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Zimbabwe's
Recovery and NEPAD
Norman
Reynolds
April, 2005
http://www.ijr.org.za/transitionaljustice/zim/peopag/download
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Introduction
South Africa has failed Zimbabweans. There were always positive,
active things to be doing over the past four years of Zimbabwe’s
economic and human rights implosion beyond ‘silent diplomacy’. By
focussing on Robert Mugabe and his eccentric personal and party
needs– itself wrong as he heads an illegal and massively corrupt
and brutal regime – South Africa has denied itself and Zimbabweans
a number of constructive measures of long term value.
If that had, or
soon does, happen, the good governance foundations of NEPAD would
have been well served. So too, an understanding as to how best to
rebuild failed states and economies could have been tried and demonstrated.
NEPAD’s economic
framework seeks foreign support, upon good governance, to build
the infrastructure to attract foreign private investment to produce
the exports to pay off the foreign loans. It, curiously and sadly,
says little of direct interest to Africans desperately seeking to
find economic activity for themselves within their own countries.
It is global without any ‘local’.
Zimbabwe, as our
immediate and most important neighbour, still provides South Africa
with several important opportunities. They are to demonstrate the
ability to help bring about the reforms and the economic security
of all citizens needed to ensure its rapid economic recovery and
return to full democratic nationhood.
This paper concentrates
on two key issues: -
- Reformed Foreign
Exchange Market
- Citizen Investment
Rights
The economic
and social recovery of Zimbabwe requires that two mechanisms for
rapid economic and social recovery be used. The first part examines
the type of foreign exchange regime that suits Zimbabwe's economic
needs and opportunities so that an economically devastated country
can recover rapidly. The second part contains a proposal for the
creation of economic and social rights for all adults, notably community
investment rights and the formation of community development associations
within which to exercise those investment rights.
The aims of
the proposed policy and programme pieces are the following:
- Dynamic foreign
exchange and a stable currency.
- Securing
the country by providing all citizens with economic activity and
thus with income whilst greater 'effective local demand' stimulates
local economic activity.
- Localisation
policies and economic rights programmes to speed up the rebuilding
of the economy and providing rewarding mutual activities within
communities riven by trauma and officially sponsored violence.
Part
1. A Stable Yet Dynamic Foreign Exchange Regime
Keynes
made the all-important distinction: people, ideas and some goods
and services must move freely between countries – but not goods
and services that can be produced locally and certainly not money.
He argued for controls over capital flows so that each country could
set interest rates according to domestic economic policy needs.
The
massive structural shift to vast speculative capital flows does
not affect the rich countries as much as it does many poorer countries.
The reason is that the developed countries, which set the rules,
conduct very little trade compared with the size of their GDPs.
For instance, the imports and exports of the USA and the EU comprise
a mere 15% and 14% of their GDPs. In the UK, trade makes up around
30% of GDP. As a small economy, 65% of Zimbabwe’s GDP is formed
by exports and imports. Zimbabwe receives prices from the global
economy. The flash of vast speculative monies rushing hither and
thither easily distorts the pricing of normal trade.
The
International Monetary Fund estimates, December 2004, the build-up
of unpaid foreign arrears is now US$2,6bn. This amounts to a debt
of R1, 300 per citizen or R7, 800 per family of six. Moreover, Zimbabwe
runs a yawning annual US$500m gap between foreign currency inflows
and outflows.
Post
the 2005 March election, there is great political and thus economic
uncertainty. Hence, it is unclear if and when Zimbabwe will rebuild
working relations with the IMF and the World Bank to help with restoring
a working currency and trade and investment systems. The international
community has long been ready to announce a "package"
of support if that government can earn enough legitimacy. The detail,
however, remains important.
The
level of state debt, international and national, makes this task
difficult. Yet Zimbabwe has and can again pay its way in the world.
The
way foreign exchange is raised and distributed becomes crucial.
With so many competing needs, an open system will not work. There
are humanitarian (food and health) and general (fuel and electricity)
needs that must be met. At the same time, the gross displays of
consumer wealth an open exchange system allows are not to be tolerated.
Non-essential imports should be curbed in favour of local production.
What
is needed is a rapid recovery of those activities that earn foreign
exchange and the creation of a large mass market for basic goods
and services, that is for locally produced items that have low foreign
exchange requirements in their production and thus consumption.
People and the public interest, sustainable economic recovery, must
be seen to come first.
Zimbabwe’s
foreign exchange system is chaotic. It is a punishment to all citizens
and businesses and rewards speculators and subsidises government
loans at the expense of savers. Most people work to make the corrupt
few rich while becoming impoverished in the process. The orthodox
foreign exchange market will not serve Zimbabwe’s recovery. It needs
a system that recognises market forces, but does not naively believe
that "free markets" are indeed free and thus are not a
perfect solution.
A
return to an orthodox foreign exchange regime would ignore the mismatch
of the highly open nature of the Zimbabwe economy, unfair international
trade practices and the dominance of speculative money flows. It
would also treat consumer goods as equal to essential imports. It
would thus starve foreign exchange-earning sectors of access to
abundant and cheap foreign exchange and hold back on essential services.
Four foreign exchange
categories fulfil different purposes in the economy. They should
be treated separately and the economy defended from difficult international
conditions, at least until it has recovered.
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