Reforms needed to ensure recovery

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DESPITE President Robert Mugabe’s meeting with the business sector at State House last week, the first time such an engagement has been held in a decade, doubts remain over the veteran leader’s commitment to reforms demanded by business leaders.

By Kudzai Kuwaza

This comes against the backdrop of a well-established track record of lack of political will and urgency to implement economic reforms.

Business executives met Mugabe to propose a raft of measures to address the deepening economic crisis, including ensuring policy coherence and consistency.

The meeting came at a time the economic malaise — characterised by a debilitating liquidity crunch, acute cash shortages, dwindling investment inflows, widespread company closures and massive job losses – is exacerbating.

In a 17-page document, prepared at the meeting, captains of industry implored the government to embrace far-reaching reforms, among them improving the investment climate, fiscal sustainability and financial sector stability, state enterprise restructuring and stamping out corruption in both the public and private sectors.

“It is important that a national investment framework be established as an anchor for investment to guide investment across the country,” the document says.

“Most important is the need to ensure policy coherence and consistency, so as to entrench macroeconomic stability fundamentals for the country.”

Mugabe, at the meeting, conceded that his Zanu PF government had grossly mismanaged parastatals and turned them into “awful money spenders, awful burdens around our neck”.

However, this situation is an all too familiar script where despite encouraging noises from government, it has remained just rhetoric without any action taken.

Although Mugabe pointed out that parastatals have bled the fiscus and the economy, plans to wean off loss-making state-owned entities from Treasury remain in limbo.

The restructuring of state-owned entities has been on government’s agenda since the early 1990s when the Privatisation Agency of Zimbabwe was formed.

There has, however, been very little to show for it more than 20 years later as the parastatals remain run down monuments to mismanagement and corruption. Since Independence only a handful of companies such as Dairiboard Zimbabwe, formerly Dairy Marketing Board and a few others, have managed to survive outside state coffers after they transformed.

Doubts of government’s commitment to reforms demanded by business is manifested by its failure to restructure parastatals despite Finance minister Patrick Chinamasa’s undertaking to do so in successive budget statements and many previous promises.

The call by the business sector for government to cut the unsustainable wage bill is likely to fall on deaf ears given that only recently Mugabe ordered that more than 2 000 youth officers — who had been retrenched as part of the government’s agreement with international financial institutions to cut down the wage bill — be reinstated.

This led to the announcement by the Civil Service Commission chairman Mariyawanda Nzuwah that government had frozen the retrenchment process until guidance is received from cabinet.

This was despite the same cabinet having approved the recommendations of an audit which include the trimming of the civil service to cut down on the wage bill which gobbles more than 90% of government income. Treasury had also undertook to reduce public sector spending to around 60% by 2019.

Only this week, government gave the greenlight to the civil service commission to employ 2 300 teachers so that the ministry of Primary and Secondary Education can implement the new curriculum, further putting pressure on Treasury coffers.

Government’s much-hyped debt clearance strategy, the Lima Plan, is under threat due to its failure to implement structural reforms, demonstrating the lethargy in the corridors of power when it comes to implementing changes needed to restore confidence, investment inflows and economic recovery.

The meeting between Mugabe and captains of industry is much ado about nothing according to the Zimbabwe Congress of Trade Unions secretary general Japhet Moyo.

“I think it is a waste of time; it is like telling the devil to repent. Do you think that the so-called captains of industry can tell Mugabe that the RBZ Governor should go, for instance?

“Do you think that the so-called business leaders can tell him that his party’s intrafights have created uncertainty that no investor can look forward to investing in such an environment?,” Moyo asked.

“Do you think those business people can tell him that his party has created a risk premium for anyone who wants to invest in this country?”

Moyo pointed out Mugabe is more interested in listening to what he wants to hear rather than what he should hear.

That the business sector’s demands for reforms will be met remains highly unlikely given that Mugabe has ignored recommendations by Chinamasa, one of his cabinet ministers.

In April 2015, he announced that government had suspended bonuses for 2015 and 2016 to cut down on costs.

However, within the same week Mugabe dismissed Chinamasa’s announcement, saying that the presidium had not been consulted and bonuses are a right for civil servants.

Chinamasa was to experience more frustration a year later after he proposed a raft of reforms in his mid-term fiscal policy last year which included cutting the salaries of cabinet ministers, closing some of the country’s embassies and retrenching civil servants. Cabinet threw out his proposals.

Economist Vince Musewe said the business interface was a waste of time because Mugabe has never shown any commitment to turn around the economy.

“Everybody has been telling the President the things that need to be done in order to revive the economy but he has been ignoring all the advice and saying everyone needs to be patient. Closing parastatals will not change anything if key issues like structural reforms, respect of property rights, access to capital and currency mend are not dealt with,” said Musewe.

“Mugabe destroyed agriculture more than 20 years ago and he has not admitted to it up to this day, if key things are not dealt with then the meeting was a total waste of time where Mugabe was just saying his usual unhelpful rhetoric.” – ZimInd