Mnangagwa faces huge challenges

HARARE – Fortune favours the bold.

President Emmerson Mnangagwa took a huge gamble and won. Now he has to turn victory into success. He has given his country, Zimbabwe, and the cause of outward-looking democracy a fresh opportunity.

The question is whether he can seize it. If he is to do so, he will need not only clarity and courage, but also luck. The reforms he outlined yesterday could work, economically and politically, provided the international community comes to the party.

Mnangagwa’s challenges are initially political. He must turn his personal victory into a hold on effective domestic power. The obstacles are huge. He is, after all, a leader piecing together a country torn by toxic politics. But beyond this looms the economic challenges.

While Zimbabwe is a basket case, it is a wealthy country with excellent mineral wealth and human capital.

As noted by Botswana President Ian Khama — who was at Mnangagwa’s televised inauguration yesterday — Zimbabwe has so much potential. Even though it took Mugabe 37 years to bring it down to the economic chaos it is today, it won’t take that long to bring the country back up again because there is so much potential, Khama said.

Zimbabwe is a wealthy country with intact infrastructure and public services that just need revamping.

So what are its economic problems? Essentially, there are three: low employment; the low rate of economic growth; and the sheer scale of public spending.

The overall rate of Zimbabwe’s unemployment is estimated at 90 percent. There is no real GDP growth to talk about. The economy is flat lining.

Public finances are overstretched. Their most striking feature is the scale of the State’s activities: public spending is just unsustainable, according to the IMF, with the bloated civil service gobbling up the lion’s share of the State budget.

Sustaining the taxes needed to finance such spending is a huge challenge for an open economy. Net public debt is also stratospheric.

So what has to be done? The first priority is to amortise international debt to attract new lines of credit. This economy needs a serious capital injection.

Mnangagwa must break from the past. As it is, core year-on-year consumer price inflation has been shooting up in recent months and this has nothing to do with social media as bureaucrats would have us believe.

We have good reason to expect a highly supportive monetary policy from the central bank that end cash shortages.

US$ in short supply in Zimbabwe

Mnangagwa needs to enact public spending reforms quickly. He needs to bring about permanent changes in the trajectory of spending.

Given luck, actions of this kind will reinforce confidence and encourage investment.