Economy on a slippery slope

By The NewsDay | Aug. 6, 2015 | 4 Min read

RECENTLY, I wrote that a country can never create a sustainable socioeconomic system if it is based on lies. Colonialism was based on lies and its foundations crumbled because of pressure on the economy.

This is exactly the situation we face now; the economy is speaking on our behalf — it did so in 2008 and, thanks to Thabo Mbeki, freedom was sabotaged and postponed. Seven years later the economy is speaking for us again and its message is loud and clear — change or perish!

In November 2014, Finance minister Patrick Chinamasa tabled the estimated revenues and expenditures for 2015. He tabled a $4,1 billion expenditure budget and estimated that the economy would grow at 3,4% for 2015, mainly driven by the mining exports, agriculture and tourism.

He further claimed that agriculture would grow by 9,2%, mining by 3,1% and tourism by 5%.

He was wrong!

Last week, he downgraded projected economic growth for 2015 to a mere 1,5% (less than half the growth he projected in 2014) while confirming that agriculture growth has actually declined by 8,2%. He blamed this decline on the drought, but we know better.

He further estimated that revenue projections for 2015 are now $3,6 billion, down from a targeted $3,99 billion. (This, again, is a huge underestimate given the decline in projected growth and increasing job losses.)

While expenditure is expected to come down to $4 billion from $4,11 billion which he projected in November 2014. (This is clearly unacceptable as the decrease should be more if this government is serious about cutting expenditures.) It will create a budget deficit of $400 million, which will, once more, be financed from domestic and external sources.

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Tourism is expected to grow by 5% and mining by 3,5%, but again we should not take these numbers seriously. This rent-seeking government has increased import duty for second-hand vehicles, banned the importation of second-hand clothing and scrapped rebates on groceries as part of measures to revive the festering economy. In addition, among other increases, fertiliser will now cost more to an already depressed agriculture sector while we will have to pay the government more for cell-phones and for talking with them.

Whatever measures Chinamasa may take right now will not result in economic revival at all, but will merely squeeze more cash out of the system, reduce disposable incomes, depress demand and squeeze more companies out of business, leading to more unemployment. This is the exact opposite of what he should be doing in an economic meltdown. The priority right now should be to do everything to stimulate domestic demand and investment while cutting down on luxury imports and unnecessary travel, especially by government officials.

I do not believe that at any moment he will be able to cut expenditures on civil servants’ salaries to 40%. That is a lie which would cause massive dismissals, increase poverty, unemployment and further have a negative impact on disposable incomes and demand. It’s a slippery slope indeed!

As Chinamasa tinkers with delusional projections, it is clear to everyone that we need a political solution first before things can turn around. Clearly, Zanu PF as it is configured now, can no longer manage this economy. So brace up for worse to come.

As a country we have been postponing visits to the doctor and drinking pills hoping that what is a terminal economic disease will go away. Well, it will not. As Jubulani Sibanda said recently, this country needs a major operation not pills.

The sad reality is that Zimbabweans will slowly get used to it, as always. We complain every time things get worse and do nothing. It seems that this government can, therefore, do whatever it likes without us saying enough is enough.

What must we do?

We must now all unite and challenge the status quo so that this government can wake up to the reality that we no longer have faith in them to manage our country and our future. We must take a vote of no confidence! We must insist an immediate establishment of a transitional technical authority which is made up of technocrats and not politicians. This would manage the country out of this quagmire and prepare for elections next year, but only after electoral reforms. We cannot wait for 2018.

Short of the above; expect no significant change except the usual party politics, infighting and lavish parties. It’s despicable.

I for one no longer take Chinamasa seriously at all. He may be doing his best to manage what is a toxic situation, but remember he is a willing accomplice in the process and that makes him culpable.

First, the economy will not grow this year. In fact, it will regress as companies become inviable and lay off thousands of workers. Remember that companies are laying people off not out of choice, but because they can’t achieve their revenues and remain viable. No political interference or decrees in what are really business matters will change that fact.

Second, the country has a secret economy that is propping up the Zanu PF predator cabal no wonder why some can afford to build 50 bedroom houses while our mothers have to be vendors and graduates remain unemployed.

Third, no significant investment that creates jobs will happen soon. China will invest only to extract resources out of the country to feed their economy and never to create jobs here. That is not their priority.

Fourth, banning imports will not stimulate domestic demand because there is no money in people’s hands. Rather the government can lead by example here and stop importing cars.

Protectionist policies with no commensurate investment in the local capacity to produce goods and services will not result in recovery, but merely in overpriced goods leading to further cuts in demand. It is a vicious cycle to nowhere.

Putting it simply, our economy is no longer viable. We have a failed State that has been manufactured by Zanu PF. The only way out is out.

 Vince Musewe is an economist and author based in Harare. You may contact him on [email protected]