In an extended mea culpa on behalf of President Emmerson Mnangagwa‘s government, Finance Minister Mthuli Ncube has written to the international financial institutions (IFIs) in Washington saying it takes ‘responsibility for the recent policy missteps during late 2019’ which have led to inflation currently running at an annual rate of over 500% year.
Ncube then writes that the government and economy are near to collapse, with the coronavirus pandemic dealing the final blow. The letter, dated 2 April, came a few days after reports of a coup plot against Mnangagwa had been circulating. A security source said the authorities had delayed the lockdown in Harare for fear that dissident officers might exploit conditions to move against the president and his circle.
In the letter, a copy of which has been seen by Africa Confidential, the usually upbeat Ncube paints a relentlessly grim picture. ‘Zimbabwe’s economy could contract by 15-20% during 2020 – with very serious social consequences. Already 8.5 million Zimbabweans (half the population) are food insecure,’
So bad is the situation, says Ncube, that it could cause an implosion of the state and threaten security in neighbouring states. ‘The global pandemic will take a heavy toll on the health sector, with many lives being lost and raise poverty to levels not seen in recent times, including worsening food security. A domestic collapse also would have potentially adverse regional effects, where spillovers are significant.’
Concerns in southern Africa about conditions in Zimbabwe are deepening. They might explain a call by South Africa‘s President Cyril Ramaphosa, at an African Union teleconference on 28 April, for Western states and the IFIs to lift sanctions against the Mnangagwa government.
On the previous day, Zimbabwean telecoms magnate Strive Masiyiwa called for urgent aid for his country to fight the pandemic. His Econet cellphone and money transfer companies have been a lifeline for many Zimbabweans.
Masiyiwa said the World Bank, the IMF and other multilateral institutions should create humanitarian trusts for Zimbabwe and Sudan, both under United States sanctions, to be managed by third parties to ensure a fair distribution of life-saving aid.
‘For the avoidance of doubt; this is not an appeal for the lifting of sanctions,’ said Masiyiwa. ‘I don’t want to get into the issues around how and why there are sanctions. Everyone knows I had to flee my country because of persecution 20 years ago.’
The state media in Harare covers every donation from business supporters of the ruling Zimbabwe African National Union – Patriotic Front (ZANU-PF) to the government’s coronavirus campaign but is more reticent about contributions from non-partisan donors such as Masiyiwa’s Higher Life Foundation. Earlier this year, Higher Life paid health workers’ salaries after the government said it had exhausted the budget.
Ncube’s letter is addressed to David Malpass, President of the World Bank, Kristalina Georgieva, managing director of the International Monetary Fund, and Akinwumi Adesina, President of the African Development Bank. He asks them to support the rescheduling or cancellation of all Zimbabwe’s foreign bilateral debt arrears and help in clearing all its multilateral arrears (AC Vol 60 No 6, Ncube wins foreign fans).
The government also needs $200 million, says Ncube, for unplanned spending to fight the pandemic, referring to World Bank estimates that the country’s financing gap is nudging $1 billion for health, education, food security and social protection.
Without those funds, Ncube says, the government will have no choice but to revert to printing money, risking a return to hyperinflation and the crash of the local currency.
In exchange for the Bank and the IMF agreeing to an emergency debt rescheduling, the government promises a ‘time-bound programme’ of economic, political and governance reforms. Ncube, who has been at odds with Reserve Bank of Zimbabwe governor John Mangudya, pledges the government will introduce a market-determined exchange rate and end what he calls the reserve bank’s ‘quasi-fiscal operations’ and its direct lending programme. It will also include all state subsidies in the budget documents presented to parliament and scrutinised by the Public Accounts Committee, he adds.
This, according to finance officials in Washington, is code for saying conditions are so horrendous that Ncube has been the given the political cover to promise a crackdown on grand corruption at the heart of the government. They add that it is well-known among banks and business people as well as foreign diplomats that RBZ subsidies to gold-mining companies have directly benefited President Mnangagwa’s inner circle.
This group and senior army officers have also benefited from preferential access to foreign exchange and schemes that profit from arbitrage between the official and parallel rates of the Zimbabwe dollar, the officials add. Even if he wanted to, there is no way that Mangudya could have stood up to those factions.
Ncube’s letter also promises to ‘limit the fiscal costs of the financing of agriculture, ensure transparency, and resolve all the related governance issues’. This would deal with another big leakage of state funds: the financing with zero accountability of Mnangagwa’s favoured Command Agriculture scheme (AC Vol 60 No 18, Cash at the generals’ command).
Apart from failing to boost productivity substantially – due to poor distribution of seeds and fertiliser as much as the latest regional drought – the Command Agriculture Programme has become a formidable source of patronage for Mnangagwa’s ally Kudakwashe Tagwirei, owner of the Sakunda group of companies working with Swiss-based Trafigura to import fuel, and well as running its own agricultural projects (AC Vol 60 No 23, Cashing in on the crisis).
One of Zimbabwe’s canniest operators, Tagwirei, who financed ZANU-PF’s election campaign in 2018, has evaded any attempt to limit his sprawling empire, and maintains close ties to both Mnangagwa and Vice-President General Constantino Chiwenga even though they are bitter rivals (AC Vol 61 No 8, Rule by rivalry).
Against this, Ncube’s promise of an ‘ambitious anti-corruption strategy’ rings hollow to finance officials. Neither do they take seriously his promises of political reform, most of whose elements have been on the government’s agenda for the past five years. Ncube’s final pledge to continue with ‘engaging in National Dialogue’ elicited the response of ‘what dialogue?’ from an official in Washington.
We hear that neither the World Bank nor the IMF have responded formally to Ncube’s letter, nor do they intend to, despite him following up with phone calls over the past week. ‘Zimbabwe is in a political, not an economic policy, crisis …without credible change on that level, nothing else will move,’ concluded the official.
Failing that, the country’s best hope might be for an international organisation to work with Masiyiwa’s plan for an independent humanitarian trust to distribute food and medicine to the most threatened people.
This was published here by the Africa Confidential.