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Zimbabwe's
economic recovery: Lessons from the neighbourhood and beyond - SAPES
Seminar
Upenyu
Makoni Muchemwa, Kubatana.net
April 15, 2010
View audio file details
As part of
their ongoing policy dialogue series SAPES
Trust hosted a discussion entitled: Zimbabwe's economic
recovery: Lessons from the neighbourhood and beyond. Economist Tim
Muzondo presented a short paper on the history of Zimbabwe's
Economy, and gave a brief outline of the issues that need to be
addressed to enable the country's recovery. Minister of Finance
Tendai Biti then discussed the realities of the economic situation.
Join the SAPES
discussion series every other Thursday from 5pm-7pm. For more information,
email admin@sapes.org.zw
Tim
Muzondo
What does one
mean by recovery? Recovery implies some sense of turning around,
getting back to where one was before. The question though, is where
are you turning back to in the case of Zimbabwe? Are we turning
back to the period prior to 2000, any period prior to 2000, or are
we turning to some specific period prior to 2000, or are we simply
saying we want the fastest possible economic growth for us to turn
around, irrespective of where we are going?
Listen
The economy
was not free. The controls were there. Foreign exchange continued
to be allocated administratively; the exchange rate was controlled;
interest rates were controlled; prices were controlled. As economists
in the Ministry of Finance it was a big job to decide what the price
of mealie meal would be and the price of bread, these things would
go to Cabinet to decide. Instead of focussing on major policy issues,
very operational things were considered much more important than
overall economic policies, because of the command and control policy
framework.
Listen
I call these
issues that need to be addressed to support recovery. The first
and most important is macroeconomic economic stability. The second
is to implement structural reforms. The third is rebuilding the
productive capacity of the economy and to rebuild economic and social
institutions, the fourth is property rights, protect and respect
property rights and the fifth is governance issues, and the final
one is international support, by which I mean government policies
must be such that they will yield maximum support from the International
Community.
Listen
What is the
National Currency going to be? My view is that it would be a terrible
mistake to go back to a Zimbabwean currency. In terms of confidence
in the Zimbabwean economy, a return to the Zimbabwean dollar given
what has happened, would make it very difficult for investors to
believe that macro economic stability is here to stay. I think the
wise thing to do would be to use the Rand as the national currency,
not only that but also integrate the financial system of this country
with that of South Africa, so that individuals and businesses can
borrow not only from banks here but banks in South Africa.
Listen
The current
situation presents enormous challenges, but in addition there are
also opportunities. There is significant excess capacity in the
economy right now. That is a good thing from the point of view of
economic recovery because it means businesses do not have to buy
additional capital in order to increase capacity. There are high
levels of unemployment, from the point of view of recovery; it's
a good thing because there are resources that can immediately be
employed to boost the economy. There is already short-term macro
economic stability. That's very good because it builds confidence
for business to invest and to produce. There is a credible cash
budget system, which was introduced by the Minister [of Finance].
It encourages firms to produce and invest. Businessmen will tell
you that there is a tremendous shortage of short term and long-term
capital or credit. If there was a new government, which satisfied
the requirements that I'm talking about, these constraints
can be removed very easily. And the fact that you could do that
would be a positive thing in terms of encouraging the recovery of
the economy.
Tendai
Biti
A failing African
economy does not generate conditions that would lead to a purple
revolution or an orange revolution that leads to the liquidation
of the government or the state. It doesn't happen. Oftentimes
the smaller the cake becomes the higher the capacity of the gatekeeper
to brief the population and reproduce itself for many years. The
classic example was Mobutu Seseseko.
Listen
Donors in this
country are doing a lot, but from the point of view of where I am
sitting in the Ministry of Finance, unless that money is channelled
in a vehicle where I am able to know that it has gone to point 'Y'
on the budget and I am able to tick it off, it is not effective
aid at all So for all intents and purposes, it becomes dead aid,
its not meaningful to us.
Listen
In January our
inflation was 0.7%, in Feb it was about 1%. That means that our
annualised inflation will be about 12%, which is not acceptable,
we will be back in double-digit figures. Our projection in the budget
is 5%. If you look at the inflation drivers for November and January,
the cost of energy did not go up, the cost of electricity did not
go up. Prices have gone up purely as a result of speculative tendencies.
One of the results of an immature, nascent bourgeois class, nascent
business class is that they find it very difficult to play by the
rules.
Listen
The wages have
become a fundamental threat to this economy. The fact of the matter
is that we have a wage bill of nine hundred and fifty million dollars,
which is seventy percent of our revenues, which is 18% of GDP. What
the wage bill in Government is doing is that it is having a multiplier
effect in respect of the wages that are being paid by the private
sector. There are companies with wage arrears of two months, three
months, and four months. When a company does not pay wages for that
long it means that PAYE has not been paid, so the entire economic
value chain has been disturbed.
Listen
This country's
economy is based on agriculture. We have not found an alternative
accumulation model. We need to find an alternative to extraction
of raw materials and agriculture. Until such time as we have found
that alternative it means that the model based on agriculture is
dominant. Now we have question marks around land, some of us have
argued that its time to give the people who have benefited from
the land reform programme, title deeds. Because if you are going
give someone a 99-year lease, what is the difference? Who will live
to 99 years anyway? You might as well give them title deeds. Then
you can rationalise on two things: you can rationalise on the sale,
because he got the land free of charge, so you might increase your
capital gains tax for the first sale. You might also rationalise
if you think that the market is going to be a tool to reverse the
land reform programme, you might say land should only be sold to
citizens, and should not be sold to corporate bodies. But you need
to make that land live capital, and you can't do that without
a title deed. It's actually dishonest if you say to someone
I'm going to give you a 99-year lease . . . what is the difference?
Listen
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