INSIDE ZIMBABWE:Returning the country to economic prosperity hinges on political stability and solving the land ownership problem, writes BILL CORCORAN
EMBRYONIC SIGNS of an economic revival in Zimbabwe are there for visitors to see shortly after their flights touch down at Harare International Airport.
As travellers make their way to the city centre the once-empty fuel stations along the highway are busy with people filling cars. And a stroll through the city’s supermarkets will reveal shelves stacked with a wide range of goods, most of which is imported from South Africa.
Less than six months ago hyperinflation had caused goods to lose their value by the hour. Moreover, the problem was made worse by the former government’s insistence that businesses refrain from increasing prices to counteract the zimdollar’s rapid devaluation.
Apart from bringing relative peace and stability to Zimbabwe, the formation of the transitional government last February between the Movement for Democratic Change (MDC) parties and President Robert Mugabe’s Zanu-PF party is also meant to create a platform from which the crippled economy can be revived.
Consequently, when planning and investment minister Elton Mangoma revealed to reporters during a mining conference in late June that since powersharing began Zimbabwe’s employment and industrial capacity had doubled, everyone was pleasantly surprised.
“When we came into office in February, we had employment of 6 per cent and capacity utilisation of less than 10 per cent,” Mr Mangoma said at the conference.
“Our production capacity has now gone up to between 20 and 30 per cent and employment is now about 15 per cent. And those who are employed are a lot more secure because they can see that the companies are a lot more steady,” he added.
What’s more, the department of finance’s decision to sideline the zimdollar and allow the US dollar, South African rand and pula to be used instead has brought the once record-breaking inflation, recorded at well over 230 million per cent a year ago, under control.
Mr Mangoma said that by next December the country’s inflation would stabilise at a rate of “no more than 3 per cent”. This he added would be sustainable.
Another consequence of the decision to “dollarise” the economy has been the demise of the once-thriving black market, which Zimbabweans no longer need to avail of to counteract the runaway inflation.
As the country’s economy declined, everyone, including the government – which printed zimdollars at will for the cost of paper and ink and then traded them on the black market for the more stable foreign exchange and gold – traded on the parallel market to survive.
However, despite the emergence of positive economic signs, the task of returning Zimbabwe’s economy to one of the most productive on the continent remains monumental, given that political stability and the land issues are key factors.
Indeed, the reality on the ground for most Zimbabweans is that economic security remains as elusive as the democracy their powersharing politicians are trying to achieve.
It is an aspiration rather than a reality.
For instance, there is a huge shortage of hard cash on the ground.
This is because western governments are reluctant to lend the $9 billion (€4.2 billion) the country needs to reboot the economy until tangible progress has been made in terms of the powersharing deal.
To date the west and east have pledged just over $1 billion in loans and increased aid through NGOs. The pledge of much-need cash has come while the International Monetary Fund insists Zimbabwe must repay the billions of dollars it owes the organisation before additional credit is forthcoming.
According to mining businessman Lee John – who owns most of the gold mining concessions around Kwekwe region in the midlands – unless problems of land title, mining claims and the issue of local and foreign ownership are resolved, then a recovery is sometime away.
“Clear and unhindered title of mining rights would be the first major step towards mines being resuscitated with local or foreign inputs,” said Mr John.
“The decision to do away with the zimdollar was a good one as it tackled the hyperinflation issue, but it needs the foreign donors to come in behind it with money if it is going to help businesses genuinely start again.
“To date businesses have not been able to run properly because there is no capital available. We cannot borrow locally as there is no money in the banks and we cannot borrow internationally because of the lack of political risk insurance.”
Mr John believes Zimbabwe’s situation should be seen as an opportunity, as in theory the unity government should present the country with a clean slate upon which an economic plan to suit Zimbabwe’s specific needs can be drawn up.
“I believe we should scrap the current income tax system and replace it with a progressive consumption tax. This starts at zero for food and basic necessities and increases up to several hundred per cent for luxury items.
“There also needs to be a new wave of land reform. When Mugabe’s regime introduced the land reform programme, and removed farmers illegally from their land, they effectively did away with title deeds and the right to own property.
“This will have a serious negative affect on investment, as who is going to invest in infrastructure if they don’t own the land upon which they are building their business?
“Once this is rectified we should introduce a land tax. If you don’t use your land productively you get taxed.
“This would deal with many of the idle farms there are at the moment, as it should force landowners to be productive,” he said.
Commercial Farmers Union economist Kuda Ndoro also believes that property rights are at the heart of any revival.
He said they need to be respected before the agricultural sector will prosper, which along with mining are Zimbabwe’s largest industries. “We need legal reforms. We need to get parliament to debate corrective issues.
“We need confidence to be built and this can only be done by matching risk and return. Agriculture is currently high risk with low return, so no one will invest in the sector. If you remove the constraints [the concerns over land ownership] you reduce the risk, so return increases.
“None of this needs donor funding to be implemented. The only external funding you need is for surveying land for demarcation, and this can be paid for by those who will benefit. There is also a huge skills shortage that needs to be dealt with, as in this sector many of those who had the skills left because they could not earn a living.”