Allen Choruma
Zimbabwe, a country with a population of 15 million people (1980: 7.2 million), is currently hamstrung by serious economic challenges. The contraction witnessed over the last two decades (1998-2018) is a symptom that Zimbabwe’s economy is ailing and should be placed under intensive care awaiting emergency surgical procedures.
Unemployment is estimated at between 85-95 percent, depending on the source of the data, a sign that the economy has predominantly become informal resulting in unemployment and poverty levels rising to unprecedented levels.
Of concern is that the bulk of government revenue collections are not going into productive sectors that grow the economy. Employment costs (civil service salaries) alone in 2017 accounted for 92 percent of revenue collection ($3.7 billion or 65 percent of public spending in 2017. (Note: all $ figures are in USD).
As at end of 2017, Zimbabwe’s gross domestic product (GDP) stood at $17.5 billion, compared to $6.7 billion in 1980, a clear sign of a stunted economic growth rate of 261 percent over a 38-year period. By contrast, Kenya’s GDP in 1980 stood at $7.2 billion (almost the same size as Zimbabwe’s) and in 2017 Kenya’s GDP had grown by 1,042 percent to $75 billion.
In simple terms, the size of Zimbabwe’s national cake has marginally increased while the number of people gathered at the table to share it has exponentially increased.
The current liquidity crisis in the country, shown by long queues in banks, has virtually brought business down to its knees.
Our import cover is as precarious as it can possibly be, to an extent that the country’s foreign currency reserves can only buy a mere two and a half weeks of imports (ideally import cover reserves should cover 3-6 months).
The trade deficit keeps widening with Reserve Bank of Zimbabwe (RBZ) figures for 2017 showing that imports stood at $5.5 billion, while exports were $3.7 billion, giving a trade deficit of $1.8 billion, an indication that Zimbabwe is basically a consumptive economy.
With such a yawning trade deficit, the RBZ Governor has stressed time and again that foreign currency shortages will remain prevalent until such a time that domestic production and exports increase significantly to levels exceeding imports.
Despite the above gloomy picture, Zimbabwe’s economic recovery is not a mission impossible.
According to the World Bank, the fundamentals for economic growth and poverty reduction remain strong for Zimbabwe provided the country can tackle its political fragility and build a consensus around inclusive and competitive investment policies.
But, the tide for re-building the economy cannot rise if all Zimbabweans are not united and share a common vision as one nation.
Elections
With national elections looming on the horizon, both domestic and international attention is zoomed on the electoral processes. Every interested party is of the hope that the election will be free, fair and transparent. Both local and international observers are already on the ground to witness this historic and watershed election.
A credible election outcome is critical to Zimbabwe’s economic recovery mission as this will yield investor confidence and open the country to both domestic and foreign direct investment, creating thousands of jobs in the process and reducing poverty levels. It is agreed that politics impacts the economy, and that the lack of consensus and national unity on the political front will make economic recovery difficult to achieve.
Confidence restoration
While a credible election process is key to creating an investment climate conducive to Zimbabwe’s economic recovery, it is not the only factor that should be looked at.
The restoration of domestic investor confidence is also critical. Confidence restoration has to start from within Zimbabwe itself before we can talk of restoring foreign investor confidence. Zimbabweans have simply lost confidence in their own political and economic system.
The restoration of both domestic and foreign investor confidence is a precursor to Zimbabwe’s economic recovery mission.
Top 10 priorities
The economic policy priorities that require immediate attention include, but are not limited to, the following top ten list:
- Policy consistency and stakeholder engagement
- Ease of doing business (removal of bureaucracy and red tape)
- Infrastructure development (continuous process)
- Focus on Domestic and Diaspora investment (open economy to citizens)
- Removal or amendment of regulations unfavourable to domestic and foreign investment
- Addressing investment risk factors (i.e. exchange controls, access to foreign currency, remitability of dividends, liquidity-cash shortages, increase import cover etc)
- Domestic and foreign debt resolution
- Sustained engagement with international community
- Reintroduction of domestic currency (upon resolution of macroeconomic fundamentals)
- Good governance (zero tolerance to corruption)
As the country focuses on wooing foreign investment, it should not close the door to its own citizens. An inward look into mobilisation of domestic resources could offer the country with quick and sustainable economic solutions.
Zimbabwe has a good asset base – its own people within the country and outside it – who are willing to participate in the economic development of their beloved motherland provided the right political and investment climate is in place.
Our youth, at home and abroad, are the key to transformation and have amazing innovative ideas which only require a nurturing environment to sprout.
Zimbabweans in the Diaspora have made significant inroads in acquiring skills, global networks and resources which can be tapped into to turn around the economy.
Over the last two decades Diaspora remittances have eclipsed foreign direct investment. Diaspora remittances, through formal and non-formal channels, are in the region of $2 billion per annum. Diaspora remittances (through formal channels) to Zimbabwe in 2016 amounted to $780m, compared to FDI for the same period of $319m.
The Diaspora Infrastructure Development Group (DIDG) for example, is a company incorporated in both Zimbabwe and South Africa and is spearheaded largely by Zimbabweans living in the Diaspora. Its objective is to unlock foreign capital inflows towards development of Zimbabwe’s infrastructure.
DIDG recently participated in the $400 million National Railways of Zimbabwe rehabilitation programme. The NRZ has now increased its freight carrying capacity to 4 million metric tonnes, up from 3.2 million in 2017.
Instead of chasing after elusive deals with multilateral lending institutions whose stringent and unfavourable conditions could hurt Zimbabwe’s economy the in future, the country should focus on leveraging on its abundant domestic resources and use them strategically to drive its economic development agenda.
Funds from multilateral institutions and donors should be used to augment, instead of being used as the primary source for funding our economic development programs.
Over-reliance on borrowing will choke Zimbabwe and drown it in a sea of debt. Zimbabwe’s foreign debt is currently in the region of $10.8 billion (62 percent of GDP), according to the The Lima Report presented by the RBZ Governor: Zimbabwe Strategies for Clearing External Debt Arrears and Supportive Economic Reform Measures, dated 8 October 2015.
The economic reform mantra post-election will remain a distant echoing sound if it is not supported by robust and competitive economic reforms and inclusive sustainable development policies buttressed by national unity, political cohesion, and unwavering political will to drive transformation and the economic recovery mission.
Allen Choruma can be contacted on email: moneytreezim@gmail.com
