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Foreign aid will not generate Zim’s wealth

Emerging from the wilderness and in a desperate attempt to be embraced by the international community, Zimbabwe has initiated dialogue with the Bretton Woods institutions, so as to encourage the latter to release more funding for the impoverished Southern African state. Contrary to the pre-election political grandstanding that elevated the landlocked former British colony to the status of a mini-super power, post-election reality has sunk proving that the country needs the West more than the latter does.

SundayDiscource By William Muchayi

As Finance minister, Chinamasa’s visit to the United States recently in a bid to re-engage with both the IMF and the World Bank is proof that Zimbabwe is a tiny drop in the ocean in the eyes of the West and can hardly tick without her.

The country’s staggering debt as of the end of 2011 was an estimated US$10,7 billion with the World Bank owed US$911 million, IMF-US$138 million, African Development Bank (AFDB) US$587 million and the European Investmemt Bank (EIB) US$244 million. Not underestimating the significance of this aid to Zimbabwe, the rest of which rarely reach its recipients, the country’s present and future development needs need not be shaped by the generosity of outsiders but by home grown solutions.

While the minister’s initiative to re-engage with the West is welcome, its significance shouldn’t be overestimated as financial aid on its own devoid of accountable and transparent governance is a recipe for disaster.  Financial aid from outside on its own  does not generate  wealth and bring  about development, but it assists the nation that has its own socio-economic and political blueprint to meet its objectives and aims.

According to the international NGO Global Witness, aboutUS$2 billion in diamond revenues in Zimbabwe have been unaccounted for since 2008. Tendai Biti, the former Finance Minister is on record complaining that in 2012, Treasury expected to get US$600 million from the proceeds of diamond exports, but only got a meagre US$41 million, with the rest unaccounted for.

A study by the AFDB and the Global Financial Integrity reveals that from 1980-2009, Africa has lost US$1,2 to US$1,4 trillion in illicit financial outflows such as corruption, tax evasion, bribes and other criminal activities. This figure, it is estimated, is more than three times the total amount of foreign aid received in the same period. A recent poverty report on the 2011-2012 Pices Survey (Zimstat) 2013 reveals that 72,3% of Zimbabweans are poor not because the country is not endowed with precious natural resources, nor is it a result of having no access to international financial aid, but due to poor governance characterised by lack of accountability and transparency on the part of government.

If Chinamasa and his colleagues in government can’t account for the diamond proceeds at Chiadzwa, what is the logic behind the minister’s visit to the US begging for aid if it is not for selfish and individualistic reasons? Does Chinamasa or anyone in government, in spite of their PhDs not realise that financial aid from outside can’t be the basis upon which to base the country’s economic development?

Rather, it is the unaccounted diamond revenue from Chiadzwa which Chinamasa should  focus his attention on and not the Bretton Woods institutions. Zimbabwe is blessed with vast mineral resources ranging from gold, coal, diamonds, platinum, uranium and land not to mention her abundant labour force.

The country’s platinum reserves are the second largest in the world and together with South Africa, they hold 75% of the world’s platinum reserves.  Wealth for the country is created by tapping into these resources and distributing them equitably among the people, as opposed to begging for aid from the IMF or the World Bank. It is the culture of accountability and transparency above anything else that ensures that society benefits from the wealth tapped from the soil.

Are the Chinese not reported to be involved in illegal alluvial gold panning in the country with Chinamasa’s government giving them a blind eye?

Zimbabwe does not have to rely on the generosity of outsiders to sustain herself. If the country can afford to lose US$2 billion in corruption and other illicit financial outflows annually, what justification is there to reward her with financial aid?

Mugabe’s indigenisation policy, while on face value appears appealing, deters investors.  Investor confidence in the country is at an all time low. The major factor dampening investor confidence is lack of policy clarity and transparency regarding key economic issues, such as implementation of the indigenisation and empowerment laws.

Who would want to invest in such a volatile and turbulent market in which property rights are not respected? The country desperately needs revenue generated from investors to boost her coffers and Chinamasa should be the first person to realise this.  It is progressive and informed policies pursued by governments that generate wealth which empowers people and not aid from the Bretton Woods institutions. By seeking aid abroad, Chinamasa contradicts himself, as he is one of the chief architects behind  the  introduction of retrogressive policies that deter investors in the country. Zimbabwe is poor not because she is cursed, but due to the fact that she is guided by individuals like Chinamasa who are of the opinion that aid can substitute wealth that is unaccounted for from Chiadzwa.

As statistics show, Zimbabwe’s global ranking on the ease of doing business dropped this year to 170 out of 185 countries, according to the World Bank’s Doing Business 2013 report. The country needs a robust taxation system that closes the current loopholes which have led to the loss of millions in government revenue. Not only is this measure enough but it has to be accompanied by a culture of accountability and transparency on the part of government and citizens.

Millions of dollars in royalties paid by diamond mining firms in eastern Zimbabwe have disappeared under unclear circumstances. Mbada Diamonds mining company, which works with the Zimbabwe government, claims to have paid US$293 million in taxes over four years but the government only received US$82 million in total with the rest unaccounted for.

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