Gono must do better than this
IS it not generally agreed that President Mugabe’s decision to make huge, unbudgeted payouts to war veterans in 1997 was a major factor in the collapse of the Zimbabwe dollar and the economic tailspin that followed?
/STRONG>On that black Friday in November, Mugabe doled out $50 000 gratuities and $2 500 monthly pensions to each of the veterans of Zimbabwe’s 1970s liberation war without batting an eyelid about where the funds would come from. What followed was an economic implosion whose effects we are yet to recover from.
The crocodiles supposed to be managing our economy have evidently not learnt a thing from that debacle seven years ago. The government will soon be awarding war collaborators and former detainees goodies — ostensibly in recognition of their alleged role in the liberation war which ended a quarter of a decade ago. This will kill the economy and no one could have put it more candidly than Reserve Bank governor Gideon Gono in his third quarter monetary policy review last Thursday when he spoke about the need to avoid unplanned payments.
Gono warned that his inflation target of 150% by December would be missed if the government embarked on a spendfest.
“This (falling inflation rate) should be bolstered through containment of expenditure levels to budgeted thresholds, avoidance of supplementary budgets and avoiding awards of unplanned benevolent or gratuity payments that are unrelated to the current production activities or real economic growth,” he said.
His warning is instructive and confirms what we have always averred: that his wirtshaftswunder (economic miracle) is susceptible to the vagaries of predatory politics in Zimbabwe. Gono’s plan will not escape this test as government, desperate to buy support ahead of the parliamentary election in March, becomes blind to elementary economic principles.
There are dangers lurking on the road to recovery. These hazards will continue to ensnare Gono’s polices and scuttle agricultural growth which he expected to notch 28% next year. He expects mining to recover 7,5% while manufacturing and tourism are also expected to register positive growth. Gono takes credit for slowing down price increases and his efforts to ensure the little foreign currency available is managed judiciously to cater for essential imports.
He has also tried to sort out the mess in the banking sector and channelled resources to the productive sectors such as mining, manufacturing and agriculture.
He has to build investor confidence, mend fences with bilateral and multilateral donors and keep business alive but does not have total control over his recovery programme. Gono’s plan has to fit into President Mugabe’s grand plan, which is not necessarily premised on fiscal and monetary prudence. Control is the key motivation.
As a student of Germany’s wirtshaftswunder of the 1950s and 60s, he should know that federal chancellor Konrad Adenauer’s post-war government swept away as many unnecessary regulatory controls as possible. The German economy between 1951 and 1960 doubled in size.
Ludwig Erhard, Director of Economic Administration in post-war Germany — who later became federal chancellor — believed that “only under a free market economy can an individual find true freedom. Only a free society and free economy will deliver the wealth needed for humane social policies and programmes”.
Government in Zimbabwe is taking no notice of its damaging interventions in the economy, just as it won’t take any notice of its own Inter-Ministerial Taskforce on Bilateral Investment Promotion and Protection Agreements tasked to ensure that no foreign investment agreements are violated.
Gono in his statement said foreign investors should be protected from “obstructive practices by untoward elements of society — individuals or groups”. Did Gono mean Agriculture minister Joseph Made who has listed for compulsory acquisition foreign-owned agro-processing concerns in the south-eastern Lowveld and in the Eastern Highlands?
Gono said he was “heartened” by the formation of the Inter-Ministerial Committee. But what do the South Africans, Indonesians and Germans have to say about their lost investments? He spoke of the need to hasten the completion of the land reform exercise in terms of the Utete Land Commission Report. Over a year after the tabling of the report, most of its recommendations have not been implemented, especially security of tenure and protection of investments. The greatest threat to the agricultural recovery plan is the Ministry of Agriculture itself.
What will Gono do to deal with the Made-made disaster in commercial agriculture?
The fact that Gono acknowledges the impediment in the way raises a new challenge for him. He now has to mend the economy while at the same time persuading errant politicians not to drive a coach and horses through his programme. This is an exigent task at a time when the penchant for populism is high among politicians. Those who have tried to walk that perilous path have either given up or were sucked into the morass of populist politics.
Last Thursday, Gono said the foreign currency black market was being fuelled by individuals and corporates dealing in fake US dollars. This extraordinary disclosure showed poor judgement. As economists were quick to point out, there is no basis for the claim. It is a transparent red herring.
We hope the governor has not fallen into the clutches of Zanu PF political spin mandarins. If his credibility is to survive he will have to do better than this.