistent. The problem is that these people (Zanu PF government) are going to be eclectic; choose this because it suits them. We will just perpetuate the concept of a high-cost-low-trust society.

Q: You worked closely with the IMF and World Bank during your tenure, what were some of the markers they laid down as part of encouraging revival and are these still critical in reviving the economy?

A: Well they were minor things like reporting of data. We were in control of that.

So I would say the first real marker is transparency over diamond revenue.

I had done a legal frame work.

I had done a Statutory Instrument before I left which had been done by the Attorney-General’s office. What was left was just to enact that into law.

The diamond policy we adopted in the previous government also had said there was going to be a new Diamond Act and the taking out of diamonds from the Precious Minerals Act.

Whether they are going to do it or not, I am not sure. Diamonds are complicated.

The second marker was to do with Domestic Debt. We had to clear domestic debt.

That would have been a very easy marker to do that.

But I think for this government, because it has made so many promises, it is going to be impossible and my belief is that this government is not going to abandon the SMP (Staff Monitored Programme) by choice but they are going to abandon the SMP by virtue of non-compliance, lack of discipline, direction and determination to meet particularly this marker.

The third issue is reserving money for social expenditure and again that is easy because here the donors could chip in if they trust you, education, and so forth.

The IMF has changed, in the long run these issues will not be issues.

But now they are saying we want to make sure that you are parting money in social delivery, health and so forth.

Then the fourth issue is the limitations on unilateral borrowing because remember the purpose of the Staff Monitored Programme is to say you have got a debt (of) $10,7 billion, you cannot pay it but you want these countries that you borrowed to cancel and forgive your debt.

So they want to know that you are going to be disciplined then they will cancel your debt.

That is the SMP. So the SMP, therefore, is a test run, probation; are you worth it if we cancel your debt.

Will you not implement the same bad habits that got you into the same debt? So the SMP is really a test of trust; can we trust that if we forgive all this amount of money you will not come back days later with an even bigger debt?

So we agreed to a situation where we will not borrow particularly non-concessionary; that is to say at market rates because we cannot afford them and that if we have to borrow we will only be borrowing at concessionary rates but for necessary infrastructure requirements, which is logical.

I think the Zanu PF government is going to fail this because they are going to borrow to sustain recurrent expenditure, trips and so forth and this will not meet this marker.

And because they do not understand money, they will borrow money at 19 percent, 7 percent, because of lack of craft competency.

Of those four markers, the two which are their downfall, are internal debt management and the restrictions on borrowing willy-nilly as if you eat money like (an) aphrodisiac.

Q: Your colleague and successor, Chinamasa, is he up to the task given what you have just outlined?

A: I do not think it is for me to comment.

I think it would be unfair to comment. I know him so well.

All I can say is that if he has to deliver for Zimbabwe he has to have a serious paradigm shift.

For starters, he has to dress better! Secondly, he has to know that this is diplomacy; it is carrying the whole country so he cannot shout at people and treat people like they are rubber mats! This is a different ball game.

Q: And what is your take on the proposed indigenisation of banks?

A: One of the things that need to be protected is the financial services sector.

The banking sector is as good as deposits that are in it. So you cannot talk of indigenising the banking sector.

It does not happen because all you are doing is indigenising the building because what is in the banks is not. And everyone who is in his right mind must appreciate the importance of the banking sector particularly a foreign bank.

The person in Britain will not give his money to John Chibadura’s bank which he does not know but he will put his money in Standard Bank or Standard Chartered Bank because he knows those.

He knows that if they default, he’s got recourse. So international banks, you actually need them for international financial mediation which is so desperately required in this country.