HARARE - As Zimbabwe hurtles towards more economic problems, leading economist and journalist John Robertson believes President Robert Mugabe’s administration is running out of time to fix the economy.
And with the country’s debt now pegged at $9,9 billion, prospects of relief appear too distant for the scarred economy, which has stubbornly continued to stare the rugged and puffing Zanu PF government in the face.
Robertson, often disparaged by senior Zanu PF officials over his unrestrained criticism of both Mugabe and the liberation movement’s policies, this week told the Daily News that government must bin the Indigenisation and Economic Empowerment Act.
“Investors who are not indigenous are now prevented from even considering further developments because of indigenisation laws,” Robertson said.
“Indigenisation should be driven by an eagerness shown by indigenous Zimbabweans to start new businesses, not a determination to take a controlling interest in any business started by anybody else.
“All talk of indigenisation should be abandoned and the act should be repealed. Indigenisation should become a natural process, the pace of which should be set by revising company registration laws to encourage a much bigger number of Zimbabweans to identify business opportunities and follow through with determination to become the promoters of new businesses.”
The indigenisation and empowerment programme has split opinion, with pro-Zanu PF groups backing the policy while business and pro-democracy groups believe there must be rational implementation.
Among the key arguments raised by groups calling for cautious approach are that government must not apply a “one-size-fits-all” approach and should skew the shareholding thresholds in favour of foreign investors, whose direct investment is needed to kick start dying enterprises.
Zanu PF is weighing up its options following proposals by the business community and interest groups to review the indigenisation policy.
It is yet to finalise its proposed amendments, which could curry favour with foreign investors.
Robertson said the immediate task of government should be the restoration of production in the economy.
“Our major problems stem from measures that caused a sharp decline in productive capacity. We have produced less of just about everything since the land reform programme was launched,” said Robertson.
“Because we produced less, the country no longer earned the export revenues needed to service its debts. Because we produced less, we have had to import more.
“With smaller exports and bigger imports, the money has drained out of the country. We will best clear the debt by increasing exports and that requires increase in production.”
Zimbabwe’s principal debt has ballooned by nearly 40 percent from $6,1 billion last year to $9,9 billion now.
The external debt stood at $8,9 billion as at December 31, 2013, which is 69 percent of Gross Domestic Product (GDP), and the total domestic debt stood at $994m, constituting eight percent of GDP.
Zimbabwe’s outstanding public and publicly guaranteed external debt, (including Reserve Bank’s external debt), stood at $6,964 billion, representing 54 percent of GDP in nominal terms.
Of the total public and publicly-guaranteed external debt of $6,964 billion, $5,012 billion (72 percent) was public debt, while $1,356 billion (20 percent) was publicly-guaranteed debt and $596m (eight percent) was RBZ debt.
Zimbabwe owes various bilateral creditors including the Paris Club and Non-Paris Club lenders such as the African Development Bank (AfDB), the World Bank (WB), the International Monetary Fund (IMF) and the European Investment Bank (EIB), among others.
Despite having established a debt management office, pessimism persists on the back of depressed production.
“The debt management office will achieve nothing if it does not help bring about an increase in production. It cannot negotiate the debt away; we won’t be considered for debt relief until the government stops defending the policies that caused the damage to the productive sectors,” added Robertson.
“To increase production, we need investment capital, but with too little money available for medium to longer-term investment, we need to encourage investment inflows.
“Investor confidence is therefore essential, but our indigenisation laws, which deeply entrench disrespect for property rights, make Zimbabwe an unacceptable investment destination.
“With almost no investment inflows ($400 million in approved investment plans does not mean that $400 million has flowed into the country yet) hardly any jobs are being created.”
The veteran economist blamed mounting economic problems on what he perceived to be government’s poor attitude towards the IMF’s prescribed Staff Monitored Programme (SMP).
Said Robertson: “The IMF’s Staff Monitored Programme is designed to get us onto the right track to a recovery. So far, government has resented and resisted almost all their attempts to steer us towards that track.
“The SMP should be extremely beneficial, but government is unwilling to take the necessary steps.”
An SMP is an informal agreement between Zimbabwe and the IMF to monitor the implementation of the country’s economic programme.
The SMP focuses on putting public finances on a sustainable course, while protecting infrastructure investment and priority social spending, strengthening public financial management, increasing diamond revenue transparency, reducing financial sector vulnerabilities, and restructuring the central bank.
Last week, the IMF said it could extend Zimbabwe’s SMP deadline for the second time as the country has missed a number of targets due to a deteriorating economy.
“…a number of quantitative targets and structural benchmarks were not met,” IMF said in a report.
“A successful conclusion of the third review could pave the way to a successor SMP, which the authorities have indicated they may request, to build on their achievements and support a stronger policy framework.”
The Zanu PF government has been grappling with a myriad of problems, chief among them hard cash for civil servants’ salaries and critical services.
Investors continue to blow their noses on attempts to make them choose Zimbabwe as an alternative investment destination.
They remain suspicious of the Zanu PF government, whose biggest undoing has been making contradictory policy pronouncements, especially on indigenisation.
In the absence of meaningful investment and cash inflows, Zimbabwe Revenue Authority (Zimra) has stepped up its revenue collection, albeit in controversial circumstances, to shore up bare treasury coffers.
“Government’s desperation for money has prompted Zimra’s aggressive behaviour. This has already reduced the number of taxpaying companies as some have been rendered bankrupt by the confiscation of bank balances,” noted Robertson.
“The issues most in need of attention are:
The collateral value of land should be restored by putting farmland back into the market.
With a market value, the land could be used as security for bank loans and farmed more productively.
Zimbabwe could restore food self-sufficiency and begin to restore manufacturing capacity and a favourable Balance of Payments.
Job creation would improve, but to bring about rapid employment growth, the labour laws should be made much more acceptable to investors.”