via Govt clueless, as economy burns – DailyNews Live by John Kachembere 21 MARCH 2014
For most Zimbabweans, these are trying times.
The country has entered a period of deflation, salaries for those lucky to be still employed are depressed amid a tightening liquidity crisis and basic goods remain priced out of the reach of many.
But even as the economy shows signs of imploding, the country is riveted with stunning revelations in the media of managers of State-owned firms earning millions of dollars in pay while the economy stutters.
Insiders say the Salarygate stories have been allowed to run to divert attention from government’s appalling handling of the economy.
Critics say President Robert Mugabe, who won last year’s elections after promising 2,2 million jobs, continues to fiddle while the economy is burning.
Figures released last week by the Zimbabwe Statistical Agency show that the economy is sliding towards deflation, a situation that could see overall output and competitiveness of industry being affected, leading to a further decline in employment levels.
Charles Msipa, the Confederation of Zimbabwe Industries (CZI) president, said the manufacturing industry was in the “intensive care unit” with most companies in the country operating below 40 percent of capacity utilisation as a result of high finance costs, electricity and water shortages, ageing equipment and stiff competition from cheap imports.
As part of efforts to halt the economic decline, government last year launched the ambitious economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset).
However, what the Zanu PF-led government had sold as a panacea for Zimbabwe’s economic depression is failing to provide the required cure, creating a deep sense of disillusionment among business leaders and ordinary citizens.
University of Zimbabwe economics lecturer Tony Hawkins says without a financial bailout, Zimbabwe’s economy will continue to slide.
“Without an International Monetary Fund (IMF) deal leading to eventual debt forgiveness, economic growth will continue to be hamstrung, not by economic sanctions, as ministers and many business people claim, but by an unsustainable debt burden,” Hawkins told the Daily News.
“Just as something will have to give politically — the current ‘factioneering’ will further undermine governance, vividly illustrated by Salarygate — so too economically.”
Hawkins asserts that if the Chinese do not come to the party soon and in a big way, the current economic malaise will deepen.
“Growth at 3,4 percent in 2013 was the slowest since dollarisation five years ago,” he said.
“Unemployment, already well over 50 percent of the workforce, will rise inexorably, the brain drain will intensify and living standards fall further.
“The difficult economic decisions that should have been made over the past five years are not going to go away. Nor are they likely to be taken while ministers and officials, in fear of losing their jobs, squabble over the succession. It is time to draw a line in the sand and move on.”
Market experts have also warned that unless government clarifies its indigenisation policies, foreign investment — itself a vital cog in economic revival — will continue skirting the country in favour of friendly investment destinations.
The controversial law, which was enacted in 2010, forces foreign-owned firms to cede 51 percent to locals.
“Some of the country’s legislation needs to be revamped to allow for foreign direct investment,” said George Guvamatanga, the president of the Bankers’ Association of Zimbabwe.
“For instance, there is need to clarify the indigenisation policy and realign it with other legislation.”
Guvamatanga noted that the indigenisation regulations were in conflict with the Zimbabwe Stock Exchange (ZSE) regulations on foreign investors.
“There is no alignment of ZSE foreign investment requirements and indigenisation regulations,” he said.
“For instance, the Indigenisation law doesn’t provide adequate clarity on someone who wants to bring investment in Zimbabwe by buying shares on a ZSE-listed company and also wants to invest in an unlisted company.
“Capital by its nature requires clarity.”
The Zimbabwe National Chamber of Commerce says robust measures to attract money into the economy must be explored.
“Steps in reforming the investment environment, reducing the country risk rating and doing business reforms should be a priority,” said a senior official with ZNCC.
With the economic environment slowly receding to the 2008 levels, infrastructure and social services delivery in the country are deteriorating at a fast pace.
Despite all the signs pointing to a failing economy, Mugabe has remained mum, a development that has been described by analysts as an indication of government’s cluelessness in turning around the economy.
This week, opposition leader Morgan Tsvangirai implored Mugabe, under whom he served as prime minister in a fractious coalition government since the disputed and bloody elections in 2008, to swallow his pride and acknowledge the deepening economic crisis.
“The economic crisis is a symptom of the political crisis of legitimacy because that is the one that undermines the confidence in the economy,” Tsvangirai told the Daily News.
“You know, for the last five years, the economy was stabilised because of confidence in the economy due to political stability.
“Now, because if the crisis of legitimacy, as a result of a rigged election, already, it’s a crisis that has undermined economic confidence to the extent that all sectors have now been affected. There is a legitimacy crisis,” he said.
Nonetheless, the Zanu PF government remains adamant that the latest economic blueprint will perform miracles and drive economic growth.