SONA: A tough task for ED

October 7, 2021

President Emmerson Mnangagwa will today make his State of the Nation Address in Parliament and also set the legislative agenda for this parliamentary session.

The SONA comes at a time the economy has opened up from the shackles of the lockdown measures imposed this year to stem the spread of the Covid-19 pandemic.

Financial results of listed companies recently published show an improvement in volumes notwithstanding the hurdles firms face in accessing the foreign currency from the auction system.

There are green shoots of recovery. However, the bulk of the companies have sung from the same hymn sheet: telling the government to ensure there is policy consistency.

As we report elsewhere in this paper, executives are wary that policy inconsistency has the potential of chasing away investors. This is an affront to President Mnangagwa’s “Zimbabwe is open for business” mantra, the new tagline for the administration as it scours for foreign direct investment.

It is one thing to say Zimbabwe is open for investors and quite another to show that Zimbabwe is really open for business. The administration has been found wanting on the latter.

Today’s SONA also comes at a time when prices of goods and services are heading north with companies blaming the unavailability of foreign currency from the formal market.

The companies say they are forced to source foreign currency from the parallel market where premiums are as high as 80%.  They are forced to pass on the costs to the consumers amid fears of a return to the hyperinflation era.

Annual inflation, which has been on a decline for the past 13 months, bucked the trend in September rising to 51.55% from 50.24% in August.

This has forced the central bank to review its inflation projection for year end to between  35% and 53% from 25% to 35%. This is a red flag which has jolted the Reserve Bank of Zimbabwe into action.

Last week, RBZ governor John Mangudya, announced the introduction of special exchange rate-linked corporate open market operations bills to mop up excess liquidity as it tightens money supply in the wake of rising inflation.

Mangudya said the bills will be targeted at corporates with huge local currency balances or those receiving huge payments in local currency, as some of these funds are being used to destabilise the foreign currency exchange market.

The economy is pinning hopes on vaccination which is set to be a shock absorber as the threat of the fourth wave remains.

However, the vaccination rate has slowed after the removal of some restrictions following the slowdown in new cases.

On the political front, the government’s failure to hold by-election has not helped matters with critics accusing the administration of attempting to suffocate the main opposition political formation, MDC Alliance.

By-elections were banned last year as part of measures to contain the spread of Covid-19. However, other regional countries have held elections during the period highlighting that better planning is key in the midst of a pandemic.

As he makes his SONA, the ball is in Mnangagwa’s court to show the world that he is not against any political party.

After all, he has a two-thirds majority and any by-election will not change anything as his party rules in Parliament. It will not be a stroll in the park for Mnangagwa as the task ahead is tough.

 

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