Mugabe’s policies spell meltdown: analysts

President Robert Mugabe’s economic policies as reflected in the Zanu (PF) manifesto are likely to offset an economic meltdown, analysts say.

Mugabe vowed to go ahead with his party’s indigenisation policy and increase civil servants and war veterans’ salaries and allowances against a lowly performing economy.

The 5.3 percent salary increase for government employees would result in 71 percent of the national budget going to salaries, leaving hardly anything for capital investment, the analysts have said.

Economists who participated at a recent panel discussion at a Policy Dialogue Forum in Harare under the theme ‘Zimbabwe: After the Election, Whither the Economy’, expressed fears that the adopted Zanu (PF) economic policies might reverse gains achieved by the GNU.

The GNU with MDC-T Tendai Biti as Minister of Finance reduced the annual inflation rate from the official 1, 200 percent to five percent. The Gross Domestic Product hovering at minus 14 percent then was improved to 3,4 percent.

Economist Daniel Ndlela, who is the Zimbabwe Resident Adviser with USAID Strategic Economic Research and Analysis, said: “Investment comes from the investor community, not the government. Unfortunately, investors are scared of Zanu (PF) business policies”.

Ndlela said the investment to GDP ratio continued to be low and the economy was fast sliding into de-industrialisation.

The incoming Zanu (PF) government was advised to maintain outgoing Minister of Finance Tendai Biti’s policies, until the new budget is formulated in November.

Conflicted policies

Economist, Ashok Chakravarti, said Zanu (PF)’s policies were in conflict with each other and the new government needed bold policies in order to steer Zimbabwe out of its economic quagmire.

According to Chakravarti, the policies should include an immediate land audit, provision of security of tenure to farmers, government assistance to small holder farmers and incentives for farmers to increase production in non-cash crops.

The mining sector needs huge investment through investors’ tax holiday, transparency and flexibility in the indigenisation programme.

“The indigenisation policy should be reviewed to become realistic and flexible, so that relevant laws are compatible with respective economic sectors,” said Chakravarti.

He said investors would be attracted by the current 51 percent local ownership in foreign-owned companies.

The government was advised to lessen its financial burden through the privatization of parastatals under the indigenisation policy, if Zanu (PF) was serious about empowering locals.

Trim govt departments

There were suggestions that irrelevant government institutions be trimmed to cut down on fiscal expenditure. The new legislative arm of the state and the usual huge cabinet will further eat away at the dwindling revenue base.

Analysts said diamond revenue would be the main source of funds available to bail Zanu (PF) out of an impending economic dilemma. Further increases in tax were ruled out since Zimbabwe already had the highest tax rate in the region.

The recent salary increase by President Mugabe was described as a political gimmick to buy support and legitimacy, despite being aware that government had no money.

Fragile recovery

Another economic analyst, Eddie Cross, described the Zimbabwe economic recovery process outside GNU as fragile.

Cross said local supermarkets were filled with exported goods, companies were surviving on foreign credit lines, the mining sector was in decline and the agricultural sector was in trouble due to lack of expertise and capital injection.

Cross said full implementation of the Zanu (PF) manifesto, would be the straw that would break the back of an ailing economy.

Corruption among Zanu (PF) officials was one of the challenges Cross said should be tackled head on, if Mugabe wanted to win the battle of resuscitating the economy.

Not very productive

Another economist, Godfrey Kanyenze, blamed Zanu (PF) policies for transferring resources from high productivity sectors in the formal industry to the low productivity informal sector. Kanyenze said the trend would worsen poverty among the majority of people living below the poverty datum line.

He said the incoming Zanu (PF) government faced the challenge of addressing issues such as an acute shortage of water, power outages and high borrowing rates. There were suggestions that the government should revive the manufacturing sector in order to create employment.

“Zanu (PF) must revisit its indigenisation policy and attract investment into the economy, so that they (investors) get linked to the empowerment programmes,” said Kanyenze.

The government was advised not to tamper with the ownership of foreign-owned banks, since local financial institutions were not innovative.

Community Share Ownership Trusts preferred by Zanu (PF) were described as a recipe for poverty, since beneficiaries sold shares during hard economic times. Kanyenze said some Zimbabwe policies were not developmental. He cited the recent scrapping of water bills as a move likely to shrink the national revenue base.

As possible solutions to the ailing economy, economists suggested the government should be transparent in its management of state institutions, tap investor confidence and implement the IMF staff monitoring policy as suggested.

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