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Published On: Tue, Nov 25th, 2014

Mugabe: Perfecting the art of tinkering around the edges

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by Ken Yamamoto

“It is a sign of a sick economy when the top two companies in it are a mobile operator and a brewery. The fact that Econet Wireless and Delta Beverages are the largest companies in Zimbabwe simply means people are talking, surfing and drinking more than they are being productive.”

THE other English word for incompetence is ineptitude – which means a gross inability to perform a certain expectation. For those that love soccer, when a coach demonstrates ineptitude, if he does not resign, he gets fired. In Japan, leaders that show ineptitude just resign and apologise to the people for letting them down. These two words – ineptitude and incompetence describe the leaders of Zimbabwe with regards to their skills as managers of the economy.

Zimbabwe’s long standing leaders, led by Mr Robert Mugabe, have developed incompetence into an art, perfected it and meshed it with great skill in giving excuses for this incompetence and leadership poverty to the point of creating an ironically effective propaganda machinery to mask it. Every economic question seems to have ZIMASSET as an answer to it.

Mr Patrick Chinamasa has been the minister in charge of the ex-chequer since the last elections in 2013. These elections culminated in new vocabulary being coined in online discussions – (Zimbabweans now refer to the act of losing elections in a questionable fashion as “being nikuved” – owing to the alleged large scale use of a shadowy Israeli outfit called Nikuv in the 2013 elections to carve electoral victory for the ruining party).

Economy at a crossroads

Early this month, a year after Zanu PF took sole charge of the economy, the IMF issued a barely covered press release to the effect that Zimbabwe’s economy was at a crossroads. The IMF noted that Zimbabwe’s:

“…external position is precarious, with low international reserves, a large current account deficit, an overvalued real exchange rate and growing external arrears.”

The IMF further said that Zimbabwe’s credit and deposit growth has slowed down sharply, liquidity conditions had further tightened and the banking system remains weak, vulnerable and susceptible to toxic debt. And after all this, as if high on weed, the IMF noted that the outlook in 2014 is for continued low growth of 3%.

It is a fact that between 2009 and 2012, the Zimbabwean economy grew to a peak of 10.5%. Yes, you read me right – in spite of the sanctions excuse peddled by Mr Mugabe and his associates, the economy achieved double digit growth!! It is also a fact that at that point, Zimbabwe’s economic affairs were run by the government of national unity. Further, it’s a fact that Mr Mugabe, being a wily fox, dumped almost all the ministries responsible for the economy and social sectors on the MDC, retaining the security-related ministries. You can conclude on your own whom amongst the parties in that government was more capable of dealing with the economy.

Come 2013, Mr Mugabe rushed Zimbabwe into an election. Now that the economic engine was running, he wanted all the power to himself, so that he could rearrange the ship’s deck to his whims and caprices. To him, it was never a good idea that the GNU had created economic breathing space for the people. In all his time in the GNU, he was smarting from the defeat he had endured from the MDC, and he felt humiliated. This explains his anger at his Vice President, Mrs Mujuru and his desire to oust her. For Mr Mugabe, it has rarely been about the people, it’s always been about him. In 2013, Zimbabwe’s economic growth dropped from a high of 10.5% in 2012 to 4.5%.

As if possessed and contrary to expectations in line with the IMF’s staff-monitored programme, Mr Chinamasa, in early 2014, increased salaries for civil servants – something that had not been budgeted for. During the GNU, the Ministry of Finance used to say that 70% of Zimbabwe budget was going towards recurrent expenditure. Come 2014, on November 6, Mr Chinamasa told legislators at a pre-budget meeting in the resort town of Victoria Falls:

“Over 92% of the 2014 budget is consumptive. This clearly is not a developmental budget. The constrained nature of the budget implies underfunding of critical developmental projects and other social services necessary for sustained economic growth. Such projects provision of health services, water infrastructure, road rehabilitation and maintenance, power generation among others.”

Clearly, as we know, when someone says “over 92%”, it simply means the figure can be as high as 100%. What Mr Chinamasa did not simply tell his audience is that his party and government is right on its path of demolishing the Zimbabwean economy, a path which had been halted in 2009. He simply neglected to tell his audience too, that in fact his mafia government is simply doing what the mafia does, loot and bleed the economy to its death.

When Companies Fold like a Deck of Cards

The economic malaise in Zimbabwe has spared no one. Companies are winding down, closing and collapsing like dominoes. The social security organization, NSSA, has given out statistics that show that as many as seven hundred companies per quarter are closing down. Recently, Cottco, a hitherto large agricultural and cotton company resolved to apply for judicial management. Like many other companies that sought judicial protection, it will never come back. On the finance side, banks are reeling under non-performing loans.

Mrs Grace Mugabe recently complained that people were not buying the yoghurt made by her dairy company.  But that’s exactly the pain that the average business person has been going through under her husband’s watch for several years now.

In any case, it is a sign of a sick economy when the top two companies in it are a mobile operator and a brewery. The fact that Econet Wireless and Delta Beverages are the largest companies in Zimbabwe simply means people are talking, surfing and drinking more than they are being productive. It’s a disastrous symptom that should make those in government lose sleep if they have any sense between their ears.

The Rudderless Ministry of Industry & Commerce

An economist from JETRO (Japan External Trade Organization), late last year, gave a public lecture on foreign direct investments (FDI), sharing on the experiences from other African countries, such as Kenya. Present at this public lecture was Zimbabwe’s Minister of Industry and Commerce, Mike Bimha. I believe he is a well-meaning gentleman, who should nevertheless be very far from running a government ministry, as evidenced by the relentless collapse of companies in Zimbabwe under his watch. Needless to say that he has failed to resuscitate Ziscosteel and conclude its acquisition by Essar.

At the public lecture, the minister was pushed by business people to look at the issue of investment risk in Zimbabwe, which is hindering FDI. In his response, the minister suggested that his ministry would pay an insurance policy to African Trade Insurance Agency (ATI). For those that do not know much about ATI, it is a multilateral financial institution providing export credit insurance, political risk insurance, investment insurance and other financial products to help reduce the business risks and costs of doing business in Africa.

But here is what takes the cake. The premium each country should pay to the ATI is $25 million. So Zimbabwe may actually assuage some investors nagging concern about risk by having an insurance policy through ATI. That’s well and good. But to date, Zimbabwe has not paid that insurance premium.

Could you be wondering why? The answer lies in Mr Chinamasa’s 2014 budget. The devil is in that budget’s detail. Mr Chinamasa only allocated seven million dollars to the Ministry of Industry and Commerce for the year 2014. Yes that’s right, a measly $7 369 000. As such, with just seven million dollars, there is no way Mr Bimha could have paid the $25 million premium to ATI.

But what does that say about the government of Zimbabwe and its leadership? It’s needless to say that the people of Zimbabwe are in worse trouble than they thought.

Just looking at the $7 million allocation to Mr Bimha’s ministry compared with the ATI premium does not tell us much. Again the devil is in the detail. If you drill further into Mr Chinamasa’s 2014 budget, you will notice a strange anomaly. Mr Mugabe’s own “office of the President and cabinet” was allocated a whopping $200 million. Yes, a cool $206 054 000. That is twenty-nine times the size of the ministry in charge of industry and commerce. Put differently, Mr. Mugabe’s office alone got a huge five percent (5%) of the total national budget. Clearly, a country does not need enemies, when it can do this to itself. No wonder companies are collapsing one after another, as if suffering from an epidemic!

Robbing Peter to Pay Bob

Business confidence remains low and Zimbabwe’s country risk premium is still high. Mr Chinamasa allocated Mr Mugabe’s office alone twenty nine times the size of the industry ministry’s budget.

The thinking into the warped allocation of resources is not too difficult see. The funds are used for non-essential schemes to keep power – such as the spy games which have been revealed by Mrs Grace Mugabe – recording political enemies in mini-skirts and so forth. More importantly, this budget covers Mr Mugabe’s endless international travels. This year alone, Mr Mugabe has travelled to no less than ten countries (Singapore, Dubai, USA, Italy, China, Bolivia, Equatorial Guinea, Ethiopia, and Austria).

During the year, Mr Chinamasa reviewed his budget, to raise more funds to finance the government mafia. He notoriously started taxing mobile calls, sticking an excise duty on mobile phone talk-time. He also introduced more taxes on gasoline, which has an effect of increasing the costs of production for the dying companies.

While they do not tire from collecting from the struggling Zimbabwean people, they do not invest in the growth of the cow they feed from. In 2014, Zimbabwe could not fund BEAM, a fund from which children from poor families pay school fees. The British government, seeing the repercussions of such a move, donated ten million dollars to this fund through DFID, run by the Foreign Office.

Decisive moment

As the IMF noted, the economy of Zimbabwe is at a crossroads. Crossroads means to be at a stage when you have to make a very important decision. The Zimbabwean economy is in free fall, and like a manual car, you cannot drive to your destination all the way in the first gear. You have to engage to higher gears to gather speed. This free fall is not going to stop till there is a fundamental change in the economy’s managers. The government of Zimbabwe operates yakuza-style; very much like a blood-sucking vampire squid. The people of Zimbabwe have tough choices to make.

Sayōnara, for now!

Ken Yamamoto is a researcher on Africa at an institute in Tokyo. He researches and travels frequently in Uganda, Kenya, Rwanda and Zimbabwe. He is presently fascinated by the sad drama going on in Zimbabwe. You can contact Ken on yamamotokensan@gmail.com

 

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