Infrastructure spending, dollarisation and abolishing RBZ: Inside MDC Alliance’s alternative economic blueprint

MDC Alliance co-VP presents alternative economic plan, Tuesday Nov 24: the party proposes redollarisation and joining rand union

On Tuesday, the main opposition MDC Alliance issued its State of the Economy Address, in which it responded to the National Development Strategy, government’s new five-year economic plan.

Here, we summarise some of the MDC-A’s main economic proposals, from currency reforms, land, to investment.

On Currency reform

According to MDC Alliance, Zimbabwe must return to using the US dollar in the immediate term. In the medium term, Zimbabwe must join the “Rand Monetary Union”. This is in reference to the Common Market Area, which includes South Africa, Lesotho, Eswatini and Lesotho. These countries have their own currencies, but which are pegged to the South African rand.

The proposal includes abolishing the RBZ entirely.

Key currency proposals by MDC Alliance:

  • Drop the forex auction system and redollarise economy
  • Join the rand union and abolish the RBZ, says MDC Alliance: “In the long term, once Zimbabwe joins the Rand Monetary Union, the Reserve Bank act must be repealed, and the Reserve Bank of Zimbabwe abolished.”
  • All legislation under which the Zimbabwe dollar was reintroduced – this includes SI142/19, SI212/19 and SI 213/19 – must be repealed
  • As a transitional measure, the local currency, created by SI33/19, must be allowed to float against the US dollar without any controls
  • The party wants to see interest rates increased above the inflation rate. At its last meeting, the RBZ’s monetary policy committee maintained the accommodation rate at 35%, citing “current tight liquidity conditions in the market and the need to continue controlling speculative borrowing.” However, MDC Alliance says rates must rise so that the economy returns to positive interest rates to promote savings and preserve value.
  • In the near term, pending joining rand union and abolishing the RBZ, MDC proposes to amend laws to make central bank more independent, and to ban its lending to Government
  • Currently, exporters are allowed to keep 70% of their forex earnings. The remainder is sold to the RBZ at the auction rate. MDC Alliance proposes to remove export surrender requirement in order to liberalise the capital account

[CLICK: MDC’s bold Rand Union plan: What it means, home and away]

On land

  • Title deeds for all beneficiaries of land reform program, so that they can access bank loans
  • A land audit to determine land use and multiple land ownership
  • Rationalise land sizes and improve transparent access to land
  • On land compensation, MDC Alliance proposes an Act of Parliament “to deal with issues of compensation”, including paying “special attention” to former farm workers.

On economic growth

MDC Alliance proposes that “Zimbabwe constructs itself out of the crisis”. This, the party says, must be done through infrastructure projects.

Targeted projects must be in electricity generation and transmission. “We propose concentration investment in large solar projects and gas projects particularly around the deposits in the Nyamandlovu gas fields in Matebeleland North, small hydro stations can also be built in Manicaland. Due to climate change, hydros are becoming less and less viable.”

MDC Alliance also proposes investment in the Distressed Industries and Marginalised Areas Fund (DIMAF) and Zimbabwe Economic Trade Revival Facility (ZETREF) to revive industries. The party also wants a diamond law to enforce diamonds to be retained in Zimbabwe for polishing, as well as value addition in agriculture.

On attracting FDI

To promote FDI, MDC says Zimbabwe must offer incentives such as tax relief to investors bringing in new technologies. In addition, Zimbabwe must promote international banks to come to Zimbabwe and “increase interconnectedness” of local banks. Zimbabwe’s high country risk profile must be resolved. There must also be a new Foreign Investment Act, says the party.

On wages

The government must resolve disputes with civil servants by paying a living wage in US dollars.

The government must urgently approach international donors for aid to pay workers. This would include a health transitional fund.

This MDC Alliance proposal would be a repeat of the arrangement under the unity government, during which a consortium of donors paid almost US$70 million payments to 18,700 health professionals between 2009 and 2011, when the scheme started to be wound down.

On international support

MDC Alliance says Zimbabwe’s finances are “too fragile” for it to recover without international aid. The party proposes a Marshal Plan for Zimbabwe, through convening of a Zimbabwe Conference on Reconstruction and Development (ZIMCORD 2), to raise donor aid for recovery.

Click here to download the MDC Alliance’s State of the Economy Address