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Africa

Focus on Africa: Zimbabwe's bid to get out of bankruptcy

media Swearing in of Zimbabwe's President Emmerson Mnangagwa, 26 August 2018. REUTERS/Philimon Bulawayo

President Emmerson Mnangagwa finds himself between a rock and a hard place, after marking his first year in charge of bankrupt Zimbabwe.

Zimbabwe President Emmerson Mnangagwa marked his first year in office this week by rolling out a series of biting austerity measures aimed at bailing out the bankrupt economy.

Mnangagwa who succeeded long-time ruler Robert Mugabe, ousted in November 2017 following a brief military takeover unveiled an 8.7 billion-euro budget for 2019 and a raft of cost-cutting and revenue generating measures to fund the country’s mountain of problems.

95 percent unemployment

Zimbabwe is under pressure to service its foreign debt burden standing at 17.9 billion euros, and tackle one of the world’s highest unemployment rates.

Last year Forbes Magazine published a stunning article in March 2017 – the headline: "Congratulations to Robert Mugabe - Zimbabwe's unemployment rate now 95%."

Yet, the most recent survey of jobless figures in the country of 16.5 million inhabitants carried out in 2014 by the statistics agency Zimstat puts the number of people over the age of 15 without jobs at 11.32 percent.

Critics of the ruling ZANU/PF regime in Harare describe the figures as ridiculously low and unrealistic as they are in stark contrast with neighbouring South Africa and Africa’s second largest economy with a 24.9% unemployment rate.

The 2019 budget unveiled in parliament by Finance Minister Mthuli Ncube, announced plans by President Mnangagwa to downsize his cabinet, and effect a five-percent cut to the salaries of senior government officials, shut down some of its diplomatic missions abroad and carry out a biometric registration of civil servants to weed out "ghost" workers for the public service payroll.

Junk companies

But as Mnangagwa swung the axe on much of the deadwood system that marked Robert Mugabe’s 37-year rule, Zimbabwe economist John Robertson pointed out that the main objective set by the government was to balance the budget and to stop losses by too many state-run organizations which are adding to the budget deficit every year.

The Bulawayo-based economic consultant, says the government is planning to sell off some of these and to find strategic partners for others and merge a few down with ministries.

Among the new fiscal measures introduced, John Robertson picks out the new two percent tax slapped on all electronic transfers that take place in the business of buying and selling throughout the country.

Hyperinflation

He says the measures are far short of what is needed to resolve the problem of foreign currency shortage that has led to a very high level of inflation projected to hit 5 percent in December, according to the World Bank.

While the government talks the talk about an ambitious plan to turn Zimbabwe into an upper middle income country by 2030, John Robertson urges the country to build up positive currency reserves by having a good balance of trade. “They must phase out trading in foreign currencies such as the US dollar, the British Pound and the South African Rand and the regain some sovereignty over monetary policy” he says.

Land reform and capital flight

The Zimbabwean economist also urges the government get down to work to repair the ravages of Mugabe’s land reforms, which he claims forced the country to depend on food imports and caused the shortage of money.

He underlines the irony that keep talking about fixing the damage done 20 years ago when they were part of the decision makers who decided to take the land off the market sparking capital flight, famine and the declaration by Mugabe of a state of agricultural disaster in 2016.

John Blessing Karumbita is a Zimbabwean economist and associate academic at the South African University of Technology in Durban. He says Mnangagwa’s charm operation will only yield the results to turn around the hyperinflation hit economy if it appeals to citizens Zimbabwe's friends abroad.

Dialogue and legitimacy

John Blessing Karumbita an academic associate at Durban’s University of technology, raises the paramount issue of the government’s legitimacy, in the aftermaths of the hotly disputed July 30 general elections.

As Dr. Karumbita puts it, Mnangagwa’s government must engage the opposition in a dialogue in order to win recognition at home and abroad so that Zimbabwe can trade, exchange and benefit from human and financial resources.

In a move which could impact positively on the Zimbabwe economy, President Mnangagwa announced on Wednesday he was ready to hold a fresh round of dialogue with opposition leader Nelson Chamisa. Mnangagwa said the offer was in response to what he described as “the extraordinary amount of goodwill fluffed”, since.

Tendai Biti a top official of the opposition MDC party is also quoted by several papers as telling the government-backed commission of inquiry into the post-election violence, that without dialogue, the country “with 95 percent of its citizens unemployed and no cash in the banks will remain trapped in conflict and economic turmoil without political dialogue”.

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