Following the sweeping victory of President Robert Mugabe and Zanu-PF in the elections of July 31,Zimbabwe is at yet another crossroads where it must choose between reality and more ruin.
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| President Robert Mugabe (89) has done nothing at all to rein in expectations |
Zimbabwe's new administration, due to be announced this week, must
break decisively with its Zanu-PF past - vividly captured in the chart -
or the country, already with indicators of dire poverty and
unemployment, risks slipping into another five years of increasingly
dangerous social unrest.
That a country so well endowed with natural resources, and which is
better placed than most in Africa in terms of education, skills,
climatic conditions and tourist attractions, should have underperformed
economically ought to convince the incoming administration that radical
economic transformation can no longer be postponed.
Yet there was no recognition of this during an election campaign
characterised by grandiose promises that can't be kept of a grand
share-out of foreign and minority-owned assets (indigenisation), of the
creation of literally millions of formal jobs and of the "empowerment"
of the population, two-thirds of which is living in poverty on less than
US$1,25/ day. People are poorer now than they were half a century ago.
Indeed, since winning his surprise landslide victory with 61% of the
presidential votes, Mugabe (89) has done nothing to rein in
expectations. In fact, the very opposite: he has promised to increase
public-sector and military pay and pledged more money for agriculture
while, not to be outdone, other senior members of Zanu-PF have
instructed parastatals and municipalities to write off the accumulated
debts of ratepayers and consumers. One senior government official even
went so far as to claim that several billions of dollars would be
"released onto the market" within the next few weeks as a result of the
indigenisation policy. Wisely, he did not explain the mechanics of so
improbable a process.
Just how the new finance minister will come to terms with such
Disneyland economics remains to be seen. A decade ago, when faced with a
similar situation, the central bank was instructed to print the money
the party had promised to spend. The inevitable result was
hyperinflation, which was brought to a halt by dollarisation in 2009.
Today, the money-printing option is no longer on the table, and while
Mugabe and others in the ruling party talk wistfully of "bringing back"
the Zim dollar, at this juncture that is a pipe dream.
At some point in the near future, perhaps in his November budget, and
after some uncomfortable meetings with the IMF, the finance minister
will have no choice but to tell parliament that few, if any, of
Zanu-PF's election promises can be honoured. He will either have to
buckle down and implement an IMF-designed debt-restructuring package,
including a range of politically and socially unpalatable austerity
measures, or leave the economy to drift.
The IMF option may yet be taken off the table, either because a
sufficient number of Western countries that believe the election was
rigged withdraw support or because the new government rejects the
debt-relief route and seeks to go it alone - backed, it will hope, by
China and other friendly nations.
The go-it-alone option looks increasingly unattractive, not least
because, having borrowed heavily offshore since 2009 (US$3bn) and with
accumulated arrears of $7bn, foreign lenders are not exactly queuing up
to make loans. Similarly, with the indigenisation law restricting
foreign investors to 49% of the equity in their businesses, inflows of
foreign direct investment have been disappointingly low ($350m/year).
(See page 49.)
Some in government speak bravely of "leveraging" the country's
mineral reserves by mortgaging them to offshore lenders at very high
interest rates to repay the debt, but this is an expensive, not to say
unnecessary, option when, given political flexibility on Zimbabwe's
part, donors would be prepared to sign a debt-forgiveness deal.
The risk for Zimbabwe is that the elections will be seen to have solved nothing.
Unless some Western nations - the UK, the US, Australia, Canada and
some EU states - change their stance, Zimbabwe will be left in limbo.
While a majority government will have replaced a dysfunctional
coalition, the elected leader is unlikely to remain in office for more
than 18 months, if that.
As long as Mugabe hangs on to power, there will be a fierce fight to
the finish within Zanu-PF over the succession, primarily between
vice-president Joyce Mujuru and former defence minister Emmerson
Mnangagwa. This rift within the party will constrain decision making as
the two factions squabble over the way ahead.
It would have helped had Zanu-PF won a mandate for economic reform.
Instead, it won a controversial victory by putting forward policies that
cannot work and that will have to be revised, if not abandoned
altogether. Those who think it is a simple matter of tweaking the
indigenisation policy to make it more palatable, or appointing senior
figures of the losing MDC party to the cabinet to create a facade of
national unity, underestimate the gravity of the economic situation and
the necessity for real, as distinct from cosmetic, economic change.
Time is running out, if it has not already done so. - FM
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