MDC grills Gumbo on key economic recovery issues

In the local press last week, minister Rugare Gumbo is quoted as claiming that the NEDPP has managed to raise US$350 million in foreign currency since its launch on April 19, 2006. The MDC now responds to the minister's responses in the press to some of the key econom

ic issues:

Question: The government has in recent years introduced programmes which it said would spur economic development, what guarantees do we have that the NEDPP will be a success?

Gumbo’s response: Most of the programmes lacked private sector participation as government set them up and implemented them at the same time. The recently unveiled programme, however, takes various players, including the private sector, on board, something that makes a major difference.
MDC’s response: To what extent, if any, did the private sector voluntarily participate in the drafting of this programme? Was their input incorporated? Do they regard the NEDPP’s targets as achievable? At both the launch of the programme in April and the session with the Sunday Mail, the Minister appeared to be making claims on behalf of the private sector. One wonders what the actual position taken by both the Confederation of Zimbabwe Industries (CZI) and the Zimbabwe National Chamber of Commerce (ZNCC) was. In any case, to what extent will the NEDPP’s targets trickle down to productive units in the economy? For example, we know that the fertilizer industry is currently operating at 12% of its capacity.

Question: A lot has been said about the programme’s intentions and strategies. But there has been little mention of the (amount of) funds that were allocated to the implementation of the programme and how the funds were sourced.

Gumbo’s response: A budgetary allocation has not been made for this initiative. However, line ministries are expected to avail funds from their respective allocations. It was suggested that funds earmarked for certain ministry projects should be channeled to the NEDPP. We would also like the Reserve Bank of Zimbabwe (RBZ) to provide funding through its various programmes.

MDC’s response: The affected line ministries are surely, barely functional, and not in any position to divert any funds to the NEDPP. This claim by the Minister appears to be impractical and without foundation, unless, of course, he is relying on Governor Gono’ money printing expertise (to refer to his second source of funding). The provision of funds by the RBZ is yet another primitive and economically dangerous quasi-fiscal activity. These funds have not been incorporated in the country’s national accounts, and have as a result, distorted national statistics particularly inflation levels and the budget deficit. Ultimately, this source of funding cannot be consistent with any positive economic growth.

Question: When the programme was launched almost two months ago, its “major part” was to harness US$2.5 billion in cash and investments within three months. Of the targeted funds, what amounts have you raised and what investments have been made?

Gumbo’s response – We have not gone very far, unfortunately. We have managed to raise US$350 million in cash. But we are still quite optimistic that we will raise quite a substantial sum of money. It should be noted, however, that focus is not merely on raising US$2.5 billion in cash but also in credit lines and revolving funds investments around the country. After all is said and done, we will probably be able to have US$2.5 billion.

MDC’s response: At least the minister is honest enough to admit that “…we have not gone very far..” although this appears to be an understatement of the situation. Given that the total foreign currency inflows during the whole of 2005 (US$1.7 billion) translates to monthly receipts of just over US$140 million, how does the Minister explain having raised US$350 million in one month? Even if one were to accept the Minister’s claim that this amount has been raised, if it were to be pro-rated to the three months within which it was claimed that US$2.5 billion would be raised, NEDPP will only raise a total of US$1.050 billion by the end of that period. Fantasy economics once again!

Question: Your detractors say you always blame the country’s economic decline on Western-imposed sanctions. Is there a way of circumventing the sanctions and promoting investments without looking East?

Gumbo’s response: Yes, ways of circumventing sanctions are there. Like a caged tiger, one has to fight their way out.

The MDC’s response: The truth is that no country has imposed economic sanctions on Zimbabwe. The causes of the country’s economic meltdown emanate from the country’s pariah status resulting from this government’s political illegitimacy, massive corruption, gross macroeconomic mismanagement and political intransigence. Solutions will be found in the restoration of political legitimacy, normalization of relations with the international community and the restoration of the rule of law and property rights. Only then, can the country realistically hope to attract any meaningful foreign direct investment.

Question: The country’s inflation rate is soaring above 1,000 percent, one of the highest rates in the world. Can you boldly assure the country that such high inflation levels will subside and when this can be expected?

Gumbo’s response: I cannot predict and project when it (inflation) will come down. But it is hoped that it will go down during the last quarter of this year, depending on the performance of the economy. I agree that inflation is high and is wreaking havoc in the economy. However, one should note that we do not have lines of credit and balance of payments support. Anticipated and existing investments that have been in productive areas as well as progress in different sectors are, however, expected to affect the rate of inflation.

MDC’s response: Clearly, the Sunday Mail journalist is not aware of the fact that Zimbabwe’s inflation rate is the highest (not one of the highest) in the world. In addition, given serious doubts surrounding the integrity of the data used by the Central Statistical Office to compute movements in the consumer price index, the true rate of inflation is likely to be somewhere between 1,500% and 1,800%.
The minister’s response does not contain any new information; we have heard all this before, and Zimbabweans are tired of false predictions and promises about false economic turnaround programmes. Of course, the Minster is correct in saying that the country does “… not have lines of credit and balance of payments support”. However, he should be reminded that the main reason for this is his own government’s policies that have brought about the pariah status that the country has. As a result, no bilateral or multilateral organization will want to deal with a ‘rogue’ state. Until such time as political legitimacy is restored, international relations normalized, the country will remain isolated, and there will be no foreign direct investment. Without investments, the supply side of the economy will continue to shrink thereby impacting negatively on all other economic fundamentals. This is the cause of the economic meltdown and not inflation; the latter is a symptom

Question: For several seasons, planning for the summer cropping season has not been up to scratch and this, apart from drought, has resulted in the country producing low yields. What measures are you taking under the NEDPP to ensure the requisite resources are mobilized in time for future seasons, starting with this year?

Gumbo’s response: That is correct, while droughts have affected us, our planning has not been perfect either. We are still battling to get agricultural planning up to scratch. There have been fuel and input shortages and this has yielded negative results.
The reason for the unavailability of inputs has largely been the lack of foreign currency, brought about by sanctions and drought.
But we can assure you that plans are in store for next season. Committees are presently meeting under the auspices of the NEDPP to discuss that. Once research and analyses are completed, the Minister of Agriculture will state Government’s position.

MDC’s response: Droughts have had little or no effect on food insecurity in recent years in this country. The destruction of commercial agriculture has largely been responsible. The ‘parceling out’ of most of the country’s arable land to ZANU(PF) cronies and to peasant farmers without the necessary capital to make extensive use of the available land, significantly contributed to food shortages. At the same time, massive corruption involving agricultural inputs (fuel, fertilizer etc) and large subsidies to peasant farmers (most of which came through the RBZ’s quasi-fiscal activities), significantly contributed to hyperinflation without any positive contribution to food stocks.
As already pointed out, foreign currency shortages are caused by severe supply side constrains that in turn, emanate from gross economic mismanagement and corruption.

Question: Different quarters continue to express skepticism over the proposed indigenisation of the mining sector. What measures are in place to ensure optimum production and investment?

Gumbo’s response: In terms of indingenisation, we do have local skills. Most of the people running mines are blacks, only they are not shareholders. A visit to various mines will reveal that management comprises indigenous Zimbabweans. Training will, therefore, be facilitated through one of our committees which deals with human resources.

MDC’s response: If most of the management on the mines comprises blacks, why is there a need for training? With respect to indigenisation, surely current government plans will only scare away investors -if ever any were forthcoming in this politically and economically hostile environment. In any case, does the recent ZIMPLATS deal not involve un-delineated resources that will require exploration capital to establish minable reserves?
It is important to note that the success of any business enterprise is based not only on training, but also on the availability of capital, appropriate technology and access to viable markets (domestic and exports). Given the present hostile political and economic environment in the country, chances of attracting the required investments are non-existent. – Mfandaidza Hove is the MDC Secretary for Finance & Economic Affairs.

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