CiZC Policy Monographs:
Zimbabwe Economy Post July 31
Where is the economy heading to?
Presented by
Moses Chundu (Msc Economics)
CiZC Seminar on the Economy
17 June 2014
Introduction-Economic Highlights
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Zimbabwe economy stuck in a rut as national
aggregate demand continue to fade and economic
output trend downwards.…deflation
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The current account deficit continues to widen
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Attracting FDI still a challenge thus worsening the
liquidity situation-confidence issues
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Inflation continues to recede as aggregate demand
tumble-its more than price correction don't be fooled.
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Agriculture – Tobacco, a bright spot in a darkening
economy, grains deficit anticipated though proving
to be the best grain year courtesy of the fair rains-not
ZIMASSET/Presidential input scheme as claimed
Introduction-Economic Highlights
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Mining and Quarrying: Pressure continues to mount
as capital remains scarce and indigenisation
confusion takes its toll.
Tourism: Arrivals are trending upwards as
occupancies improve-best tourist destination by EU
at the back of relative peace following the not so
violent 2013 poll.
ICT: Competition is on the rise in telecoms,
improved service delivery and connectivity
Manufacturing Sector in Limbo-no capital, no
utilities, no demand, rising worker demands-hence
more company closures with attendant rising
unemployment.
Banking: Worsening NPLs, the albatross around the
banking sector’s neck, reverse indigenisation.
Introduction-Economic Highlights
Period
Growth Rate
Annual inflation
2009
5.4%
-7%
2010
11.4%
3.1%
2011
11.9%
3.5%
2012
10.6%
3.7%
2013est
3.4%
1.6%
2014proj
6.1%
3%
2015proj
6.4%
3%
2016proj
6.5%
4%
2017proj
7.9%
4%
2018proj
9.9%
4%
Zim Asset-the Pillars
‘Zimbabwe experienced a deteriorating economic and
social environment since 2000 caused by illegal economic
sanctions imposed by the Western countries’. Pg 1
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The implementation of Zim Asset will be underpinned
and guided by the Results Based Management (RBM)
System through OPC, since the 1990s
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Zim Asset is a cluster based Plan, not new
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National Corporate Governance Framework will be
launched and implemented-endemic corruption
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Value addition will be key-not a novel policy stance, has
remained statement of intent for decades now
Nothing new in the above pillars of the Plan.
Failure to establish causality will be its downfall
Zim Asset-The Assumptions
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Improved liquidity and access to credit by the key
sectors of the economy such as agriculture;-a
pipedream, though there is mystery surrounding the
$2.4 billion agric facility for 2014.
Establishment of a Sovereign Wealth Fund;-impossible
Improved revenue collection from key sectors of
the economy e.g mining;-the reverse is true the action
on the ground not backing this assumption-policy
conflict.
Increased investment in infrastructure, through
acceleration in the implementation of PPPs and
other private sector driven initiatives; -corruption
main challenge
Zim Asset-The Assumptions
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Increased FDI;-ground actions actually achieving the
opposite-capital flight
Establishment of Special Economic Zones;-not magic,
the whole country actually needs to be turned into a
SEZ.
Continued use of the multi-currency system;-still
holding but on a narrow string
Effective implementation of value addition policies
and strategies;-threat of policy contradictions
Improved electricity and water supply;-you just need
to listen to Mavahaire and see a list of his board
members to judge.
Zim Asset-Funding Dilemma
The Plan to be funded from,
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tax and non tax revenue, -firms closing, negative variance for
ZIMRA collections, Chiadzwa gone dry trying to do the right thing
when its late-one firm to mine nothing.
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leveraging resources, -lack of transparency
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Sovereign Wealth Fund, -not now cannot save- St+1 cannot fund
Et
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issuance of bonds, -no takers-trust issues
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accelerated implementation of Public Private Partnerships,corruption main challenge
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securitization of remittances, -not easy
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re-engagement with the international and multilateral finance
institutions and-difficulty given gvt’s double standards and
multiple messages
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other financing options, focusing on the BRICS.-not interested
in us but our resources; where is SA R700m 2009 pledge?
2014 Budget
‘Business confidence remains low and Zimbabwe’s
country risk premium is still high. The result is a lack of
investment and financial inflows required to drive
future growth’. Min Chinamasa
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The 2014 National Budget, consequently seeks to
facilitate the implementation of ZIM-ASSET
programmes
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Central to this is recovery of both public and
private investment in the economy.
Minister was spot on but his subsequent pronouncements
are addressing other issues not the above issues, if anything
making it worse e.g. stance on indigenisation.
2014 Budget
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Budget sought to effect the principle of value addition
by revamping the duty regime.
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The targeting of industries and products has not been
strategic at all, needed more consultation.
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Value addition means investments and as long as
confidence issue are not addressed, the support to Zim
Asset will not materialise.
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Funding gap will remain a challenge in the absence of
deficit financing in a multicurrency regime.
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The role of the sovereign wealth fund and timing of its
launch demonstrates a deficit of knowledge of its make
up and functions.
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Budget strain will continue to manifest in delayed civil
servants salary payments.
2014 Monetary Policy statement
‘I remain optimistic that the economic prospects for
Zimbabwe will not disappoint, provided we decisively
and holistically implement all the ingredients as
embodied in Zim-Asset’. Acting Governor Dhliwayo.
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MPS a failure from the onset given the impossibility of
fulfilling the above assumptions.
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Proposed measure below not new and therefore will not
work miracles on their own.
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Bound to fail for the same reasons previous interventions
failed, need to deal with fundamentals of economic
management.
2014 Monetary Policy statement
Proposed policy measures include;
 Enhancing role of the Reserve Bank -lender of last resort;
 Capitalization of banks-extension of compliance;
 Consolidations and Mergers-of small banks
 Insider Loans and Non-Performing Loans; No more
 Enhancement of Supervision through Amendment to
the Legal Framework;
 Gold Mobilization;-legalising makorokoza
 Use of electronic means of payments to enhance
financial inclusion; means ok but object is fast dwindling;
and
 Enhancing Export Receipts-reducing overdue CD1s-how
do you control this, we need to export more period!
The Real Challenge
Zimbabwe facing a governance crisis, the recent cashgate
issues just tells of the extent of the rot in governance
circles both in government and private sector.
 Corruption tax is too high in both government and
private sector.
 Competitiveness is more affected by corruption ahead
of the other causes that are fronted like infrastructure
and liquidity, these are symptoms.
 What is reported on the $144m HCC Chinese tender is
happening at all levels, ending up producing goods that
are 2-5 times our regional competitors. Ref ZBC OBV!
 The porous ZIMRA system and duty regime not helping
either-smuggling and dumping killing the remaining
industries.
 Archaic labour law regime adding salt to the injury.
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The Outlook-The Sad Reality
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Economic activity to remain depressed with more
company closures expected.
Liquidity and budget challenges to persist in the
outlook.
Confidence in the banking system to remain low thus
locking the little liquidity away.
If multicurrency regime is maintained the economy will
just go by registering negligible growth figure way below
the projected numbers-around 2 percent.
Government revenues will remain squeezed against the
backdrop of a blotted and populist government. Do we
need 10 boards to deliver electricity?
Infrastructure deficit to persist dampening any
prospects of a recovery.- no ZESA, no water, more
potholes, yet, higher tariffs, more charges, double tollgate fees
The Outlook-Game Changers
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The questioned legitimacy of the government no longer
an issue, the government is here to stay, the best that can
happen is for the present government to respect basic
principles and laws of economic management and avoid
the populist trap as it has always backfired.
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To avoid total collapse government will have to avoid the
dual temptation of Z$ reintroduction and controls.
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The real game changer will be the attitude of
government towards addressing corruption that is now
endemic at all levels of society.
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Bringing perpetrators to account without fear or favor
and upholding the doctrine of restitution ahead of
retribution, recovery ahead of imprisonment.
The Outlook-Game Changers
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Merit based appointments in all key institution and
injection of new blood to drive institutions into the
future-no recycling of deadwood starting with cabinet
all the way down. Balancing loyalty and
performance/competence
Clear and better signals on key policy areas affecting key
means of production eg. Land reform, and indigenisation
laws. Beyond populist pronouncements to amendments
of relevant statutory instruments to foster certainty.
Immediate review of labour laws away from the tired
principle of collective bargaining which creates
unemployment to competitive productivity linked
industry/firm specific wages negotiations.
Implementing a duty regime that promotes winners and
not losers or speculators. Protection not for its sake but
to preserve jobs in competitive industries.
The Outlook-Role of Civil Society
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Talk of regime change in the old tone a tired script overtaken
by time and events. Sad reality is you are stuck with a regime
that is not patriotic.
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Lobbying role need to leverage factional fights and buttress
the facts coming out of the fights, i.e.
 lobby for reform of laws to back up good policy
pronouncements;
 lobby for amendments of the various laws esp. on rule of
law and civil rights in compliance with the new
constitution;
 lobby for accountability and prosecution of blatant
corruption in public domain-pursue more private
prosecutions;
 lobby for reform of electoral law ahead of 2018.
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Post December 2014 the landscape can significantly change
so much of the lobbying must gain traction now when intraparty fights are still pronounced.
Thank you