The 2026 national budget: Mthuli must be stopped!

by Itai Zimunya- Senior Economist with the Eastern Caucus in Mutare.

The recently presented 2026 national budget statement has ignited fierce debate within policy circles. The Minister of Finance states that his policy intention has three targets, that is, a) stability, b) growth and c) transformation. On the other side, some policy analysts argue that the budget statement is counter-productive. This piece contributes to the ongoing debate, with the hope that, maybe, or, in fact, that Parliament must stop Minister Ncube and ensure that he corrects his proposed policy prescriptions. The intention is not academic, but to ask Parliament to call for a comprehensive philosophical policy rethink by actors along Samora Machel Avenue. This write-up presents our marking scheme as well as proffer better solutions to move Zimbabwe forward.

It is clear that Minister Ncube framed the 2026 budget on orthodox economics, that is, generally assuming that one plus one equals two. Whilst this is a universally accepted mathematical permutation, framing a national budget needs a variety of frameworks. The multiplicity of interests and, broadly, the targets of growth and stability often compete.

Whilst there are several points combining to build a strong case for a budget revision, this article isolates the introduced cash withdrawal levy at Section 722 of the National Budget. This new levy simply intends to choke the informal sector. Mthuli’s economic orthodoxy assumes that when the government fatally taxes the informal sector, conveniently called the “emerging sector”, it will naturally collapse, thereby creating space for Foreign Direct Investment (FDI).

In section 724 of the Budget, Minister Ncube says, “… The continued increase in cash withdrawals, which reached US$353 million in June 2025, heightens risks of informality, tax evasion, corruption and administrative inefficiencies”.  In short, he finds it problematic that this emerging sector withdraws its USD through the Automated Teller Machines (ATMs). The Minister wants people and companies to reduce or stop getting USD from ATMs.  

In section 725, the Minister clarifies his wrong prescription “… it is imperative to introduce measures that discourage excessive cash withdrawals, enhance transparency, strengthen tax compliance and gradually shift economic activity toward formal and digital payment platforms”.  Kindly note the characterisation of these cash withdrawals as “excessive”.

How can people keep their USD in banks when the policy makers are threatening mandatory return of the Zimbabwe Gold (ZiG) as the sole currency on a date and path unknown as if ZiG is a new Jesus Christ? How can people keep money in banks that charge hefty average $20 per month as bank fees in addition to a myriad of other fees and taxes? Is the Minister aware that elsewhere in the southern African region, including Mozambique, Tanzania, Botswana and Zambia, bank deposits are protected, earn interest and actually grow every month?

Why then punish a growing, struggling, self-financed informal/emerging sector for reasons beyond them?

This is where the Minister and economists on Samora Machel Avenue miss the point. They take this “emerging sector” growth as wrong, evil, bad and needing “punitive taxes for it to reform within 40 days. Their hope is that, come January 1 2026, this “emerging sector” must toe the line or suffer.

In the paragraph below, we wish to display how and why the Minister’s orthodoxy reading is reactionary, simplistic and a bit dangerous. Yes, dangerous!

The Zimbabwean economy and its historiography, sociology and politics require a broader and less Eurocentric set of analysis.

One fine scholar, the late Professor Sam Moyo of the Sam Moyo Institute of Agrarian Studies (SMAIS) studied Zimbabwe and made a seminal conclusion.  He found out that Zimbabwe’s economy presents what he called a heterogenous paradox. In other words, growth is coming from sectors and or through models not often associated with growth. In reality, Sam Moyo, focusing on agriculture years after the land reform program, noted that the small-scale farmers’ produce was increasing even though, then, before 2007- the aggregate national production was still lower than that of the 90’s. So, even though the production of the small-scale sector was rising, the national story was different. This is the paradox.

Now, twenty-four years later, the story has changed. The paradox has entrenched to such an extent that it must be taken as the new normal.

Here is why.

Zimbabwe’s growth is being powered by the informal sector and Diaspora remittances. Zimbabweans working abroad are anticipated to remit $2.7billion USD in 2025. The plus 70% Zimbabweans in the so-called “informal sector”- or what the Minister calls the “emerging sector” produce an average 65% of Zimbabwe’s maize, gold, and tobacco. The Zimbabwe National Chamber of Commerce (ZNCC) posited that this sector contributed 76% to aggregate demand using the Purchasing Power Parity (PPP) measure. In this 2026 budget, Section 722, Minister Ncube says this emerging sector accounts for a “substantive share” of the cash transactions in Zimbabwe. This confirms our thesis that this informal sector is the current hub of the economy.

In the 2025 fiscal year, there is global consensus among many policy actors including the World Bank, the Government of Zimbabwe, and the International Monetary Fund (IMF), that the Zimbabwean economy will grow by 6.6%. This growth is not coming on the background of FDI or some big money coming out of Europe, the United States, or China. No!

It is this emerging sector that Mthuli wants to kill. It is the Diaspora sacrificing their sweat and blood to develop their villages, plots and houses.

Secondly, this proposed “withdrawal tax” is a big move aimed to reverse the ongoing economic revolution in the gold, maize, tobacco, construction and retail sectors.

It seems the Minister is suffering from nostalgia or some European-economic-infatuation. He expects the Zimbabwean economy to go back to the 1975 formal economy that was associated with large manufacturing firms across Zimbabwe, or to follow the European model of industrialisation associated with these mega factories.

Whilst we agree with the endgame that Zimbabwe must, sometime, build mega factories to export its technologies, goods and services, the mode of transformation must not be binary or substitutive:  to kill the informal sector and build the formal sector.

Thirdly, today’s emerging/informal economy did not just emerge from nowhere, but was created by the very same government. Perhaps the only difference is that the foundations of today’s economy were set by the first republic post-2000. The government of Zimbabwe invested huge sums of money, political will and time to support small-scale miners, brought in 1.2 million people into small-scale agriculture through the A1 and A2 models. Now, fifteen years later, those investments have started bearing fruit. Small-scale miners, or “emerging miners” are producing more than 24 tons of gold versus big Zimbabwe Stock Exchange and Johannesburg Stock Exchange-listed mining giants. The big mines only produced 35% of the gold in 2024. Emerging farmers are contributing an average 65% of maize and tobacco deliveries to the Grain Marketing Board (GMB) and to tobacco auction floors, respectively. The retail industry has also indigenized, of course, within the informal or emerging space.

The economic base has changed significantly, and it is not bad. How does the Minister expect emerging entrepreneurs to build mega factories without access to credit. The stock markets are still largely colonial and parked far away from the masses.

The Minister, in doing his corrections, must answer the question: how to grow and formalize the informal/emerging sector (and not how to kill it).

Fourthly, how can the Minister conclude that withdrawing $353 million per month is excessive by a sector that receives $2.7 billion from the Diaspora in addition to earnings from tobacco, maize and gold? The emerging sector is much broader, including an increasing quantum in the manufacturing sectors like plastics, clothing, food, as well as the retail sector.

Fifth, this emerging sector employs the biggest number of people in Zimbabwe. Yes, the jobs are informal-but because people live every day, families are getting sustained.

Sixth, the fact that this “emerging sector” is not banked is not its problem. Banks in Zimbabwe are still in 1980. They still bizarrely require a proof of residence, a three-month salary statement among a litany of other requirements for one to open a bank account. For one to get a loan, they require a title deed. These requirements are part of the orthodox that, unfortunately, reflect an old and vanishing characterization of the economy as a forte for male and of the property class only. In Botswana, the US, Europe or other innovative societies, governments and private funds have been set aside to support innovation hubs. Ideas run the world- not title deeds or proofs of residences, among other old-fashioned requirements that bureaucrats in Zimbabwe banks still require. There is no direct and positive corelation between having smart business ideas and a title deed. The earlier government, banks and other venture funders realise this, the better.

The so-called ama 2000’s are way ahead now. They park their money in bitcoins among other online financial instruments that require fingerprints or other biometric forms of identity as security passwords.

If Zimbabwe’s financial sector, including banks and insurance firms still expects well-manicured clients in Gucci and Versace suits as their source of business, they might also, soon, find themselves on the ropes. I salute some business development managers for Meikles Holdings group, Dairiboard, among other local manufacturers. Meikles Holdings quickly closed its big departmental stores and subdivided them into smaller units for rentals to this “emerging economy”. Dairiboard and other local producers changed their route-to-market by going directly to the “tuckshops” and other smaller traders. Why? They pay cash on delivery and do not negotiate 30-day terms associated with bigger retailers.

A new economy has emerged. It did not mushroom from the sky but was created by the government of Zimbabwe through land reform and indigenization programs. That is why this budget is toxic and dangerous.

Instead of using a stick to scatter, we propose that the Minister throws a lot of carrots into this emerging economy.

These carrot policy measures include,

a)     Facilitate convenience and ease of business registration – Zimbabwe is fairly small, with a population of 17 million people. The government must invest in an all-of-government cloud-based biometric system that services all of government and avoid the need for production of National Identity cards when dealing with government.

b)     Instead of taxing bank-withdrawals, the Minister must, conversely, promote financial inclusion by reducing bank charges from the current 3% plus an average $20 bank-fees per month. Minister Ncube must assess the situation within the Southern African Development Community (SADC) where bank balances earn interest. In Zimbabwe, depositors’ balances reduce every month. Which normal person would keep their $500 USD in the bank when they know that within 30 days, their balance could reduce to $478? More fees and taxes risk harvesting the reverse: more pillow banking and deeper informalization.

c)     The Minister must cast away the “them and us” lens on the economy and take the economy as one constituted by different parts. Dr Godfrey Kanyenze wrote extensively on dualism in the title ”Beyond the enclave”. This othering of the majority is dangerous. From a political perspective, after all the investments in land reforms, mining mechanisation, maize production, among others, why would the Minister want to kill these sectors? The majority of Zimbabweans in the informal sector earn better average monthly incomes, albeit unstable, than their formally employed counterparts. They need more policy support, not taxes.  

d)     On Diaspora remittances, the Minister must make it easier for the Diaspora to send in more money by giving some incentives like access to agricultural land, access to mining claims, discounted holiday packages at national parks among others. When more money flows in, the better for Zimbabwe.

e)     Export substitution scheme must be supported to ensure growth of the local manufacturing sector. Trade barriers must be removed including that 30% forex retention scheme by Government. If these emerging farmers and Makorokozas can produce 65% of maize, tobacco and gold- how and why would they fail to produce lemons, macadamia and flowers for export?

Policy consistency and policy congruence are crucial. The proposed 2026 budget is a sharp departure from the earlier policies of indigenization, entrepreneurship and land reform. This nostalgic expectation that Zimbabwe will go back to a European type of an economy with big firms and above 80% formal employment is not likely to happen in the short term. If that is to happen, it will not likely be a result of “taxing this emerging economy”- but supporting them to grow. Zimbabwe must learn from Asia, Ethiopia and Kenya. Small milk, goat and avocado producers of Ethiopia and Kenya were not taxed to die- but supported through targeted value chain systems. They grew and now employ many more people.

We conclude with a call for African economists to study this notion of heterogenous paradox to help other developing economies in Africa. Our growth and happiness will not likely come from wanting to mirror Europe’s developmental model. The advent of technology and new possibilities means that Africa’s growth, as Zimbabwe is witnessing, might come from non-expected corners. That is okay. As Chinese philosopher, Deng Xioping said, “I don’t mind the colour of the cat, so long it catches mice”. On the same note, Minister Ncube must reduce taxes, continue to ease the cost of doing business, seal possible avenues for corruption or rent seeking, digitize the regulatory systems and lead in using the ZiG.

To prosperity!

ends//  

Intro Zim Economic Freedom Audit 2024

 Zimbabwe is rich and it’s story must be that of plenty. However, the country has experienced significant economic challenges over the past two decades, characterized by hyperinflation, currency instability, and a decline in foreign investment. Against this backdrop, the primary objective of this audit is to evaluate the current state of economic freedom in Zimbabwe and its impact on the economy allowing this report to assess Zimbabwe’s progress towards achieving the National Development Strategy (NDS)1 and Vision 2030. This report therefore would be a good policy paper for the private sector, the government, industry, inform investment policy, academia as well as the public.  In preparing the report, the study employed a mixed methodology approach. Approximately 80% of the analysis was derived from desktop research, utilizing secondary economic freedom data that is freely accessible from the Economic Freedom of the World database. The remaining 20% of the analysis was informed by qualitative data collected through focus group discussions with key informants. In the report, the analysis was conducted by examining Zimbabwe alongside its four neighboring countries: South Africa, Zambia, Botswana, and Mozambique. This approach, which considers countries that share a common history, similar climatic conditions, and significant trade relations with Zimbabwe, provides a broader context for understanding the economic conditions within Zimbabwe itself. Furthermore, this comparative analysis facilitates an examination of the various economic policies implemented by neighboring countries. It also allows for an assessment of how well Zimbabwe is integrating into regional markets and economies.

The economic freedom audit report is based on five key economic freedom indicators: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation. The findings indicate that Zimbabwe has low and deteriorating economic freedom performance, ranking the lowest across all indicators when compared to its neighbors. This highlights the significant challenges facing Zimbabwe in terms of economic freedom. The report proposes the following policy recommendations: strengthen property rights by establishing clear legal frameworks for property ownership that promote confidence among stakeholders; enhance government integrity by adopting anti-corruption measures, including transparent procurement processes, whistleblower protections, and independent oversight bodies to improve accountability within government institutions; reform bureaucratic procedures by simplifying regulations that govern business operations; promote market openness by reducing import tariffs and eliminating non-tariff barriers to encourage competition and attract foreign direct investment (FDI); and ensure monetary stability by implementing sound monetary policies aimed at controlling inflation through fiscal discipline, strengthening the independence of the central bank, and encouraging the use of a stable currency while gradually phasing out multi-currency systems.

 

2:         Introduction

This audit finds out why Zimbabwe, a resource-rich country, has a contemporary history of economic challenges. Zimbabwe has experienced significant economic challenges over the past two decades, characterized by hyperinflation, currency instability, and a decline in foreign investment. Amidst these challenges, the concept of economic freedom has emerged as a crucial framework for understanding and addressing the underlying issues in the Zimbabwean economy. In Zimbabwe’s context, enhancing economic freedom is seen as a pathway to revitalizing the economy, fostering entrepreneurship, and improving living standards.

When comparing Zimbabwe's level of economic freedom to its Southern African neighbors, the disparities become apparent. Countries such as Botswana and South Africa have implemented policies that promote higher levels of economic freedom, resulting in more robust economic performance and stability. In contrast, Zimbabwe's restrictive economic policies and regulatory frameworks have hindered its growth potential.

Economic freedom is a fundamental principle that resonates deeply with Zimbabwe's constitutional framework and national development agendas. Chapter 4 of the Zimbabwean Constitution outlines fundamental human rights and freedoms, particularly in Section 13 (National Objectives) emphasizes that every citizen has the right to participate in economic activities and Section 14 (Right to Property) ensures that individuals have a right to own property, which is crucial for business operations. Thus, the Constitution of Zimbabwe enshrines the rights to personal liberty, property, and entrepreneurship, establishing a legal foundation that supports individual economic agency. As Zimbabwe strives to rebuild its economy, the alignment of economic freedom with constitutional values becomes increasingly vital in fostering an environment conducive to growth and stability.

The National Development Strategy 1 (NDS1) emphasizes the importance of creating a vibrant economy through strategic interventions aimed at enhancing economic freedom. This initiative seeks to transform Zimbabwe into a middle-income economy by 2030, promoting investments, innovation, and sustainable development. By prioritizing economic freedom, NDS1 aims to empower citizens and businesses, encouraging local and foreign investments essential for economic recovery. The mantra "Zimbabwe is Open for Business" further underscores the government's commitment to fostering an open and competitive economic environment. This slogan highlights the need for deregulation, improved infrastructure, and a more favorable business climate. By embracing economic freedom, Zimbabwe can attract investment, stimulate job creation, and enhance overall economic resilience.

In addition to NDS1, various policy frameworks, such as the Zimbabwe Investment Policy and the Industrialization Policy, emphasize the critical role of economic freedom in achieving sustainable development. These frameworks advocate for reducing bureaucratic red tape, enhancing property rights, and creating a transparent regulatory environment. By aligning these policies with the principles of economic freedom, Zimbabwe can position itself as an attractive destination for both domestic and international investors.

Finally, for Zimbabwe, embracing economic freedom can facilitate greater participation in this expanded marketplace offered by the African Continental Free Trade (AfCTA). By reducing trade barriers, enhancing regulatory frameworks, and fostering a competitive business environment, Zimbabwe can position itself to take full advantage of the AfCFTA. This strategic alignment not only promises to boost exports but also encourages foreign direct investment, which is crucial for revitalizing the economy.

In conclusion, economic freedom for Zimbabwe is not only aligned with the country's Constitution but also resonates with its developmental agenda and trade and investment policies. By embracing the principles of economic freedom, Zimbabwe positions itself to unlock considerable benefits that can address a myriad of economic challenges. This alignment promises to foster an environment conducive to growth, innovation, and resilience, ultimately paving the way for sustainable development and improved living standards for all Zimbabweans. As the nation seeks to revitalize its economy, the pursuit of economic freedom stands as a critical strategy to navigate the complexities of both domestic and regional economic landscapes

Objectives of the Audit

The primary objective of this audit is to evaluate the current state of economic freedom in Zimbabwe and its impact on the economy. Specifically, the audit aims to:

§  Assess the existing policies and regulations impacting economic freedom in Zimbabwe.

§  Identify barriers to economic freedom and opportunities for reform.

§  Benchmark Zimbabwe's economic freedom against regional peers to highlight areas for improvement.

§  Recommend actionable strategies to enhance economic freedom, promote sustainable growth, and improve the overall economic landscape.

Through this comprehensive analysis, the consultancy aims to provide a roadmap for policymakers and stakeholders in Zimbabwe to foster an environment conducive to economic prosperity and stability.

by Dr E, Mavodyo, L. Kanyonganise, I. Zimunya, N.Musikambesa, P.Mutize et al 2024

Summer is here- beware of malaria!

Now that summer is here, one of sub-Saharan Africa’s biggest health challenge also looms, Malaria.

Whilst malaria is worrying across all demographic segments, it is during pregnancy that it is of a greater concern.

 This article seeks to inform women, especially those pregnant and those hoping to be pregnant to be on the lookout for this life threatening disease.

Being pregnant is a delicate phase which requires maximum care both for the mother and baby.   Prevention and detection of threatening conditions which may affect mother and baby often include early bookings, routine antenatal investigations and continued education on pregnancy care.

Even though there are other worrying conditions to look out for when pregnant, here is why Malaria is of greater concern.

1] During pregnancy the immunity of the mother is naturally low so the mother has minimal resistance to diseases.

2] The symptoms of malaria more or less tally with common minor disorders of pregnancy like vomiting, body weakness headache etc. So disease progression may go unnoticed.

3] Malaria crosses the placenta and consequently affects fetal growth.

4] Malaria consumes and survives on glucose which is much needed by the mother and growing fetus.

5] Some drugs of choice are contraindicated in pregnancy depending on the trimester thereby limiting the choice of treatment.

Malaria is a non-communicable disease transmitted via the bites of an infected anopheles mosquito and is most prominent in the low veld, hot and humid areas of Zimbabwe.

With climate change, the precedence of malaria is increasing even on the higher veld of Zimbabwe.

It is very important for pregnant women to be protected from malaria during pregnancy. Untreated malaria often has negative effects on mother and baby. When malaria enters the body of a pregnant woman enters the bloodstream and consequently affects red blood cells which are responsible for the transport of oxygen to the whole body.

Malaria crosses the placenta and starts destroying red blood cells in the fetus.  The growing baby relies on the oxygen from the mother but the destruction of red blood cells distorts the gaseous exchange process.

The usual symptoms of malaria are body aches, diarrhea, a cold stage characterised by shivering, a hot stage characterised by headaches, vomiting and sweating. Effects on pregnancy include intrauterine growth retardation, miscarriages, premature delivery, low birth weight baby, neonatal jaundice –due to the destruction of red blood cells and neonatal respiratory distress syndrome since destruction of red blood cells in utero impairs the transport of oxygen in the baby’s body.

Complicated malaria often has symptoms of coca cola coloured urine, fever and in some cases confusion.

Prevention of malaria includes sleeping in insecticide treated mosquito nets, avoid travelling to malaria endemic zones during pregnancy and taking malarial prophylactic medication.

The secondary prevention includes early treatment at a health facility as soon as symptoms are noted.  So malaria prevention in pregnancy is a vital step in ensuring a healthy and safe pregnancy and a healthy mother.

The responsibility is for everyone- women, men and the community. A healthy summer to you all!

By Patience Hombarume Zimunya. She is a nurse midwife and writes in her own capacity.  Contact: petiehombas@yahoo.com

“Bhora musango” and the crisis of administration in Zimbabwe

That Zimbabwe, the whole of it suffers from a crisis of administration is no longer a contested issue. Many people read, see and emphasise the symptoms of a collapsed political and economic administration, which include corruption and a super-informal economy.

This article seeks to present the idea of “bhora musango” and its implications to politics and business in Zimbabwe. The chief argument is that the endemic and almost “normal” bhora musango may in fact generate a bigger challenge to national reconstruction as people prefer often lazy and quick-money making methods over systematic value based and often tiresome productive systems.

It is important to firstly define and describe this notion of “bhora musango”. Literally, it means kicking the ball off field. In a team of sport, the one who plays “bhora musango” is the one who passes the ball to the opponents or out of the field just to scuttle the team’s winning effort for that person’s private profit.  

This paper argues that whilst “self-interest” has been part of public and political administration in Zimbabwe, it has now permeated the Zimbabwean society and now forms part of the national mode, both in politics and business, big and small.

The splits and challenges within Zanu PF, notably after the Tsholotsho declaration to the current vanquishing of former Vice President Joyce Mujuru and her team are largely not results of ideological differences, but just “bhora musango”.

On the other hand, the splits within the opposition movement are rarely defined on ideology or group plan, but self-seeking “bhora musango”.

In economics, this idea of “Bhora musango” is often referred to as speculative economics.

Economists define speculative economics as that which “is often short term, takes large risks, especially with respect to trying to predict the future; gambling, in the hopes of making quick, large gains”.

Tim Bollerslev, an economic modeller argues that in speculative economies, “rates of return tend to be high in the short term, uncorrelated over time but characterized by volatile and tranquil periods.”

It is important to state that in fact speculative economics is not necessarily bad, but becomes toxic if employed alone or if it displaces productive economics.

Productive economics, in simpler terms, emphasises the use of capital, land and ideas to produce/innovate goods and services to satisfy human needs.

It is therefore my argument that millions of informal traders now fill up the streets of Zimbabwe’s cities, not necessarily because they cannot produce, but the lure of quick but often elusive gain is irresistible.

Many false “middle class” people have ex-Japan cars, farms and small businesses which they use as symbols of status. Much of it is dead, zero-producing capital.  

Such characters cover their lack of economic depth by parading labels of clothes and hence derive status and “deals” by the shoe and dress labels they wear, and not by what their ideas are worth. They make money on the basis of who they know or the political party they conveniently purport to support.

In politics, speculators are agile and unpredictable. They make the most noise especially attacking others of a different opinion in public but dine and wine with the so-called enemies at night.

Insider trading which is going on unchecked within government, where departmental buyers have become departmental suppliers is blatant corruption, but all in the stampede of this “get rich quickly” manifesto.

The recent public policy debate on whether police officers have the constitutional mandate to charge and collect “road offense fees” comes to mind. It is unconstitutional but the supporters of that process argue that “it is easier to administer road fines by police collecting it there and then than for offenders to pay at police stations or through some safe system”

Read simply, they argue that the constitution and the administration it creates are inconvenient. The constitution is now a victim of “bhora musango” as well.

Common sense means it would be very convenient for the state if offenders pay and get their funds into the cycle of public administration. But under “Bhora musango” the private interests of the “administrator” are superior, and then the state/public/povo suffer the cost of missed development.  

From a political perspective, the various short-term, egoistic political decisions and processes we witness in Zimbabwe make it difficult to read the future. Because it remains volatile and uncorrelated, I argue that Grace,  S.K Moyo, Mnangagwa, Tsvangirai or any of the front runners to state presidency are not guaranteed to take over from Cde.R.G Mugabe. Far from it!

With “bhora musango”, political succession in Zimbabwe has ceased to be mainly determined by social bases, but largely a sub-function of speculative politics. This means, among all leading contenders for state presidency, no one is purely MDC or Zanu PF, but like shifting sands, eats within all camps to maintain their short-term speculative edge.

From an economic perspective, it’s better for people to broaden their portfolios and do at least 75% production and less speculative economics in Zimbabwe.

The main actors of economic “bhora musango” may soon lose as the new post Mugabe administration, whether Zanu PF or not, would want to stabilise the country and make themselves legitimate by emphasising merit and institutions.

As a point of conclusion, as policy debates continue on the kind of Zimbabwe the future deserves, politicians must never again sink a whole country by substituting production with speculation.

Speculation must not also be killed totally as no country or administration functions purely on production alone. Both production and speculative economics and politics are necessary, but the average balance must always lie on production.

The prospect of a merit and production based Zimbabwean economy is possible but remote unless if the political leadership boldly brings order within the state. President Mugabe can no longer reform the state as he is, sadly, now held hostage by “bhora musango”. 

Whoever takes over after Mugabe may not survive two terms in power due to this “bhora musango” politics. The touchstone is to restore institutions; merit and teamwork (cross party and cross faction) to both survive and re-build production as an economic base.

Time will tell!

Itai Zimunya.... writes in his personal capacity and participates in the Institute for New Economic Thought. 

Zimbabwe’s economy: any hope for 2015?

As the year 2014 comes to the end, Zimbabweans continue to ponder on what year 2015 promises on the economic front. Part of that debate focuses on 2015’s $4.1bn national budget which was presented by Finance Minister Patrick Chinamasa in November. It seems two schools of thought are competing on reading 2015. Firstly, the government or the “new government” with new policy makers seem to promise a robust implementation of Zimasset and hence better economic fortunes for Zimbabwe in 2015 going forward. On the other hand, ordinary citizens who were largely cash strapped in 2014 and smarting from the introduction of “valueless” bond coins and a non-delivered public service bonus are already bracing for a worse 2015.

As things stand, it appears the external factor of weather seems to be bringing smiles to the faces of ordinary Zimbabweans as the xmas and new year week seems to be wet, hence good for both crops and livestock; themself significant factors of household food security and food sovereignty.

This article seeks to contribute to the debate on Zimbabwe’s economic fortunes. In particular, it shall focus on the 2015 budget and compare it with those of other countries in the region, and assess whether Zimbabwe is making progress or regressing. Whilst we have the latitude to use many economic indicators, a relative analysis of Zimbabwe and her neighbours’ gross budgets will be sufficient in assessing where Zimbabwe will likely lie in 2015.

In 2014, Angola, Mozambique and Namibia did far better than Zimbabwe both in real and nominal terms of economic development. Their projected budgets for 2015 are much higher than that of Zimbabwe. Their economies are also growing at faster rates than that of Zimbabwe.

The notes below display these economic figures and rough development trends for these countries.

Zimbabwe’s 2015 national budget remains largely pegged at $4bn, with a growing budget deficit meaning Zimbabwe may fail to pay her bonuses again in 2015.

Angola, with 27 years of regression during its civil war has a projected 2015 national budget of $70bn which will be 17 times bigger than that of Zimbabwe.

Mozambique, also with a sad history of a post independent civil war has a growing budget of $8.9bn, double that of Zimbabwe in 2015. Using the gross investment flows into the region, Mozambique tops with more than $2bn of investments in 2013/2014. Zimbabwe had less than $400million real new productive investments in 2014.

Zambia, Zimbabwe’s Siamese twin has out leaped her southern sister. Zambia’s budget for 2015 is pegged at $11.8bn, which is two times bigger than that of Zimbabwe. Zambia like Zimbabwe is largely a mining economy even though it is diversifying its economy.

To really display what is happening to Zimbabwe, it is important to state that Zimbabwe had a higher budget in US dollar terms in 1980. Its economy was more diversified and its growth rate was far much higher than most of these countries in this cluster.

This story of Zimbabwe’s demise is not new. The key policy questions are-perhaps; why and is there light at the end of the tunnel?

The reasons for Zimbabwe’s economic collapse are many and have historically invited serious debate and disagreements. These factors jointly contributed (or still contribute) at different times and in different degrees to Zimbabwe’s sorry state.

The ruling party and its scholars argue that the reasons for Zimbabwe’s collapse are largely due to neo-colonial forces, with Western international institutions responsible through both covert and overt means to destabilise Zimbabwe.  

Others cite leadership failure at the national policy level as Zimbabwe’s challenge. This is what many political scientists discuss as the failure of the post-colonial state in Africa, Zimbabwe included.

From an economic perspective, every fair economist concurs with those that argue that leadership failure is the significant factor in Zimbabwe’s fall. Leadership failure including lack of viable alternatives is the biggest challenge confronting Zimbabweans in 2015 and the medium term.

It is important to qualify the phrase leadership failure as it is loaded and may mean different things to different people. The leadership discussed herein refers to leadership of the state. The state has a primary duty to promote growth and stability of business and the economy. The Zimbabwean state, rather, focuses on “deception and operations” thereby making investors and ordinary citizens largely uncertain thereby taking a normal “wait and see” stance which further leads to zero or negative response to the numerous and incoherent but often false incentives/declarations.

The current rejection of bond coins and mass-withdrawal of money from banks is a good example.

The Zimbabwean economy in fact shrunk in 2014, and yet the government “declares” a 3% growth rate. A government that pumps 80% of its revenue to salaries and allocates 12% of its budget to defence in times of relative peace reaps what it sows- hunger and recession!

At the risk of sounding pessimistic and losing hope on the future, perhaps, the fitting question would be: is there any hope on Zimbabwe?

 From an economic perspective, yes, there is lots of hope on Zimbabwe. Zimbabwe is fairly endowed with economic resources ranging from natural resources to brain power. Investors from Zimbabwe and abroad have enough information on economic opportunities that Zimbabwe presents. That piece of information is golden and other things being equal, Zimbabwe can easily turn-around within a year of sound, coherent and business friendly policy regime.

Assuming everything constant, if Zimbabwe were to fully explore only one mineral -platinum and purify it in Zimbabwe and sell it as a finished product, her economy can easily hit the $20billion mark per year.

The leadership that Zimbabwe needs is to change from politics of isolation into that of engagement. Hospitality must be seen not as a limited function of tourism only, but international relations.

The noise, both ideological and political that Zimbabwe makes is an antithesis to her economic development endeavours.

The risks of remaining behind the region in terms of development are too many, including, at some stage becoming the regions dumping ground. Unbridled corruption and politicisation of business that the leadership along Samora Machel Avenue promotes and protects choke entrepreneurship.  

Business leadership is not directly co-related to being a Zanu PF party member and of a particular faction in fact. Promotion and protection of business has to be non-partisan and in the national interest.

The very basic values of care, respect, tolerance, honesty, fairness are the very same magnets of investment that the political leadership in Harare knows but practices not.

Growth and happiness is possible Zimbabwe- if and only if Zimbabwe drifts from its narrow and person/party centred leadership schemes of Mnangagwa /Mujuru or Zanu PF/MDC onto national development plans which promote growth and development of the country irrespective of race, politics, ethnicity and gender.

Party politics and personalities must be junior to the country’s development plan.

Sadly for Zimbabwe, the state was captured. This state capture in Zimbabwe is defined along party politics, tribe, gender and race. The more associated one is to those in power the better. The stampede by people of the Midlands province to swear allegiance to the new Vice President Mnangagwa at his celebration party was shocking but revealing how and why things (don’t) work in Zimbabwe.

Zimbabwe has no serious economic development plans like Angola or Mozambique. Zimasset is not an economic development plan (EDP), but a stepping stone towards an EDP.

Now that Zimbabwe has a new cabinet, does that mean change for the better or more of the same in terms of economic development?

The hope is that things change for the better as the social cost of regression will be terrible especially to vulnerable populations.

Conversely, this continued economic collapse may, soon, bring demise to the current political edifice. The economy and its mismanagement are bigger threats to Mugabe and his succession politics than Mujuru and her team.  

The choice is the leaderships to make- propaganda or delivery.

Welcome 2015!

Itai Zimunya is a socio-economic analyst based in Mutare and participates in the Institute for new economic thought. 

Zimbabwe’s economy: any hope for 2015?

Zimbabweans continue to debate the 2015 $4.1bn national budget which was presented by Finance Minister Patrick Chinamasa last month. Some say it is shallow, some say he did his best and some did not even follow it beyond just knowing some budget was passed last month. 

This article seeks to contribute to that discussion, especially taking the whole budget and economy and compare it with those of other countries in the region, and assess whether Zimbabwe is making progress or regressing. Whilst economic indicators are many, a relative analysis of Zimbabwe and her neighbours and how they manage their economies frames the scope of this paper.

Angola, Mozambique and Namibia are all doing far better than Zimbabwe both in real and nominal terms of economic development. Their projected budgets for 2015 are much higher than that of Zimbabwe. Their economies are also growing at faster rate than that of Zimbabwe.

The notes below display these figures and rough trends.

Angola, with 27 years of regression during its civil war has a projected 2015 national budget of $70bn, 17 times bigger than that of Zimbabwe.

Mozambique, also with a sad history of a post independent civil war has a growing budget of $8.9bn, double that of Zimbabwe in 2015. Using the gross investment flows into the region, Mozambique tops with more than $2bn of investments in 2013/2014. Zimbabwe had less than $400million real new productive investments in 2014.

Zambia, Zimbabwe’s Siamese twin has out leaped her southern sister. Zambia’s budget for 2015 is pegged at $29.8bn, which is seven times bigger than that of Zimbabwe. Zambia like Zimbabwe is largely a mining economy even though it is diversifying its economy.

To really display what is happening to Zimbabwe, it is important to state that Zimbabwe had a higher budget in US dollar terms in 1980. Its economy was more diversified and its growth rate was far much higher than most of these countries in this cluster.

This story of Zimbabwe’s demise is not new. The key policy questions are-perhaps; why and is there light at the end of the tunnel?

The reasons for Zimbabwe’s economic collapse are many and invite serious debate as well. These factors jointly contributed (or still contribute) at different times and in different degrees.

The ruling party and its scholars argue that the reasons for Zimbabwe’s collapse are neo-colonial, with Western international institutions responsible through covert and overt regimes of restrictions/sanctions.

Others cite leadership failure at the national policy level as Zimbabwe’s poison. This is what many political scientists discuss as the failure of the post-colonial state to move beyond the struggle to development.

From an economic perspective, and being a researcher on Zimbabwe, I concur with those that argue that leadership failure is the significant factor in Zimbabwe’s fall.

Perhaps, the fitting next question is: is there any hope on Zimbabwe?

This question solicits different answers depending on who is responding. From an economic perspective, yes, there is lots of hope on Zimbabwe. Zimbabwe is fairly endowed with economic resources ranging from natural resources to brain power. Investors from Zimbabwe and abroad have enough information on economic opportunities that Zimbabwe present.

Zimbabwe shares its geological endowments with its neighbours like Coal with Botswana and Mozambique, Platinum with South Africa, Diamonds and Gold among many other mineral endowments.

Assuming everything constant, if Zimbabwe fully explores only one mineral -platinum and purifies it in Zimbabwe and sell finished products, her economy can easily hit the $1 trillion mark. Yes, $1trillion US dollars!

The leadership that Zimbabwe needs is to change from politics of isolation into that of engagement. Hospitality is not a limited function of tourism only, but international relations.

The noise, both ideological and political that Zimbabwe makes is an antithesis of its economic development endeavours.

The risks of remaining behind the region in terms of development are too many, including, at some stage becoming the regions mafia-market. The corruption and politicisation of business that the leadership along Samora Machel Avenue in Harare tolerates is Zimbabwe’s enemy number one.

The very basic values of care, respect, tolerance, honesty, fairness are the very same magnets of investment.

Growth and happiness is possible- if and only if Zimbabwe drifts from its narrow and person/party centred leadership schemes of Mnangagwa /Mujuru or Zanu PF/MDC onto national development plans which promote growth and development of the country. 

Party politics and personalities must be junior to the country’s development plan.

Sadly for Zimbabwe, the state was captured. This state capture in Zimbabwe is defined along party politics, tribe, gender and race. The more associated one is to those in power the better.

That country has no serious economic development plan like Angola or Mozambique have.

Like Zambia, the people- as workers, investors and consumers have to have free space to participate in the economy.

Now that Zimbabwe has a new cabinet, does that mean change for the better or more of the same in terms of economic development?

The hope is that things change for the better as the social cost of regression is sorry especially to vulnerable populations. Continued economic collapse may, soon, bring demise to the current political edifice. 

Time will tell! 

Stop the IMF in Zimbabwe!

The International Monetary Fund (IMF) has visited Zimbabwe several times in 2013 and 2014, advising government on how to manoeuvre out of its current economic mess. That institution must be saluted for that gesture, for many institutions would stand and watch when such a self-injuring government as Zimbabwe’s continues with its errors, deliberate or otherwise.

Unfortunately, the IMF-Zimbabwe Government alliance has been far from public scrutiny, leading to possible laxity. This paper unscrambles the IMF’s Staff Monitored Program (SMP) and presents a report on what that prescription is likely to cause to Zimbabwe- the economy and the people.

The argument is that the IMF’s policy agenda and methodology are both misplaced as they prime debt repayment to please the insatiable appetites’ of western capital at the expense of anguish and pain on ordinary Zimbabwean citizens. 

It further questions why the IMF is giving different pills to Zimbabwe compared with what it gave to Greece and USA during their economic crisis periods? One of the recommendations this paper advances is based on Hernando de Soto Polar’s idea of converting dead capital into productive capital, and grow the economy.

To make this discussion easy, it is best to start by painting the state of the Zimbabwean economy using a story. It is like a person suffering from many ailments at once, malaria, hunger, sore-eyes and a cough. The universal and clinically recommended way to manage this multiple set of ailments perhaps is to arrange the conditions by their nature of threat to life, and start with the life threatening ones. The other conditions would be stabilised and attended to once the patient moves from the critical care unit to a general ward.

 In the case above, feeding the person and giving them anti-malaria medication would most likely save their soul, and focusing on the cough would be tantamount to condemning that person to death.

That is the footprint of the IMF in Zimbabwe.

The IMF African Department Director, Antoinette Monsio Sayeh visited Zimbabwe from October 21-24 and met several people and institutions. After her mission, she issued a statement thus:

" .... I highlighted four issues that are key to helping fast-track the country’s policy reform agenda and to gathering support toward a strategy for clearing the outstanding arrears: balancing the primary fiscal budget; restoring confidence and stability in Zimbabwe’s financial sector; addressing the country’s debt challenge; and enhancing the business environment with a view to attracting investments.....”

Put simply, the main agenda is to “help” Zimbabwe clear its outstanding arrears using a methodology of structural adjustment, technically called primary fiscal budget management or just cutting government expenditure and collecting more revenue.

Both the IMF targets and methodology are largely heartless and misplaced as they treat the people of Zimbabwe as nerveless and or useless iron objects.

Here are the two main reasons the IMF's model is wrong.

a)      The recommendation to balance the primary fiscal budget by mainly cutting the government’s wage bill in order to stabilise and grow the economy will most likely yield the opposite, further sink the economy.

Economists at the IMF and within government would be so careless to miss this basic economic theory behind our reasoning. It is called the paradox of thrift. It states that the prescription of “saving to grow” works for individuals and not whole economies.

In Zimbabwe’s case, if the government cuts its wage bill by retrenching some workforce; that would have a likely effect of reducing the aggregate income whose knock-on effect is reduced aggregate demand.

When aggregate demand falls in an economy, other things being equal, that economy shrinks further. The spiral continues until it reaches the trough or lowest point at which that economy can’t sink any further.

Retrenchments will likely result in more social support pressure as the retrenched families join the social welfare list needing government help like the Basic Education Assistance Module (BEAM) among other social welfare interventions.  Ordinary citizens and the already fragile industry will struggle to pay rents, interests and buy basic commodities/inputs. This is the big risk of the IMF's prescription of balancing the primary fiscal budget.

The evidence of our analysis is there for all.

The move by government to generate more revenue through increased toll-fees, hiked duties and taxation as well as the introduction of pre-paid water meters received and continues to receive public outcry and litigation. That reaction ought to have informed the IMF of the unholiness of its template.

As a public relations stunt, the Government constantly sings the tune, “Zimbabweans are resilient” and the IMF swallows that line. 

We challenge both the policy actors in government and the IMF on this. Which one of you can last a month on $400?

This is the psychological trap that the Zimbabwean government uses to freeze and trick the IMF. 

Those people you see in Zimbabwe are as human as other beings in Greece, the USA or Nigeria. They deserve peace, love and happiness and not the patronising label of “resilience and peace” in hunger.

b)      The payment of arrears to international financiers is a good proposal assuming that fiscal space exists. However, the IMF very much knows that, in the short run, the government of Zimbabwe cannot pay for various reasons main of which is the government’s own record of pillaging. The auditor general’s subsequent audit reports reveal how this government constantly abuses its resources without concern.

So why should ordinary citizens re-pay, and keep on paying what the government keeps on abusing? It’s absurd! This scenario reveals four fools, and not in any order:  the citizens, the government, the private sector and the IMF.

By placing arrears payment ahead of growth, would it be remote that their unstated aim is to retrench government workers, save some money and use that money to pay the international financiers so that they sink Zimbabwe into bigger debt?

This displays the IMF’s duality and unfairness from a global perspective. The pills they are giving Zimbabwe are different to what they gave the US and or Greece when these countries had their credit bubbles in 2010.

This is why the IMF must be stopped!

The Zimbabwean economy is so informalised to an extent that its degree of favourable response to such policy prescriptions is very low. Less than 20% of its able workforce is employed in the formal sector, and does it make any economic sense to further contract that sector without further hurting the very tax base that is contributing to the much needed revenue?

Why are both the government and the IMF ignoring Zimbabwe’s 80% workforce in the informal sector? Zimbabwe has massive dead capital in the informal sector and in the Diaspora. That is Zimbabwe’s touchstone!

The second reason why the IMF needs to be stopped is its heartless proposal to remove bread from the mouths of hungry Zimbabwean children to bring extra red-wine to the noses of financiers in London and New York.

It is prudent at this point to acknowledge that indeed Zimbabwe owes lots of money, and the gist of this discussion in not to promote national decadence, but to challenge the IMF  to consider the ordinary people, and not punish them for the errors, deliberate or not, of the leadership in Zimbabwe.

Zimbabwean citizens and private sector institutions need tax relief and fresh capital.

If the IMF fails to come to the side of ordinary citizens in its economic modelling, then it has to know that both the IMF and the government of Zimbabwe will be complicit in blood sucking vulnerable citizens, and further compounding Zimbabwe to a short-medium term future of pain and sorrow.

The morality and legitimacy of the IMF in Zimbabwe is under constant threat.

In conclusion, it is important to repeat that the IMF and other international interventions are needed in Zimbabwe. The Zimbabwean economy is very vulnerable, its bureaucrat’s clueless and ordinary citizens almost reaching a breaking point. The best intervention for the IMF and the Ministry of Finance is to offer four complementary remedies, a) tax relief to households, b) targeted support and formalisation of the Diaspora and the small to medium sector, c) support substantial public works like railway, road and housing construction to anchor the SME growth, and d) deploy the African Development Bank as a fiscal agent to strictly stabilise Zimbabwe’s return to credit.

It is possible!

Itai Zimunya – works with the Open Society Initiative for Southern Africa and participates in the Institute for New Economic Thinking.