Zimbabwe, Mixed Messages and Missed Opportunities.

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This is a series of observations of the performance of President Mnangagwa and his administration so far in certain. Also included are recommendations for how government can improve it’s performance and civil society can pressure them to do so. Though extensive, this is by no means an exhaustive account of the state of Zimbabwe and much will continue to be written about the ascendency of President Mnangagwa, his performance and that of his administration. This is important as it gives us opportunity to discuss, be better informed and hold the executive to account when we get the opportunity to.

The President is gone. Long live the President.

In September 2008, following a drawn out, bloody and acrimonious general election, SADC chairperson and chief mediator in the Zimbabwe crisis announced to the world the conclusion of a Global Political Agreement, GPA, which saw the immediate formation of what became known as the Government of National Unity, GNU. The GNU saw then President Mugabe retain his post but also the appointment of Morgan Tsvangirai as Prime Minister along with members of the opposition to key cabinet positions, most notably finance and industry & trade. The ushering in of the GNU saw immediate positive changes in the lives of Zimbabweans, inflation was brought under control, prices plummeted, goods reappeared on supermarket shelves, fuel was plentiful and people were able to access cash from their bank accounts without hinderance. 2009 saw the first positive GDP growth in many years, what was key to it was the buy-in of everybody involved. From politics, to business, to NGOs, to the international community and ordinary Zimbabweans, everybody was aware of what exactly was happening and why. Unfortunately the recovery was short-lived for reasons I will not go into here, had it not been, Zimbabwe may not be where it finds itself today, fast forward to November 2017.

Despite the fact that Zimbabwe was in the midst of the worst economic turmoil since 2008, in some aspects the worst in history, nobody predicted the events of November 2017. In a matter of days President Mugabe resigned after 37 years power and Emmerson Mnangagwa became the new president. Shortly following his ascendency President Mnangagwa declared “Zimbabwe is now open for business” which quickly became his government’s mantra. It was catchy, punchy and quotable so despite questions about what the mantra actually meant, general consensus in the country and beyond was to give this new administration the benefit of the doubt. Unfortunately time and circumstances have not been so kind over the last few months and whilst this administration has made some progress, it has often times been caught flat-footed as will be shown below.

Old brooms with older tricks on broken telephones.

From the start, the Mnangagwa administration, made up almost exclusively of people who had served under Mugabe for much of his 37 year rule, appeared to be caught between the way they were used to running the country and the demands of their new principal. Vice President Kembo Mohadi is on record saying that under former President Mugabe ministers hardly came to work choosing to spend most of their time on their farms but now things are different. As government expends much energy on restoring the image of Zimbabwe through various rebranding efforts and separating itself from the Mugabe era, much of it’s messaging has been focused around the president himself and the Office of the President and Cabinet, OPC.

There is more than a hint of centralisation of power and decision making around the president in this administration, something Mugabe was routinely accused of despite having a bloated cabinet and civil service.

There is more than a hint of centralisation of power and decision making around the president in this administration, something Mugabe was routinely accused of despite having a bloated cabinet and civil service. Under Mnangagwa there have been instances where certain functions that should be the purview of specific ministries being usurped by the OPC on the pretext of multi-stakeholder coordination. The OPC does not have a good history, having been used by then president Mugabe to monitor just about every facet of Zimbabwean life so it is entirely understandable that any moves towards this by President Mnangagwa would be cause for concern.

Key institutions that should be disseminating important information on recovery efforts have websites that have barely been updated since Robert Mugabe was president, if at all, including the Ministry of Finance, Ministry of Health, Infrastructure Development Bank of Zimbabwe and the Zimbabwe Investment Authority. There is also the duplication of functions with various agencies that report to different principals working sometimes at cross purposes or doing the exact same job. This simultaneous vacuum and proliferation of information makes it difficult to track progress on policy reform and hampers efforts to communicate with key stakeholders across the various functions of state. One has to constantly scour the media for policy announcements and even when these stories are published, it is still a task to get accurate information from those responsible for policy implementation, some department heads do not even have work email addresses.

The lack of communication also leads to instances of contradiction in policy positions as one agency of government does not know what the other is doing, at best this is just embarrassing, at worst it results in the misallocation of scarce resources, failures in service delivery and lost investment. At a recent investment conference in Bulawayo one presentations hailed the airport as a key investment driver that showed how the city is open for business only to be immediately followed by another which highlighted how the same airport is in dire need of investment and is barely fit for purpose. It cannot be overstated that this is a government in dire need of a transparent, accessible and responsive communications strategy.

Where there is policy ambiguity, inefficiency and corruption follow.

Local media coverage, both state and private, of this administration has quickly fallen back on old habits, notably, focusing on the president and the rest of government as secondary. Despite initial noises about no longer doing business as usual, cabinet has fallen back into old habits and in many cases is doing just that. To get anything of significance done in Zimbabwe still requires buy-in, read permission, from the political appointee in charge, in most cases the minister. This often unnecessary layer of red tape allows them the opportunity to claim this as their achievement giving them undue authority and influence over business activity whilst gaining political milage. In the past this was a significant impediment to investment in Zimbabwe as reported by various investors as ministers and officials reportedly demanded bribes. Already there are rumours of individuals selling access to the President and claiming, for the right price, to be able o get his approval on investments, time will tell if this is indeed the case and if so, government’s response will be most telling.

It is imperative for government to employ and empower professional staff to manage investment processes taking this away from politicians, including the president except in matters of national interest. Ministers also need to be empowered to speedily develop and lobby the passing of policy that responds to the country’s recovery needs followed by ensuring it’s implementation. This, rather than speeches, trips and ribbon cuttings, should be their focus.

What could have been a significant win for this administration if properly executed has become an embarrassment and the only winners are going to be the lawyers engaged to sue or defend them.

As mentioned earlier, the focus on the president and the OPC has to an extent disempowered some ministries in the name of expediency and multi-stakeholder coordination. Such is the case with the handling of the externalisation list. From the start the presidency, in partnership with the reserve bank, led the call for the repatriation of funds illicitly exported from Zimbabwe within ninety days. The entire process was, for reasons best known to them, exclusively handled by the RBZ and the OPC resulting in a list that has disappointed many  and been panned across the country and beyond likely opening up government to litigation and with no clear indication as to what happens from here. What could have been a significant win for this administration had it been properly executed has become an embarrassment and the only winners are going to be the lawyers engaged to sue or defend them.

This desire by the presidency to be seen to be active will likely, if it hasn’t already, cause conflict with line ministries as it looks a lot like interference. As early as mid-December 2017 some ministers were reported to be struggling with the demands of their offices. The OPC should ideally be focused on developing and monitoring implementation of an over-arching national recovery strategy that will inform policy and coordinate interaction between ministries without getting into the daily minutia of operationalising this strategy.

Dollars over sense?

In Zimbabwe’s push for investment there have been both overt and covert efforts to change, remove or ignore regulations that have in the past been viewed as a hindrance to business. An overt example is the Indigenisation Bill which from April 2018 will no longer restrict foreign investors from owning more than 49% of a business in almost every economic sector except for platinum and diamonds. This, according to ZIA, has opened Zimbabwe up to a slew of investment enquiries some of which are reportedly at advanced stages of preparation for commencement. However, as unpopular as it was with business, the indigenisation bill served to ensure local ownership and participation in the economy, just like in other countries with similar laws, but it was badly written and applied. Without this protection, what will be the long term effects on local business of unfettered foreign investment?

Mining has been touted as the key to a quick turnaround in Zimbabwe and since November, President Mnangagwa and Mines Minister Winston Chitando, a mining professional, have shown themselves to be extremely pro-business. Since December barely a fortnight has gone by without the announcement of some new “investment commitment” in this sector. However, mining is not just about the businesses and investors, it affects communities, the environment, national economic planning and future resource allocation. To fully take these intersections into account requires inter-ministerial cooperation and coordination but due to the communication limitations highlighted earlier, it is unclear if this is happening or even if there are at least plans to do so.

Throughout all of this the Environmental Management Agency, EMA, has been conspicuously silent which is odd for an agency that is mandated to ensure sustainable resource management, prevention of pollution and environmental degradation, the last two being direct consequences of mining and manufacturing. EMA falls under the Ministry of Environment, Water and Climate headed by Oppah Muchinguri who has most prominently been in the news for investigating ivory smuggling, EMA and the ministry’s role in regulating Zimbabwe’s economic recovery have not gotten much attention. There is a possible reason for this, EMA’s more stringent regulations are seen by the new administration as a hinderance to investment.

Talk to artisanal gold miners in and around Bulawayo and you get a sense of this covert business-friendly relaxation, possibly suspension, of regulations. They will tell you they no longer see EMA inspectors or police doing routine visits to their operations, word is both EMA and ZRP have been told to lay off because artisanal miners now account for more than half of Zimbabwe’s gold output. Under Mugabe the police became a bane upon the lives of all Zimbabweans, at the centre of corruption, bribery and human rights abuses but since the “coup that was not a coup” they have gotten a new commissioner and have drastically scaled back their visibility. You can drive around Bulawayo and Harare CBDs for literally days without seeing a single traffic cop.

What will be the cost to the country of this relaxation of regulations? .

A deafening fiscal silence.

In his budget speech last November, Finance and Economic Planning Minister Patrick Chinamasa announced a number of interventions to reduce government expenditure, reduce debt reliance and increase state revenue whilst creating a more functional economic environment for all Zimbabweans. Jump to March and the minister has barely been seen in public leaving most major announcements to the presidency. This does not mean he has not been busy, quite the opposite, however, not exactly busy keeping his budget speech commitments.

For a country with $11,6 billion of public debt as at June 2017, this type of apparent fiscal profligacy is greatly concerning and there is little evidence that this has slowed down.

In January it was announced that the government would seek to pass the Zisco Debt Assumption Bill, currently going through public hearings, which will see treasury taking over $380 million in Ziscosteel debt so the company is more attractive to potential investors. This year treasury also assumed an NRZ debt of $348 million, in 2015 treasury also assumed debts of Air Zimbabwe of $300 million and the Reserve Bank for $1,35 billion.The state broadcaster ZBC has debts of $66 million it has failed to pay and recently the CEO suggested that government take this over through a debt assumption bill. For a country with $11,6 billion of public debt as at June 2017, this type of apparent fiscal profligacy is greatly concerning and there is little evidence that this has slowed down. The finance minister’s silence on the implementation of austerity measures and the reduction of public debt does not inspire confidence and is a red flag for any potential investor with a long term investment horizon.

Another promise made by Mnangagwa is to compensate white farmers who lost their farms during the land reform process. Depending on who you speak to, this compensation amounts to anywhere between five and thirty billion dollars, with government and the farmers at opposite ends of the spectrum. As a show of goodwill some white farmers have been restored to their farms whilst negotiations continue to get more of them to return. Considering Zimbabwe’s already massive debt burden it is anybody’s guess when and how these farmers will be compensated. Judging by past performance, treasury is likely to at some stage finance compensation through the issuing of treasury bills or agricultural bonds. In both cases this will just be kicking the can down the road until these bills, bonds or any other debt instruments must ultimately be honoured.

The optimist may want to assume that Chinamasa is quietly busy engaging with global institutions on resolving these issues and other fiscal matters but the realist will wonder why, knowing the urgency of the situation, the government has not been able to secure the necessary support to resolve the debt crisis by now.

Chinamasa’s promise to cut government’s wage bill in his November budget announcement was not unexpected and since then there have been some, though not significant, cuts. Whilst civil servants have said they understand the pressure government is under their patience has worn thin resulting in teachers, nurses and junior doctors demanding wage and allowance increases with the latter two currently on strike. It is an unenviable task to balance these demands with limited resources whilst dealing with other pressing commitments however, government would do well to be more proactive in their response. It is surprising that after weeks of being on strike the president is yet to engage junior doctors directly.

Quick wins lost, the achievements that should have been.

President Mnangawa set a deadline of 100 days from his inauguration to effect significant change, an offer that quickly came to haunt his administration when at the end of it questions were asked about what really had been achieved. Over the 100 days much was said and much was promised creating a great sense of anticipation which, depending on who you talk to, amounted to very little or was earth shattering progress as never seen before in Zimbabwe. This contrast of views is due in no small part to government’s failure to control the narrative, there is a lack of coordination in government’s messaging and often the situation on the ground has not been what officials intend or would have us believe.

One can be forgiven for having flashbacks to the era of mega-deals, when many of the same people, under President Mugabe, promised the country they were at various stages of negotiating billions in investment from China that never materialised.

After his first 100 Days Mnangagwa released a short video and penned an op-ed piece in the New York Times highlighting his and government’s achievements, unfortunately, it does not take much to show these claims to not be as grand as they are made out to be. One claim that is especially striking is that of “$3 Billion in investment commitments”, this has been repeated ad nauseam by government and state media with no interrogation. There has been little indication as to when these “investment commitments” will transform into actual money, assets or infrastructure being transferred to Zimbabwe and jobs created. One can be forgiven for having flashbacks to the era of mega-deals, when many of the same people, under President Mugabe, promised the country they were at various stages of negotiating billions in investment from China that never materialised. As with the mega-deals then, specific details of the various investment commitments now are hard to come by as the process is shrouded in secrecy.

Earlier this month Sivio Institute released their “The 100 Day Report on the New Government – A Citizen’s Perspective” which has, amongst other things, tracked government’s promises and actions over the first hundred days providing the first independent analysis of it’s kind. Government, despite assurances from various ministries, is yet to provide anything more than soundbites regarding their first hundred days. Instead, promises are already being made for the next hundred and two hundred days.

The problem with Zimbabwe is that the government is focused on marketing what they want to show to the world and the investment community in particular, without taking the time to understand what the world and investment community actually want to see from Zimbabwe. So whilst the Mnangagwa administration focuses on wooing foreign direct investment, FDI, potential international partners are looking to the government’s commitment to good governance, standards of best practice in local business and respect for the rule of law. It comes off as disingenuous to be telling the world that “Zimbabwe is now open for business” yet the vast majority of local businesses are struggling and blame government for many of their problems.

A president who promised to focus on the economy has after more than 100 days, failed to solve the cash crisis and eradicate bank queues but instead celebrates the forced use of plastic money as an achievement.

It is notable that a president who:

  • came in with a promise of “jobs, jobs, jobs” has not given an indication of how many have been created during the life of his administration;
  •  promised to focus on the economy has after more than 100 days, failed to solve the cash crisis and eradicate bank queues but instead celebrates the forced use of plastic money as an achievement;
  • came in promising to uphold freedoms has and done nothing to amend legislation like AIPPA, BSA and POSA that restrict the rights of Zimbabweans to freely access information, congregate and speak in direct conflict with the new constitution. Whilst there is definitely a greater sense of freedom of speech today than possibly any other time in Zimbabwe, these oppressive laws remain and celebrating the national broadcaster covering the rallies of opposition politicians is setting the bar extremely low;
  • has repeatedly invited the international community to come and observe the elections is yet to give a date for said elections and insists the country can’t afford a diaspora vote;
  • has consistently said “the voice of the people is the voice of God” is seemingly deaf to the salary and allowance demands of teachers, nurses and doctors with the latter’s strike now entering it’s fourth week.

These are but a few of the challenges that the Mnangagwa administration were previously party to creating and had the opportunity to correct in their first hundred days but did not. It is unclear why the administration has failed to adequately address any of these issues, what is clear is that these issues are not their area of focus. Instead, the focus is on good news about the president and his cabinet as they fall over each other to officiate at the next factory opening, the next business conference or any international platform that will host them to tell the world that Zimbabwe is open for business.

Fact is, there is nothing that Zimbabwe has which cannot be found elsewhere in the world and this is not the only country to declare itself open for business. At the World Economic Forum in Davos earlier this year attended by President Mnangagwa, the leaders of South Africa and the United States used the exact same phrase to describe their countries. This is the nature of the global competition for investment. How then does Zimbabwe expect to get investor attention ahead of these global and continental heavyweights?

The only thing that this administration has going for it is it’s credibility and it has expended a great deal of this since November. With so many challenges that can go horribly wrong Mnangagwa and his administration have very little room for any more mistakes. If, for example, the much touted investment commitments do not turn into tangible results within a reasonable period, read before elections, there will not be enough promotional videos, conferences and op-ed pieces in the world to restore the administration’s lost credibility. All is not lost though, government can still turn this around by effecting the legal, political, social and economic reforms they are well aware off which will see immediate positive changes for all Zimbabweans rather than focusing almost exclusively on attracting FDI. Like charity, investment begins at home, fix your domestic environment and they will come.

Based in Johannesburg South Africa, Ricky Marima is a recovering economist and twenty year veteran of building businesses across a variety of industries. He currently works at knowledge startup RemNes where he guides clients across the continent to ask the right questions about the 4th Industrial Revolution. You can reach him on ricky@remnes.com

 

Old Brooms For Old Corners.

This morning I, along with everyone else who is not a member of Team #NoSleep, woke up to the news that President Mnangagwa had announced his 22 member cabinet late last night. It seems some were ready with analysis and opinion pieces literally the moment the press statement was released, something I find quite odd seeing as most of these ministers have not even had a chance to put bums to seats let alone outline policy. Some have even complained that this has taken “agonisingly long”, as if the President was sworn in barely a week ago and has had a lot on his plate. Many have complained about the retention of many familiar faces that have been implicated in corruption in the past and at best have shown lack-lustre performance in their decades in cabinet. I too look at their retention with trepidation but I believe, as I will try to outline below with a focus on economics, that context is key. I will leave the implications of installing military men in cabinet to others more qualified.

The ghosts of still-born mega-deals.

When Chris Mutsvangwa was still ambassador to China he led the effort to secure deals with that country which, whilst great for the Chinese, did not yield the desired results for Zimbabwe due to various reasons, chief amongst them ZANU PF infighting for a slice of the action going back to at least as early as 2005. Following the 2013 elections much was made of mega-deals with China that would ensure Zimbabwe’s recovery and the success of ZANU PF’s economic blueprint ZimAsset, to date it is unclear what exactly these mega-deals were or are. None of this came to pass as four years later the country is in a far worse economic condition to the point the army even noted this as one of the reasons for their coup that wasn’t a coup. Again, it is still a mystery as to why the mega-deals never materialised however I have it on good authority that ZANU PF and in effect, presidential, succession was a nagging issue for the Chinese who wanted assurance of continuity after Mugabe. As we all know now, Mugabe’s idea of succession was not that popular outside of Blue Roof.

Another mega-deal that seemed to mysteriously go up in smoke was the 2015 multi-billion dollar Dangote investment in power generation and cement manufacturing. After a flurry of activity reportedly under the personal watch of then VP Mnangagwa himself, Zimbabwe’s government went to all lengths to facilitate the consummation of the deal only to be tripped up by political risk concerns. This deal, like those with the Chinese have been on ice for years now, could the change in government be what breaks the impasse? Granted much has happened around the world as China and Dangote have turned their attention to other markets but a repackaging of these deals by Chinamasa, Bimha, Mutsvangwa and a willing President Mnangagwa could see them back on track and finally spur into life Zimbabwe’s recovery.

The Lima Plan.

In 2015 Finance minister Patrick Chinamasa was on an outreach mission to reengage international lenders who had long abandoned Zimbabwe for failure to repay debts. This culminated in a trip to Lima Peru where he presented an ambitious plan to repay all debts to the International Monetary Fund, World Bank and African Development bank simultaneously by end April 2016. As has become the norm, Zimbabwe missed this deadline and was therefore unable to access further lending despite government’s claim of a billion dollar lifeline from global commodities firm Trafigura to pay the World Bank that never materialised. With Zimbabwe enjoying a now enjoying renewed attention from global lenders and development partners, could there be a resuscitation of the Lima Plan in the short term and a restoration of credit lines within the next six to eight months? The first test will be the visit by the IMF to Harare next week.

Out with the Populists in with the Reformers.

Former President Mugabe never really enjoyed a good relationship with his finance ministers particularly from the start of the current economic crisis in the late 1990s namely, Herbert Murerwa, Simba Makoni, Christopher Kuruneri and Patrick Chinamasa. The more they advised caution, the worse the relationship, Mugabe famously said to Herbert Murerwa in 2006:

“We are under sanctions and there is no room for the type of bookish economics we have at the Ministry of Finance,” 

Patrick Chinamasa, despite his many mistakes in an effort to please a demanding and diametrically opposed boss, is nothing if not a reformer. He has consistently called for fiscal restraint but only to be rebuffed on occasions too numerous to mention culminating in his recent short-lived move to the now defunct Ministry of Cyber Security.  President Mnangagwa too shows all the signs of being a reformer and in the short term this combination could yield spectacular results for Zimbabwe if Chinamasa is given the independence to carry out the much needed reforms he is all too aware of. It will be interesting to see how his reformist agenda is received by the rest of government. Another man who was brought in as a reformer but had no choice but to tow the Mugabe line is Reserve Bank of Zimbabwe governor John Mangudya. He is now the man tasked with facilitating the return of stolen money under the ninety day exemption and overseeing the recovery of the financial sector and with Chinamasa, dealing with international financial institutions.

Policies, policies everywhere but not a sign of implementation.

It is no secret Zimbabwe is “blessed” with policy crafters but what has been sorely lacking is implementation. If President Mnangagwa is to be believed, his administration will focus on correcting this. It would not be surprising at all if the new administration, rather than start from scratch,  simply dust off the some old policies, update them and get to work implementing. It would save a lot of time, labour and money, especially on critical economic and legal reforms that have been pending for years. So whilst many have criticised this cabinet for being full of the same old faces, I am inclined to believe there is a valid reason for this. These same old faces will not need to start from scratch, they are already aware of what needs to be done, who needs to do it and how. What has lacked in the past is a reason for implementation and this is no longer the case, government has no choice but to fix the economy and to do so urgently. If one wants to take a more macabre view, even those who have been eating know they can only eat from a functioning economy. There is much work to be done and whilst a rising tide lifts all ships, cautious optimism remains the default position at this stage.

 

Based in Johannesburg South Africa, Ricky Marima is a recovering economist and twenty year veteran of building businesses across a variety of industries. He currently works at knowledge startup RemNes where he guides clients across the continent to ask the right questions about the 4th Industrial Revolution. You can reach him on ricky@remnes.com

 

NO VACANCY HERE! A National Moto. (Part 2)

In my previous post I looked at how corporate Zimbabwe has consistently replicated certain traits of the government and political parties. I initially meant for this to be a follow-up outlining how those negative traits have impacted the economy and how they can be corrected, however, this idea was overtaken by events. Over the last three weeks I have worked and reworked the article as one event after another changed Zimbabwe’s trajectory leading me to widen the scope of this post. Now that the political dust seems to have settled, albeit temporarily, the time has come to look at the economy and particularly the private sector’s role in it’s recovery.

Zimbabwe’s Real Economic Dependency Ratio.

A country’s dependency ratio is defined as the ratio of economically active workers compared to inactive. In Zimbabwe one has to take into consideration the fact that the unemployment rate has been stubbornly above 90% for years and despite government’s best attempts to rework the numbers, the truth of a failing economy is impossible to hide. Recently I was told about middle management staff at a certain bank, most of them have been there for a number of years and enjoy numerous benefits including access to hard currency and school fees being paid for by the employer. These people are getting on in years but have no intention of leaving their positions to make space for new blood because of the fear of unemployment. This means there is no chance for upward mobility for those lower down the totem pole, and no chance of entry for those applying for jobs at that same bank. Now extrapolate this to the entire economy and you start to get a sense of the difficulties in reducing the country’s stubbornly high unemployment rate.

As we all wait for the announcement of President Mnangagwa’s cabinet, something I expected to have happened within hours of his swearing in, and government’s economic recovery framework, we have to consider some of the potential landmines that can scupper Zimbabwe’s recovery.

A multi-generational time bomb.

I come from a generation that started their adult life with much promise in the mid-nineties and went through the trauma of watching those opportunities wither and die over the last twenty years. In that period, many Zimbabweans who cam of age have been unable to get jobs and those who did, the vast majority were not able to hold onto them. This has led to two failed generations of Zimbabweans with little to no experience who have been forced to make a living in any way they can yet yearn for the security of a regular pay cheque. We now find ourselves looking at potentially a third failed generation if there isn’t a radical transformation of the economy. Assuming that government and business are able to quickly craft and immediately implement policies that see rapid job creation, how will they deal with three generations all simultaneously seeking employment? These jobs will need to be sustainable and contribute to economic recovery, rather than just be window-dressing.

Government’s wage bill conundrum.

Zimbabwe’s public service has long been plagued by ghost workers, an inefficient and bloated workforce, and a hugely excessive wage bill accounting for over 86% of overheads in January 2017. As finance minister, Patrick Chinamasa tried repeatedly to reduce this wage bill but was blocked by then President Mugabe for purely populist reasons. For any economic recovery strategy to be taken seriously, it will need to include not only drastic cuts in the government wage bill, but also a plan for where these people will go to avoid worsening an already terrible unemployment crisis. Government even went as far as changing the legislation to avoid hefty severance packages. This however, may no longer be possible and if government sought to retrench employees to reduce the wage bill, they would likely have to borrow to fund the process which is something that would bring it’s own challenges considering government’s current inability to borrow internationally and illiquidity of the local market. With an unenviably long list of development priorities it will be interesting to see how government handles this.

The diaspora factor.

Much has been said over the years about Zimbabwe and her relationship with her diaspora, you can find my thoughts here, however, this segment of the population is going to be key to the country’s economic recovery. This will require specific policies to attract this resource back to the country even if it is at risk of a local backlash from those who have toughed it out through the worst of the economic decline. The risk of backlash can be mitigated if policies are designed in such a way as to attract diaspora resources without affording undue benefit, as was done in the past by the Reserve Bank of Zimbabwe (RBZ) under then governor Gideon Gono.

In the past the RBZ’s only way of engaging the diaspora has been through encouraging remittances, this money has almost exclusively gone towards consumptive expenditure. Past efforts to encourage corporate investment have fallen flat due to a well founded lack of trust in the government, despite the positive wave the new administration is riding on, it will take some work to turn this goodwill into investment.

What the future holds.

Some have expressed disappointment that Zimbabwe missed an opportunity for a new democratic dispensation, this view does not take into account the country’s history. Since it’s inception as a nation Zimbabwe has never known the type democratic dispensation that they imagine and this was never going to happen with the cast of characters behind this latest change of the guard. To be frank, Zimbabwe is a quasi-authoritarian state with a strong military influence on governance. Looking at the continent this may actually not be a bad thing for the economy when one considers that Africa’s fastest growing economies are similarly structured, Rwanda, Ethiopia and Egypt, which recently overtook South Africa as Africa’s largest receiver of foreign direct investment (FDI), all fall into the quasi-authoritarian mould. Rwanda’s Paul Kagame who regularly wins elections with more than 90% of the vote has been referred to as a benevolent dictator. Maybe the question Zimbabwe needs to face is, how much democratic space are we willing to give up for economic recovery and subsequently growth? Going by the events of the last two weeks this question may already have been answered for us.

Whilst I do not trust politicians, I do have utmost faith in their instincts of self-preservation and this new administration in the making has shown unique tenacity in coming back from the political brink to force the resignation of Robert Mugabe. If this is anything to go by, the easiest way for them to hold onto power is to facilitate an economic recovery.  The new government has it all to do and is currently riding on a wave of national euphoria that it still has not fully taken advantage of. Everything hinges on the cabinet announcement and policy direction, the sooner that happens the better. It is notable that the British government have been the first to unequivocally pledge their support for Zimbabwe’s economic recovery and their minister for Africa, Rory Stewart, was on the ground as soon as former President Mugabe resigned. Despite some initial misgivings about the British being the first to show up, I believe anyone stepping up to help Zimbabwe at this point should at least be considered, the country has a long  recovery and the sooner this journey begins, the better.

NO VACANCY HERE! A National Moto. (Part 1)

 

“Like Saturn, the Revolution devours its children.” Jacques Mallet Du Pan 1793 

It has long been known that Zimbabwe’s politicians regardless of party affiliation, are not given to discussions about succession, whilst simultaneously talking about the importance of the country’s youth. The ruling elite continues to introduce laws and measures that not only seek to ensure their privileged status but extend it at the expense of the general population. However, this resistance to succession is not unique to politics.

No Country For Young Folk.

Zimbabwe is a classic case of a country led by people who are stuck on the fact that they liberated the country but at the same time do not recognize that the country is indeed liberated and events of the last twenty years have not helped. To this end, they stay in power purportedly to protect the liberation they ushered in, never letting you forget it. In this spirit of liberation the late eighties and early nineties saw the emergence of a black male business elite buoyed by favorable government policies and generous loans. Whilst there are a number of admirable businessmen who emerged, the not so admirable were never far behind, along with corrupt and corruptible government officials. In 1990 these self-proclaimed economic liberators formed the Indigenous Business Development Centre to “secure” said liberation. Barely four years later the Affirmative Action Group, AAG, was formed in response to the perceived slow pace of progress in IBDC. In reality, it was a collection of the more radical and flamboyant elements in black business who wanted their own platform from which to shine, personified best in the character of one of the founding members, Philip Chiyangwa.  He remains a loud voice in AAG despite no longer being it’s president.

In this spirit of liberation the late eighties and early nineties saw the emergence of a black male business elite buoyed by favorable government policies and generous loans.

One trait in corporate Zimbabwe that emerged in this era and continues today, is a reluctance to let go. Granted, founders and experienced managers have a lot to contribute but you will be hard-pressed to find a Zimbabwean board, public or private that has ever actively groomed new talent and rotated members out at the end of their terms. This is something that was symptomatic before the economic collapse beginning in the late nineties and has only become more entrenched since.

In banking we trusted.

The early nineties saw Zimbabwe welcome a number of black-owned financial services firms most notably banks and insurance companies either newly established or through acquisition of interest in existing businesses.  Jump to late 2003 and the country was gripped by a banking crisis which, if the Reserve Bank is to be believed, was engineered by these very founders. Despite this many of the founders continued to head their institutions, even if it meant attempting to do so from outside the country after evading arrest. Others survived or defied board attempts to remove them or get them to relinquish their shares eventually leaving on their own terms. Some, like William Nyemba of Trust Bank and Mthuli Ncube of Barbican Bank were not so lucky, they had their banks seized and closed respectively by the Reserve Bank. James Mushore who co-founded NMBZ in 1993 fled the country to avoid imminent arrest in 2004 to only return six years later and later left the bank in 2014. In 2015 he joined the board of Meikles Africa in 2015, they have an interesting way of explaining his time away from 2004 to 2010.

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Who’s company is it anyway?

This resistance to succession is so entrenched in Zimbabwe you will find it in just about any sector. John Moxon, Executive Chairman of Meikles is embroiled in a years long battle to topple him having joined in 1970 and been on various Meikles boards since 1980. Anthony Mandiwanza has been Group Chief Executive at Dairibord for almost 20 years and joined the company in 1980, oddly enough none of this information is on the Dairibord site. Retired Justice Leslie Smith has been Chairman of the National Blood Service Zimbabwe, NBSZ, since 1977.  Michael Fowler and Zed Koudounaris are a founding shareholders of Innscor and have featured on the board in various roles, they are currently non-executive directors.

Drill down to management in corporate Zimbabwe and you will likely find this resistance is rife. With limited opportunities for upward mobility and the dire consequences of unemployment in a failing economy, people will do all they can to hold onto their positions for as long as they can. Even with companies struggling to pay salaries on time, sometimes not at all, employees hold onto their jobs regardless.

What’s good for the party is good for the board.

This economic liberation of the eighties and nineties is devouring the children of two generations and eyeing a third. We routinely berate political parties for not having clear succession plans but the best laid plans of politicians will come to nothing if there is no succession in the economy. It is sheer suicide to wait for the current executive to die off in the hope that this will finally present an opportunity for new blood.

“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure,” Thomas Jefferson November 13, 1787. 

In Part 2 next week I will look at the economic distortions in Zimbabwe as a consequence of of this culture of holding on as the economy has contracted, what this means for Zimbabwe’s recovery and possible solutions.

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Based in Johannesburg South Africa, Ricky Marima is a recovering economist and twenty year veteran of building businesses across a variety of industries. He currently works at knowledge startup RemNes where he guides clients across the continent to ask the right questions about the 4th Industrial Revolution. You can reach him on ricky@remnes.com