Monday, 29 December 2014

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. 

Friday, 12 December 2014

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!