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.

Smoke & Mirrors, Lessons from the elective congress that wasn’t.

The much-hyped ZANU PF elective congress finally took place last week in Harare from Tuesday to Saturday and there was no shortage of fireworks throughout. With the frenetic talk of factions in recent months many expected a showdown like never before but in a move to preempt this the outgoing politburo recommended that rather than elections the First Secretary appoint the new politburo and this was approved by congress. This gave President Mugabe sole discretion to appoint his two vice presidents and second secretaries, the national chairperson, the heads of departments of the politburo, the committee members of the politburo and the deputies to the heads of department.

President Mugabe was expected to announce these appointments on Saturday night but in another move to possibly keep the peace he said:

“I could not rush to choose people. I would want time to look at the new names, new people that have come into the central committee and see which hands we could put to the politburo,”

“…I haven’t seen what the provinces gave us. I don’t want to rush it, so be patient. By mid next week, by Wednesday or Thursday, we will make an announcement. We will let you know because we cannot go far. We will have to choose the two vice presidents and the chairman, and the secretary, one who is in charge of our secretariat, the job Mutasa was doing.”

In a week where everything seemed to be going right for the first couple as they secureed their leadership positions in ZANU PF and in effect Zimbabwe, this would have brought finality to internal strife that has gripped the party in recent months. There is much speculation as to why he did this ranging from his advanced age to him wanting to enjoy the extended grovelling by those seeking appointments. I have another theory.

The President now effectively has sole control of ZANU PF’s decision-making structures which means the party’s fortunes rise and fall with him now more directly than before. Once appointed every politburo member can now rightly claim they have been directly appointed by the President and that they speak on  his behalf. As they are no longer voted for who is to say that anyone else’s authority beside’s the President’s will be adhered to going forward? The politburo itself may now be of little meaning as a decision making body. President Mugabe may be wondering if, by appointing the wrong people to key positions how will he control them considering the alleged coup plot that has caused such ructions in the party? This may explain why throughout his speeches on Saturday President Mugabe continually emphasised service to the party and the nation saying at one point

“I want to say thank you. I know I am not greater than people. As a leader, I am your servant, . . We must treasure and take care of Zimbabwe.”.

Maybe realising the delicacy of the task President Mugabe said he needed more time to consider politburo and presidium candidates. Now I am not sure, but I assume the ZANU PF constitutional amendments do not allow for the central committee to review politburo appointments made by the President. ZANU PF has guidelines for who is eligible to contest which post based mostly on experience but this has been rubbished by the unopposed election and subsequent appointment of Grace Mugabe as Secretary For Women’s Affairs without her having held any prior position in the party. This is not to mention her vicious attacks on various senior members in previous months without being challenged whilst she was still an ordinary member. This apparent suspension of the rules can only make the pending appointments more difficult and less predictable. President Mugabe is famous for taking his time to make seemingly key appointments and I would not be surprised if come Friday there is still no decision on the politburo, presidium and the vice presidents, remember second Vice President John Nkomo died in January 2013 but his replacement is yet to be announced.

It is not unreasonable to think the events of the last week have left an old man drained and he needs time to come to terms with the fact that he has, amongst other problems,  a potential constitutional crisis on his hands with a Vice President he has publicly accused of treason but has taken no action against. These events have also brought about the realisation that he is surrounded by people who no longer take his word as gospel but now merely pay him lip service. Considering how he went on at length about the liberation struggle only to be passed a note from his wife saying he should wrap up, is President Mugabe now realising just how out of touch he is with the relative youths in ZANU PF leadership? The liberation struggle was such a simpler time, you were either with or against the movement, nowadays there are factions within factions and unparalleled intrigue.

It could be too that the purges of the last two months finally took their toll on him. Despite the lack of blood so far, these events remind me of Stalin’s Great Purge of the 1930s where family members accused each other of treason and the allegations got more fantastic by the day. Jacob Mudenda took the allegations against Vice President Mujuru to new levels with this gem

“This plot involved some among us, under the leadership of then Vice-President Joice Teurai Ropa Mujuru and her cabal of senior politburo members, who had been enticed by the Americans and some Europeans with promises that they would pour billions of dollars into Zimbabwe once they succeeded in allying with the opposition formations to oust Zanu PF and its iconic President and first secretary from power.”.

Not done yet Mudenda went on in classic purge mode to encourage the accused to repent and ask for forgiveness before evidence is produced against them. The accused are yet to respond.

With power games at such a high level it is not unusual for the protagonists to continue communicating via back channels whilst in public they excoriate each other. Consider that Vice President Joice Mujuru has only made one public statement and along with her co-accused did not attend congress. Whilst President Mugabe and others publicly heaped scorn on her throughout the congress it is significant that she is not currently in jail considering the seeming seriousness of the allegations against her and others. I would wager that the President is weighing his options as any punitive moves against VP Mujuru may weaken his position. President Mugabe is a master of isolating threats and the best way to do this right now would be to retain Joice Mujuru whilst whittling away her perceived support base effectively making her a lame duck VP.

Being the obedient party cadre that she is, VP Mujuru has kept a disciplined silence and not challenged the first family on their allegations against her. My guess is this is part of a plan for a post-Mugabe white knight campaign for the presidency. As others fall over themselves to make accusations, denials, threats, insults, retractions and counter-accusations, she is the only one who has not descended to this level, making her relatively clean. I imagine VP Mujuru sees the current situation as unsalvageable and could wait out the next few years till elections whilst those who have hounded her tear each other apart. It is much easier to fight a battle on one front against a tired enemy than the current situation where brazen attackers and accusers abound. Already the ranks are thinning out with some perceived candidates for the vice presidency retiring from the race.

President Mugabe may have won this round but the battle for the presidency is far from over and time is not on his side. Despite ZANU PF and the state media’s declarations as to his abilities and inferences to his immortality, the signs of age were there for all to see on Saturday with him making a number of notable gaffs. If the congress taught us one thing it is that the race to state house will be won by the one who bides their time, not by shock and awe tactics which fizzle out into hot air.