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National debt trap: How Zimbabwe should lift itself out of its misery

Opinion & Analysis
A few weeks ago, Omen Muza wrote about the scourge of non-performing loans and debts and how everyone owes everyone else.

A few weeks ago, Omen Muza wrote about the scourge of non-performing loans and debts and how everyone owes everyone else — a result of the huge liquidity crisis created by (hyperinflation and subsequent) dollarisation. To get out of the debt gridlock, he pointed out; Zimbabwe may need a significant bail out.

Painona with with Tapiwa Nyandoro

We know why we are in the current hole. Too modest a vision and ambition is one reason.

The second is a focus on consumption. The third is fiscal and monetary policy mismanagement riddled with cronyism, corruption and poor project identification and execution.

Even when talking of a bail out, our ambitions are sub-economic and below the critical level needed for double digit growth over a few decades.

We ask for $4 billion when we should be asking for $30 billion over a fifteen-year period to cover not only the non-odious debt owed by central and local government, utilities, other institutions and households, but also the capital funding for infrastructure re-habilitation and expansion necessary for a vibrant and greatly enhanced mining and agriculture industry expansion, thus creating the necessary environment for export-focused manufacturing and the attendant service industries.

A request for a sizeable bail out loan and/or grant to fund the following:

genuine national, household and institutional debt write down or cancellation,

budgetary support and cash transfer schemes to vulnerable families over a five-year period,

provision of sufficient capital for an essential infrastructure upgrades and expansion proposition, requires that the nation must concurrently or in advance table a business plan to boost production, productivity, exports, tax revenues and job creation across the key areas of mining and agriculture, in the process eliminating the trade deficit.

This production side business plan needs to be in place to ensure the bail out will be seen as a once-off venture by the capital providers, as it should be, given the humanitarian thrust of a bail out grant.

Consumption has left us with a growing $10 billion debt. The failure to create new wealth is our major shortcoming.

Focus, for the incoming Cabinet, should squarely be on enhanced production of major industrial raw materials such as coal, iron ore,  electricity, cement, cotton, maize and soya beans and raising productivity and raw material beneficiation, thus growing revenues and jobs and in the process tax receipts as well.

Enhanced beneficiation of the major raw materials into liquid fuel and chemicals, from gas to liquid and or coal to liquid plants, steel from iron ore, PGM from concentrates, textiles from cotton, poultry, beef and pork from maize and soya beans is where the greater number of quality jobs is created and significant value addition is made.

We need to ramp up platinum mining to reach the one million ounce mark and smelt and refine it locally.

That could require a $3 billion investment, but earn the nation $2 billion per annum thereafter.

We have high quality Iron deposits that require electricity, coal and nickel and lots of high quality jobs to turn into steel.

If power and the logistics infrastructure, ports included are in place we could export upwards of fifty million tonnes of steel, earning Zimbabwe $30 billion per year.

A further 50 million tonnes of iron ore could be exported at the same time via a slurry pipeline raising $5 billion per annum. We can do the same with Coal exports raising a further $3,5 billion from exporting fifty million tonnes of that commodity.

Agriculture, if appropriately funded and treated as an enterprise could turn around our food deficit into export proceeds.

Provided the hydrological surveys support the investment, a million hectares under drip irrigation would make it possible to register agro-industrial exports of $5 billion annually.

This would also have a significant beneficial effect on the manufacturing sector which has all but collapsed.

The challenge to our technocrats is to put a cost tag and time frame to not only the necessary enabling local and regional infrastructure needed to achieve such an export oriented game changing ambition, but also to do the same to the mining, agricultural and manufacturing industries that has the highest potential, by utilising the infrastructure, to earn the highest returns across the value chain.

The challenge to our Treasury is how to fund such a colossal undertaking over a 20 to 30-year period.

The challenge to our legislators is to provide the necessary enabling environment to reduce country risk.

Recent Press reports indicated that Sadc had a $64 billion infrastructure blueprint for implementation over five years. While this is welcome, it is more on the expenditure side. A balanced approach is necessary.

Concurrently, therefore, money should be sought for the productive side such as for mining, smelting, agriculture and manufacturing to ensure that the infrastructure does not lie idle upon completion, but is put to maximum use as soon as possible.

This would allow the servicing of any loans that may go towards the $64 billion needed for the infrastructure.

It would also allow for the generation of funds for the maintenance of the infrastructure.

It goes without saying that the investment in infrastructure must be matched by the investment in the productive and social sectors for the program to work as a synergistic coherent whole.

That this is being taken into account is the $64 billion dollar question.