“The fiscal position remained under pressure during the first half of the year due to underperforming revenues and high expenditures that exceeded the target” says Patrick Chinamasa.
By Vince Musewe
To my judicious readers who don’t necessarily understand economics jargon, Chinamasa statement above can be rephrased as follows:
“Your government has, as usual, been irresponsible and continues to recklessly spend more than the tax revenues that it is collecting. This is mainly because your government has decimated the productive sector which generates the very income it relies on while spending most of taxes collected on paying salaries and benefits to an inflated partisan civil service machinery which is adding no value whatsoever to the economy.”
In short, your government continues to pay a blind eye to the sacrosanct economic development principles of spending less than what you earn, avoiding unnecessary debt at all costs, investing in productive activity and saving for the future.
Zimbabwe will, once again, miss its targeted budget deficit of $150 million for the year because this government already has a deficit of $632 million before the year is out. Expect this to at least double by year end. We have a sad case where less than 2% of the population is destroying our economy at the expense of 14 million people. What this means is that, as long as we burn more money on non-productive government activity and we produce less as an economy, economic regression is inevitable.
It is not correct therefore, for anyone to estimate that our economy will grow by 1.2% this year. It will actually contract simply because high government expenditures crowd out productive investment by the private sector where companies continue to close due to lack of capital and decreasing local demand for their products and services. All sectors are down and cash is scarce. This is a cocktail for disaster.
On the trade side, we continue to import much more than we export. This is simply because we are not locally producing competitively priced products and consumers would rather import cheaper products as their incomes are reducing. Our focus should be to reduce food imports and increase exports.
Our economy remains vulnerable to what happens in agriculture and mining. The underutilisation and underdevelopment of our natural resource assets is pervasive. This government has clearly failed to create an economic environment which is conducive to unlocking the full potential therein.
A clear indication of this the fact that a whole country with an excess of 15 million hectares of arable land and the highest land to water ratio in Africa can only produce 512,000 tonnes of maize per annum which is a fraction of our annual needs of 2,2 million tonnes. This means we have to import 1, 7 million tonnes of maize at a huge cost due to costly logistics and a dilapidating transportation infrastructure especially railways.
When it comes to mining, everyone agrees that we have some of the best assets in the world but again, due to lack of vision, lack of planning and lack of consistent and clear government policies, our country is bleeding minerals through smuggling and corruption particularly conflicts of interests among those we expect to manage this sector. In addition we as a country do not determine the international prices of raw minerals meaning that China, usually the biggest buyer, has the final say on pricing.
The usual story applies in this sector where diamond production of 972,000 carats has fallen far short of the targeted 6 million carats. Someone is stealing somewhere. Our gold output should be around 25 tonnes per annum but we are producing very little. The minister has acknowledged this fact while platinum exports have done well, doubling to $ 396 million in the first half of this year. However, for a country with the second largest platinum reserves in Africa, this is just not good enough.
The long and short of it is that our country Zimbabwe is underperforming in every sense of the word. This underperformance is a culmination of sheer incompetency, greed, corruption and lack of visionary leadership at all levels of government. Although cutting government expenditures is critical, we must not be naïve to assume that all will be well by merely saving $180 million from the government wage bill. Only fundamental economic reform is the only way out.
With regard to foreign direct investment which we urgently need, our problem is the issue of confidence building and trust so that we can attract other people’s money. However, when you have a government that doesn’t understand that any economic recovery is highly dependent on confidence building then expect the worst.
You don’t build confidence by teargasing peaceful and legal demonstrations. You don’t build confidence by criticising the judiciary. You don’t build confidence when a whole President sees it fit to congratulate a thug (ZANU (PF) Secretary for youth) and promote him for a job well done. You can never build confidence when you spend tax revenues recklessly and expect others to fund your false comforts. You certainly don’t build confidence to outsiders by threatening your citizens with arrest and imprisonment simply because they differ with you. When you continue to seize private assets and pay a blind eye to those who are corrupt amongst your cronies, nobody can trust you with their hard earned money. It’s as simple as that.
I am quite surprised by the tone of the World Bank leaked report on Zimbabwe which is full of lies that “Nevertheless, the authorities have been able to maintain the reform direction owing to a broad party (and national) consensus that the country requires a fundamental change in its economic strategy. The magnitude of reforms and financial and social costs of adjustment represent an opportunity for the Bank to re-engage and support Zimbabwe to maintain its recovery and address the needs of the poor.”
Nothing can be further from the truth! For goodness sake, the World Bank must at least be honest about the realities on the ground before they implement their badly imagined policies once more. We cannot dig a hole to fill another. Without substantive political and economic reforms there will not be sustainable progress.
In my opinion, it is evident that ZANU (PF) politicians cannot run this economy, they just don’t have the competencies nor the political will required. Second without visionary leadership, integrity, a fresh approach and good planning Zimbabwe will never perform according to our expectations.
Soon our government will not be able to pay its salaries, soon we will run out of money as a country as we generate less exports, soon the streets will be full of more unemployed and poor people and the quality of life will continue deteriorate. It’s a case of one calamity after another.
Vince Musewe is economist and author. He is also the Secretary for Finance and Economic Affairs of PDP. You may contact him on vtmusewe@gmail.com
