Cabinet reshuffle fails to inspire market

HARARE - Zimbabwe's economy remained in a fragile state this week as a Cabinet reshuffle by President Robert Mugabe failed to calm investors’ nerves set on edge by a black economic empowerment drive, the acceleration of de-industrialisation and informalisation of the economy.

Despite the 91-year-old president reshuffling his cabinet on Monday for the second time in six months, the economy continued weakening yesterday, while stocks and government bonds also fell.

The opposition accused Mugabe of recycling the same faces after he made seven Cabinet changes, naming only two new ministers, raising the temperature in a months-long crisis that has worsened economic slowdown due to liquidity problems, outdated technologies, power shortages and a volatile and fragile global financial environment and reigniting anti-government sentiment that has simmered since Mugabe’s re-election in July 2013.

Piers Pigou, southern Africa project director for the International Crisis Group (ICG), said Mugabe has made minor, somewhat underwhelming reshuffle, and for some, much ado about nothing.

“It is telling that there are no moves at all on the economic portfolios, the most critical at this juncture,” Pigou said.

Mugabe retained the “lacklustre” Finance minister Patrick Chinamasa, signalling the continuity of economic policies that have so far failed to turn around Zimbabwe’s struggling economy.

“The reshuffle does move some key individuals associated with alleged factionalism and internal discord within the party, and reflects Mugabe’s penchant for not allowing anyone to get too comfortable and the importance of trying to balance interests,” Pigou added.

“Whether this contributes to stability and balance or exacerbates internal discord within the party remains to be seen.”

As expected, former minister of Media, Information and Broadcasting Services Jonathan Moyo — who had been frozen out of Cabinet for the past two weeks — was shunted to the less influential position of minister of Higher and Tertiary Education, Science and Technology Development.

The move was interpreted by Zanu PF insiders as a significant blow to the aspirations of the party’s ambitious Young Turks who go by the moniker Generation 40, and who stand accused of fanning factionalism in the crisis-ridden party and having designs on Mugabe’s and Vice President Emmerson Mnangagwa’s positions.

Mugabe also moved Zanu PF secretary for administration and former minister of Local Government, Ignatius Chombo, to the ministry of Home Affairs, which has historically been occupied by the Zapu side of the ruling party.

Chombo’s political rival and Zanu PF political commissar, Saviour Kasukuwere — said to be a close ally of Moyo — was moved from the Water ministry to the Local Government portfolio — which means that the combative youthful minister will have a direct hand in dealing with opposition-dominated urban councils and a growing vendors’ crisis.

“Those who believed Moyo and Kasukuwere were on their way out have obviously been proven wrong,” Pigou commented.

“Moyo’s move may be seen as a demotion, but he is evidently still an important asset.

“The promotions of Mohadi and Chombo appear to be part of a political consolidation around security-related concerns. Chombo was a long-term fixture in local government, and it will be interesting to see how Kasukuwere is able to deal with the mess he will find here.”

Obert Gutu, spokesperson for the Morgan Tsvangirai-led opposition MDC, described the shuffle as utterly meaningless.

“It’s a nonevent,” Gutu said. “Zero plus zero equals zero… We have the same tried and failed ministers being moved around from one ministry to the other.

“We will have to wait until it snows in Harare before the Zimbabwean economy can be turned around with Robert Mugabe as the president of the country.”

Pigou said most of these ministries have limited operational budgets, so he was not sure how these moves will inspire a new vision, adding that there was nothing ostensibly untoward about such reshuffles.

“The merits of these moves will play out in the arena of delivery, but from the get-go, we must recognise all these portfolios remain severely constrained,” Pigou said.

The reshuffle caused a further deterioration in market sentiment towards Zimbabwe, with key challenges such as policy inconsistency, funding constraints, corruption, inefficient government bureaucracy and inadequate infrastructure remaining and heightening political risk and Zimbabwe remaining a focal point for market anxiety.

The local financial community and foreign investors have generally seen Mugabe and his Cabinet as an unpredictable administration that has failed to support economic growth and a broadly economically liberal policy drift.

Already under pressure this year from persistent liquidity shortages combined with low effective demand and a weak South African rand that has dampened inflationary pressures, the economy has been beaten down further by the uninspiring Cabinet changes.

On Tuesday, the Zimbabwe Stock Exchange (ZSE) said the industrial index shed 0,42 points (0,29 percent) to close at 145,03 points while the mining index was flat at 42,09 after sustaining heavy losses last week.

Zimbabwe’s largest mobile-telephone company Econet Wireless led the shakers with a cent loss to close at 34 cents while Barclays and Masimba were both 0,20 cents lower at 4 cents and 0,80 cents respectively whilst ZPI was down 0,02 cents to settle at 0,81 cents.

In minings, Bindura, Falgold, Hwange and RioZim maintained previous price levels at 3,50 cents, 0,50 cents, 3,90 cents and 14 cents in that order.

Leading economist John Robertson said the cabinet reshuffle has done nothing to diffuse tensions between ruling party factions, but said the economy will continue facing a deepening crisis.

“Its not gonna make a difference,” Robertson said, adding “the economy is sinking,” unless the country attracts capital to address liquidity challenges and achieve economic growth.

A banking analyst said: “(Market) direction will be determined by political risk perception.”

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.