Biti warns of economic collapse

via Biti warns of economic collapse | The Zimbabwean 24 September 2014

It will take between six months and a year before Zimbabwe is in an acute economic crisis similar to the one experienced in 2007-2008, says former Finance Minister Tendai Biti.

In a wide-ranging interview this week, Biti told The Zimbabwean that the Cabinet put in place after last year’s elections that Zanu (PF) claimed to have won was incompetent.

He was in charge of fiscal policy during the Government of National Unity (GNU) between March 2009 and July 2013 when the economy made modest gains after a lengthy period of hyperinflation, widespread shortages and a steep decline in industrial production. 2008 marked the height of the crisis and forced Zanu (PF) to the negotiating table.

“This clueless government will fumble and tumble for six months and there will hardly be any economy to talk about after that. At most, it will take 12 months before we get stuck at the bottom of the economic trough and it will be very, very difficult to pull out,” he said.

“Those running the economy now lack competence. They don’t have a single idea on how to fix fiscal issues and they are employing feja feja (street gambling) tactics because they don’t have the sense of doing it properly. The current economy is couched in residues of the GNU,” Biti said.

He said government would soon fail to pay civil service salaries and shop shelves would become empty as most of the surviving industries closed down and pushed up unemployment – currently independently estimated at more than 80 percent.

The former finance minister bemoaned the increasing shrinkage of the economy. “We are now in an economic depression and have graduated from a recession. When an economy recedes for more than two successive quarters, it gets into a depression. This is what we have seen happening in the post-2013 election period,” said Biti.

In 2011, Zimbabwe became the fastest growing economy in the world when it recorded 11.9 percent economic growth. In 2012 the figure dropped to 10.7 percent and then plunged to 4.3 percent in 2013.

The new Finance Minister, Patrick Chinamasa, projected a 6.1 percent growth in his 2014 national budget but revised that to 3.1 in his recent Mid-Term Fiscal Policy Review. Biti forecast that in reality it would be around 1.5 percent.

He described Chinamasa as ignorant of the basic principles of economics and accused him of adopting counterproductive measures.

Recently, Biti’s successor introduced a raft of taxes in his mid-term fiscal policy review as a way of boosting revenue collection at a time government coffers are almost dry. His adopted higher import duty on numerous commodities and announced more tax on fuel, a move that is already driving price increases.

The new measures, Biti said, would discourage expenditure and shrink the economy further.

“When operating in an economy such as ours, you need to develop a matrix of spending. More taxation collapses that crucial expenditure and this is what Chinamasa, unbelievably, has done through his new measures.

“What it means is that less and less people will be shopping or crossing the border to import. The retail and industrial sectors will feel the pinch as sales will go down drastically and they will fold. In effect, there will be less revenue generated through taxation such as VAT (value added tax), excise and customs duty, PAYE (pay as you earn), and corporate tax will fall. This is killing the goose that lays the golden egg,” said Biti.

He further accused Chinamasa of “clumsiness” in the mid-term fiscal policy, in which he indicated that there would be no cuts in budgetary expenditure yet acknowledged that there would be almost a further billion dollars needed to service debts and fund other government obligations.

“Where is he going to get an extra $1 billion? Remember, even the constitution obligates the state to ensure there is money to fund the budget,” said Biti. “The problem with Mugabe and his government is that they think that money grows on trees. There is nothing political about what they are doing. It’s plain daftness. They lack the necessary technical expertise and that is why I am saying there must be a change of government before we revert to being hunter-gatherers.”

He warned that consumers and corporate entities would resist the new taxation system because it lacked legitimacy and they regarded the current government as too compromised to be in charge of the economy.

“The economy is cruel. You can’t bomb it. You can’t put make-up on it. Very soon, the government of Mugabe will realise that it has lost its direction and the people completely,” he said.

He said there was need for the government to re-engage the west alongside eastern governments and demonstrate a willingness to be democratic in order to attract foreign direct investment.

Biti said the economic crisis facing the nation was due to a “rare and unusual” combination of issues, which included bad governance, a weak opposition, disintegrating civil society, a poorly performing judiciary and a disintegrating industry.

President Mugabe (90), he said, was a cruel man who insisted on ruling over a country in chaos despite his advanced age and failure and must “be charged with treason”.

COMMENTS

WORDPRESS: 26
  • comment-avatar

    And so what is your suggestion, Mr Biti? Another political party??? You all need to fix things with each other and come as a unified front and stop putting knives in each others back. There is only ONE enemy!

    • comment-avatar
      William Doctor 7 years ago

      @ NBS

      And what enemy would that be?

      • comment-avatar
        Feisal Greenland 7 years ago

        How stupid are you???

      • comment-avatar
        Chanisa 7 years ago

        The enemy is the stupidity of a nation that puts up with a self-serving dictator and his arse-licking brigade for 34 years

  • comment-avatar
    revenger avenger 7 years ago

    Insiders informed me that vat sales tax will be increased by 5 percentage post to plug widening black hole

  • comment-avatar
    revenger avenger 7 years ago

    Agree on treason charges. Its punishable by death. Pamberi mob justice street action

  • comment-avatar
    William Doctor 7 years ago

    I say let it collapse completely. Only then will there be an uprising and zanoids will be dragged into the streets and slaughtered.

    • comment-avatar
      Chanisa 7 years ago

      This country has been in a collapsed state for a long time. Where is Biti missing it?

  • comment-avatar

    Biti should know that we all cant be CEO’s of a company.He should have stuck with the finance post at MDC and no one would have challenged him for years and years.Take a look at Chombo, he has been occupying local govt post for i don’t know how many years now.You just need to identify your niche position in the party and hang onto it, finance is a tricky post very few people can handle it. Biti just became power hungry that’s all.

  • comment-avatar
    mumvana 7 years ago

    True that!!

  • comment-avatar
    Kitsi-yatota 7 years ago

    if that position is given to n-one asiri Zanu things will change, not really biti..biti was a mere figurehead…we have lots of capable pple like Prof Hawkins, Dr mashakada, Coltart n many more… its just an issue of policy

  • comment-avatar

    Guys some of you may share some precedence. When can we really say an economy has collapsed? When cars stop moving in the streets? Has this economy not collapsed alreafy? Or am I being too pessimistic. When an economy reaches a point of no return like I feel ours has surely it will have collapsed!

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    tapiwa 7 years ago

    I don’t think how Biti being power hungry has to do with the current state of the economy even if he had stayed with MDC-T he still would not have been a minister and his influence on the economy would still be the same.Regardless of whether Biti is the right person or not all that is needed is for a government of competent individuals with Zimbabweans at heart not there to protect their ill gained riches.Its even most likely that even if president Mugabe was to pass on most of the same guys and ladies will just be recycled back into the cabinet based on war credentials.

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    Mlimo 7 years ago

    Biti go to your master and tell Robert to resign. That will go a long way to fixing the woes. I believe he still claims that the evil West is responsible for the failed policies of his government. That is quite astounding. Does No one In zanupf troll the Internet and get an understanding of why no one wants to help. Just shows how stupid they are.

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    Maczomba 7 years ago

    How is Mugabe Bitis master when what he is saying is showing how useless Mugabe and his cabinet are. Zimbabweans have too much hate, here is a guy who is trying to tell you what’s going on and yet you attack him or call him power hungry. He is a true democrat, he couldn’t stand the way Tsvangirai had made the MDC is own private party, so he walked without compromising his own values. This is a leader I will follow. He is not in it for the money but he wants to help you Zimbabweans

  • comment-avatar

    tht is all desperation of failed ppl

  • comment-avatar

    thts all desperation

  • comment-avatar

    Biti is correct.
    The increase in taxes on imports, air time, fuel etc. will reduce the very little disposable income in peoples’ pockets. They will have less to spend, and so our producers will sell fewer products. This will then force them to reduce their production and costs, leading to more company closures.
    However Chinamasa is also in a corner. He has to find money to pay the Civil Service and Debt Service bills. If he fails, civil unrest is highly likely.
    No-one is lending money to Zimbabwe because our debt is already US$9 billion. Investing here is fraught because of the huge political uncertainties.
    Mugabe and Zanu PF have a cast iron reputation of being totally lawless, especially in context of property rights.
    The result is that only China and Russia are prepared to cherry pick investments and use political muscle to get and protect highly favourable mining contracts, negotiated directly with the President.
    Is there a solution? There was – the last general election. But we wasted that opportunity, preferring instead to rig it for short term gain.
    As a first step, Mugabe should retire immediately.

  • comment-avatar

    Zimbabwean politicians don’t have a conscious how do u expect them to run the economy after rigging the elections!They are a illigetmit government with no answers!They have so many fires to put out one can’t even believe it!Also how long does it take for them to admit it?

  • comment-avatar
    Baba Jukwa's Tokoloshe 7 years ago

    Baba Jukwa’s Tokoloshe is just everywhere we look now. He is a very busy Tokoloshe with Zanu.

  • comment-avatar
    gwabu 7 years ago

    Since when has Biti been saying the same. this time around there is at least a bench mark of 6 months. but 6 months is not a long time at all and it will just come to pass without any incident.

    I personally do not believe in the economic collapse of the economy of Zimbabwe. Biti should argue with figures. otherwise he is prophesying like makandiwa.

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    cypriano 7 years ago

    Mr Biti you mentioned the point of weak opposition-that is laughable to say the least.Instead of consolidating the gains of MDC Revolution and strengthening opposition you have decided to form a splinter group further weakening the opposition.The best strategy was to work towards unifying all the MDCs ana have a united opposition, forgive each other your past misdeeds and reach out to the desperate Zimbabweans who all languishing with poverty because of poor governance by Robert Mugabe administration.

  • comment-avatar
    Roger Zulu 7 years ago

    I can hear the former Rhodesian’s saying “We told you so!!”
    Not ready to run a country…. who would have thought it would come to this.
    Well done Robert and good luck to Grace about to take over.
    One Zimbabwe, One Nation, One Diaster. 🙁

  • comment-avatar
    Kusvikazvanaka 7 years ago

    One thing is certain…Mugabe won’t let go his Presidency. Now the way forward could be (1) Zanu Pf Ministers should strike (2)public should strike. (3) soldiers, teachers, Nurses, Doctors, CIDs, CIOs, TM workers, OK workers, Delta workers, NRZ, TelOne, Econet, Telcel, Forestry, ALL Government workers should SAY enough is enough and down tools….without this, this dictator will keep on his Cheap Talk of million job positions creation and just buy time. He is very very cruel. Let us all go into the street before our kids are history

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    Nick Collis 7 years ago

    Owen ….you nailed it ! I would go further and say that the MDC’s decision to sign up to the GNU in 2008 when ZANU was on it’s collective knees was also a huge wasted opportunity!