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A recipe for recovery
Eric Bloch
May 03, 2007

http://www.mg.co.za/articlePage.aspx?articleid=306499&area=/supzim0407_home/supzim0407_content/

Zimbabwe's economy is in gross disarray and is declining at a rapid pace. Inflation has soared to 2 200% according to latest figures, which is currently the highest rate in the world.

As unappealing as that record is, realities are even worse, for it is undoubted that real inflation is markedly greater.

Unemployment in Zimbabwe is at about 82% of the employable population, notwithstanding that millions have left to seek livelihoods in neighbouring territories, and further afield (including the United Kingdom, the United States and Australia).

The gargantuan contraction in employment is because of agriculture, which was the economy's foundation, shrinking to less than 20% of levels of 10 years ago and to the closure and downsizing of many factories.

As a result of intense unemployment and pronounced hyperinflation, an estimated 84% of the population subsists below the poverty datum line, while a horrendous 57% are believed to exist on incomes below the food datum line.

Therefore, more than half of the population is undernourished, suffering malnutrition and faced with starvation, misery and ill-health, if not death.

The tales of woe are neverending, for they include a massive inadequacy of foreign exchange, in the absence of significant foreign direct investment, lines of credit and much developmental aid, and with vastly declining export earnings.

As a result, there are overwhelming scarcities of many essential commodities, including antiretrovirals for HIV/Aids sufferers, other medications, petroleum, electricity, industrial inputs and much more.

There is a virile black market in foreign currency, and in scarce commodities, further fuelling inflation. The state anticipates a fiscal deficit of $8-billion. The listing of economic ills could be endless.

Nevertheless, an economic transformation is readily possible. The country has a wealth of assets which, if properly used, can fuel a vibrant economy. It has fertile land, but that land must be used constructively and productively. It has vast wealth under that land, including uranium, platinum, gold, diamonds, nickel, coal, methane gas and more, but Zimbabwe is extracting very little of it.

It has a unique tourism resource, including the spectacular Victoria Falls, much wild life, the Great Zimbabwe Ruins, the Matopos Hills, Lake Kariba, enthralling Nyanga, Chimanimani and the Bvumba mountains.

Despite the economic morass, Zimbabwe still has the second-most developed industrial infrastructure in Southern Africa and is geographically ideally located to supply a free trade area with a populace of 326-million people.

Most of all, it has 11,4-million people, of which 11,3-million are the most wonderful, hard-working, willing, aspiring people on Earth, but their lives are being destroyed by 100 000 others.

These assets will be the foundation of economic recovery and well-being, if the right enabling environment is put in place.

That environment requires political change. Such change must be either a change of the political hierarchy or a dynamic change of the present hierarchy's policies and actions. The prospect of the latter appears to be most remote.

However the change occurs, an economic metamorphosis requires diverse, prompt, consistent and committed actions.

First is a need to recognise that it is illusory to believe that Zimbabwe can "go it alone". Economic recovery and ongoing economic vibrancy needs effective and constant interaction with the rest of the world.

To that end, international relations will have to be repaired. Many countries have been alienated and rejected, and restoring good relationships, although not easy, will not be impossible.

Six key actions are necessary: an absolute respect for human rights must be demonstrated, international norms must be conformed to and respect for law and order must be restored.

In addition, the judiciary must be shown to be wholly free and independent; there must be unequivocal observance of, and regard for, property rights and the country must be willing to accept well-intentioned, constructive criticisms from the international community.

The meaningless, non-yielding "Look East" policy must be abandoned and replaced with a reciprocally beneficial "Look North, South, East and West" policy.

The ill-conceived and grossly mismanaged land reform programme must be reformed. Few have disputed that land reform is needed, but it has to be just and equitable, and enhance agricultural production, instead of destroying it. It also has to be effected with regard to law and order and to property rights.

The country must also honour its bilateral investment protection agreements. It must encourage and facilitate the return of white farmers to the lands, while increasing the number of black farmers. All recipients of land should be selected on merit and not nepotistically.

The currency needs to be substantially devalued, pending allowing it to float, at an early future date. This will reduce the scarcity of foreign exchange, while stimulating greater productivity, increased employment and greater downstream economic activity, as well as enhanced fiscal inflows.

Key to economic recovery is also pronounced economic deregulation and the clamping down on public and private-sector corruption.

Other distortions that need to be removed include an absence of "real" interest rates and a plethora of unrealistic and abused state subsidies.

In alignment with these actions, the government must contain its spending, reduce the excessive number of ministries, embassies, consulates and missions around the world, and neverending global travels by the political elite, among many other expenditure excesses.

Hand-in-hand with these actions, the government must create a genuinely welcoming investment environment, inclusive of infrastructural redevelopment and parastatal privatisation.

There is no quick fix but, if these and other actions are positively pursued, and especially so within the next few months, they will succeed and the country will, in time, have a dynamic and vigorous economy.

*Economist Eric Bloch serves as an independent adviser to the governor of the Reserve Bank of Zimbabwe

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