The Zimbabwean economy requires urgent and decisive steps to generate investment-led recovery and revamp production across all the sectors, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has said, expressing apparent frustration at the slow pace that agreed reforms are being implemented.
BY NDAMU SANDU
In his policy advice accompanying the mid-term monetary policy statement, Mangudya said the economy was under stress, consumed by large current and fiscal gaps which affected growth.
Enhanced production, he said, would increase employment, fiscal space, exports and economic growth while reducing import dependence, a development that would restore trust and confidence.
The RBZ governor said policy precision and urgent implementation of necessary reform measures were required to improve the prevailing debilitating economic conditions.
The process would not be easy but had to be done and required national sacrifice, sincerity and integrity, Mangudya said.
He said the clarification of the indigenisation policy by President Robert Mugabe in April was a critical milestone towards improving the investment climate, but the enabling Act was yet to be aligned to the policy.
In April, Mugabe had to step in after his ministers clashed in public over the implementation of the policy.
Indigenisation minister Patrick Zhuwao had given foreign companies an April 1 deadline to submit plans on how they would sell at least 51% equity to locals, failure of which they would be closed.
He later withdrew his ultimatum, saying he had interpreted the law wrongly.
Similarly, regularisation of the 99-year land leases to make them bankable documents was yet to be done, Mangudya said. Banks say in their present form, the 99-year leases cannot be used as collateral to secure the much-needed loans for agriculture.
“Regularisation of these two policy documents will cost almost nothing but yet taking action on them would be tremendous as it would signal that domestic and foreign investment is welcome in Zimbabwe. We need to walk the talk to see this through in order to create an investor-friendly environment,” he said.
Mangudya commended the Office of the President and Cabinet for leading the ease of doing business reforms.
Zimbabwe is ranked 155th on the World Bank’s ease of doing business out of 189 countries. It targets to be in the top 100 by the next ranking.
“What is now needed is to walk the talk by fast-tracking the implementation of all the identified areas of improvement, especially as they pertain to the regulatory environment of doing business in Zimbabwe. Business licence application forms, for example, should be available on-line, identical to all applicants and processed as a routine procedure,” he said.
The bold economic reforms, Mangudya said, would need to be supported by concessional external financing. Thus, with fresh foreign financing being an integral part of the envisaged Zimbabwe transformation agenda, completion of the re-engagement process was critical to improve Zimbabwe’s country risk premium, he said.
Zimbabwe is re-engaging with the international financial institutions to unlock fresh lines of credit. The first step in the process is the repayment of the $1,8 billion debt to the three preferred creditors — the International Monetary Fund, World Bank and the African Development Bank.
Mangudya said an attractive investment climate was needed because investment, like people, required security.
“Security of tenure is the best form of reward or incentive for business. Putting in place a conducive investment climate, fortunately, costs almost nothing, yet the cost of not having it is horrendous,” he said.
Economist Prosper Chitambara told Standardbusiness the country was in a mess because it had allowed political convenience to override economic logic. This, he said, explained the slow pace at which reforms were being implemented.
“Key institutions have been captured by the elite. You cannot move forward because some are benefitting from the parastatals [in their present form],” Chitambara said.
Parastatal reforms have been on the cards for over a decade but wheels are moving slowly due to interference amid claims the bottlenecks are fattening the wallets of senior government officials. The Auditor-General’s reports have exposed massive corruption at these entities but nothing has been done, signifying a business-as-usual approach.
Buy Zimbabwe chief economist Kipson Gundani said prudent policies had to be complemented by implementation.
“Gone are the days when you indicate left but turn right. It’s a statement and what is important is to see it happening. When you see these things happening then you believe them,” Gundani said.
He said the monetary policy did not operate in isolation as other policies had to be prudent and consistent to attain the same goal.
“Much as it can be prudent, you need the whole spectrum to be speaking with one voice,” Gundani said.
Policy inconsistency has been the hallmark of government. Last week, government curiously reversed the proposals by Finance minister Patrick Chinamasa to cut salaries and forgo bonus payments to civil servants.