via Economy chokes Zanu PF – DailyNews Live by Thelma Chikwanha 13 MAY 2014
In a bid to avert a looming economic crisis the ruling Zanu PF government is launching a new economic offensive.
Officials say in this fresh strategy, the ruling party will no longer be focused on robustly indigenising foreign business — as enunciated in its manifesto and economic blueprint ZimAsset — but it will aim at attracting foreign direct investment and subsequently the expansion of production capacities in the industrial sector.
Zanu PF has released two clues of its increasingly troubled position on the economy.
The party yesterday convened an emergency politburo meeting to coordinate a response to the deepening economic crisis as business analysts predicted Zimbabwe’s economy would get worse towards the end of the year with economic activity suffering from increasing government interventionism and production bottlenecks originating from the liquidity crisis.
The meeting came hard on the heels of an admission by Finance minister Patrick Chinamasa at a business conference at the Zimbabwe International Trade Fair (ZITF) of the grave challenges afflicting this tiny economy.
“We are confronted with an economy which is heavily indebted, that is a reality I am facing, whether it is China or Malawi or the Bretton Wood Institutions (IMF and World Bank),” Chinamasa said.
“We must be cognisant of the fact that the country needs foreign direct investment. So, we must come up with policies to attract FDI.
“To be honest with you, I’m grappling with the cause of the liquidity problem in the economy. Is it a political issue or an economic issue?”
Just last week, newly appointed Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, in his acceptance speech, warned that the lack of liquidity and its limited circulation within the economy “remains the biggest immediate challenge that the Zimbabwe economy is facing.”
While some hawks in Zanu PF were said to be lobbying for the return of the Zimdollar, Mangudya advised that the multiple currency system needed to be buttressed and maintained to restore and enhance confidence and credibility.
“The multiple currency system is sine qua non for turning around the fortunes of the economy,” he said.
Mangudya, described by Chinamasa as a “Keynesian economist”, said Zimbabwe needed financial discipline amid concerns that government was squandering millions of taxpayers’ money on luxury vehicles, expensive hotels, banquets, advertising and other wasteful expenditure.
The profligate spending indicated government was “out of touch with economic realities in Zimbabwe,” analysts said.
And to buttress the point, Mangudya said there was need for “discipline to utilise our resources efficiently, discipline to know that we need to increase production before we increase consumption,” adding that there was need for the country to refrain “from living beyond our means, as this would bring greed and corruption.”
Mugabe, who won a July 31 vote to extend his 34 years in power, is struggling to breathe new life into an economy that contracted by 40 percent between 2000 and 2008 after a controversial agrarian revolution that slashed exports, and skyrocketed inflation to record highs and strained relations with the International Monetary Fund and other multilateral financial institutions.
“The past three years have been challenging for the Zimbabwe economy and difficult for many Zimbabweans,” the new RBZ boss said.
“People cannot find jobs, companies cannot pay each other as well as servicing their loans with banks, tax revenues are going down and the tax base is narrowing.
“The economy is weaker and the financial system is depressed. We need to be courageous and skilful to manage the situation on hand,” he said.
Over the past two months, government has failed to pay its workers and pensioners in time, and has relied on Value Added Tax to bankroll salaries.
The tax collector Zimra has also trawled company accounts looking for outstanding obligations to finance government expenditure.
The ruling party’s economic blue print Zim Asset, which proposes a cocktail of measures to revive the economy, including borrrowing money from Brazil, Russia, India, China and South Africa, a group of large emerging market nations collectively known as BRICS, and setting up a sovereign wealth fund, has so far failed to attract any funding amid reports it needs $27 billion.
ZimAsset also proposed the sale of bonds, securitisation of remittances, re-engagement with international finance institutions and the creation of special economic zones, but without funding, all this remained pie in the sky, analysts warn.
Government has had to confront the reality that it might have to revise its ambitious 6,1 percent growth projections for this year.
Social service provision on the one hand is also collapsing as more and more people fail to access basic economic rights enshrined in the new Constitution such as water, health and education.
The economy, which has been stagnating, has taken a turn for the worse after the July 31 election which saw Zanu PF claim a landslide victory.
At yesterday’s meeting of the ruling party’s supreme governing body, the politburo, business ideas on how to save the economy were high on the agenda.
Analysts said reality was beginning to sink in that a new paradigm was needed to save the economy.
University of Zimbabwe political science lecturer Eldred Masunungure said the 51-year-old liberation movement was beginning to realise that there was need for urgent interventions to prevent total collapse of the economy, hence the extraordinary meeting.
“It’s recognition that things are going haywire, things are falling apart,” Masunungure told the Daily News.
“They are trying to find ways of averting an inevitable collapse of the economy.”
The political scientist said the ruling party would also seek to enforce a shift in economic policy which will boost investor confidence which had been eroded by multiple messaging from government.
“They are biting the bullet and we are going to see the shifting of economic policies,” he said.
“There have been conflicting signals sent to investors and this meeting might have been convened so that they come up with a unified position on the economy because investors have been confused by the multiple positions coming from the Zanu PF government.
“They have been singing from multiple hymn books. And this meeting will probably see policy cohesion.”.
Political analyst Maxwell Saungweme said it was natural for Zanu PF to convene a meeting on the economy because of the dire current state of affairs. He described the current situation as an “economic emergency.”
MDC leader Morgan Tsvangirai on Sunday told party supporters during a rally in Norton the economic problems bedeviling Zimbabwe could culminate in an uprising, warning that many have been pushed to the brink by the collapsing economy.
Tsvangirai warned that people might be forced to take to the streets demanding food if the economic situation was not addressed speedily.
But Masunungure ruled out mass action, saying Zimbabweans have gone beyond the search for a collective approach and that the suffering people would deal with their problems at an individual level.
“Gone are the days when the ZCTU led by Tsvangirai would organise food riots and massive stay aways,” Masunungure told the Daily News. “Tsvangirai is living in the past for suggesting that. “