‘Zim’s economy dying’

via ‘Zim’s economy dying’ – DailyNews Live 9 August 2015

HARARE – Analysts say contrary to government’s propaganda, the Zimbabwe economy is “definitely dying”, as manifested by worsening liquidity challenges, company closures and job losses.

Speaking in interviews with the Daily News on Sunday yesterday, the analysts — who laid the blame squarely on President Robert Mugabe and his warring Zanu PF for the country’s myriad problems — also lamented the fact that the nonagenarian appeared “completely clueless” about finding solutions to the problems.

These sentiments were expressed as a leading think-tank warned that Zimbabwe was increasingly becoming a potential conflict zone, as the country’s economy continued to hurtle backwards — creating a tense and explosive environment in which violent riots and mass demonstrations could easily flare up. The World Bank has said Zimbabwe’s economy will at best grow by a miserly 1 percent this year, the country’s lowest growth forecast since dollarisation, although many economists say this is way too optimistic and that the economy is in fact already in recession.

“We do not expect the economy to recover in the near term. The recently announced mid-term fiscal policy review statement confirmed our fears that the economy has stalled. We believe that even this forecast (of 1,5 percent growth) is ambitious and expect growth to be negative this year (at -1percent),” Invictus Capital — a securities advisory firm — says, for example, in a recent report.

University of Zimbabwe (UZ) political science lecturer, Eldred Masunungure, said yesterday that the wave of job losses taking place in the country could be “a deliberate move by a broke government to off-load surplus labour”.

“Mugabe is reluctant to use his presidential powers which have the immediate effect to stop the job losses, and instead the government is opting to take the long route of amending the Labour Act. However, by the time the Act is amended, the damage would already have been done and thousands will be on the streets with nowhere to go,” Masunungure said.

He was commenting in the wake of estimates by the Zimbabwe Congress of Trade Unions (ZCTU) that more than 20 000 workers have been affected by a recent Supreme Court ruling that confirmed that companies could lay off staff on notice.

Commenting on the wave of corporate right-sizing taking place in the country last week, Mugabe — as is consistent with his ill-advised populist policies of the past 35 years — said his government was against the loss of jobs — but provided nothing by way of policy recommendations to keep stressed companies afloat.

Another UZ lecturer, Albert Makochekanwa, an economist, said there was no doubt that the current wave of retrenchments would negatively impact the economy.

“The problem is that these retrenched people will no longer have the buying power to promote economic growth, prompting businesses to reduce stocks of their products. By so doing they may also end up retrenching more people as there will be no one to produce the stock for.

“There are also people from large companies who have taken out mortgages for homes. Once out of a job there may be an increase in non-performing loans, forcing banks to attach property and thus creating a vicious cycle of poverty of people with no jobs and no homes,” he said.

Social commentator Blessing Vava weighed in saying Mugabe had never appreciated workers or their plight in his 35 years in power.

He said that workers had been “punished by the same government in the 1990s when Mugabe assented to the Economic Structural Adjustment Programme (Esap)” that had also resulted in massive job losses.

“You must understand that Zanu PF has never been a friend of the workers. They embraced neo-liberal and free market policies at the advice of the International Monetary Fund and World Bank when they embraced Esap in 1992.

“This resulted in massive retrenchments and it is not different from what we are witnessing now. No one knows, but maybe those who want to give them money advised them to retrench workers, seeing that (Finance minister Patrick) Chinamasa recently announced that the civil service wage bill is too much, which could soon see government itself retrenching,” Vava said.

“Zanu PF is not concerned not just about the plight of workers, but also the citizens of this country. The people of Zimbabwe have never been a priority for Zanu PF. The point is, government is too broke and desperate for any financial bailout and these are some of the conditions that come with those packages. Zanu PF is behind that (Supreme Court) ruling,” he added.

MDC spokesperson Obert Gutu said Mugabe was “oblivious of the collapsing economy around him”, which was the reason why the nonagenarian was continuing to embark on “endless foreign jamborees that have cost the national Treasury no less than $100 million in only two years”.

“The bloated civil service is struggling to be paid on a regular basis and, in his mid-term fiscal policy review statement, a thoroughly exasperated and out-of-sorts Chinamasa announced that the government intends to cut the size of the civil service bill by at least 40 percent.

“This effectively means that at least 200 000 civil servants will soon be laid off and dumped on the job market,” he said.

Gutu added that while the nonagenarian had managed to rig the 2013 national elections, he was “failing to rig the economy”.

“We are now faced with the horrifying spectre of a national economy that has been virtually informalised in a very short two years. The revenue base for tax authorities continues to shrink and there is a real likelihood that the Zanu PF regime will very soon be totally unable to pay civil servants’ salaries and other benefits.

“Zimbabwe is presently in an economic and financial hell hole. The tragic and capitalistic judgment of the Supreme Court that was handed down on Friday, July 17, 2015 is, to all intents and purposes, ruthlessly and rapidly decimating the country’s labour force, particularly those few people who are still lucky enough to be in formal employment and there is no doubt that it is Mugabe who is to blame because workers have no other option because the economy is dead,” Gutu said.

Economists also say Zimbabwe cannot afford a further contraction of the economy as the country is already grappling with high unemployment, estimated at up to 95 percent — which has forced many, including university graduates, to resort to street vending for a living.

Zimbabwe is currently without balance of payment support from multilateral and bilateral financial institutions and donors due to huge debt arrears and a dismal repayment record.

In the meantime, renowned think-tank, NKC African Economics (NKC), recently added Zimbabwe to a list of unstable countries which include Burkina Faso, Ethiopia, Guinea-Bissau, Kenya, Madagascar, Mauritania, Swaziland, Togo, Tunisia and the Western Sahara — after taking into account recent economic and social developments in the country.

The South Africa-based research institute, which is a unit of the UK’s famous Oxford Economics, said in its latest report on Zimbabwe that in view of the fact that government revenues are dwindling, authorities might be forced to retrench, driving more people onto the streets, while fuelling social instability.

“We remain reluctant to make short-term predictions that ‘the political end is nigh’ for Zanu PF and Mugabe given the regime’s extraordinary ability to survive against ever mounting odds, but we also believe that the equally extraordinary patience and resilience of the Zimbabwe people is wearing thin.

“What is different about the pressures building this time is that we are approaching the point where the moribund economy and regime excesses are putting more and more people on the street with no prospects of returning to employment any time soon, and then denying them even the opportunity to scrape out a meagre day-to-day subsistence existence.

“One of these straws, one of these days, and the back of the camel will break,” NKC said.